JAILE 

OLISA, ET. AL vs. DANILO ESCARIO, ET. AL

G.R. No. 160302, 27 September  2010

FACTS:

All the officers and some 200 members of the Malayang Samahan ng mga Manggagawa sa Balanced Foo
ds (Union) walked out of Pinakamasarap Corporation (PINA)’s premises and proceeded to the barangay 
office to show support for Cañete ,an officer of the Union, charged with oral defamation by personnel m
anager, and her secretary which resulted in a settlement. As a result of the walkout, PINA preventively s
uspended all officers of the Union. And later on terminated the officers of the Union.

PINA filed a complaint for ULP and damages. The  Labor Arbiter ruled that the incident was an illegal wal
kout constituting ULP; and that all the Union’s officers, except Cañete, had thereby lost their employme
nt. The Union filed a notice of strike, claiming that PINA was guilty of union busting through the construc
tive dismissal of its officers. Because of a majority strike vote, a strike was held which was later on declar
ed to be illegal.

ISSUE:

Whether or not employees dismissed for joining an illegal strike are entitled to backwages considering t
hey were reinstated of being merely members of the striking union.

RULING:

No. Employees dismissed for joining an illegal strike are not entitled to backwages for the period of the s
trike even if they are reinstated by virtue of their being merely members of the striking union who did n
ot commit any illegal act during the strike.

The petitioners contend that they are entitled to full backwages by virtue of their reinstatement, and su
bmit that applicable to their situation is Article 279.Article 279(Security of tenure) refers to a dismissal t
hat is unjustly done, that is, the employer dismisses the employee without observing due process, either 
substantive or procedural.

In contrast, the third paragraph of Article 264(a) provides that “…Any union officer who knowingly partic
ipates in an illegal strike and any worker or union officer whZ6
o knowingly participates in the commission of illegal acts during a strike may be declared to have lost his 
employment status…”On the consequences of an illegal strike, the provision distinguishes between a uni
on officer and a union member participating in an illegal strike. A union officer who knowingly participat
es in an illegal strike is deemed to have lost his employment status, but a union member who is merely i
nstigated or induced to participate in the illegal strike is more benignly treated. Part of the explanation f
or the benign consideration for the union member is the policy of reinstating rank-and-file workers who 
are misled into supporting illegal strikes, absent any finding that such workers committed illegal acts dur
ing the period of the illegal strikes.

The petitioners were terminated for joining a strike that was later declared to be illegal. The NLRC order
ed their reinstatement or, in lieu of reinstatement, the payment of their separation pay, because they w
ere mere rank-and-file workers whom the Union’s officers had misled into joining the illegal strike. They 
were not unjustly dismissed from work.
MANILA TRADING & SUPPLY CO., vs. MANILA TRADING LABOR
ASSOCIATION
G.R. No. L-5062 April 29, 1953
FACTS :
 Respondent Labor Association made a demand from their employer
(petitioner company) for increase of personnel, Christmas bonus,
and other gratuities and privileges.
 This demand was refused
 Failed to effect an amicable settlement, The Department of Labor,
whose assistance was also sought by the Labor Association,
certified the dispute to the Court of First Instance
 The same day it was filed, Petitioner also applied to the same
court for authority to lay off 50 laborers due to “poor business”
 Various hearings were conducted for both cases in the CFI where
the president and vice-president of the association, of their own
volition, attended and absented themselves from work
 They are now claiming that they were entitled for their wages
 CFI found merit in their claim and ordered the company to pay them
their wages
 Petitioner questioned the authority of the CFI to issue such an
order and asks the Court to have it annulled
ISSUES:
o Whether the CFI may require an employer to pay the wages of
officers of its employees’ labor union while attending the hearing
of cases between the employer and the union
HELD:
o NO.
When in case of strikes, and according to the CIR even if the
strike is legal, strikers may not collect their wages during the
days they did not go to work, for the same reasons if not more,
laborers who voluntarily absent themselves from work to attend the
hearing of a case in which they seek to prove and establish their
demands against the company, the legality and propriety of which FACTS :

 Respondent Labor Association made a demand from their employer

(petitioner company) for increase of personnel, Christmas bonus,
and other gratuities and privileges.
 This demand was refused
 Failed to effect an amicable settlement, The Department of Labor,
whose assistance was also sought by the Labor Association,
certified the dispute to the Court of First Instance
 The same day it was filed, Petitioner also applied to the same
court for authority to lay off 50 laborers due to “poor business”
 Various hearings were conducted for both cases in the CFI where
the president and vice-president of the association, of their own
volition, attended and absented themselves from work
 They are now claiming that they were entitled for their wages
 CFI found merit in their claim and ordered the company to pay them
their wages
 Petitioner questioned the authority of the CFI to issue such an
order and asks the Court to have it annulled
ISSUES:
o Whether the CFI may require an employer to pay the wages of
officers of its employees’ labor union while attending the hearing
of cases between the employer and the union
HELD:
o NO.
When in case of strikes, and according to the CIR even if the
strike is legal, strikers may not collect their wages during the
days they did not go to work, for the same reasons if not more,
laborers who voluntarily absent themselves from work to attend the
hearing of a case in which they seek to prove and establish their
demands against the company, the legality and propriety of which
INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE),
petitioner, vs. HON. LEONARDO A. QUISUMBING in his capacity
as the Secretary of Labor and Employment; HON. CRESENCIANO
B. TRAJANO in his capacity as the Acting Secretary of Labor and
Employment; DR. BRIAN MACCAULEY in his capacity as the
Superintendent of International School-Manila; and
INTERNATIONAL SCHOOL, INC., respondents.,

G.R. No. 128845, June 1, 2000

FACTS:

Private respondent International School, Inc. (School), pursuant to PD 732, is

a domestic educational institution established primarily for dependents of
foreign diplomatic personnel and other temporary residents. The decree
authorizes the School to employ its own teaching and management personnel
selected by it either locally or abroad, from Philippine or other nationalities,
such personnel being exempt from otherwise applicable laws and regulations
attending their employment, except laws that have been or will be enacted for
the protection of employees. School hires both foreign and local teachers as
members of its faculty, classifying the same into two: (1) foreign-hires and (2)
local-hires.

The School grants foreign-hires certain benefits not accorded local-hires.

Foreign-hires are also paid a salary rate 25% more than local-hires.

When negotiations for a new CBA were held on June 1995, petitioner ISAE, a
legitimate labor union and the collective bargaining representative of all
faculty members of the School, contested the difference in salary rates
between foreign and local-hires. This issue, as well as the question of whether
foreign-hires should be included in the appropriate bargaining unit, eventually
caused a deadlock between the parties.
ISAE filed a notice of strike. Due to the failure to reach a compromise in the
NCMB, the matter reached the DOLE which favored the School. Hence this
petition.

ISSUE:

Whether the foreign-hires should be included in bargaining unit of local-

hires.

RULING:

NO. The Constitution, Article XIII, Section 3, specifically provides that labor is
entitled to “humane conditions of work.” These conditions are not restricted to
the physical workplace – the factory, the office or the field – but include as
well the manner by which employers treat their employees.

Discrimination, particularly in terms of wages, is frowned upon by the Labor

Code. Article 248 declares it an unfair labor practice for an employer to
discriminate in regard to wages in order to encourage or discourage
membership in any labor organization.

The Constitution enjoins the State to “protect the rights of workers and
promote their welfare, In Section 18, Article II of the constitution mandates
“to afford labor full protection”. The State has the right and duty to regulate
the relations between labor and capital. These relations are not merely
contractual but are so impressed with public interest that labor contracts,
collective bargaining agreements included, must yield to the common good.

However, foreign-hires do not belong to the same bargaining unit as the local-
hires.

A bargaining unit is a group of employees of a given employer, comprised of

all or less than all of the entire body of employees, consistent with equity to
the employer indicate to be the best suited to serve the reciprocal rights and
duties of the parties under the collective bargaining provisions of the law.
The factors in determining the appropriate collective bargaining unit are (1)
the will of the employees (Globe Doctrine); (2) affinity and unity of the
employees’ interest, such as substantial similarity of work and duties, or
similarity of compensation and working conditions (Substantial Mutual
Interests Rule); (3) prior collective bargaining history; and (4) similarity of
employment status. The basic test of an asserted bargaining unit’s
acceptability is whether or not it is fundamentally the combination which will
best assure to all employees the exercise of their collective bargaining rights.

In the case at bar, it does not appear that foreign-hires have indicated their
intention to be grouped together with local-hires for purposes of collective
bargaining. The collective bargaining history in the School also shows that
these groups were always treated separately. Foreign-hires have limited
tenure; local-hires enjoy security of tenure. Although foreign-hires perform
similar functions under the same working conditions as the local-hires,
foreign-hires are accorded certain benefits not granted to local-hires such as
housing, transportation, shipping costs, taxes and home leave travel
allowances. These benefits are reasonably related to their status as foreign-
hires, and justify the exclusion of the former from the latter. To include
foreign-hires in a bargaining unit with local-hires would not assure either
group the exercise of their respective collective bargaining rights.

WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby

GRANTED IN PART.

 
Robert Pascua vs. G & G Real Tv Corporation

G.R. No. 196383 October 15, 2012

FACTS:

Robert Pascua (Pascua), doing business under the name and style Tri-
Web Construction, and G & G Realty Corporation (G & G) entered into a
contract for the construction of a four-storey commercial building and
two-storey kitchen with dining hall. Under the contract, Pascua would
provide all the materials and labor. In turn, G & G would pay the amount
of Eleven Million One Hundred Thousand Pesos (P11,100,000.00).

During the course of the construction project, G & G required Pascua to

undertake several additional works and change order works which were
not covered by their original contract. Pascua complied accordingly.
Subsequently, Pascua was able to finish the construction of the four-
storey building and two-storey kitchen with dining hall, albeit behind the
scheduled turnover date. Pascua demanded for the payment of the
contract price but G & G refused to pay.
Thus, Pascua filed a Complaint for Sum of Money with Damages before
the RTC. The RTC ruled in favor of Pascua. On appeal, the CA
overturned the RTC.

ISSUE: Whether or not Pascua is entitled to the payment of the

outstanding balance of the contract price?

HELD: The Court finds the petition meritorious.

CIVIL LAW: reciprocal obligation; unjust enrichment

Apropos, Dieparine, Jr. v. Court of Appeals states that "a construction

contract necessarily involves reciprocal obligations, as it imposes upon
the contractor the obligation to build the structure subject of the
contract, and upon the owner the obligation to pay for the project upon
its completion."
Pursuant to the aforementioned contractual obligations, petitioner
completed the construction of the four-storey commercial building and
two-storey kitchen with dining hall. Thus, this Court finds no legal basis
for respondent to not comply with its obligation to pay the balance of the
contract price due the petitioner.

What's more, in Heirs of Ramon Gaite v. The Plaza, Inc., this Court held
that "under the principle of quantum meruit, a contractor is allowed to
recover the reasonable value of the thing or service rendered in order to
avoid unjust enrichment. Quantum meruitmeans that in an action for
work and labor, payment shall be made in such amount as the plaintiff
reasonably deserves. To deny payment for a building almost completed
and already occupied would be to permit unjust enrichment at the
expense of the contractor."
GRANTED.

Heirs of Ramon Gaite v. The Plaza, Inc.,

G.R. No. 177685, January 26, 2011

FACTS:

The Plaza, through its president, Jose C. Reyes, entered into a contract with Rhogen Builders,
represented by Ramon C. Gaite, for the construction of a restaurant building in Greenbelt, Makati for
the price of PhP7,600,00.00. To secure Rhogen's compliance with its obligation, Gaite and FGU Insurance
corporation executed a surety bond in favor of the Plaza.

Subsequently, Gaite was ordered by Engineer Gonzales to stop construction due to violations of the
National Building Code. This was referred to the Plaza's Project Manager, Tayzon. Later, the permit for
the construction of the restaurant was revoked for non-compliance with the National Building Code.
Gaiterequested that they fix the problem with cooperation from the Plaza but the Reyes, on behalf of
the Plaza, said that it was not their responsibility to help Rhogen after its failure to comply with the
construction requirements. Because Reyes would neither cooperate with Rhogen to fix the problem nor
compensate Rhogen for the percentage of work done, Gaite informed the Plaza that he would be
terminating their contract based on the Contractor's Right to Stop Work or Terminate Contracts as
provided for in their agreement.

Later, the Plaza filed a case against Gaite and FGU for breach of contract, sum of money and damages
and also a separate case for nullification of the project development contract. The RTC ruled in favor of
the Plaza saying that instead of rectifying the violations,Rhogen continued with the construction work
thereby causing more damage. The trial court pointed out that Rhogen is not only expected to be aware
of standard requirements and pertinent regulations on construction work, but also expressly bound
itself under the General Construction Contract to comply with all the laws, city and municipal ordinances
and all government regulations.Having failed to complete the project within the stipulated period and
comply with its obligations, Rhogen was thus declared guilty of breaching the Construction Contract and
is liable for damages under Articles 1170 and 1167 of the Civil Code.

The CA affirmed the RTC decision saying that the Plaza cannot now be demanded to comply with its
obligation under the contract since Rhogen has already failed to comply with its own contractual
obligation. Thus, The Plaza had every reason not to pay the progress billing as a result of Rhogens
inability to perform its obligations under the contract. Further, the stoppage and revocation orders were
issued on account of Rhogens own violations involving the construction as found by the local building
official. Clearly,Rhogen cannot blame The Plaza for its own failure to comply with its contractual
obligations. The CA stressed that Rhogen obliged itself to comply with "all the laws, city and municipal
ordinances and all government regulations insofar as they are binding upon or affect the parties to the
contract, the work or those engaged thereon.

ISSUE: Whether the CA erred in not holding that there were valid and legal grounds for Rhogen to
terminate the contract pursuant to Article 1191 of the Civil Code and its agreement with the Plaza.

HELD: The petition is unmeritorious.

CIVIL LAW - Contracts; reciprocal obligations

Reciprocal obligations are those which arise from the same cause, and in which each party is a debtor
and a creditor of the other, such that the obligation of one is dependent upon the obligation of the
other. They are to be performed simultaneously such that the performance of one is conditioned upon
the simultaneous fulfillment of the other. Respondent The Plaza predicated its action on Article 1191 of
the Civil Code, which provides for the remedy of "rescission" or more properly resolution, a principal
action based on breach of faith by the other party who violates the reciprocity between them. The
breach contemplated in the provision is the obligors failure to comply with an existing obligation. Thus,
the power to rescind is given only to the injured party. The injured party is the party who has faithfully
fulfilled his obligation or is ready and willing to perform his obligation.

The construction contract between Rhogen and The Plaza provides for reciprocal obligations whereby
the latters obligation to pay the contract price or progress billing is conditioned on the formers
performance of its undertaking to complete the works within the stipulated period and in accordance
with approved plans and other specifications by the owner. Pursuant to its contractual obligation, The
Plaza furnished materials and paid the agreed down payment. It also exercised the option of furnishing
and delivering construction materials at the jobsite pursuant to Article III of the Construction Contract.
However, just two months after commencement of the project, construction works were ordered
stopped by the local building official and the building permit subsequently revoked on account of several
violations of the National Building Code and other regulations of the municipal authorities.

Since Rhogen had already breached its contractual obligation by not complying with the National
Building Code, it had no right to terminate the contract based on the Plaza's refusal to compensate it for
the percentage of work done.

Petition is DENIED.

METROPOLITAN MANILA DEVELOPMENT AUTHORITY v. D.M. CONSUNJI, GR No.

222423, 2019-02-20
Facts:
The process, however, was stymied by legal actions filed by some concerned sectors of the
society, particularly, those groups in the affected area. MMDA was thus restrained from
proceeding with the new sanitary landfill project.
MMDA's request was approved by then President Joseph E. Estrada in an undated
memorandum subject to the condition that "the negotiated contract to be entered by MMDA
shall be subject to the approval of the Office of the President," among others. The project was
then opened for public bidding and was awarded to respondents as winning joint bidders.
the MMDA, thru the Office of the Solicitor General, filed an Answer. The MMDA averred that
the contract involves a project under the BOO scheme for which the approval of the President
of the Philippines is required pursuant to paragraph (d), Section 2 of Republic Act No. 7718.
Corollarily, paragraph 16 of the negotiated contract provides that it shall be valid, binding and
effective upon approval by the President pursuant to existing laws. Since the negotiated
contract was not signed and approved by the President, the same never became effective and
binding.
Issues:
On the other hand, respondents filed a Motion for Partial Reconsideration of the decision on
the ground of failure by the trial court to award litigation expenses in the amount of
P450,977.06 in their favor despite the fact that they were compelled to file the case to
protect their interests. This was denied in an Order dated 30 August 2012. Respondents then
filed their Notice of Partial Appeal dated 14 September 2012.
MMDA raises the following issues: (1) whether judgment on the pleadings is proper; (2)
whether DMCI and R-II Builders are entitled to recover the expenses they incurred based on
quantum meruit; and (3) whether the COA has primary jurisdiction over the present case.
Ruling:
The resolution of the issue of whether the COA has primary jurisdiction over the present case
will determine whether there is a need to resolve the first two issues. Thus, the Court deems it
necessary to settle first the issue of jurisdiction.
They argue that "even if the trial court's decision in this case becomes final, the settlement of
[their] money claim is still subject to the primary jurisdiction of the COA."[16] They further
claim that assuming the doctrine of primary jurisdiction applies, this case falls under the
exceptions to this doctrine, namely, alleged unreasonable delay and official inaction on the
part of MMDA, and this case allegedly involves only a purely legal question.
In the narration of facts in EPG Construction Co. v. Vigilar,[30] the DPWH, which opined that
payment of petitioner's money claims should be based on quantum meruit , referred
petitioner's money claims to the COA, which acted on the same.
In Movertrade Corporation v. COA,[31] the Court affirmed the COA's ruling of inapplicability
of the quantum meruit principle since there was a written contract entered into by the parties,
and eventually denied petitioner's money claim on the ground of breach of contract.
WHEREAS, in the adjudication of claims arising from void government contracts, the issue
that is sometimes presented to the Commission on Audit for resolution is whether or not
recovery against the government under such contracts may be allowed on the basis of the
quantum meruit principle
WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are SET ASIDE.
#25

G.R. No. 221967 February 6, 2019

Ramiro Lim & Sons Agricultural Co., Inc., Sima Real Estate Development , Inc. and
Ramiro Lim

Vs

Armando Guilaran, et. al. [G.R. No. 221967, February 06, 2019

FACTS:

Respondents filed complaints for illegal dismissal against petitioners. They alleged
that they were agricultural workers of the petitioners, employed to work in all the
agricultural stages of work on its 84-hectare hacienda. Respondents also alleged
that they were paid on a mixed pakyaw and daily basis.

The Labor Arbiter and the NLRC dismissed the complaints.

Meanwhile, petitioners filed a petition for review on certiorari to the Supreme
Court (this Court), but was denied for failure to sufficiently show any reversible
error to warrant the exercise of its discretionary appellate jurisdiction.

In an Order dated 29 March 2010, the Labor Arbiter adopted the computation of
the Fiscal Examiner who awarded to respondents their backwages. The award was
based on the mandated rates provided by law for the period from 2000 until
December 2009, and was limited to six months of work per year, considering that
sugarcane farming is not continuous the whole year round.

Petitioners filed a Memorandum of Appeal to the NLRC. They claimed that

respondents barely worked, and thus, are not entitled to the computation of six
months pay per year.
The NLRC annulled and set aside the Order of the Labor Arbiter finding that the
computation used was erroneous. The Motion for Reconsideration filed by
respondents was denied by the NLRC. Thereafter, respondents filed a petition for
certiorari under Rule 65 before the CA.
The CA reversed and set aside the Decision of the NLRC and reinstated the Order
of the Labor Arbiter. The CA disregarded the payrolls presented by petitioners as
these payrolls were self-serving, unreliable, and unsubstantial evidence. The
inconsistencies in the signatures of respondents were so questionable to the
naked eye that the CA found that its genuineness is doubtful.

In a Resolution, the CA denied the Motion for Partial Reconsideration filed by

petitioners

ISSUES:

A. Whether or not the CA erred in disregarding the payroll submitted by the

petitioner in computing the backwages of the respondents.
a. Whether the entries in the payrolls enjoy the presumption of
regularity.
b. Define prima facie evidence.
B. Whether or not the Labor Arbiter and CA are correct in limiting the
computation of the amount of backwages due to a period of six months of work
per year.
a. What are the factors to consider in determining the amount of backwages
for piece-rate or pakyaw workers.

RULING:

While it is true that entries in the payrolls enjoy the presumption of regularity, it
is merely a disputable presumption that may be overthrown by clear and
convincing evidence to the contrary.
Section 43 of Rule 143 of the Rules of Court provides:

Section 43. Entries in the course of business. — Entries made at, or near the time
of transactions to which they refer, by a person deceased, or unable to testify,
who was in a position to know the facts therein stated, may be received as prima
facie evidence, if such person made the entries in his professional capacity or in
the performance of duty and in the ordinary or regular course of business or duty.
A presumption is merely an assumption of fact that the law requires to be made
based on another fact or group of facts. It is an inference as to the existence of a
fact that is not actually known, but arises from its usual connection with another
fact, or a conjecture based on past experience as to what the ordinary human
affairs take. Moreover, prima facie evidence is defined as evidence which, if
unexplained or uncontradicted, is sufficient to sustain a judgment in favor of the
issue it supports, but which may be contradicted by other evidence.Thus, prima
facie evidence is not conclusive or absolute evidence to the contrary may be
presented by the party disputing the assumption of fact made by inference of law
and the court may validly consider such.
In this case, we find that the CA did not err when it found that the inconsistencies
in the signatures of respondents are so questionable to the naked eye that there
exists doubt on their genuineness. After a painstaking scrutiny of the voluminous
records, it found inconsistencies in the signatures.
Thus, while the payrolls in question enjoyed the presumption of regularity as
entries made in the course of business, this presumption of regularity was
effectively overthrown by evidence to the contrary.

#26

G.R. No. 195466 July 2, 2014

Ariel L. David

Vs

John G. Macasio

FACTS
Macasio filed before the LA a complaint against petitioner for non-payment of
overtime pay, holiday pay and 13th month pay.
Macasio also claimed payment for service incentive leave (SIL).
Macasio alleged that he had been working as a butcher for David
Macasio claimed that David exercised effective control and supervision over his
work
In his defense David claimed that he hired Macasio as a butcher or chopper on
"pakyaw" or task basis who is, therefore, not entitled to overtime pay holiday pay
and 13th month pay pursuant to the provisions of the Implementing Rules and
Regulations (IRR) of the Labor Code.
LA
LA dismissed Macasio's complaint for lack of merit.
LA concluded that as Macasio was engaged on "pakyaw" or task basis, he is not
entitled to overtime, holiday, SIL and 13th month pay.
NLRC
NLRC affirmed the LA ruling.
CA
CA partly granted Macasio's certiorari petition and reversed the NLRC's ruling
The CA explained that as a task basis employee, Macasio is excluded from the
coverage of holiday, SIL and 13th month pay only if he is likewise a "field
personnel." As defined by the Labor Code, a "field personnel" is one who
performs the work away from the office or place of work and whose regular work
hours cannot be determined with reasonable certainty. In Macasio's case, the
elements that characterize a "field personnel" are evidently lacking as he had
been working as a butcher at David's "Yiels Hog Dealer" business in Sta. Mesa,
Manila under
David's supervision and control, and for a fixed working schedule that starts at
10:00 p.m.
CA awarded Macasio's claim for holiday, SIL and 13th month pay for three years,
with 10% attorney's fees on the total monetary award.

Issues:
HOLIDAY & SIL = NOT EXCLUDED; 13TH = EXCLUDED
Macasio's engagement was on a "pakyaw" or task basis. Hence, the latter is
excluded from the coverage of holiday, SIL and 13th month pay.
Ruling:
Macasio is engaged on "pakyaw" or task basis
A distinguishing characteristic of "pakyaw" or task basis engagement, as opposed
to straight-hour wage payment, is the non-consideration of the time spent in
working.
In a task-basis work, the emphasis is on the task itself, in the sense that payment
is reckoned in terms of completion of the work, not in terms of the number of
time spent in the completion of work.
In Macasio's case, the established facts show that he would usually start his work
at 10:00 p.m. Thereafter, regardless of the total hours that he spent at the
workplace or of the total number of the hogs assigned to him for chopping,
Macasio would receive the fixed amount of P700.00 once he had completed his
task.
Accordingly, Macasio is David's employee, albeit engaged on "pakyaw" or task
basis.
YES... entitlement to holiday, SIL the general rule is that holiday and SIL pay
provisions cover all employees. To be excluded from their coverage, an employee
must be one of those that these provisions expressly exempt, strictly in
accordance with the exemption.
Under the IRR, exemption from the coverage of holiday and SIL pay refer to "field
personnel and other employees whose time and performance is unsupervised by
the employer including those who are engaged on task or contract basis"
Note that unlike Article 82 of the Labor Code, the IRR on holiday and SIL pay do
not exclude employees "engaged on task basis" as a separate and distinct
category from employees classified as "field personnel." Rather, these employees
are altogether merged into one classification of exempted employees.
the payment of an employee on task or pakyaw basis alone is insufficient to
exclude one from the coverage of SIL and holiday pay. They are exempted from
the coverage of Title I (including the holiday and SIL pay) only if they qualify as
"field personnel."
The IRR therefore validly qualifies and limits the general exclusion of "workers
paid by results" found in Article 82 from the coverage of holiday and SIL pay. This
is the only reasonable interpretation since the determination of excluded workers
who are paid by results from the coverage of Title I is "determined by the
Secretary of Labor in appropriate regulations."
The Court explained that the phrase "including those who are engaged on task or
contract basis, purely commission basis" found in Section 1(d), Rule V of Book III
of the IRR should not be... understood as a separate classification of employees to
which SIL shall not be granted. Rather, as with its preceding phrase - "other
employees whose performance is unsupervised by the employer" - the phrase
"including those who are engaged on task or contract basis" serves to amplify the
interpretation of the Labor Code definition of "field personnel" as those "whose
actual hours of work in the field cannot be determined with reasonable
certainty." in determining whether workers engaged on "pakyaw" or task basis" is
entitled to holiday and SIL pay, the presence (or absence) of employer supervision
as regards the worker's time and performance is the key: if the worker is simply
engaged on pakyaw or task basis, then the general rule is that he is entitled to a
holiday pay and SIL pay unless exempted from the exceptions specifically
provided under Article 94 (holiday pay) and Article 95 (SIL pay) of the Labor Code.
However, if the worker engaged on pakyaw or... task basis also falls within the
meaning of "field personnel" under the law, then he is not entitled to these
monetary benefits.
Macasio does not fall under the definition of "field personnel.
first, Macasio regularly performed his duties at David's principal place of business;
second, his actual hours of work could be determined with reasonable certainty;
and, third, David supervised his time and performance of duties. Since Macasio
cannot be considered a "field personnel," then he is not exempted from the grant
of holiday, SIL pay even as he was engaged on "pakyaw" or task basis.
NO
Entitlement to 13th month pay unlike the IRR of the Labor Code on holiday and
SIL pay, Section 3(e) of the Rules and Regulations Implementing PD No. 851
exempts employees "paid on task basis" without any reference to "field
personnel." This could only mean that insofar as payment of the 13th month pay
is concerned, the law did not intend to qualify the exemption from its coverage
with the requirement that the task worker be a "field personnel" at the same
time.
#27

G.R. No. 193493 June 13, 2013

Jaime N. Gapayao

VS

Rosario Fulo

FACTS

Jaime Fulo died of "acute renal failure secondary to 1st degree burn 70%
secondary electrocution" while doing repairs at the residence and business
establishment of Gapayao. Gapayao extended some financial assistance to
Rosario Fulo, the wife of the deceased, and the latter executed an Affidavit of
Desistance stating that she was not holding them liable for the death of her late
husband. Thereafter, a private respondent filed a claim for social security benefits
with the Social Security System (SSS) Sorosogon Branch. However, upon
verification and evaluation, it was discovered that the deceased was not a
registered member of the SSS. Upon Rosario's insistence that her late husband
had been employed by petitioner from January 1983 up to his untimely death on
4 November 1997, the SSS conducted a field investigation to clarify his status of
employment. The findings revealed that Mr. Jaime Fulo was an employee of Jaime
Gapayao as a farm laborer from 1983 to 1997 and that Mr. Jaime Fulo receives
compensation on a daily basis ranging from P5.00 to P60.00 from 1983 to 1997.
As per interview, Mrs. Estela Gapayao contends that Jaime Fulo is an employee of
Mr. & Mrs. Jaime Gapayao on an extra basis. the SSS demanded that petitioner
remit the social security contributions of the deceased. Gapayao denied that the
deceased was his employee but was rather an independent contractor whose
tasks were not subject to his control and supervision . Assuming arguendo that
the deceased was his employee, he was still not entitled to be paid his SSS
premiums for the intervening period when he was not at work , as he was an
"intermittent worker who was only summoned every now and then as the need
arose." Hence, Gapayao insisted that he was under no obligation to reported
formers demise to the SSS for social security coverage. Rosario alleges that her
late husband had been in the employ of petitioner for 1 4 years, from 1983 to
1997. During that period, he was made to work as a laborer in the agricultural
landholdings, a harvester in the abaca plantation, and a repairman/utility worker
in several business establishments owned by petitioner. The considerable length
of time during which [the deceased] was given diverse tasks by Gapayao was a
clear indication of the necessity and indispensability of her late husband s services
to Gapayao's business.

ISSUE

Whether or not there exists between the deceased Jaime Fulo and Gapayao an
employer-employee relationship that would merit an award of benefits in favor of
Rosa rio Fulo under social security laws.

Ruling

Yes. Farm workers may be considered regular seasonal employees. Farm workers
generally fall under the definition of seasonal employees. Court held that
seasonal employees may be considered as regular employees. Regular seasonal
employees are those called to work from time to time. The nature of their
relationship with the employer is such that during the off-season, they are
temporarily laid off; but reemployed during the summer season or when their
services may be needed. They are in regular employment because of the nature
of their job, and not because of the length of time they have worked. The other
tasks allegedly done by the deceased outside his usual farm work only bolster the
existence of an employer-employee relationship. It only proves that even during
the off-season, the deceased was still in the employ of Gapayao. The most telling
indicia of this relationship is the Compromise Agreement executed by Gapayao
and Rosario. Gapayao entered into the agreement with full knowledge that he
was described as the employer of the deceased. Pakyaw workers are considered
employees for as long as their employers exercise control over them. In this case,
Gapayao wielded control over the deceased in the discharge of his functions. The
right of an employee to be covered by the Social Security Act is premised on the
existence of an employer-employee relationship.73 That having been established,
the Court ruled in favor of Rosario

#28

G.R. No. 204651 August 6, 2014

Our Haus Realty Development Corporation

Vs

Alexander Parian

FACTS:

Respondents were all laborers working for petitioner Our Haus Realty
Development Corporation, a company engaged in the construction business.

Sometime in May 2010, Our Haus experienced financial distress. To alleviate its
condition, Our Haus suspended some of its construction projects and asked the
affected workers, including the respondents, to take vacation leaves.

Eventually, respondents were asked to report back to work but instead of doing
so, they filed a complaint for underpayment of their daily wages with the LA. They
claimed that except for Tenedoro, their wages were below the prescribed
minimum rates.

Our Haus argued that the respondents’ wages complied with the law’s minimum
requirement. In determining the total amount of the respondents’ daily wages,
the petitioner considered the value of the benefits that respondents also enjoy --
their subsidized meals and their free lodging. Our Haus also rejected the
respondents’ other monetary claims for lack of proof that they were entitled to it.
On the other hand, respondents argued that the value of their meals should not
be considered in determining their wages’ total amount since the requirements
set under Sec. 4 of DOLE Memorandum Circular No. 2 were not complied with.
The respondents pointed out that Our Haus never presented any proof that they
agreed in writing to the inclusion of their meals’ value in their wages. Also, Our
Haus failed to prove that the value of the facilities it furnished was fair and
reasonable. Finally, instead of deducting the maximum amount of 70% of the
value of the meals, Our Haus actually withheld its full value.

The LA ruled in favor of Our Haus. He held that if the reasonable values of the
board and lodging would be taken into account, the respondents’ daily wages
would meet the minimum wage rate. As to the other benefits, the LA found that
the respondents were not able to substantiate their claims for it.

The NLRC, in turn, reversed the LA’s decision. The NLRC noted that the
respondents did not authorize Our Haus in writing to charge the values of their
board and lodging to their wages. Thus, it cannot be credited. The NLRC also
ruled that respondents are entitled 13th month payments and SIL payments.
However, it sustained the LA’s ruling that the respondents were not entitled to
overtime pay since the exact dates and times when they rendered overtime work
had not been proven.

Our Haus moved for reconsideration and submitted 5 kasunduans as new

evidence to show that the respondents authorized Our Haus in writing to charge
the values of their meals and lodging to their wages. The NLRC denied Our Haus’
motion, thus it appealed to the CA.

In its petition, Our Haus made a distinction between deduction and charging.
According to them, a written authorization is only necessary if the facility’s value
will be deducted and will not be needed if it will merely be charged or included in
the computation of wages. Our Haus claimed that it did not actually deduct the
values of the meals and housing benefits. It only considered these in computing
the total amount of wages paid to the respondents for purposes of compliance
with the minimum wage law. Hence, the written authorization requirement
should not apply.

The CA affirmed in toto the NLRC’s rulings. It found no real distinction between
deduction and charging and ruled that the legal requirements before any
deduction or charging can be made, apply to both. Our Haus, however, failed to
prove that it complied with any of the requirements laid down in Mabeza v.
National Labor Relations Commission. Accordingly, it cannot consider the values
of its meal and housing facilities in the computation of the respondents’ total
wages.

ISSUE:

Whether or not the facility’s value should be included in the computation of

respondent’s wages

RULING:

To justify its noncompliance with the requirements for the deductibility of a

facility Our Haus made a substantial dinstinction between deduction and the
charging of a facility’s value to the wages. It explained that in deduction, the
amount of the wage would still be lessened by the facility’s value, thus needing
the employee’s consent. On the other hand, in charging, there is no reduction of
the employee’s wages since the facility’s value will just be theoretically added to
the wage for purposes of complying with the minimum wage requirement.

Our Haus’ argument is a vain attempt to circumvent the minimum wage law by
trying to create a distinction where none exists.

In reality, deduction and charging both operate to lessen the actual take-home
pay of an employee; they are two sides of the same coin. In both, the employee
receives a lessened amount because supposedly, the facility’s value, which is part
of his wage, had already been paid to him in kind. As there is no substantial
distinction between the two, the requirements set by law must apply to both.

These requirements as summarized in Mabeza v. NLRC are the following:

 a. proof must be shown that such facilities are customarily furnished by the
trade;

b. the provision of deductible facilities must be voluntarily accepted in

writing by the employee; and

c. the facilities must be charged at fair and reasonable value.

One of the badges to show that a facility is customarily furnished by the trade is
the existence of a company policy or guideline showing that provisions for a
facility were designated as part of the employees’ salaries.

In this case, the records reveal that the board and lodging were given on a per
project basis. Our Haus did not show if these benefits were also provided in its
other construction projects, thus negating its claimed customary nature. If Our
Haus really had the practice of freely giving lodging, electricity and water
provisions to its employees, then Our Haus should not deduct its values from the
respondents’ wages. Otherwise, this will run contrary to the affiants’ claim that
these benefits were traditionally given free of charge.

Apart from company policy, the employer may also prove compliance with the
first requirement by showing the existence of an industry-wide practice of
furnishing the benefits in question among enterprises engaged in the same line of
business. However, Our Haus could not really be expected to prove compliance
with the first requirement since the living accommodation of workers in the
construction industry is not simply a matter of business practice they are
mandated by the law itself to ensure the humane working conditions of
construction employees despite their constant exposure to hazardous working
environments.

Moreover, the law mandates that the cost of the implementation of the
requirements for the construction safety and health of workers, shall be
integrated to the overall project cost. As part of the project cost that construction
companies already charge to their clients, the value of the housing of their
workers cannot be charged again to their employees’ salaries. Our Haus cannot
pass the burden of the OSH costs of its construction projects to its employees by
deducting it as facilities. This is Our Haus’ obligation under the law.

Lastly, even if a benefit is customarily provided by the trade, it must still pass the
purpose test. Under this test, if a benefit or privilege granted to the employee is
clearly for the employer’s convenience, it will not be considered as a facility but a
supplement. Here, careful consideration is given to the nature of the employer’s
business in relation to the work performed by the employee. This test is used to
address inequitable situations wherein employers consider a benefit deductible
from the wages even if the factual circumstances show that it clearly redounds to
the employers’ greater advantage.

Under the law, only the value of the facilities may be deducted from the
employees’ wages but not the value of supplements. Facilities include articles or
services for the benefit of the employee or his family but exclude tools of the
trade or articles or services primarily for the benefit of the employer or necessary
to the conduct of the employer’s business. The law also prescribes that the
computation of wages shall exclude whatever benefits, supplements or
allowances given to employees. Supplements are paid to employees on top of
their basic pay and are free of charge. Since it does not form part of the wage, a
supplement’s value may not be included in the determination of whether an
employer complied with the prescribed minimum wage rates.

In the present case, the board and lodging provided by Our Haus cannot be
categorized as facilities but as supplements. In SLL International Cables Specialist
v. NLRC, the court distinguished the two terms. It said that the distinction lies not
so much in the kind of benefit or items given, but in the purpose for which it is
given. If it is primarily for the employee’s gain, then the benefit is a facility; if its
provision is mainly for the employer’s advantage, then it is a supplement.

Our Haus is engaged in the construction business, a labor-intensive enterprise.

The success of its projects is largely a function of the physical strength, vitality and
efficiency of its laborers. Its business will be jeopardized if its workers are weak,
sickly, and lack the required energy to perform strenuous physical activities. Thus,
by ensuring that the workers are adequately and well fed, the employer is actually
investing on its business.

Moreover, in the construction business, contractors are usually faced with the
problem of meeting target deadlines. More often than not, work is performed
continuously, day and night, in order to finish the project on the designated turn-
over date. Thus, it will be more convenient to the employer if its workers are
housed near the construction site to ensure their ready availability during urgent
or emergency circumstances. Also, productivity issues like tardiness and
unexpected absences would be minimized.

Based on these considerations, we conclude that even under the purpose test,
the subsidized meals and free lodging provided by Our Haus are actually
supplements. Although they also work to benefit the respondents, an analysis of
the nature of these benefits in relation to Our Haus’ business shows that they
were given primarily for Our Haus’ greater convenience and advantage. If
weighed on a scale, the balance tilts more towards Our Haus’ side. Accordingly,
their values cannot be considered in computing the total amount of the
respondents’ wages.
#29

G.R. No. 176985 April 1, 2013

Ricardo E. Vergara, Jr

Vs

Coca-Cola Bottlers Philippines, Inc

FACTS:

Petitioner Ricardo E. Vergara, Jr. was an employee of respondent Coca-Cola

Bottlers Philippines, Inc. from May 1968 until he retired on January 31, 2002 as a
District Sales Supervisor for Las Pinas City, Metro Manila. As stipulated in
respondent’s existing Retirement Plan Rules and Regulations at the time, the
Annual Performance Incentive Pay of a DSS shall be considered in the
computation of retirement benefits.

Claiming his entitlement to an additional P474,600.00 as Sales Management

Incentives and to the amount of P496,016.67 which respondent allegedly
deducted illegally, representing the unpaid accounts of 2 dealers within his
jurisdiction, petitioner filed a complaint before the NLRC for the payment of his
“Full Retirement Benefits, Merit Increase, Commission/Incentives, Length of
Service, Actual, Moral and Exemplary Damages, and Attorney’s Fees.”

ISSUE:

Whether or not the SMI should be included in the computation of petitioner’s

retirement benefits on the ground of consistent company practice
RULING:

Generally, employees have a vested right over existing benefits voluntarily

granted to them by their employer. Thus, any benefit and supplement being
enjoyed by the employees cannot be reduced, diminished, discontinued or
eliminated by the employer. The principle of non-dimunition of benefits is actually
founded on the Constitutional mandate to protect the rights of workers, to
promote their welfare, and to afford them full protection.

There is diminution of benefits when the following requisites are present: (1) the
grant or benefit is founded on a policy or has ripened into a practice over a long
period of time; (2) the practice is consistent and deliberate; (3) the practice is not
due to error in the construction or application of a doubtful or difficult question of
law; and (4) the diminution or discontinuance is done unilaterally by the
employer.

To be considered as a regular company practice, the employee must prove by

substantial evidence that the giving of the benefit is done over a long period of
time, and that it has been made consistently and deliberately. Jurisprudence has
not laid down any hard-and-fast rule as to the length of time that company
practice should have been exercised in order to constitute voluntary employer
practice. The common denominator in previously decided cases appears to be the
regularity and deliberateness of the gran of benefits over a significant period of
time. It requires an indubitable showing that the employer agreed to continue
giving the benefit knowing fully well that the employees are not covered by any
provision of the law or agreement requiring payment thereof. In sum, the benefit
must be characterized by regularity, voluntary and deliberate intent of the
employer to grant the benefit over a considerable period of time.
 #30

G.R. No. 200010, August 27, 2020

Home Credit Mutual Building and Loan Association And/Or Ronnie B. Alcantara,

Vs

Ma. Rollette G. Prudente

FACTS

In 1997, Home Credit Mutual Building and Loan Association gave its employee
Rollette Prudente her first service vehicle. Later, Rollete purchased the vehicle
from Home Credit at its depreciated value.

In 2003, Home Credit granted Rollete's request for a second service vehicle.
However, Home Credit required Rollete to pay for additional equity in excess of
the maximum limit of P660,000.00.

In 2008, Rollete again purchased the vehicle at its depreciated value.

In 2009, Rollette applied for a third service vehicle. This time, Home Credit
informed Rollette that she must pay the equity more than P550,000.00. Home
Credit likewise adopted a cost sharing scheme where Rollette must shoulder 40%
of the acquisition price. Aggrieved, Rollette filed a complaint against Home Credit
for violation of Article 100 of the Labor Code on non-diminution of benefits
before the Labor Arbiter (LA).

Issue:

Whether an employer violated the rule on non-diminution of benefits when it

adopted a cost sharing scheme in its car plan for employees

RULING

The petition is meritorious.

There is no dispute that Rollette received service vehicles from Home Credit in
1997 and in 2003. The LA and the NLRC both held that the car plan has ripened
into a company practice but the specific manner by which it is given may vary and
is subject to management prerogative. On the other hand, the CA ruled that
Rollette is entitled to a service vehicle at full company cost as this benefit was part
of her hiring package. Also, Home Credit may not diminish this benefit which it
had practiced for a long period of time. The question now is whether the CA
committed reversible error in finding that Home Credit violated the rule against
diminution of benefits.

Generally, employees have a vested right over existing benefits that the employer
voluntarily granted them. These benefits cannot be reduced, diminished,
discontinued or eliminated consistent with the constitutional mandate to protect
the rights of workers and promote their welfare.Apropos is Article 100 of the
Labor Code, viz.:
ART. 100. Prohibition against Elimination or Diminution of Benefits. - Nothing in
this Book shall be construed to eliminate or in any way diminish supplements, or
other employee benefits being enjoyed at the time of promulgation of this Code.

The petition is GRANTED. The Court of Appeals' Decision dated August 31, 2011 in
CA-G.R. SP No. 117332 is REVERSED and SET ASIDE. The National Labor Relations
Commission's Decision dated August 5, 2010, which affirmed the labor arbiter's
dismissal of the complaint is REINSTATED.

#31

G.R. No. 201396, September 11, 2019

Yushi Kondo

Vs

Toyota Boshoku (Phils.) Corporation

FACTS:

Yushi Kondo (petitioner), a Japanese citizen, applied with and was hired by
respondent Toyota Boshoku Philippines Corporation (Toyota) on September 26,
2007 as Assistant General Manager for Marketing, Procurement and Accounting.
He was assured of different benefits including the use of a company car. Toyota
caused the issuance of petitioner's Alien Employment Permit (AEP). When
respondent Mamoru Matsunaga (Matsunaga) took over as President of Toyota,
petitioner was transferred to the Production Control, Technical Development and
Special Project department as Assistant Manager. Petitioner allegedly objected to
the transfer on the ground that it is in violation of the terms of his AEP, and
admitted having no knowledge, skills, and experience in production control and
technical development. Nonetheless, petitioner assumed his new post on July 1,
2008. On September 1, 2008, petitioner was notified that his service car and
driver will be withdrawn. On October 13, 2008, Toyota terminated the services of
petitioner's driver. Since petitioner could not report for work, he considered
himself constructively dismissed. On the same day, he filed a complaint with the
NLRC tor constructive dismissal, diminution of benefits, illegal transfer of
department, harassment, and discrimination against Respondents. Respondents
denied petitioner's allegations, arguing that petitioner was entitled to the service
car and driver only for a period of one year, after which he was expected to drive
himself to and from work. Labor Arbiter held that petitioner was constructively
dismissed. The NLRC reversed and set aside the LA Decision and dismissing
petitioner's complaint. The CA denied the Kondo’s appeal. It held that it is not the
function of certiorari proceedings to review the factual findings of the NLRC, Even
if the petition were to be treated as an appeal, the CA held that it is still
dismissible.

ISSUE:

A. Whether there exists dimunition of benefits in the present case. B. Whether

Kondo was illegally dismissed.

RULING:

A. NO. The Court has held that there is diminution of benefits when the following
are present:

(1) the grant or benefit is founded on a policy or has ripened into a practice over a
long period of time; (2) the practice is consistent and deliberate;

(3) the practice is not due to error in the construction or application of a doubtful
or difficult question of law; and
(4) the diminution or discontinuance is done unilateral1y by the employer. Under
the first requisite, the benefit must be based on express policy, a written contract
or has ripened into a practice. Here, the grant of service car and local driver to
petitioner was based neither on express policy or a written contract. It may also
not be considered company practice. To be considered as a regular company
practice, the benefit must be characterized by regularity and voluntary and
deliberate intent of the employer to grant the benefit over a considerable period
of time. The burden of proving that the benefit has ripened into practice rests in
the employee. In this case, petitioner failed to prove that the car and driver
benefits were also being enjoyed by other employees who held positions
equivalent to his position, or that the benefits were given by the company itself
with voluntary and deliberate intent. On the contrary, the record shows that
these benefits were granted by Toyota's former President specifically to
petitioner at the time he was hired, in a verbal agreement. As such, the grant of
the benefits may be viewed more as an accommodation given to petitioner by
virtue of him being a fellow Japanese working in a foreign, and presumably
unfamiliar, land.

#32

G.R. No. 208027 April 1, 2019

Philippine Journalists Inc

Vs

Erika Marie R. De Guzman And Edna Quirante

FACTS:

De Guzman and Quirante are both employees of PJI. De Guzman started with the
company on 1994 and left the company on 2008. On the other hand, Quirante
was employed since 1989 until 2009. In 2008 and 2009, respectively, they, in
separate letters, informed the company of their desire to avail of the company's
optional retirement plan as embodied in the CBA. Because of PJI's failure and
refusal to process the payment of the optional retirement benefits due them,
respondents filed a complaint against PJI and its officers. The Labor Arbiter
dismissed the complaint for lack of merit stating that the CBA categorized certain
positions as managerial and are therefore excluded from the bargaining unit.
Respondents are not rank and file employees and therefore not entitled to
optional retirement benefits. In finding for the respondents, the NLRC in its ruled
that as to the existence of an approved optional Retirement Plan, it sustains
respondents' contention. Respondents argued that even if there are categories of
employees who are excluded from the coverage of the CBA, the company, as a
matter of practice, has extended benefits under the CBA to those who have been
excluded. They cite in particular the cases of former employees who availed of,
and were granted optional retirement benefits despite being managerial
employees. The CA held that the despite being among those listed as excluded
from the coverage of the CBA, respondents can still avail of the optional
retirement benefits because it has been a company practice to grant retirement
benefits to PJI employees.

ISSUE:

Whether or not the grant of optional retirement benefits has been a company
practice - YES.

RULING:

The Court found CA’s pronouncement tenable that PJI's grant of optional
retirement benefits to its managerial employees and executive staff had ripened
into a company practice. Furthermore, the CA's ruling is correct in light of PJI's
conduct of pursuing a scheme to reduce its personnel by any means necessary,
which is both unfair and prejudicial to the interests of labor. In respondents' case,
operating under the honest belief that they could avail of an optional retirement
scheme that PJI allowed with respect to other employees in the past, respondents
tendered their resignation letters on the sole ground that they were availing of
the company's optional retirement package. The grant of optional retirement
benefits to two management employees in the past was voluntary, deliberate,
and done with sufficient regularity as would indicate that this had become a
company practice within PJI, which petitioners now refuse to apply in the case of
respondents, on the pretext that the company was losing money at that time. But
PJI was not incurring losses, and was in fact exhibiting conduct inconsistent with
the claim. What is clear is that it engaged in unfair labor activities and took an
anti-labor stance at the expense of its employees, including respondents. PJI has
shown that its employees interests take a backseat to the perks and prerogatives
of management. This cannot be countenanced.

33. NIPPON PAINT PHILIPPINES, INC. v. NIPPON PAINT PHILIPPINES EMPLOYEES’ ASSOCIATION G.R.
No. 229396, 30 June 2021, THIRD DIVISION (Inting, J.)

DOCTRINE OF THE CASE

There is diminution of benefits when the following requisites are present:

(a) The grant or benefit is founded on a policy or has ripened into a practice over a long period of time;
(b) The practice is consistent and deliberate;

(c) The practice is not due to error in the construction or application of a doubtful or difficult question of
law; and

(d) The diminution or discontinuance is done unilaterally by the employer.

Here, the Court found that Nippon Paint’s grant of additional holiday pay for Eidul Adha to its employees
for a period of two (2) years ripened into a company practice. Thus, it can no longer withdraw the grant
of such additional holiday pay without violating the principle of non-diminution of benefits. The Court
was not convinced that Nippon Paint merely erred in granting the additional holiday pay for Eidul Adha
considering that companies such as Nippon Paint have a meticulous financial audit every year. Thus, a
yearly audit of its finances particularly in the years 2010 and 2011 as reflected in its financial statements
should have made the purported error evident to it. And yet, it did not immediately rectify the
purported error as it took two years for it to stop the grant of the additional holiday pay for Eidul Adha.
Furthermore, its allegation that it only discovered the error in the payment of additional holiday pay for
Eidul Adha is unsubstantiated by any evidence.
FACTS

Nippon Paint Philippines, Inc. (Nippon Paint) and Nippon Paint Philippines Employees Association
(NIPPEA) entered into a Collective Bargaining Agreement (CBA) which provided that Nippon Paint agreed
to pay all of its employees their holiday remuneration pay every year on regular holidays listed therein.
In 2009, Republic Act No. 9849 (R.A. No. 9849) was enacted into law declaring the celebration of Eidul
Adha as a regular holiday.

Nippon Paint employees received their holiday pay for the enumerated regular holidays in 2010 and
2011, including an additional holiday pay for the Eidul Adha. However, upon the execution of a new CBA
in 2012, the Eidul Adha was not mentioned as one of the regular holidays. NIPPEA argued that
consistent with the company practice, the employees were entitled to 200% of their regular daily rate
for regular holidays, if unworked, and 300%, if worked. It claimed that the additional pay for the Eidul
Adha has ripened into a company practice which Nippon Paint could no longer recover as it would be
arbitrary, illegal, and tantamount to diminution of benefits.

The Voluntary Arbitrator (VA) ruled that the overpayment made by reason of payroll system error
cannot be considered as a voluntary employer practice. The VA also noted that the 2007 CBA did not
state that future regular holidays shall be automatically included in the list of holidays therein, and that
being excluded from the list Eidul Adha cannot be deemed subsumed thereto. NIPPEA filed a Petition for
Review before the Court of Appeals (CA). The CA granted the petition and considered as company
practice Nippon Paint’s grant of an additional holiday pay for the Eidul Adha to its employees in addition
to what was mandated by law. It declared that, as a rule, Nippon Paint employees have a vested right
over the existing benefit which cannot be reduced, diminished, discontinued, or eliminated by the
company.

ISSUE

Are Nippon Paint employees entitled to additional 100% pay in 2012 and 2013 for the Eidul Adha
holiday?

RULING

YES. Article 100 of the Labor Code on the principle of non-diminution of benefits provides that
employees have a vested right over existing benefits voluntarily granted to them by their employer. Any
benefit and supplement being enjoyed by the employees cannot be reduced, diminished, discontinued,
or eliminated by the employer.

There is diminution of benefits when the following requisites are present:

(a) The grant or benefit is founded on a policy or has ripened into a practice over a long period of time;
(b) The practice is consistent and deliberate;

(c) The practice is not due to error in the construction or application of a doubtful or difficult question of
law; and 2022] LANDMARK CASES 208

(d) The diminution or discontinuance is done unilaterally by the employer.

Here, the Court found that Nippon Paint’s grant of additional holiday pay for Eidul Adha to its employees
for a period of two (2) years ripened into a company practice. Thus, it can no longer withdraw the grant
of such additional holiday pay without violating the principle of non-diminution of benefits. The Court
was not convinced that Nippon Paint merely erred in granting the additional holiday pay for Eidul Adha
considering that companies such as Nippon Paint have a meticulous financial audit every year. Thus, a
yearly audit of its finances particularly in the years 2010 and 2011 as reflected in its financial statements
should have made the purported error evident to it. And yet, it did not immediately rectify the
purported error as it took two years for it to stop the grant of the additional holiday pay for Eidul Adha.
Furthermore, its allegation that it only discovered the error in the payment of additional holiday pay for
Eidul Adha is unsubstantiated by any evidence.

The Court found as immaterial to the case the fact that Eidul Adha was not included in the 2012 CBA's
list of regular holidays for which Nippon Paint’s employees would receive additional holiday pay. The
source of the entitlement of its employees to the subject additional benefit is not the CBA but company
practice. All told, the Court found that its payment of additional holiday pay for Eidul Adha in favor of its
employees has ripened into a company practice which can no longer be withdrawn by Nippon Paint.
Thus, Nippon Paint has the obligation to pay its employees additional holiday pay for Eidul Adha.

34. National Federation v. NLRC Digest

National Federation of Labor v. NLRC

GR No. 103586

Facts:

1. Wage orders 3, 4, 5 & 6 were implemented for a year which effectively icnreased the statutory
minimum wages of workers. In the private respondent's company (Franklin Baker Corp.) the wage rates
of the regular employees and casuals were such that there wasa positive differential between 2 in the
amount of P4.56. After Wage Order No. 5, this differential is not zero. As a result, grievance meetings
were held between the parties. It resulted to the following action on the part of the employer: a)
regularization of casual employees, b) increase in the wages of the regular employees, and the c) grant
of across the board increase of P2 to all the regular employees.
2. The company experienced output slowdown resulting to the dismissal of 205 employees. The
petitioner union went on strike and demand the rectification of the wage distortion. The NLRC in its
decision found the existence of a wage distortion and ordered the respondent company to increase
wage by P1.00. However, the NLRC Fifth division held (after an MR) that the wage distortion only existed
for 15 days and has ceased.

Issue: W/N it is within management prerogative or discretion to implement a new classification of its
employees

RULING:

Yes. It is a decision that lies outside the concept of 'wage distortion.' It is a decision that the company
must make either in conjuction with employee negotiation. It is not therefore within the power of the
NLRC to impose unilaterally a new scheme for the classification of employees under the guise of
rectifying a wage distortion when none has been established either by CBA or by management decision.

The court held that wage increases given by employers either unilaterally or as a result of collective
bargaining negotiations should be validated as an action on the part of the employer to correct the wage
distortion caused by the implementation of the wage orders.

Moreover, the regularization of the casual employees with the increases in the wages of the regulars
made the issue on wage distortion academic

35. BANKARD EMPLOYEES UNION-WORKERS ALLIANCE TRADE UNIONS, petitioner, vs. NATIONAL
LABOR RELATIONS COMMISSION and BANKARD, INC., respondents. (G.R. No. 140689, THIRD
DIVISION, February 17, 2004, CARPIO MORALES, J.)

The employees of private respondent have been "historically" classified into levels, i.e. I to V, and not on
the basis of their length of service. Put differently, the entry of new employees to the company ipso
facto place[s] them under any of the levels mentioned in the new salary scale which private respondent
adopted retroactive [to] April 1, 1993. Petitioner cannot make a contrary classification of private
respondent’s employees without encroaching upon recognized management prerogative of formulating
a wage structure, in this case, one based on level.

It is thus clear that there is no hierarchy of positions between the newly hired and regular employees of
Bankard, hence, the first element of wage distortion is wanting. While seniority may be a factor in
determining the wages of employees, it cannot be made the sole basis in cases where the nature of their
work differs. Moreover, for purposes of determining the existence of wage distortion, employees cannot
create their own independent classification and use it as a basis to demand an across-the-board increase
in salary. The formulation of a wage structure through the classification of employees is a matter of
management judgment and discretion.

In trying to prove wage distortion, petitioner union presented a list of five employees allegedly affected
by the said increase. Even assuming that there is a decrease in the wage gap between the pay of the old
employees and the newly hired employees, said gap is not significant as to obliterate or result in severe
contraction of the intentional quantitative differences in the salary rates between the employee group.

FACTS:

Bankard, Inc. classifies its employees by levels, to wit: Level I, Level II, Level III, Level IV, and Level V. In
1993, its Board of Directors approved a "New Salary Scale" for the purpose of making its hiring rate
competitive in the industry’s labor market. The "New Salary Scale" increased the hiring rates of new
employees, to wit: Levels I and V by one thousand pesos (P1,000.00), and Levels II, III and IV by nine
hundred pesos (P900.00). Accordingly, the salaries of employees who fell below the new minimum rates
were also adjusted to reach such rates under their levels.

Bankard’s move drew the Bankard Employees Union-WATU, the duly certified exclusive bargaining agent
of the regular rank and file employees of Bankard, to press for the increase in the salary of its old,
regular employees.

Bankard took the position, however, that there was no obligation on the part of the management to
grant to all its employees the same increase in an across-the-board manner. The Second Division of the
NLRC, finding no wage distortion, dismissed the case for lack of merit. Petitioner thereupon filed a
petition for certiorari before the Supreme Court. In accordance with its ruling in St. Martin Funeral
Homes v. NLRC, the petition was referred to the CA which denied the same for lack of merit. Hence, the
present petition.

ISSUE: Whether or not there is wage distortion in this case? (NO)

RULING:

Prubankers Association v. Prudential Bank and Trust Company laid down the four elements of wage
distortion, to wit: (1.) An existing hierarchy of positions with corresponding salary rates; (2) A significant
change in the salary rate of a lower pay class without a concomitant increase in the salary rate of a
higher one; (3) The elimination of the distinction between the two levels; and (4) The existence of the
distortion in the same region of the country.

The employees of private respondent have been "historically" classified into levels, i.e. I to V, and not on
the basis of their length of service. Put differently, the entry of new employees to the company ipso
facto place[s] them under any of the levels mentioned in the new salary scale which private respondent
adopted retroactive [to] April 1, 1993. Petitioner cannot make a contrary classification of private
respondent’s employees without encroaching upon recognized management prerogative of formulating
a wage structure, in this case, one based on level.

It is thus clear that there is no hierarchy of positions between the newly hired and regular employees of
Bankard, hence, the first element of wage distortion is wanting. While seniority may be a factor in
determining the wages of employees, it cannot be made the sole basis in cases where the nature of their
work differs. Moreover, for purposes of determining the existence of wage distortion, employees cannot
create their own independent classification and use it as a basis to demand an across-the-board increase
in salary. The formulation of a wage structure through the classification of employees is a matter of
management judgment and discretion.

In trying to prove wage distortion, petitioner union presented a list of five employees allegedly affected
by the said increase. Even assuming that there is a decrease in the wage gap between the pay of the old
employees and the newly hired employees, said gap is not significant as to obliterate or result in severe
contraction of the intentional quantitative differences in the salary rates between the employee group.

Petitioner cannot legally obligate Bankard to correct the alleged "wage distortion" as the increase in the
wages and salaries of the newly-hired was not due to a prescribed law or wage order. The wordings of
Article 124 are clear. If applied to voluntary and unilateral increases by the employer in fixing hiring
rates which is inherently a business judgment prerogative, then the hands of the employer would be
completely tied even in cases where an increase in wages of a particular group is justified due to a re-
evaluation of the high productivity of a particular group, or as in the present case, the need to increase
the competitiveness of Bankard’s hiring rate. An employer would be discouraged from adjusting the
salary rates of a particular group of employees for fear that it would result to a demand by all employees
for a similar increase, especially if the financial conditions of the business cannot address an across-the-
board increase.

In fine, absent any indication that the voluntary increase of salary rates by an employer was done
arbitrarily and illegally for the purpose of circumventing the laws or was devoid of any legitimate
purpose other than to discriminate against the regular employees, the Court will not step in to interfere
with this management prerogative. Employees are of course not precluded from negotiating with its
employer and lobby for wage increases through appropriate channels, such as through a CBA.

36. PRUBANKERS ASSOCIATION vs. PRUDENTIAL BANK & TRUST COMPANY G. R. No. 131247 January
25, 1999 J. Panganiban

Facts:

1. That on November 18, 1993, the Regional Tripartite Wages and Productivity Board of Region V issued
Wage Order No. RB 05-03 a. Provided for a Cost of Living Allowance (COLA) to workers in the private
sector who has rendered service for at least 3 months before its effectivity and for the period after
period i. 17.50 in Naga and Legaspi ii. 15.50 in municipalities Tobaco, Daraga, Pili, Legaspi iii. 10 for all
the areas in the Bicol Region

2. November 23, 1993 RTWPB Region VII issued Wage Order No. RB VII-03, which directed the
integration of the COLA mandated pursuant to WO RO VII-02-A into the basic pay of all workers. The
wage order also called for an increase in the minimum wage rates for all workers and employees in the
private sector as follows:

a. 10 in Cebu, Mandaue, Lapulapu

b. 5 in the municipalities of Compostela, Liloan, Consolacion, Cordova, Talizay, Manglanilla, Naga and the
cities of Davao, Toledo, Dumaguete, Bais, Canlaon and Tagbilaran

3. Pursuant to the said WO, Prudential Bank and Trust Company granted COLA of 17.50 to Naga branch
only and integrated COLA in to the basic pay of the rank and file employees at its Cebu, Mabolo and P.
Del Rosario branches

4. That on June 7, 1994, Prubankers Association wrote to Prudential bank requesting the Labor
Management Committee be immediately convened to discuss and resolve the alleged wage distortion
created in the salaray structure upon the implementation of the WO.

a. Demanded in the Labor Management Committee meetings that the petitioner extend the application
of the wage orders to its employees outside Regions V and VII, claiming that the regional
implementation of the said orders creates wage distortion in the wage rates of Prudential Bank
employees’ nation wide

i. Agreed to submit the matter in the Voluntary Arbitration

5. VA: there is wage distortion

6. CA: no wage distortion a. That the variance in the salary rates of employees in different regions of the
country was justified by RA 6727 b. The distinctions between each employee group in the region are
maintained, as all employees were granted an increase in minimum wage rate.

Issue: W/N there is wage distortion, NO

Held:

The statutory definition of wage distortion is found in Article 124 of the Labor Code, as amended by
Republic Act No. 6727, which reads:

Art. 124. Standards/Criteria for Minimum Wage Fixing — . . . As used herein, a wage distortion shall
mean a situation where an increase in prescribed wage results in the elimination of severe contraction
of intentional quantitative differences in wage or salary rates between and among employee groups in
an establishment as to effectively obliterate the distinctions embodied in such wage structure based on
skills, length of service, or other logical bases of differentiation.
Elaborating on this statutory definition, this Court ruled: "Wage distortion presupposes a classification of
positions and ranking of these positions at various levels. One visualizes a hierarchy of positions with
corresponding ranks basically in terms of wages and other emoluments. Where a significant change
occurs at the lowest level of positions in terms of basic wage without a corresponding change in the
other level in the hierarchy of positions, negating as a result thereof the distinction between one level of
position from the next higher level, and resulting in a parity between the lowest level and the next
higher level or rank, between new entrants and old hires, there exists a wage distortion. . . . .

The concept of a wage distortion assumes an existing grouping or classification of employees which
establishes distinctions among such employees on some relevant or legitimate basis. This classification is
reflected in a differing wage rate for each of the existing classes of employees"

Wage distortion involves four elements:

1. An existing hierarchy of positions with corresponding salary rates

2. A significant change in the salary rate of a lower pay class without a concomitant increase in the salary
rate of a higher one

3. The elimination of the distinction between the two levels

4. The existence of the distortion in the same region of the country

37. PNB vs. PHILIPPINE NATIONAL BANK EMPLOYEES ASSOCIATIONG.R. No. L-30279July 30, 1982

Facts:

The case involves a 25 year dispute. PNB assails the decision of the Court of Industrial Relations pursuant
to a jurisprudence (NAWASA vs NAWASA Consolidated Unions) that in the computation of overtime pay
the cost of living pay and longevity pay be taken into account. PNB questions the ruling doctrine as well
as asks the court for the correct interpretation of CA 444 or the eight hour law in the determination of
the overtime pay.

Issue: Whether or not the cost of living allowance and longevity pay be included in the computation of
overtime pay

Held:

The cost-of-living allowance began to be granted in 1958 and the longevity pay in 1981. In other words,
they were granted by PNB upon realizing the difficult plight of its labor force in the face of the unusual
inflationary situation in the economy of the country, which, however acute, was nevertheless expected
to improve. There was thus evident an inherently contingent character in said allowances. They were
not intended to be regular, much less permanent additional part of the compensation of the employees
and workers. Also with the longevity pay; manifestly, this was not based on the daily or monthly amount
of work done or service rendered it was more of a gratuity for their loyalty, or their having been in the
bank's employment for consideration periods of time. What are decisive in determining the basis for the
computation of overtime pay are two very germane considerations, namely,

(1) whether or not the additional pay is for extra work done or service rendered and (2) whether or not
the same is intended to be permanent and regular, not contingent nor temporary and given only to
remedy a situation which can change any time.

Overtime pay is for extra effort beyond that contemplated in the employment contract, hence when
additional pay is given for any other purpose, it is illogical to include the same in the basis for the
computation of overtime pay. This holding supersedes NAWASA.

38. [ GR No. 236331, Sep 14, 2020 ]

RNB GARMENTS PHILIPPINES v. RAMROL MULTI-PURPOSE COOPERATIVE

RNB is a corporation engaged in manufacturing and exporting quality garments, while RMPC is a
[7]
cooperative duly registered with the Cooperative Development Authority. In pursuit of its business,
RNB engaged the services of RMPC, which undertook to manufacture garments in accordance with
[8]
RNB's specifications. Pursuant to their agreement, the services of Desacada, et al. were engaged.
They performed their respective tasks as sewers, trimmers, reviser, quality control staff, and sewing
[9]
mechanic.

On 10 October 2011, RNB decided to stop loading RMPC's sewing line until further notice, claiming to
[10]
have suffered from "very minimal loading" of orders from its principal vendor, Champan. Allegedly,
[11]
this led to Desacada, et al.'s temporary lay-off for more than six (6) months.

Denying employer-employee relationship with Desacada, et al., RNB assailed the LA's jurisdiction over
the illegal dismissal complaints. RNB pointed to RMPC as Desacada, et al.'s employer, claiming the same
[14]
to be an independent contractor.

For its part, RMPC invoked that it is a legitimate independent contractor duly registered with the
Department of Labor and Employment (DOLE). While acknowledging Desacada, et al. as its employees,
RMPC belied their claims of illegal dismissal. It explained that their employment was merely suspended,
[15]
invoking the purported suspension of operation coming from RNB's principal vendor.

[16]
In their Reply, Desacada, et al. averred that RMPC is a labor-only contractor, having no substantial
capital in the form of tools, equipment, machineries, and work premises, and that RMPC merely
supplied workers to RNB. They argued that their respective functions as sewers, trimmers, reviser,
quality control staff, and sewing mechanic were directly related to RNB's principal business. They added
that they worked under the direct control and supervision of RNB as to the means and methods of their
[17]
work.

The Issues

RNB and RMPC both submit to the Court the following issues:

1. Whether the CA erred in declaring that RMPC is a labor-only contractor;

RMPC is a labor-only contractor

As defined under Article 106 of the Labor Code, labor-only contracting, a prohibited act, is an
arrangement where the contractor, who does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among others, supplies workers to an employer and the
workers recruited are performing activities which are directly related to the principal business of such
employer.

On the other hand, permissible or legitimate job contracting or subcontracting, as defined by the Court
in Norkis Trading Corporation v. Buenavista,[66] viz.:

[R]efers to an arrangement whereby a principal agrees to put out or farm out with the contractor or
subcontractor the performance or completion of a specific job, work, or service within a definite or
predetermined period, regardless of whether such job, work, or service is to be performed or completed
within or outside the premises of the principal. A person is considered engaged in legitimate job
contracting or subcontracting if the following conditions concur: (a) the contractor carries on a distinct
and independent business and partakes the contract work on his account under his own responsibility
according to his own manner and method, free from the control and direction of his employer or
principal in all matters connected with the performance of his work except as to the results thereof; (b)
the contractor has substantial capital or investment; and (c) the agreement between the principal and
the contractor or subcontractor assures the contractual employees' entitlement to all labor and
occupational safety and health standards, free exercise of the right to self-organization, security of
tenure, and social welfare benefits.[67]

Section 5 of Department Order No. 18-02 of the Rules Implementing Articles 106 to 109 of the Labor
Code, as amended, provides what constitutes "substantial capital or investment" and "right of control,"
viz.:

"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements, machineries and work premises, actually and directly used
by the contractor or subcontractor in the performance or completion of the job work or service
contracted out.
The "right to control" shall refer to the right reserved to the person for whom the services of the
contractual workers are performed, to determine not only the end to be achieved, but also the manner
and means to be used in reaching that end.

39. MARVIN O. DAGUINOD, petitioner, v. SOUTHGATE FOODS INC., represented by MAUREEN O.

FERRER and GENERATION ONE RESOURCE SERVICE AND MULTIPURPOSE COOPERATIVE: represented
by RESTY CRUZ, respondents

G.R. No. 227795 | February 20, 2019

TOPIC: Contract and Subcontracting of Labor

FACTS:

Petitioner Marvin Daguinod was assigned as counter crew/cashier of Jollibee Alphaland pursuant to a
Service Agreement that Generation One Resource Service and Multi-Purpose Cooperative will provide
“specified non-core functions and operational activities” for the franchise operator Southgate Foods,
Inc’s Jollibee Alphaland branch.

Daguinod also executed a Service Contract with Generation One which stated that Generation One was
contracted by Southgate to perform “specified peripheral and support services.” In the Service Contract,
Daguinod was referred to as a service provider and member of Generation One cooperative. The specific
work responsibilities to be performed by Daguinod were left blank. The period of Daguinod’s services
was stated as “beginning Sept. 9, 2010 until the end of the project.”

To become a member of Generation One, Daguinod was required to pay a membership fee of P250.00
and participate in “capital build-up and savings program” which obligated him to acquire 150 paid-up
share in Generation One, valued at P1,500.00. Prior to his employment/membership in Generation One
cooperative, Daguinod was employed directly bu Southgate as counter crew.

On April 10, 2011, Daguinod was accused of theft and was then dismissed.

ISSUES:

Whether Generation One is a legitimate labor contractor

RULING:

Generation One is not a legitimate labor contract, thus, Daguinod is a regular employee of Southgate.

Under Section 4(a) of DO 18-02, legitimate labor contracting or subcontracting refers to an arrangement
whereby a principal agrees to put out or farm out with a contractor or subcontractor the performance
or completion of a specific job, work, or service within a definite or predetermined period, regardless of
whether such job, work or service is to be performed or completed within or outside the premises of the
principal. The “principal” refers to any employer who puts out or farms out a job service or work to a
contractor or subcontractor.

Meanwhile, labor-only contracting is prohibited and defined under Section 5 of DO 18-02. When there is
labor-only contracting, Section 7 of DO 18-02 states that the principal shall be deemed the employer of
the contractual employee.

In Garden of Memories Park and Life Plan, Inc. v. NLRC, the Court said that in determining the existence
of an independent contractor relationship, several factors may be considered, such as, but not
necessarily confined to, whether or not the contractor is carrying on an independent business; the
nature and extent of the work; the skill required; the term and duration of the relationship; the right to
assign the performance of specified pieces of work; the control and supervision of the work to another;
the employer’s power with respect to the hiring, firing and payment of the contractor’s workers; the
control of the premises; the duty to supply premises, tools, appliances, materials and labor; and the
mode, manner and terms of payment.

On the other hand, there is labor-only contracting where: (a) the person supplying workers to an
employer does not have substantial capital or investment in the form of tools, equipment, machineries,
work premises, among others; and (b) the workers recruited and placed by such person are performing
activities which are directly related to the principal business of the employer.

Based on this, one of the factors in determining whether there is a labor-only contracting is the nature
of the employee’s job; whether the work he performs is necessary and desirable to the business.

In this particular case, Daguinod was assigned to perform cash control activities which entails gathering
of orders and assembling food on the tray for dine-in customers or for take-out. As cashier, Daguinod
was also tasked to receive payments and give change. These tasks are undoubtedly necessary and
desirable for a business like that of Jollibee. It is not merely a non-core or peripheral activity as
Generation One and Southgate claim. These circumstance lead to no other conclusion than that
Daguinod was a regular employee of Southgate and that Generation One was a mere agent of
Southgate.

The ownership of substantial capital in the form of tools, equipment, machineries, work premises, and
other properties, by the contractor is another factor in establishing whether it is legitimate. Generation
One submitted only one Income Tax Return for the year December 2010 but did not submit any Audited
Financial Statements to show its assets, liabilities, and equity. It only submitted notes to the AFS for the
year ended 2010 which does not show a complete picture of its financial standing. In fine, the
documents submitted are insufficient to prove that Generation One possesses substantial capital to be
considered a legitimate labor contractor.

Generation One cannot rely either on their Certificate of Registration as an Independent Contractor
issued by the DOLE. In San Miguel Corporation v. Semillano, the Court ruled that it is not a conclusive
evidence of being a legitimate labor contractor. The fact of registration simply prevents the legal
presumption of being a mere labor-only contractor from arising. In distinguishing between permissible
job contracting and prohibited labor-only contracting, the totality of the facts and the surrounding
circumstances of the case are to be considered.
A perusal of Daguinod’s Service Contract shows that the specific work responsibilities were unspecified,
leaving the “other requirements to perform the services to be part of the orientation at the designated
place of assignment,” thus, suggesting that the right to determine not only the end to be achieved, but
also the manner and means to achieve that end, was reposed in Southgate. Consequently, Southgate
shall be deemed as the direct employer of Daguinod.

40. ALLIED BANKING CORPORATION, now merged with PHILIPPINE NATIONAL BANK, petitioner

vs. REYNOLD CALUMPANG, respondent

G.R. No. 219435 | January 17, 2018

TOPIC: Contracting and Subcontracting of Labor

FACTS:

Petitioner Allied Banking Corporation and Race Cleaners, Inc. entered into a Service Agreement whereby
RCI will provide Allied with messengerial, janitorial, communication, and maintenance services.

On Sept. 28, 2003, respondent Reynold Calumpang was hired as a janitor by RCI and was assigned at the
bank’s Tanjay City Branch.

Petitioner observed that whenever respondent went out on errands, it takes a long time for him to
return to the branch. It was eventually discovered that during these times, respondent was also plying
his pedicab and ferrying passengers. The Bank Manager also found out that respondent has been
borrowing money from several clients of the branch. He was then told by the Bank Manager that his
services was no longer needed.

Thereafter, respondent filed a complaint for illegal dismissal and underpayment of wages against
petitioner before the NLRC.

In his position paper, respondent asserted that the four-fold test of employer-employee relationship is
present between him and the bank. He averred that he was a regular employee of the Bank assigned as
a janitor of the branch with a salary P4,200 payable every 15 days each month, and assigned such other
tasks essential and necessary for the Bank’s business.

He alleged that petitioner engaged his services and exercised direct control and supervision over him,
through the Branch Head, not only as to the result of his work but also as to the means and methods by
which the same was to be accomplished. As regards the payment of salary, respondent claimed that it
was the Branch that directly paid his salaries and wages. As for the power of dismissal, respondent
further alleged that it was petitioner Bank, through its Branch Head, who terminated his services.

Pettitioner denied the existence of any employer-employee relationship between itself and respondent.
It asserted that respondent was clearly an employee of RCI by virtue of the Service Agreement which
clearly indicated in Article XI thereof that there would be no employer-employee relationship between
RCI’s employees and the Bank. It further averred that RCI is a qualified job contractor because of its
capitalization and the fact that it exercised control and supervision over its employees deployed at the
branches of the petitioner in accordance with Rule VIII-A, Sec. 4, pars. (d) & (e) of the Omnibus Rules
Implementing the Labor Code.

ISSUE:

1. Whether RCI is a labor-only contractor

2. Whether there exists an employer-employee relationship between the Bank and the respondent

RULING:

Permissible job contracting or subcontracting has been distinguished from labor-only contracting such
that permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees
to put out or farm out to a contractor the performance or completion of a specific job, work or service
within a definite or predetermined period, regardless of whether such job, work or service is to be
performed or completed within or outside the premises of the principal, while labor-only contracting, on
the other hand, pertains to an arrangement where the contractor or subcontractor merely recruits,
supplies or places workers to perform a job, work or service for a principal.

As a general rule, a contractor is presumed to be a labor-only contractor, unless such contractor

overcomes the burden of proving that it has the substantial capital, investment, tools and the like.

In the present case, petitioner failed to establish that RCI is a legitimate labor contractor as
contemplated under the Labor Code. Except for the bare allegation of petitioner that RCI had substantial
capitalization, it presented no supporting evidence to show the same. Aside from this, petitioner’s claim
that RCI exercised control and supervision over respondent is belied by the fact that petitioner admitted
that its own Branch Manager had informed respondent that his services would no longer be required at
the Branch. Moreover, respondent’s work is related to petitioner’s business and is characterized as part
of or in pursuit of its banking operations.

A finding that a contractor is a labor-only contractor, as opposed to permissible job contracting, is

equivalent to declaring that there is an employer-employee relationship between the principal and the
employees of the supposed contractor, and the labor-only contractor is considered as a mere agent of
the principal, the real employer.

In this case, petitioner bank is the principal employer and RCI is the labor-only contractor. Accordingly,
petitioner and RCI are solidarily liable for the rightful claims of respondent.
57. G.R. No. 120095 August 5, 1996

JMM PROMOTION AND MANAGEMENT, INC., and KARY INTERNATIONAL, INC., petitioner,

vs.

HON. COURT OF APPEALS, HON. MA. NIEVES CONFESSOR, then Secretary of the
Department of Labor and Employment, HON. JOSE BRILLANTES, in his capacity as acting
Secretary of the Department of Labor and Employment and HON. FELICISIMO JOSON, in his
capacity as Administrator of the Philippine Overseas Employment Administration, respondents.

Facts:

in 1991, former President Corazon C. Aquino ordered a total ban against the deployment of
performing artists to Japan and other foreign destinations. the government, through the
Secretary of Labor and Employment, subsequently issued Department Order No. 28, creating
the Entertainment Industry Advisory Council (EIAC), which was tasked with issuing guidelines
on the training, testing certification and deployment of performing artists abroad.

Pursuant to the EIAC's recommendations,1 the Secretary of Labor, on January 6, 1994, issued
Department Order No. 3 establishing various procedures and requirements for screening
performing artists under a new system of training, testing, certification and deployment of the
former. Performing artists successfully hurdling the test, training and certification requirement
were to be issued an Artist's Record Book (ARB), a necessary prerequisite to processing of any
contract of employment by the POEA. Upon request of the industry, implementation of the
process, originally scheduled for April 1, 1994, was moved to October 1, 1994.

the Federation of Entertainment Talent Managers of the Philippines (FETMOP), on January 27,
1995 filed a class suit assailing these department orders, principally contending that said orders
1) violated the constitutional right to travel; 2) abridged existing contracts for employment; and
3) deprived individual artists of their licenses without due process of law. FETMOP, likewise,
averred that the issuance of the Artist Record Book (ARB) was discriminatory and illegal and "in
gross violation of the constitutional right... to life liberty and property." Said Federation
consequently prayed for the issuance of a writ of preliminary injunction against the aforestated
orders.

On February 2, 1992, JMM Promotion and Management, Inc. Kary International, Inc., herein
petitioners, filed a Motion for Intervention in said civil case, which was granted by the trial court
in an Order dated 15 February, 1995.

However, on February 21, 1995, the trial court issued an Order denying petitioners prayed for a
writ of preliminary injunction and dismissed the complaint.

On appeal from the trial court's Order, respondent court, in CA G.R. SP No. 36713 dismissed
the same. Tracing the circumstances which led to the issuance of the ARB requirement and the
assailed Department Order, respondent court concluded that the issuance constituted a valid
exercise by the state of the police power.

Issue:

Whether or not the said issuance constituted a valid exercise by the state of the police power.

Ruling:

Yes, the said issuance constituted a valid exercise by the state. Of the police power.

The latin maxim salus populi est surprema lex embodies the character of the entire spectrum of
public laws aimed at promoting the general welfare of the people under the State's police
power. As an inherent attribute of sovereignty which virtually "extends to all public needs,"2 this
"least limitable"3 of governmental powers grants a wide panoply of instruments through which
the state, as parens patriae gives effect to a host of its regulatory powers.

Thus, police power concerns government enactments which precisely interfere with personal
liberty or property in order to promote the general welfare or the common good. As the assailed
Department Order enjoys a presumed validity, it follows that the burden rests upon petitioners to
demonstrate that the said order, particularly, its ARB requirement, does not enhance the public
welfare or was exercised arbitrarily or unreasonably.

As to the other provisions of Department Order No. 3 questioned by petitioners, we see nothing
wrong with the requirements for document and booking confirmation (D.O. 3-C), a minimum
salary scale (D.O. 3-E), or the requirement for registration of returning performers. The
requirement for a venue certificate or other documents evidencing the place and nature or work
allows the government closer monitoring of foreign employers and helps keep our entertainers
away from prostitution fronts and other worksites associated with unsavory, immoral, illegal or
exploitative practices. Parenthetically, none of these issuances appear to us, by any stretch of
the imagination, even remotely unreasonable or arbitrary. They address a felt need of according
greater protection for an oft-exploited segment of our OCW's. They respond to the industry's
demand for clearer and more practicable rules and guidelines. Many of these provisions were
fleshed out following recommendations by, and after consultations with, the affected sectors and
non-government organizations. On the whole, they are aimed at enhancing the safety and
security of entertainers and artists bound for Japan and other destinations, without stifling the
industry's concerns for expansion and growth.

In any event, apart from the State's police power, the Constitution itself mandates government
to extend the fullest protection to our overseas workers. The basic constitutional statement on
labor, embodied in Section 18 of Article II of the Constitution provides:

Sec. 18. The State affirms labor as a primary social economic force. It shall protect the rights of
workers and promote their welfare.

More emphatically, the social justice provisions on labor of the 1987 Constitution in its first
paragraph states:

The State shall afford full protection to labor, local and overseas, organized and unorganized
and promote full employment and equality of employment opportunities for all.

In any case, where the liberty curtailed affects at most the rights of property, the permissible
scope of regulatory measures is certainly much

wider.14 To pretend that licensing or accreditation requirements violates the due process clause
is to ignore the settled practice, under the mantle of the police power, of regulating entry to the
practice of various trades or professions. Professionals leaving for abroad are required to pass
rigid written and practical exams before they are deemed fit to practice their trade. Seamen are
required to take tests determining their seamanship. Locally, the Professional Regulation
Commission has began to require previously licensed doctors and other professionals to furnish
documentary proof that they has either re-trained or had undertaken continuing education
courses as a requirement for renewal of their licenses. It is not claimed that these requirements
pose an unwarranted deprivation of a property right under the due process clause. So long as
professionals and other workers meet reasonable regulatory standards no such deprivation
exists.

Finally, it is a futile gesture on the part of petitioners to invoke the non-impairment clause of the
Constitution to support their argument that the government cannot enact the assailed regulatory
measures because they abridge the freedom to contract. In Philippine Association of Service
Exporters, Inc. vs. Drilon, we held that "[t]he non-impairment clause of the Constitution... must
yield to the loftier purposes targeted by the government."15 Equally important, into every
contract is read provisions of existing law, and always, a reservation of the police power for so
long as the agreement deals with a subject impressed with the public welfare.

The equal protection clause is directed principally against undue favor and individual or class
privilege. It is not intended to prohibit legislation which is limited to the object to which it is
directed or by the territory in which it is to operate. It does not require absolute equality, but
merely that all persons be treated alike under like conditions both as to privileges conferred and
liabilities imposed.16 We have held, time and again, that the equal protection clause of the
Constitution does not forbid classification for so long as such classification is based on real and
substantial differences having a reasonable relation to the subject of the particular legislation.17
If classification is germane to the purpose of the law, concerns all members of the class, and
applies equally to present and future conditions, the classification does not violate the equal
protection guarantee.

WHEREFORE, finding no reversible error in the decision sought to be reviewed, petition is

hereby DENIED.

SO ORDERED.

58. G.R. No. 167614 March 24, 2009

ANTONIO M. SERRANO, Petitioner,

vs.

Gallant MARITIME SERVICES, INC. and MARLOW NAVIGATION CO., INC., Respondents.

Facts:

According to Antonio Serrano, the Republic Act (R.A.) No. 8042's Section 10's Fifth Paragraph
breaches the constitutional rights of foreign workers by undermining the terms of their
employment contracts, denying them equal protection under the law, and depriving them of due
process.

Antonio Serrano, a Filipino seafarer with a 12-month contract and a basic monthly salary of
US$1400, was engaged as Chief Officer by Gallant Maritime Services Inc. and Marlow
Navigation Co., Inc. However, on March 19, when he left, Serrno was forced to accept a lower-
paying job as a Second Officer in 1998 with a monthly salary of US$1,000 on the promise that
he would be promoted to Chief Officer by the end of April. Serrano spent just 2 months and 7
days of the 12 month contract but was returned to the Philippines because the respondents
broke their commitment and he refused to continue serving as the second officer.

Serrano brought a claim for constructive dismissal, payment of money claims totaling
US$26442.73, moral and exemplary damages, and attorney's expenses before the Labor
Arbiter.

Labor Arbiter: SERANO WAS DECLARED ILLEGALLY DISMISSED AND AWARDED MONEY
BENEFITS REPRESENTING SERANO'S SALARY FOR THREE (3) MONTHS OF THE
REMAINDER OF HIS EMPLOYMENT CONTRACT AT THE EXCHANGE RATE OF USD45
AND ATTORNEY'S FEES EQUIVALENT TO 10% OF TOTAL AMOUNT AWARDED (TOTAL
USD8,770). Serrano's base salary ($1,400), set overtime pay ($700), and vacation pay served
as the foundation for LA (USD490).
Serrano filed an appeal with the NLRC, claiming that Tripe Intefrated Services Inc v. NLRC
gives him the right to his wages for the remaining time on his contract.

NLRC: The NLRC changed the financial awards and ordered respondents to pay just USD4669,
which is equal to 3 months' salary (USD1400 x 3); salary differential of USD45; and 10%
attorney's costs of USD424.5 .citing that No. 8042 "does not provide for the award of overtime
compensation, which should be demonstrated to have been really performed, and for vacation
leave pay.Other judgments were upheld.

Serrano questioned the constitutionality of said provision.

Court of Appeals: The CA affirmed the NLRC’s ruling on the reduction but skirted the
constitutional issue.

Respondents argue that respondent cannot belatedly question the constitutionality of the said
law on appeal.

The Sol Gen (OSG) contends that because the legislation existed before to Serrano's contract,
it (including the financial claims) is seen as having been included therat without agreement. The
OSG also argues that there is a justifiable basis for differentiating between OFWs and local
employees, and as a result, neither section 18 Art. II of the Constitution's equal protection
clause nor the provision in question are violated.

ISSUES:

1. Whether or not the issue of Constitutionality was timely raised by Serrano and before the
proper tribunal

2. Whether or not Section 10 of Rep. Act No. 8402 is constitutional.

3. Whether or not Serrano is entitled to salaries equivalent of three months of the unexpired
portion or salaries equivalent of the entire nine months and 23 days left of his employment
contract including overtime pay and holiday pay.

RULING:

1. The Court may exercise its power of judicial review of acts of a co-equal branch, i.e
Congress, when the following conditions are satisfied:

a. There is an actual controversy

b. The constitutional question is raised by proper party and at the earliest opportunity
c. The constitutional question is the very lis mota of the case.

In ruling that the conditions were met, the Court ruled that:

There is an actual controversy re the Labor and CA’s computation of Serrano’s monetary
claims.

The issue on Constitutionality was timely raised when Serrano raised the same before the
Court of Appeals, such court having been vested with the power of judicial review to declare a
law unconstitutional.

The constitutional issue is critical to the resolution of the monetary claim of Serrano.

2. On Violation of Non-Impairment Clause (Sec 10, Art II of the Constitution)

The provision does not violate the principle of non-impairment of contract (as the law preceded
the contract and laws operate prospectively.

On Violation of Sec 1, Art III; Sec 18, Art II; and Section 3 of Article XIII of the Constitution

The subject clause VIOLATES the Equal Protection Clause and Right of an individual to due
Process(Sec 1, Art III), recognizing their rights as a protected Sector (Sec 18, Art II; and Section
3 of Article XIII)

Prior to R.A. 8042, all OFWs who were illegally terminated were subjected to a uniform rule of
monetary benefits computation: basic salary times the entire unexpired portion of their
employment. However, upon the enactment of R.A. 8042, illegally dismissed employees with
unexpired portion of 1 year or more are singled out and subjected to the disadvantageous
monetary award of 3 months of their unexpired portion; as opposed to those illegally terminated
OFWs with unexpired contracts of less than one year who are entitled to their salaries for the
unexpired period; and illegally dismissed local workers with fixed-term employment who are not
subjected to the 3-cap limitation.

Filipino workers are protected and afforded certain rights under the Constitution subject to the
inherent power of Congress to incorporate a system of classification into its legislation.

There is a valid classification if the classification is

1.) based on substantial distinction,

2.) germane to the purpose of law,

3) it is not limited to existing conditions; and

4) it applies equally to all members of the class.

There are three levels of scrutiny at which the Court reviews the constitutionality of a
classification embodied in a law:

1.) the deferential or rational basis scrutiny in which the challenged classification needs only be
shown to be rationally related to serving a legitimate state interest

2.) the middle-tier or intermediate scrutiny in which the government must show that the
challenged classification serves an important state interest and that the classification is at least
substantially related to serving that interest; and

3.)) strict judicial scrutiny in which a legislative classification which impermissibly interferes with
the exercise of a fundamental right or operates to the peculiar disadvantage of a suspect class
is presumed unconstitutional, and the burden is upon the government to prove that the
classification is necessary to achieve a compelling state interest and that it is the least restrictive
means to protect such interest

In American jurisprudence, strict scrutiny is triggered by suspect classifications based on race or

gender but not when the classification is drawn along income categories. However, foreign
decisions, although persuasive, are not per se controlling in the Philippines. Philippine laws are
to be construed in light of our lawmakers intent and construed to serve our own public interest.

Imbued with the same sense of "obligation to afford protection to labor," the Court in the present
case also employs the standard of strict judicial scrutiny, for it perceives in the subject clause a
suspect classification prejudicial to OFWs.

In the present case, the Court dug deep into the records but found no compelling state interest
that the subject clause may possibly serve.

The Court ruled that the Government has failed to discharge its burden of proving the existence
of a compelling state interest that would justify the perpetuation of the discrimination against
OFWs under the subject clause.
The Court declared the provision unconstitutional clause VIOLATES the Equal Protection
Clause and Right of an individual to due Process(Sec 1, Art III), recognizing their rights as a
protected Sector (Sec 18, Art II; and Section 3 of Article XIII).

Note how the Court approaches the issue applying Section 1, Art III and not solely on the
provisions re the Constitution’s state policy on labor.

This is so because Setion 3 of Article XII is not a self-executing provision and it cannot on its
own, be a source of enforceable right. What it does is recognize labor as a protected sector;
otherwise, it will lead to a broad interpretation would suggest a blanket shield in favor of labor.

In declaring the subject clause unconstitutional, the Court reasoned that since the same
deprived Serrano of property and money benefits without an existing valid and definitive
governmental purpose, it violated not only Serrano’s right to equal protection but as well as his
right to substantive due process under (Section1, Art. III of the Constitution); thus, entitling
Serrano to his salaries for the entire unexpired period.

3. Serrano is entitled to his salaries for the entire unexpired period, not including his overtime
and leave pay because there is no evidence that he performed work during those periods.

Salary is understood as the basic wage, exclusive of overtime, leave pay and other bonuses;
whereas overtime pay is compensation for all work "performed" in excess of the regular eight
hours, and holiday pay is compensation for any work "performed" on designated rest days and
holidays.

WHEREFORE, the Court GRANTS the Petition. The subject clause "or for three months for
every year of the unexpired term, whichever is less" in the 5th paragraph of Section 10 of
Republic Act No. 8042 is DECLARED UNCONSTITUTIONAL; and the December 8, 2004
Decision and April 1, 2005 Resolution of the Court of Appeals are MODIFIED to the effect that
petitioner is AWARDED his salaries for the entire unexpired portion of his employment contract
consisting of nine months and 23 days computed at the rate of US$1,400.00 per month.

So ordered.
 59 .METRO EYE SECURITY, INC., Petitioner,

vs.

JULIE V. SALSONA, Respondent.

G.R. No. 167637 September 28, 2007

Facts:

The petitioner, a domestic business working as a security firm for the AMA Group of
Companies, recruited respondent Julie Salsona as a Security Officer on October 4, 1999.
Salsona received a memo from the petitioner demanding an answer on July 11th, 2000.
complaint was filed against him for allegedly serving as an intelligence/investigation officer for a
rival. Salsona responded to the message the following day, July 12, 2000, with promptness.

On July 13, 2000, the petitioner sent Salsona another note requesting a response to a charge of
tampering payroll records and stealing building supplies.

salsona also responded to the second memorandum. On 10 August 2000, petitioner, through
its Human Resources Supervisor Filomeno Fabunan, Jr., issued a third memorandum to
Salsona finding him guilty of tampering with payroll documents and dismissing him based on
loss of confidence.

As a result, Salsona complained to the National Labor Relations Commission about petitioner's
wrongful dismissal (NLRC).

On 31 March 2003, the Labor Arbiter rendered a Decision on Salsona's case

WHEREFORE, premises all considered, judgment is hereby rendered finding the dismissal
illegal and ordering respondents to pay complainant back wages

From the foregoing Decision of the Labor Arbiter, petitioner filed an Appeal with the NLRC. In a
Decision dated 30 April 2004, the NLRC concurred in the finding of the Labor Arbiter that the
dismissal of Salsona was illegal. It held that the petitioner's accusation... that Salsona tampered
with his payroll documents was without basis. It likewise concluded that the charges against
Salsona of tampering with payroll documents and pilferage of construction materials are without
basis... the NLRC ruled

WHEREFORE, premises considered, the appealed Decision is hereby AFFIRMED with

MODIFICATION only insofar as the dropping of individual respondents Amable Aguiluz and
Ernesto Rioveros from the Decision.

Petitioner filed a motion for reconsideration which the NLRC denied in a Resolution dated 24
August 2004.

Petitioner filed a Motion for Reconsideration of the dismissal of its Petition. The Motion was
denied for lack of merit by the Court of Appeals in a Resolution dated 21 March 2005.
In denying petitioner's Motion for Reconsideration, the Court of Appeals explained that the
original copy of the assailed Resolution dated 24 August 2004 issued by the NLRC indicates
that counsel for the petitioner received a copy of the same on 13 September 2004.

Issues:

WHETHER OR NOT THERE ARE SUFFICIENT GROUNDS FOR THE DISMISSAL OF THE
PETITION BY THE HONORABLE COURT OF APPEALS;

Ruling:

In the present case, the petitioner did not base Salsona's dismissal on clearly established facts
sufficient to warrant separation from work.

On the charge that Salsona inserted his name in the Daily Attendance Report when in truth he
was not present at his place of assignment on that date, the Court agrees in the finding of the
Labor Arbiter that the Head Guard assigned to the AMALand Detachment checked and signed

Salsona's daily time records (DTRs). As correctly maintained by Salsona, the signature of the
Head Guard on his DTR is adequate proof that the entries therein are in order and that he
indeed rendered work on that date.

WHEREFORE, premises considered, the instant Petition is partially GRANTED in the sense
that the Resolution of the Court of Appeals dated 15 December 2004 dismissing the petition for
having been filed out of time and the resolution of the same court dated 21 March

2005, denying petitioner's Motion for Reconsideration in CA-G.R. SP No. 87537, are SET
ASIDE. While we set aside these Resolutions, in consideration of public interest and the
speedy administration of justice and the peculiar circumstances of this case, the Court,...
however, resolves to proceed to decide this case on the merits instead of remanding the same
to the Court of Appeals for further proceedings. We find that the Decision of the NLRC dated 30
April 2004 and its Resolution dated 24 August 2004 affirming the Decision of the

Labor Arbiter dated 31 March 2003 are in consonance with applicable law and jurisprudence
and thus AFFIRM the same. Costs against petitioner.

SO ORDERED.

60. MANLY EXPRESS INC. and SIU ENG T. CHING, Petitioners,

vs.

ROMUALDO PAYONG, JR., Respondent.

 G.R. No. 167462 October 25, 2005

Facts:

Romualdo Payong, Jr. were employed by Manly Express, Inc. and/or Siy Eng T. Ching on
different dates, as tour coordinator (dispatcher) and welder, respectively.

in December 1999, petitioner Romualdo Payong was complaining of eyesight problems.

Brought to an eye specialist by private respondent Ching, he was diagnosed to be suffering
from eye cataract. Despite having the cataract removed in January of 2000, he was disallowed
to return to his work by Ching. Much later, on August 1, 2000, he was given a letter of
termination of employment.

Dear Mr. Romualdo Payong Jr.,

Our company has been severely affected by the prevailing poor business climate. There is a
reduced demand for our bus services – both for shuttle and city operations – and this has
substantially reduced our income. At the same time, our operating costs have increased, leaving
us with a difficult cash position.

In order to survive, the company has decided to check on the performance of all its employees
to determine productivity. Unfortunately, it has been noticed that due to your partial blindness,
you can no longer work in the position that you are presently employed for.

In view of the above and the fact that despite the proper medical treatment for more than six
months now, the company is constrained to terminate your employment effective immediately.
In line with this, you are given a grace period of 15 days to remove all your personal belongings
from the company premises counted from this date.

In behalf of the company, I would like to express my gratitude for the services that you have
rendered our company. Kindly see the undersigned to coordinate the payment of your financial
assistance and other benefits.

Thank you.

(Sgd.)

Charles Malvin Ching

Operations Manager

On July 31, 2001, the Labor Arbiter rendered judgment the dispositive portion of which reads:

WHEREFORE, in view of all the foregoing, the complaint of Hercules Balena is hereby
DISMISSED for want of cause of action. Furthermore, respondent company is hereby ordered
to pay complainants Payong, Adsuara and Palisoc the total amount of SEVENTY-FIVE
THOUSAND NINE HUNDRED PESOS (P75,900.00), as discussed above.
SO ORDERED.5

The National Labor Relations Commission (NLRC) modified the decision of the labor arbiter,
thus:

WHEREFORE, premises considered, the Decision of July 31, 2001 is hereby MODIFIED.
Respondents are directed to pay the following:

Romualdo Payong - P3,352.00 Service incentive leave pay

20,115.00 13th month pay

P23,467.00

Flor Palisoc 20,115.00 13th month pay

The other findings stand affirmed.

SO ORDERED.6

Issue:

Whether or not Romualdo Payong was illegally dismissed.

Ruling:

Yes, Sc Held that the dismissal of Payong is illegal. Because the petition lacks of merit.

Art. 284. Disease as ground for termination. – An employer may terminate the services of an
employee who has been found to be suffering from any disease and whose continued
employment is prohibited by law or is prejudicial to his health as well as to the health of his co-
employees:

Sec. 8. Disease as a ground for dismissal. – Where the employee suffers from a disease and
his continued employment is prohibited by law or prejudicial to his health or to the health of his
co-employees, the employer shall not terminate his employment unless there is a certification by
a competent public health authority that the disease is of such nature or at such a stage that it
cannot be cured within a period of six (6) months even with proper medical treatment. If the
disease or ailment can be cured within the period, the employer shall not terminate the
employee but shall ask the employee to take a leave. The employer shall reinstate such
employee to his former position immediately upon the restoration of his normal health.

The rule is explicit. For a dismissal on the ground of disease to be considered valid, two
requisites must concur: (a) the employee suffers from a disease which cannot be cured within
six months and his continued employment is prohibited by law or prejudicial to his health or to
the health of his co-employees, and (b) a certification to that effect must be issued by a
competent public health authority.

WHEREFORE, the petition is DENIED. The November 22, 2004 Decision of the Court of
Appeals in CA-G.R. SP No. 83800 and its February 28, 2005 Resolution, are AFFIRMED.
SO ORDERED.

61. CENTRO PROJECT MANPOWER SERVICES CORPORATION, Petitioner,

vs.

AGUINALDO NALUIS and THE COURT OF APPEALS, Respondents.

G.R. No. 160123 June 17, 2015

Facts:

Naluis was hired by petitioner Pacific Micronesia Corporation (Pacific Micronesia) through
Centro Project Manpower Services Corporation (Centro Project), a local employment agency, to
work overseas as a plumber in Garapan, Saipan, in the Commonwealth of the Northern Mariana
Islands (Northern Marianas). The job was covered under the principal Employment Contract
dated March 11, 1997[6], which stated that his employment would start upon his arrival in the
Northern Marianas and run for 12 months.

His Authorization for Entry was granted by the Northern Mariana Islands Department of Labor
and Immigration on June 3, 1997. Centro Project and Naluis signed an addition to the main
Employment Contract on September 3, 1997.

On September 13, 1997, the day of his actual deployment, Naluis departed for Northern
Mariana, and his job remained there until June 3, 1998, when he was repatriated to the
Philippines purportedly as a result of the employment contract's expiration. not owning after
completing a year of employment, he brought a claim for illegal dismissal against Centro
Project.

Naluis appealed to the NLRC, which found that Centro Project had no choice but to terminate
the employment contract because the AE issued by the Department of Labor and Immigration of
the Northern Mariana Islands had limited his stay in Northern Marianas and that his employment
had expired on May 13, 1998 as expressly provided in the employment contract. The Labor
Arbiter determined that Centro Project had been justified in repatriating Naluis, and as a result,
dismissed the complaint.

On April 23, 2009, the CA issued its ruling overturning the NLRC's judgment, concluding that
Naluis' employment status was unaffected by the AE, that the AE did not restrict his time in the
Northern Marianas, and that Centro Project had therefore broken the terms of the agreement by
ordering his return.

Issue:

Whether or not is the dismissal of Naluis is Illegal?

Ruling:

Yes, SC held that the dismissal of Naluis is illegal because of lack of merit.

here is no dispute that Naluis did not complete the 12-month period stipulated in the primary
Employment Contract. However, the NLRC concluded that Centro Project had been justified in
repatriating him because the AE had stipulated a limit of stay for him. The NLRC thereby...
relied on a loose interpretation of the AE and the primary Employment Contract.

There is no dispute that Naluis did not complete the 12-month period stipulated in the primary
Employment Contract. However, the NLRC concluded that Centro Project had been justified in
repatriating him because the AE had stipulated a limit of stay for him. The NLRC thereby...
relied on a loose interpretation of the AE and the primary Employment Contract.

The burden of proof to show that the employment contract had been validly terminated
pertained to the employer. To discharge its burden, the employer must rely on the strength of its
own evidence. However, Centro Project’s reliance on the AE limiting Naluis’ stay was
unwarranted, and, worse, it did not discharge its burden of proof as the employer to show that
Naluis’ repatriation had been justified.
The AE thereby clearly indicated that the date of May 13, 1998 appearing thereon referred only
to the expiration of the document itself. Centro Project stretched its interpretation to bolster its
contention that May 13, 1998 was the limit of stay for Naluis in Northern Marianas

The AE thereby clearly indicated that the date of May 13, 1998 appearing thereon referred only
to the expiration of the document itself. Centro Project stretched its interpretation to bolster its
contention that May 13, 1998 was the limit of stay for Naluis in Northern Marianas.

this rule herein. Hence, any doubt or vagueness in the provisions of the contract of employment
should have been interpreted and resolved in favor of Na

It is fundamental that in the interpretation of contracts of employment, doubts are generally

resolved in favor of the worker.[16] It is imperative to uphold this rule herein. Hence, any doubt
or vagueness in the provisions of the contract of employment should have been interpreted and
resolved in favor of Naluis

It is fundamental that in the interpretation of contracts of employment, doubts are generally

resolved in favor of the worker. It is imperative to uphold this rule herein. Hence, any doubt or
vagueness in the provisions of the contract of employment should have been interpreted and
resolved in favor of Naluis.

It is fundamental that in the interpretation of contracts of employment, doubts are generally

resolved in favor of the worker. It is imperative to uphold this rule herein. Hence, any doubt or
vagueness in the provisions of the contract of employment should have been interpreted and
resolved in favor of Naluis.

Although Centro Project alleges that it feared that Naluis would eventually be declared an illegal
alien had he not been repatriated, the records do not support the allegation.

Denying its participation in the fixing of the expiration date, Centro Project argues that it was the
Philippine representative in Northern Marianas who had inserted by hand the date of expiration
in the Employment Contract.

The argument has no basis

The argument has no basis.

Centro Project’s allegation on the expiration date being merely inserted by the Philippine
representative in Northern Marianas was not substantiated with credible proof. It supported its
allegation by alluding to the fact that the signature of the person who had... verified the
employment contract was similar to the handwritten insertion made on the blank space of the
employment contract.

even assuming that Centro Project did not have any participation in fixing the expiration date, it
did not amend the employment contract despite being fully aware that the term of 12 months
was clearly indicated as the period of Naluis’ work. The primary

Employment Contract was sent for approval to the principal employer abroad, as well as to the
immigration authorities of the Philippines and Northern Marianas. In such circumstances, Centro
Project could not but know that the period had been fixed by the immigration authorities of
Northern Marianas prior to his actual deployment. Thus, Centro Project was in bad faith in not
taking any action when the Philippine immigration authorities supposedly inserted the
handwritten date of expiration of the contract.

Undoubtedly, the term of the contract was 12 months. The AE could not be used as a valid
cause for pre-terminating the employment of Naluis.

Undoubtedly, the term of the contract was 12 months. The AE could not be used as a valid
cause for pre-terminating the employment of Naluis. His repatriation was clearly a breach of the
contract of employment, for which the CA awarded to him the following money claims

WHEREFORE, the Court AFFIRMS the decision promulgated on April 23, 2003, subject to the
DELETION of the awards for guaranteed overtime pay and legal holiday; and ORDERS the
petitioner to pay the costs of suit.

SO ORDERED.

62. GERMAN MARINE AGENCIES, INC., ET AL, Petitioners

vs.

TEODOLAH R. CARO, in behalf of her husband EDUARDO V. CARO, Respondent

G.R. No. 200774 FEBRUARY 13, 2019

Facts:

German Marine is a domestic corporation which recruited Eduardo for and in behalf of its
foreign principal, Baltic Marine. 7 Since May 1996, German Marine had continuously hired
Eduardo until he signed his last employment contract with them as Second Officer on February
15, 2005 for a period of nine months. 8 Prior to the signing of this contract, Eduardo underwent
the Pre-Employment Medical Examination and was declared "[f]it to [w]ork." 9 Eduardo
thereafter boarded the vessel "Pacific Senator" on March 16, 2005. 10
On January 3, 2006, Eduardo finished his contract of employment and was repatriated. 11 On
June 25, 2007, Eduardo died of "acute respiratory failure" while he was confined at the National
Kidney and Transplant Institute.12

On August 28, 2007, Teodolah filed a complaint13 with the Labor Arbiter for death benefits,
medical expenses, and attorney's fees. Teodolah alleged that: (1) during Eduardo's
employment, he suffered dry cough and experienced difficulty in breathing and urinating; (2)
Eduardo's illness, which he tried to address by self-medication, is attributed to exposure to
chemicals on board the vessel; (3) Eduardo felt very ill at the time of his repatriation but he
merely endured it in the hopes of getting another contract; and (4) Eduardo consulted a
physician at the Lung Center of the Philippines who diagnosed him to be suffering from
bronchial asthma induced by chemica1s

LA ruling: In his Decision,15 dismissed Teodolah's complaint for lack of merit. He ruled that
Eduardo's death is not compensable because it occurred after the expiration of his employment
contract. The Labor Arbiter further reasoned that even assuming Eduardo died during the term
of the contract, it was not clearly and sufficiently established that the cause of death was work-
related or considered an occupational disease.

NLR Ruling : the NLRC affirmed the Labor Arbiter's Decision, noting that Teodolah would be
entitled to death benefits only if Eduardo died during the term of his employment contract. 17
Since Eduardo died one (1) year, five (5) months, and twenty-three (23) days after the
expiration of the contract, the employer-employee relationship already ceased to exist prior to
his death; thus, Teodolah cannot be granted death benefits. 18 The NLRC likewise denied the
motion for reconsideration filed by Teodolah. 19

SC Ruling: n its Decision20 dated December 22, 2011, the CA reversed the ruling of the NLRC.
It held that a perusal of the record reveals that Teodolah was able to present substantial
evidence to show her entitlement to death benefits. First, Eduardo's series of employment
contracts with Baltic Marine covered a total lengthy period of almost 10 years. Second, on
March 19, 2001, March 27, 2001, July 19, 2001, July 30, 2001, October 8, 2001, December 3,
2001, November 4, 2003, March 7, 2005, October 7, 2006, January 12, 2007, and January 26,
2007, Eduardo consulted at the Lung Center of the Philippines where he was diagnosed with
allergic rhinitis, bronchial asthma, sinusitis, and bronchitis. Third, Eduardo, as a Second Officer
(formerly Third Officer) on board the vessel, was exposed to toxic fumes, chemicals, and such
other hazards which contributed to his lung illness. Fourth, the immediate cause of Eduardo's
death was "Acute Respiratory Failure" and the antecedent cause was "Prob. Sec. to Pulmonary
Thromboembolism."21

Issue: whether or not the death of eduardo’s death is work related.

Ruling:

Yes, the SC held that the death of Eduardo is work related and the petition of the petitioner is
unmeritorious.

The pertinent provision of Section 20(A) on Compensation and Benefits for Death under

the 2000 POEA-SEC reads:

A. Compensation and benefits for death

1. In case of work-related death of the seafarer[,] during the term of his

contract[,] the employer shall pay his beneficiaries the Philippine

Currency equivalent to the amount of Fifty Thousand US dollars

(US$50,000.00) and an additional amount of Seven Thousand US

dollars (US$7,000.00) to each child under the age of twenty-one (21)

but not exceeding four (4) children, at the exchange rate prevailing

during the time of payment. When a party claims benefits for the death of a seafarer due to a
work related illness, one must be able to establish that: (1) the death occurred during the term of
his employment; and (2) the illness is work-related.

The SC agree on the conclusion of the CA that Eduardo acquired bronchial asthma, an
occupational disease under Section 32-A of the 2000 POEA-SEC, during his employment with
petitioners. The CA further found that there was a reasonable connection between Eduardo's
job as a Second Officer and his bronchial asthma, which eventually developed into an acute
respiratory failure and ultimately caused his death.

Under the given definition of the 2000 POEA-SEC, a work-related illness is "any sickness
resulting to disability or death as a result of an occupational disease listed under Section 32-A of
this contract with the conditions set therein satisfied."[32] The 2000 POEA-SEC creates a
disputable presumption that illnesses not mentioned therein are work-related.

Teodolah was able to prove through substantial evidence the

causal connection between Eduardo's work as a seafarer and his cause of death. Evidence
substantiating the same included an enumeration of Eduardo's exposure to chemicals, noise
and whole-body vibrations, strong draft winds and stormy weather, cold stress and heat stress,
excessive heat from burners and steam pipes, and ultraviolet radiation during welding
operations while on board and in the exercise of his duties as a Second Officer for petitioners.

Teodolah already established the causal link between the nature of

Eduardo's work and the cause of the deterioration of his health leading to his repatriation at the
first instance in her complaint[36] before the Labor Arbiter. There, she contended, among
others, that after his repatriation, a physician at the Lung Center of the Philippines diagnosed
him then to have been suffering from bronchial asthma, which was chemical-induced. These
claims were not dispelled by the Labor Arbiter but were merely disregarded on the reasoning
that Eduardo's death was not compensable because it occurred after the expiration of his
employment contract.

In the present case, Eduardo's causes of death included acute respiratory failure which was
diagnosed as secondary to pulmonary thromboembolism. It does not demand a stretch of the
imagination to reasonably presume that the conditions to which Eduardo was exposed to during
the fulfillment of his duties as Second Officer aboard petitioners' vessel at the very least
contributed to either the contracting of said respiratory illness or the aggravation thereof. Such a
seafarer's sacrifice of labor and health for the petitioners' ultimate profit as in this case demands
that the death resulting therefrom be duly indemnified, consistent with our avowed doctrine of
protection of the rights of labor and our high aspirations for social justice.

WHEREFORE, the petition is DENIED. The assailed Decision dated December 22, 2011 and
Resolution dated February 24, 2012 of the Court of Appeals in CA-G.R. SP No. 109711 are
AFFIRMED.

SO ORDERED.

62. DEL MONTE FRESH PRODUCE (PHILIPPINES), INC., PETITIONER, VS. DEL MONTE
FRESH SUPERVISORS UNION, RESPONDENT.

G.R. No. 225115 January 27, 2020

Facts:

Respondent Del Monte Fresh Supervisors Union is the only negotiating representation of
petitioner Del Monte Fresh Produce, Inc.'s supervisory staff. Following unsuccessful mediation
and conciliation attempts, respondent filed a Complaint with the Voluntary Arbitrator on behalf of
18 supervisor-members for "accrued differentials and salary adjustments due to underpayment
of salary resulting from the non-implementation of the supervisors' salary structure" as outlined
in "company policies which are binding between the employer and employees of a Collective
Bargaining Agreement (CBA)." The respondent alleged that the petitioner gave the affected
supervisors salaries that were less than their respective minimum wages at the time of their
regularization.

Issue:

Whether or not implementation of the terms of company policies relating to the minimum rates
for regularized employees is mandatory.

Ruling:

Yes. Court has repeatedly stated, labor contracts are no ordinary private contracts; rather, they
are imbued with public interest and a proper subject matter of police power measures. In this
case, the CA correctly sought to uphold rather than impair the contract between petitioner and
its employees by requiring implementation of a policy that is adjunct to the contract.

WHEREFORE, premises considered, the instant Petition is DENIED for lack of merit. The
assailed Decision dated May 13, 2015 and Resolution dated May 18, 2016 of the Court of
Appeals in CA-G.R. SP No. 04980-MIN are AFFIRMED.

SO ORDERED.