4.

Jurisdiction
22. SMC vs. NLRC

SAN MIGUEL CORPORATION, VS. NATIONAL LABOR RELATIONS COMMISSION AND RUSTICO VEGA

FACTS In line with an Innovation Program sponsored by petitioner San Miguel Corporation (SMC) and under which management under took to grant cash awards to “all SMC employees . . .
except [ED-HO staff, Division Managers and higher-ranked personnel” who submit to the Corporation ideas and suggestions found to be beneficial to the Corporation , private
respondent Rustico Vega submitted an innovation proposal. Mr. Vega’s proposal was entitled “Modified Grande Pasteurization Process,” and was supposed to eliminate certain defects in
the quality and taste of the product “San Miguel Beer Grande.”

Mr. Vega at that time had been in the employ of petitioner SMC for thirteen (13) years and was ten holding the position of “mechanic in the Bottling Department of the SMC Plant Brewery
situated in Tipolo, Mandaue City.

Petitioner SMC, however, did not find the aforesaid proposal acceptable and consequently refused Mr. Vega’s subsequent demands for a cash award under the Innovation Program . A
complaint was filed against petitioner SMC with the Regional Arbitration Branch No. VII (Cebu City) of the then “Ministry of Labor and Employment. Private respondent Vega alleged there
that his proposal “had been accepted by the methods analyst and implemented by SMC, and that the same “ultimately and finally solved the problem of SMC in the production of Beer
Grande.” Private respondent thus claimed entitlement to a cash price of ₱ 60,000.00 (the maximum award per proposal offered under the Innovation Program) and attorney’s fees.

In an Answer With Counterclaim and Position Paper, petitioner SMC alleged that the private respondent had no cause of action. It denied ever having approved or adopted Mr. Vega’s
proposal as part of SMC’s brewing procedure in the production of San Miguel Beer Grande. Among other things, petitioner stated that Mr. Vega’s proposal was turned down by the
company “for lack of originality” and that the same “even if implemented [could not] achieve the desired result.” Petitioner further alleged that the Labor Arbiter had no jurisdiction,
Mr Vega having improperly bypassed the grievance machinery procedure prescribed under a then existing collective bargaining agreement between managements and employees,
and available administrative remedies provided under the rules of the Innovation Program. A counterclaim for moral and exemplary damages, attorney’s fees, and litigation expenses
closed out the petitioner's pleading.

LABOR ARBITER In an Order, the Labor Arbiter, noting that the money claim of complainant Vega in this case is “ not a necessary incident of his employment” and that said claim is not among those
mentioned in Article 217 of the Labor Code, dismissed the complaint for lack of jurisdiction. However, in a gesture of “compassion and to show the government’s concern for the working
man,” the Labor Arbiter also directed the petitioner to pay Mr. Vega, the sum of ₱ 2,000.00 as “financial assistance.”

NLRC The Labor Arbiter’s order was subsequently appealed by both parties, private respondent Vega assailing the dismissal of his complaint for lack of jurisdiction and petitioner SMC
questioning the propriety of the award of “financial assistance” to Mr. Vega. Acting on the appeals, the public respondent National Labor Relations Commission, rendered a Decision. “The
appealed Order is hereby set aside and another judgment entered, ordering petitioner SMC to pay Mr. Vega the amount of ₱ 60,000.00.

ISSUE RULING

Whether or not The jurisdiction of Labor Arbiters and the National Labor Relations Commission is outlined in Article 217 of the Labor Code.
the Labor
Arbiter and the Article 217. Jurisdiction of Labor Arbiter and the commission. (a) The Labor Arbiters shall have the original and exclusive jurisdiction to hear and decide within thirty (30) working
Commission days after submission of the case by the parties for decision, the following cases involving are workers, whether agricultural or non-agricultural:
have no
jurisdiction over 1. Unfair labor practice cases;
the subject 2. Those that workers may file involving wages, hours of work and other terms and conditions of employment;
matter of the 3. All money claims of workers, including those based on non-payment or underpayment of wages, overtime compensation, separation pay and other benefits provided by
case. law or appropriate agreement, except claims for employees’ compensation, social security, medicare, and maternity benefits;
4. Cases involving household services; and
5. Cases arising from any violation of Article 265 of this Code, including questions involving the legality of strikes and lockouts.
 (b) The Commission shall have exclusive appellate jurisdiction over all cases decided by the Labor Arbiters.

While paragraph 3 above refers to “all money claims of workers,” it is not necessary to suppose that the entire universe of money claims that might be asserted by workers against their
employers had been absorbed into the original and exclusive jurisdiction of Labor Arbiters. In the first place, paragraph 3 should be read not in isolation from but rather within the context
formed by paragraph 1 related to unfair labor practices, paragraph 2 relating to claims concerning terms and conditions of employment, and paragraph 5 relating to certain activities
prohibited to employees or to employers.

It is evidence that there is a unifying element that runs through paragraph 1 to 5 and that is, that they all refer to cases or disputes arising out of or in connection with an employer-
employee relationship. This is, in other words, a situation where the rule of noscitur a sociis may be usefully invoked in clarifying the scope of paragraph 3, and any other paragraph of
Article 217 of the Labor Code, as amended. The Court believes and so holds that the money claims of workers’ referred to in paragraph 3 of Article 217 embraces money claims which arise
out of or in connection with the employee-employer relationship, or some aspect or incident of such relationship. Put a little differently, that money claims of workers which now fall
within the original and exclusive jurisdiction of Labor Arbiters are those money claims which have some reasonable causal connection with the employer-employee relationship.

Applying the foregoing reading to the present case, petitioner’s Innovation Program is an employee incentive scheme offered and open only to employees of petitioner SMC, more
specifically to employees below the rank of manager. Without the existing employer-employee relationship between the parties here, there would have been no occasion to consider the
petitioner’s Innovation Program or the submission by Mr. Vega of his proposal concerning beer grande; without that relationship, private respondent Vega’s suit against petitioner SMC
would never have arisen. The money claim of respondent Vega in this case, therefore, arose out of or in connection with his employment relationship with the petitioner.

Whether the The important principle that runs through these three (3) cases is that where the claim to be principal relief sought is to be resolved not by reference to the Labor Code or other labor
fact that the relation statute or a collective bargaining agreement but by the general civil law, the jurisdiction over the dispute belongs to the regular court of justice and not to the Labor Arbiter
money claim of and the NLRC. Clearly, such claims fall outside the area of competence or expertise ordinarily ascribed to Labor Arbiter and the NLRC and the rationale for granting jurisdiction over such
private claims to these agencies disappears.
respondent Vega
arose out of or Applying the foregoing to the instant case, the Court notes that the SMC Innovation Program was essentially an invitation from petitioner SMC to its employees to submit innovation
in connection proposals, and that petitioner SMC undertook to grant case awards to employees who accept such invitation and whose innovation suggestions, in the judgment of the SMC’s officials,
with his satisfied the standards and requirements of the Innovation Program and which, therefore, could be translated into some substantial benefits to SMC. Such undertaking, though unilateral
employment in origin, could nonetheless ripen into an enforceable contractual (facio ut des) obligation on the part of petitioner SMC under certain circumstances. Thus, whether or not an
relation with enforceable contract, albeit implied arid innominate, had arisen between petitioner SMC and private respondent Vega in the circumstances of this case, and if so, whether or not it had
petitioner SMC, been breached, are pre eminently legal questions, questions not to be solved by referring to labor legislation and having nothing to do with wages or other terms and condition of
is enough to employment, but rather having recourse to out laws on contracts.
bring such
money claim The complaint is hereby dismissed, without prejudice to the right of private respondent Vega to file a suit before the proper court, if he so desires.
within the
original and
exclusive
jurisdiction of
Labor Arbiters.

23. Pepsi vs. Galang

PEPSI COLA DISTRIBUTORS OF THE PHILIPPINES, INC., VS. GAL-LANG

FACTS The private respondents were employees of the petitioner who were suspended of complicity in the irregular disposition of empty Pepsi Cola bottles. The petitioners filed a criminal
 complaint for theft against them but this was later withdrawn and substituted with a criminal complaint for falsification of private documents. After a preliminary investigation conducted
by the Municipal Trial Court of Tanauan, Leyte, the complaint was dismissed. The dismissal was affirmed by the Office of the Provincial Prosecutor.

Meantime, allegedly after an administrative investigation, the private respondents were dismissed by the petitioner company. As a result, they lodged a complaint for illegal dismissal with
the Regional Arbitration Branch of the NLRC in Tacloban City, and decisions manded reinstatement with damages. In addition, they instituted in the Regional Trial Court of Leyte, a
separate civil complaint against the petitioners for damages arising from what they claimed to be their malicious persecution.

TRIAL COURT The petitioners moved to dismiss the civil complaint on the ground that the trial court had no jurisdiction over the case because it involved employee-employer relations that were
exclusively cognizable by the labor arbiter. The motion was granted. However, the respondent judge, acting on the motion for reconsideration, reinstated the complaint, saying it was
“distinct from the labor case for damages now pending before the labor courts.”

ISSUE RULING

Whether or not Article 217. Jurisdiction of Labor Arbiters and the Commission. - (a) The Labor Arbiters shall have the original and exclusive jurisdiction to hear and decide within thirty (30) working days
the private after submission of the case by the parties for decision, the following cases involving all workers, whether agricultural or non-argicultural:
respondents’
civil complaint 1. Under labor practice cases;
for damages falls 2. Those that workers may file involving wages, hours of work and other terms and conditions of employment;
under the 3. All money claims of workers, including those based on non-payment or underpayment of wages, overtime compensation, separation pay and other benefits provided by law or
jurisdiction of appropriate agreement, except claims for employees’ compensation, social security, medicare maternity benefits;
the labor arbiter. 4. Cases involving household services; and
5. Cases arising from any violation of Article 265 of this Code, including questions involving the legality of strikes and lockouts.

(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by labor arbiters.

It must be stressed that not every controversy involving workers and their employers can be resolved only by the labor arbiters. This will be so only if there is a “reasonable cause
connection” between the claim asserted and employee-employer relations to put the case under the provisions of Article 217. Absent such a link, the complaint will be cognizable by
the regular court of justice in the exercise of their civil and criminal jurisdiction.

The case now before the Court involves a complaint for damages for malicious prosecution which was filed with the Regional Trial Court of Leyte by the employees of the defendant
company. It does not appear that there is a “reasonable causal connection” between the complaint and the relations of the parties as employer and employees. The complaint did not
arise from such relations and in fact could have arisen independently of an employment relationship between the parties. No such relationship or any unfair labor asserted. What the
employees are alleging is that the petitioners acted with bad faith when they filed the dismissal of which was affirmed by the Provincial Prosecutor “for lack of evidence to establish even a
slightest probability that all the respondents herein have committed the crime imputed against them.”

This is a matter which the labor arbiter has no competence to resolve as the applicable law is not the Labor Code but the Revised Penal Code.

24. Medina vs. Castro Bartolome

MEDINA, VS. CASTRO-BARTOLOME

FACTS 1. Cosme de Aboitiz, acting in his capacity as President and Chief Executive Officer of the Pepsi-Cola Bottling Company of the Philippines, Inc., went to the Pepsi-Cola Plaint in
Muntinlupa, Metro Manila, and without any provocation, shouted and maliciously humiliated petitioners Ernesto Medina and Jose Ong with the use of slanderous language and
other words of similar import uttered in the presence of the petitioners subordinate employees.
 2. Petitioners filed a joint criminal complaint for oral defamation against Cosme de Aboitiz duly supported with respective affidavits and corroborated by the affidavits of two (2)
witnesses, but after conducting a preliminary investigation, Hon. Jose B. Castillo, dismissed the complaint allegedly because the expression “Fuck you” and “You are both shit to
me” were uttered not to slander but to express anger and displeasure;
3. Petitioners filed a Petition for Review with the office of the Secretary of Justice (Ministry of Justice) and the Deputy Minister of Justice, Catalino Macaraig, Jr., issued a resolution
sustaining the petitioner’s complaint, reversing the resolution of the Provincial Fiscal and directing him to file against Cosme de Aboitiz an information for Grave Slander…;
4. The employment records of petitioners show their track performance and impeccable qualifications, not to mention their long years of service to the Company which
undoubtedly caused their promotion to the two highest positions in Muntinlupa Plant having about 700 employees under them with Ernesto Medina as the Plant General
Manager receiving a monthly ₱ 6,600.00 excluding other perquisites accorded only to top executives and having under his direct supervision other professionals like himself,
including the petitioner Jose G. Ong, who was the Plant Comptroller with a basic monthly salary of ₱ 4, 855.00;
5. That far from taking these matters into consideration, the private respondent corporation, acting through its President, Cosme de Aboitiz, dismissed and slandered the
petitioners in the presence of their subordinate employees although this could have been done in private;
6. That Cosme de Aboitiz have evidently enjoyed the act of dismissing the petitioners and such dismissal was planned to make it as humiliating as possible because instead of
allowing a lesser official like the Regional Vice President to take whatever action was necessary under the circumstances, Cosme de Aboitiz himself went to the Muntinlupa Plant
in order to publicly upbraid and dismiss the petitioners;
7. That Cosme de Aboitiz dismissed the petitioners because of an alleged delay in the use of promotional crowns when such delay was true with respect to the other Plants, which
is therefore demonstrative of the fact that Cosme de Aboitiz did not really have a strong reason for publicly humiliating the petitioners by dismissing them on the spot

A motion to dismiss the complaint on the ground of lack of jurisdiction was filed by the private respondents.

TRIAL COURT The trial court denied the motion in an order which reads the following:

The private respondents’ Motion to Dismiss which is basically anchored on whether or not this Court has jurisdiction over the instant petition.

The complaint alleges that the petitioners’' dismissal was without any provocation and that private respondent Aboitiz shouted and maliciously humiliated petitioners and used the words.
The petitioners further allege that they were receiving salaries of P6,600.00 and P4,855.00 a month. So the complaint for civil damages is clearly not based on an employer-employee
relationship but on the manner of petitioners’ dismissal and the effects flowing therefrom.

This case was filed on May 10, 1979. The amendatory decree, P.D. 1367, which took effect on May 1, 1978 and which provides that Regional Directors shall not indorse and Labor Arbiters
shall not entertain claims for moral or other forms of damages, now expressly confers jurisdiction on the courts in these cases, specifically under the petitioners’ causes of action.

Because of the letter dated January 4, 1978 and the statement of petitioner Medina that his receipt of the amount from the private respondent company was done "under strong protest,"
it cannot be said that the demands set forth in the complaint have been paid, waived or otherwise extinguished. In fact, in private respondents’' Motion to Dismiss, it is stated that 'in the
absence of a showing that there was fraud, duress or violence attending said transactions, such Release and Quitclaim Deeds are valid and binding contracts between them, which in effect
admits that petitioners can prove fraud, violence, duress or violence. Hence a cause of action for plaintiffs exists.

It is noticed that the defamatory remarks standing alone per se had been made the sole cause under the first cause of action, but it is alleged in connection with the manner in which the
petitioners had been dismissed, and whether the statute of limitations would apply or not would be a matter of evidence.

It has been already settled by jurisprudence that mere asking for reinstatement does not remove from the CFI jurisdiction over the damages. The case must involve unfair labor practices
to bring it within the jurisdiction of the CIR (now NLRC).

The defendants' Motion to Dismiss is hereby denied.

NLRC While the trial was underway, the private respondent filed a second motion to dismiss the complaint because of amendments to the Labor Code immediately prior thereto. Acting on the
motion, the trial court issued the following order:
 Up for resolution by the Court is the private respondents' Motion to Dismiss dated January 23, 1981, on grounds not existing when the first Motion to Dismiss dated June 4, 1979 was
interposed. The ground relied upon is the promulgation of P.D. No. 1691 amending Art. 217 of the Labor Code of the Philippines and Batasan Pambansa Bldg. 70 which took effect on May
1, 1980, amending Art. 248 of the Labor Code.

The Court agrees with private respondents that the complaint alleges unfair labor practices which under Art. 217 of the Labor Code, as amended by P.D. 1691, has vested original and
exclusive jurisdiction to Labor Arbiters, and Art. 248, thereof ... "which may include claims for damages and other affirmative reliefs." Under the amendment, therefore, jurisdiction over
employee-employer relations and claims of workers have been removed from the Courts of First Instance. If it is argued that this case did not arise from employer-employee relation,
but it cannot be denied that this case would not have arisen if the petitioners had not been employees of private respondent Pepsi-Cola. Even the alleged defamatory remarks made by
Cosme de Aboitiz were said to the petitioner in the course of their employment, and the latter were dismissed from such employment. Hence, the case arose from such employer-
employee relationships which under the new Presidential Decree 1691 are under the exclusive, original jurisdiction of the labor arbiters.

The ruling of this Court with respect to the defendants' first motion to dismiss, therefore, no longer holds as the positive law has been subsequently issued and being a curative law, can be
applied retroactively.

ISSUE RULING

Whether or not For if the Labor Code has no relevance, any discussion concerning the statutes amending it and whether or not they have retroactive effect is unnecessary.
the Labor Code
has any The complaint that the petitioners have not alleged any unfair labor practice. Theirs is a simple action for damages for tortious acts allegedly committed by the defendants. Such being the
relevance to the case, the governing statute is the Civil Code and not the Labor Code. It results that the orders under review are based on a wrong premise.
reliefs sought by
the petitioners.

25. Philippine National Bank vs. Cabansag

PHILIPPINE NATIONAL BANK, VS. CABANSAG

FACTS Respondent Cabansag arrived in Singapore as a tourist. She applied for employment with the Singapore Branch of the Philippine National Bank, a private banking corporation organized
and existing under the laws of the Philippines, with principal office at the PNB Financial Center, Roxas Boulevard, Manila.

At that time, the Singapore PNB Branch was under the helm of Ruben C. Tobias, a lawyer, as General Manager, with the rank of Vice-President of the Bank. At that time, too, the Branch
Office had two (2) types of employees:

(a) Expatriates or the regular employees, hired in Manila and assigned abroad including Singapore, and
(b) Locally (direct) hired.

She applied for employment as Branch Credit Officer, at a total monthly package of $SG 4,500.00, effective upon assumption of duties after approval. Ruben C. Tobias found her eminently
qualified and wrote a letter to the President of the Bank in Manila, recommending the appointment of Florence O. Cabansag, for the position.

"The President of the Bank was impressed with the credentials of Florence O. Cabansag that he approved the recommendation of Ruben C. Tobias. She then filed an ‘ Application,’ with the
Ministry of Manpower of the Government of Singapore, for the issuance of an ‘ Employment Pass’ as an employee of the Singapore PNB Branch. Her application was approved for a period
of two (2) years.

"Ruben C. Tobias wrote a letter to Florence O. Cabansag offering her a temporary appointment, as Credit Officer, at a basic salary of Singapore Dollars 4,500.00, a month and, upon her
 successful completion of her probation to be determined solely, by the Bank, she may be extended at the discretion of the Bank, a permanent appointment and that her temporary
appointment was subject to the terms and conditions.

‘6. Termination of your employment with the Bank may be made by either party after notice of one (1) day in writing during probation, one month notice upon confirmation or the
equivalent of one (1) day’s or month’s salary in lieu of notice.’

"Florence O. Cabansag accepted the position and assumed office. In the meantime, the Philippine Embassy in Singapore processed the employment contract of Florence O. Cabansag and,
she was issued by the Philippine Overseas Employment Administration, an ‘Overseas Employment Certificate,’ certifying that she was a bona fide contract worker for Singapore.

"Barely three (3) months in office, Florence O. Cabansag submitted to Ruben C. Tobias, her initial ‘Performance Report.’ Ruben C. Tobias was so impressed with the ‘Report’ that he made a
notation and, on said ‘Report’: ‘GOOD WORK.’ However, while Florence O. Cabansag was in the flat, which she and Cecilia Aquino, the Assistant Vice-President and Deputy General
Manager of the Branch and Rosanna Sarmiento, the Chief Dealer of the said Branch, rented, she was told by the two (2) that Ruben C. Tobias has asked them to tell Florence O. Cabansag
to resign from her job. Florence O. Cabansag was perplexed at the sudden turn of events and the runabout way Ruben C. Tobias procured her resignation from the Bank. The next day,
Florence O. Cabansag talked to Ruben C. Tobias and inquired if what Cecilia Aquino and Rosanna Sarmiento had told her was true. Ruben C. Tobias confirmed the veracity of the
information, with the explanation that her resignation was imperative as a ‘cost-cutting measure’ of the Bank. Ruben C. Tobias, likewise, told Florence O. Cabansag that the PNB
Singapore Branch will be sold or transformed into a remittance office and that, in either way, Florence O. Cabansag had to resign from her employment. The more Florence O. Cabansag
was perplexed. She then asked Ruben C. Tobias that she be furnished with a ‘Formal Advice’ from the PNB Head Office in Manila. However, Ruben C. Tobias flatly refused. Florence O.
Cabansag did not submit any letter of resignation.

Ruben C. Tobias again summoned Florence O. Cabansag to his office and demanded that she submit her letter of resignation, with the pretext that he needed a Chinese-speaking Credit
Officer to penetrate the local market, with the information that a Chinese-speaking Credit Officer had already been hired and will be reporting for work soon. She was warned that, unless
she submitted her letter of resignation, her employment record will be blemished with the notation ‘ DISMISSED’ spread thereon. Without giving any definitive answer, Florence O.
Cabansag asked Ruben C. Tobias that she be given sufficient time to look for another job. Ruben C. Tobias told her that she should be ‘out’ of her employment by May 15, 1999.

"However, Ruben C. Tobias again summoned Florence O. Cabansag and adamantly ordered her to submit her letter of resignation. She refused. She received a letter from Ruben C. Tobias
terminating her employment with the Bank.

LABOR ARBITER The Labor Arbiter rendered judgment in favor of the Complainant and against the Respondents. Considering the foregoing premises, judgment is hereby rendered finding respondents
guilty of Illegal dismissal and devoid of due process.

NLRC PNB appealed the labor arbiter’s Decision to the NLRC. In a Resolution, the Commission affirmed that Decision, but reduced the moral damages and the exemplary damages.. In a
subsequent Resolution, the NLRC denied PNB’s Motion for Reconsideration.

COURT OF In disposing of the Petition for Certiorari, the CA noted that petitioner bank had failed to adduce in evidence the Singaporean law supposedly governing the latter’s employment
APPEALS Contract with respondent. The appellate court found that the Contract had actually been processed by the Philippine Embassy in Singapore and approved by the Philippine Overseas
Employment Administration (POEA), which then used that Contract as a basis for issuing an Overseas Employment Certificate in favor of the respondent.

According to the CA, even though respondent secured an employment pass from the Singapore Ministry of Employment, she did not thereby waive Philippine labor laws, or the
jurisdiction of the labor arbiter or the NLRC over her Complaint for illegal dismissal. In so doing, neither did she submit herself solely to the Ministry of Manpower of Singapore’s
jurisdiction over disputes arising from her employment. The appellate court further noted that a cursory reading of the Ministry’s letter will readily show that no such waiver or submission
is stated or implied.

Finally, the CA held that petitioner had failed to establish a just cause for the dismissal of respondent. The bank had also failed to give her sufficient notice and an opportunity to be heard
and to defend herself. The CA ruled that she was consequently entitled to reinstatement and back wages, computed from the time of her dismissal up to the time of her reinstatement.

ISSUE RULING
Whether or not Our labor statutes may not be rendered ineffective by laws or judgements promulgated, or stipulations agreed upon, in a foreign country.
the arbitration
branch of the The jurisdiction of labor arbiters and the NLRC is specified in Article 217 of the Labor Code as follows:
NLRC in the
National Capital “Article 217. Jurisdiction of the Labor Arbiters and the Commission. - (a) Except as otherwise provided under this Code, the Labor Arbiters have original and exclusive jurisdiction
Region has to hear and decide, within thirty (30) working days after submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the
jurisdiction over following cases involving all workers, whether agricultural or non-agricultural:
the instant
controversy. 1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file involving wage, rates of pay, hours of work and other terms and conditions of
employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions involving legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare, and maternity benefits, all other claims, arising from employer-employee relations, including
those of persons in domestic or household service, involving an amount of exceeding five thousand pesos ( ₱ 5,000.00) regardless of whether accompanied with a claim
for reinstatement.

(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.

More specifically, Section 10 of R.A. No. 8042 reads in part:

"SECTION 10. Money Claims. — Notwithstanding any provision of law to the contrary, the Labor Arbiters of the National Labor Relations Commission (NLRC) shall have the
original and exclusive jurisdiction to hear and decide, within ninety (90) calendar days after the filing of the complaint, the claims arising out of an employer-employee
relationship or by virtue of any law or contract involving Filipino workers for overseas deployment including claims for actual, moral, exemplary and other forms of damages.

Based on the foregoing provisions, labor arbiters clearly have original and exclusive jurisdiction over claims arising from employer-employee relations, including termination disputes
involving all workers, among whom are overseas Filipino workers (OFW).

We are not unmindful of the fact that respondent was directly hired, while on a tourist status in Singapore, by the PNB branch in that city state. Prior to employing respondent, petitioner
had to obtain an employment pass for her from the Singapore Ministry of Manpower. Securing the pass was a regulatory requirement pursuant to the immigration regulations of that
country.
Similarly, the Philippine government requires non-Filipinos working in the country to first obtain a local work permit in order to be legally employed here. That permit, however, does not
automatically mean that the non-citizen is thereby bound by local laws only, as averred by petitioner. It does not at all imply a waiver of one’s national laws on labor. Absent any clear
and convincing evidence to the contrary, such permit simply means that its holder has a legal status as a worker in the issuing country.

Noteworthy is the fact that respondent likewise applied for and secured an Overseas Employment Certificate from the POEA through the Philippine Embassy in Singapore. The Certificate,
issued declared her a bona fide contract worker for Singapore. Under Philippine law, this document authorized her working status in a foreign country and entitled her to all benefits and
processes under our statutes. Thus, even assuming arguendo that she was considered at the start of her employment as a "direct hire" governed by and subject to the laws, common
practices and customs prevailing in Singapore she subsequently became a contract worker or an OFW who was covered by Philippine labor laws and policies upon certification by the
POEA. At the time her employment was illegally terminated, she already possessed the POEA employment Certificate.

Moreover, petitioner admits that it is a Philippine corporation doing business through a branch office in Singapore. Significantly, respondent’s employment by the Singapore branch office
had to be approved by Benjamin P. Palma Gil, the president of the bank whose principal offices were in Manila. This circumstance militates against petitioner’s contention that
respondent was "locally hired"; and totally "governed by and subject to the laws, common practices and customs" of Singapore, not of the Philippines. Instead, with more reason does
this fact reinforce the presumption that respondent falls under the legal definition of migrant worker, in this case one deployed in Singapore. Hence, petitioner cannot escape the
 application of Philippine laws or the jurisdiction of the NLRC and the labor arbiter.

In any event, we recall the following policy pronouncement of the Court in Royal Crown Internationale v. NLRC:

"x x x. Whether employed locally or overseas, all Filipino workers enjoy the protective mantle of Philippine labor and social legislation, contract stipulations to the contrary
notwithstanding. This pronouncement is in keeping with the basic public policy of the State to afford protection to labor, promote full employment, ensure equal work opportunities
regardless of sex, race or creed, and regulate the relations between workers and employers.1awphi1.net For the State assures the basic rights of all workers to self-organization, collective
bargaining, security of tenure, and just and humane conditions of work [Article 3 of the Labor Code of the Philippines; See also Section 18, Article II and Section 3, Article XIII, 1987
Constitution]. This ruling is likewise rendered imperative by Article 17 of the Civil Code which states that laws ‘which have for their object public order, public policy and good customs shall
not be rendered ineffective by laws or judgments promulgated, or by determination or conventions agreed upon in a foreign country.’

Whether or not Section 1(a) of Rule IV of the NLRC Rules of Procedure reads:
the arbitration
of the NLRC in "Section 1. Venue – (a) All cases which Labor Arbiters have authority to hear and decide may be filed in the Regional Arbitration Branch having jurisdiction over the workplace of
the National the complainant/petitioner; Provided, however that cases of Overseas Filipino Worker (OFW) shall be filed before the Regional Arbitration Branch where the complainant
Capital Region is resides or where the principal office of the respondent/employer is situated, at the option of the complainant.
the most
convenient "For purposes of venue, workplace shall be understood as the place or locality where the employee is regularly assigned when the cause of action arose. It shall include the place where
venue or forum the employee is supposed to report back after a temporary detail, assignment or travel. In the case of field employees, as well as ambulant or itinerant workers, their workplace is where
to hear and they are regularly assigned, or where they are supposed to regularly receive their salaries/wages or work instructions from, and report the results of their assignment to their employers."
decide the
instant Under the "Migrant Workers and Overseas Filipinos Act of 1995" (RA 8042), a migrant worker "refers to a person who is to be engaged, is engaged or has been engaged in a remunerated
controversy. activity in a state of which he or she is not a legal resident; to be used interchangeably with overseas Filipino worker." Undeniably, respondent was employed by the petitioner in its
branch office in Singapore. Admittedly, she is a Filipino and not a legal resident of that state. She thus falls within the category of "migrant worker" or "overseas Filipino worker."

As such, it is her option to choose the venue of her Complaint against the petitioner for illegal dismissal. The law gives her two choices:
(1) at the Regional Arbitration Branch (RAB) where she resides or
(2) at the RAB where the principal office of her employer is situated.

Since her dismissal by petitioner, respondent has returned to the Philippines -- specifically to her residence at Filinvest II, Quezon City. Thus, in filing her Complaint before the RAB office in
Quezon City, she has made a valid choice of proper venue.

Whether or not The appellate court was correct in holding that respondent was already a regular employee at the time of her dismissal, because her three-month probationary period of employment had
the respondent already ended. This ruling is in accordance with Article 281 of the Labor Code: "An employee who is allowed to work after a probationary period shall be considered a regular employee."
was illegally Indeed, petitioner recognized respondent as such at the time it dismissed her, by giving her one month’s salary in lieu of a one-month notice, consistent with provision No. 6 of her
dismissed, and employment Contract.
therefore,
entitled to As a regular employee, respondent was entitled to all rights, benefits and privileges provided under our labor laws. One of her fundamental rights is that she may not be dismissed without
recover moral due process of law. The twin requirements of notice and hearing constitute the essential elements of procedural due process, and neither of these elements can be eliminated without
and exemplary running afoul of the constitutional guarantee.
damages and In dismissing employees, the employer must furnish them two written notices:
attorney’s fees. 1) one to apprise them of the particular acts or omissions for which their dismissal is sought; and
2) the other to inform them of the decision to dismiss them.

As to the requirement of a hearing, its essence lies simply in the opportunity to be heard/
 The evidence in this case is crystal-clear. Respondent was not notified of the specific act or omission for which her dismissal was being sought. Neither was she given any chance to be
heard, as required by law. At any rate, even if she were given the opportunity to be heard, she could not have defended herself effectively, for she knew no cause to answer to.

All that petitioner tendered to respondent was a notice of her employment termination effective the very same day, together with the equivalent of a one-month pay. This Court has
already held that nothing in the law gives an employer the option to substitute the required prior notice and opportunity to be heard with the mere payment of 30 days’ salary.
Well-settled is the rule that the employer shall be sanctioned for noncompliance with the requirements of, or for failure to observe, due process that must be observed in dismissing an
employee.

Moreover, Articles 282, 283 and 284 of the Labor Code provide the valid grounds or causes for an employee’s dismissal. The employer has the burden of proving that it was done for any of
those just or authorized causes. The failure to discharge this burden means that the dismissal was not justified, and that the employee is entitled to reinstatement and back wages.
Notably, petitioner has not asserted any of the grounds provided by law as a valid reason for terminating the employment of respondent. It merely insists that her dismissal was
validly effected pursuant to the provisions of her employment Contract, which she had voluntarily agreed to be bound to.

Truly, the contracting parties may establish such stipulations, clauses, terms and conditions as they want, and their agreement would have the force of law between them. However, the
petitioner overlooks the qualification that those terms and conditions agreed upon must not be contrary to law, morals, customs, public policy or public order. As explained earlier, the
employment Contract between petitioner and respondent is governed by Philippine labor laws. Hence, the stipulations, clauses, and terms and conditions of the Contract must not
contravene our labor law provisions.

Moreover, a contract of employment is imbued with public interest. The Court has time and time again reminded parties that they "are not at liberty to insulate themselves and their
relationships from the impact of labor laws and regulations by simply contracting with each other." Also, while a contract is the law between the parties, the provisions of positive law that
regulate such contracts are deemed included and shall limit and govern the relations between the parties.

Basic in our jurisprudence is the principle that when there is no showing of any clear, valid, and legal cause for the termination of employment, the law considers the matter a case of
illegal dismissal.

25. Urbanes vs Secretary of Labor

URBANES, VS. SECRETARY OF LABOR

FACTS Petitioner Placido O. Urbanes, Jr., doing business under the name and style of Catalina Security Agency, entered into an agreement to provide security services to the respondent Social
Security System (SSS).

During the effectivity of the agreement, petitioner, by letter, requested the SSS for the upward adjustment of their contract rate in view of Wage Order No. NCR-03 which was issued by
the Regional Tripartite Wage and Productivity Board-NCR pursuant to Republic Act No. 6727 otherwise known as the Wage Rationalization Act.

In the cases of contracts for construction projects and for security, janitor and similar services, the prescribed amount set forth herein for covered workers shall be borne by the
principals or the clients of the construction/service contractors and the contract shall be deemed amended accordingly. In the event, however, that the principal or client failed
to pay the prescribed increase, the construction/service contractors shall be jointly and severally liable with the principal or client.
As his letter to SSS remained unheeded, petitioner sent another letter, reiterating the request, which was followed by another letter. Petitioner pulled out his agency’s service from the
premises of the SSS and another security agency, Jaguar, took over.

Petitioner filed a complaint with the DOLE-NCR against the SSS seeking the implementation of Wage Order No. NCR-03. In its position paper, the SSS prayed for the dismissal of the
complaint on the ground that petitioner is not the real party in interest and has no legal capacity to file the same. In any event, it argued that if it had any obligation, it was to the security
guards.
 DOLE-NCR Finding for the petitioner, the Regional Director of the DOLE-NCR issued an Order. “The respondent Social Security Services (SSS) is hereby Ordered to pay Complaint the total sum of ₱
1,600,858.46 representing the wage differentials under Wage Order No. NCR-03 of the 168 Security Guards of Catalina Security Agency covering the period from December 16, 1993 to
June 24, 1994.

SECRETARY OF The Secretary of Labor, by Order, set aside the order of the Regional Director and remanded the records of the case “for recomputation of the wage differential using ₱ 5,281.00 as the
LABOR basis of the wage adjustment.” And the Secretary held petitioner’s security agency “JOINTLY AND SEVERALLY liable for wage differentials, the amount of which should be paid DIRECTLY
to the security guards concerned.”

ISSUE RULING

Whether or not Neither the petitioner’s contention nor the SSS’s is impressed with merit. Lapanday Agricultural Development Corporation v. Court of Appeals instructs so. In that case, the security agency
the Secretary of filed a complaint before the Regional Trial Court (RTC) against the principal or client Lapanday for the upward adjustment of the contract rate in accordance with Wage Order Nos. 5 and 6.
Labor does not Lapanday argued that it is the National Labor Relations Commission, not the civil courts, which has jurisdiction to resolve the issue in the case, it involving the enforcement of wage
have jurisdiction adjustment and other benefits due the agency’s security guards as mandated by several wage orders. Holding that the RTC has jurisdiction over the controversy, this Court ruled:
to review the
appeals from We agree with the respondent that the RTC has jurisdiction over the subject matter of the present case. It is well settled in law and jurisprudence that where no employer-
decisions of the employee relationship exists between the parties and no issue is involved which may be resolved by reference to the Labor Code, other labor statutes or any collective
Regional bargaining agreement, it is the Regional Trial Court that has jurisdiction. In its complaint, private respondent is not seeking any relief under the Labor Code but seeks payment of
Director in a sum of money and damages on account of petitioner's alleged breach of its obligation under their Guard Service Contract. The action is within the realm of civil law, hence
complaints filed jurisdiction over the case belongs to the regular courts. While the resolution of the issue involves the application of labor laws, reference to the labor code was only for the
under Article determination of the solidary liability of the petitioner to the respondent where no employer-employee relation exists.
129 of the Labor
Code. In the case at bar, even if petitioner filed the complaint on his and also on behalf of the security guards, the relief sought has to do with the enforcement of the contract between him and
the SSS which was deemed amended by virtue of Wage Order No. NCR-03. The controversy subject of the case at bar is thus a civil dispute, the proper forum for the resolution of which is
the civil courts.

But even assuming arguendo that petitioner’s complaint were filed with the proper forum, for lack of cause of action, it must be dismissed.

Articles 106, 107 and 109 of the Labor Code provide:

ART. 106. CONTRACTOR OR SUBCONTRACTOR. – Whenever an employer enters into contract with another person for the performance of the former’s work, the employees of
the contractor and of the latter’s subcontractor, if any, shall be paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wage of his employees in accordance with this Code, the employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly
employed by him.

ART. 107 INDIRECT EMPLOYER. – The provisions of the immediately preceding Article shall likewise apply to any person, partnership, association or corporation which, not being
an employer, contracts with an independent contractor for the performance of any work, task, job or project.
ART. 109. SOLIDARY LIABILITY. – The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer shall be held responsible with his
contractor or subcontractor for any violation of any provision of this Code. For purposes of determining the extent of their civil liability under this Chapter, they shall be
considered as direct employers.
In the case of Eagle Security Agency, Inc. v. NLRC, this Court held:

The Wage Orders are explicit that payment of the increases are "to be borne" by the principal or client. "To be borne", however, does not mean that the principal, PTSI in this
case, would directly pay the security guards the wage and allowance increases because there is no privity of contract between them. The security guards' contractual relationship
 is with their immediate employer, EAGLE. As an employer, EAGLE is tasked, among others, with the payment of their wages [See Article VII Sec. 3 of the Contract for Security
Services, supra and Bautista v. Inciong, G.R. No. 52824, March 16, 1988, 158 SCRA 665].

On the other hand, there existed a contractual agreement between PTSI and EAGLE wherein the former availed of the security services provided by the latter. In return, the
security agency collects from its clients payment for its security services. This payment covers the wages for the security guards and also expenses for their supervision and
training, the guards' bonds, firearms with ammunition, uniforms and other equipment, accessories, tools, materials and supplies necessary for the maintenance of a security
force.
Premises considered, the security guards' immediate recourse for the payment of the increases is with their direct employer, EAGLE. However, in order for the security agency
to comply with the new wage and allowance rates it has to pay the security guards, the Wage Orders made specific provision to amend existing contracts for security services by
allowing the adjustment of the consideration paid by the principal to the security agency concerned. What the Wage Orders require, therefore, is the amendment of the
contract as to the consideration to cover the service contractor's payment of the increases mandated. In the end, therefore, ultimate liability for the payment of the increases
rests with the principal.
In view of the foregoing, the security guards should claim the amount of the increases from EAGLE. Under the Labor Code, in case the agency fails to pay them the amounts
claimed, PTSI should be held solidarily liable with EAGLE [Articles 106, 107 and 109]. Should EAGLE pay, it can claim an adjustment from PTSI for an increase in consideration to
cover the increases payable to the security guards.

Passing on the foregoing disquisition in Eagle, this Court, in Lapanday, held:

It is clear also from the foregoing that it is only when [the] contractor pays the increases mandated that it can claim an adjustment from the principal to cover the increases
payable to the security guards. The conclusion that the right of the contractor (as principal debtor) to recover from the principal (as solidary co-debtor) arises only if he has
paid the amounts for which both of them are jointly and severally liable is in line with Article 1217 of the Civil Code which provides:

"Art. 1217. Payment made by one the solidary debtors extinguishes the obligation. If two or more solidary debtors offer to pay, the creditor may choose which offer to accept.

He who made payment make claim from his co-debtors only the share which corresponds to each, with interest for the payment already made. If the payment is made before
the debt is due, no interest for the intervening period may be demanded. x x x”

In fine, the liability of the SSS to reimburse petitioner arises only if and when petitioner pays his employee-security guards "the increases" mandated by Wage Order No. NCR-03.

The records do not show that petitioner has paid the mandated increases to the security guards. The security guards in fact have filed a complaint with the NLRC against petitioner relative
to, among other things, underpayment of wages.

26. Yusen Air and Sea Service Philippines vs. Villamor

YUSEN AIR AND SEA SERVICE PHILIPPINES, INCORPORATED, VS. VILLAMOR

FACTS Petitioner, a corporation organized and existing under Philippine laws, is engaged in the business of freight forwarding. As such, it is contracted by clients to pick-up, unpack, consolidate,
deliver, transport and distribute all kinds of cargoes, acts as cargo or freight accommodation and enters into charter parties for the carriage of all kinds of cargoes or freight.

Petitioner hired the respondent as branch manager in its Cebu Office. Later, petitioner reclassified respondent’s position to that of Division Manager, which position respondent held until
his resignation.
 Immediately after his resignation, respondent started working for Aspac International, a corporation engaged in the same line of business as that of petitioner.

In the Regional Trial Court at Parañaque City, petitioner filed against respondent a complaint for injunction and damages with prayer for a temporary restraining order.
“7. That respondent duly signed an undertaking to abide by the policies of the petitioner which includes the provision on the employees’ responsibility and obligation in cases of conflict of
interest.

No employees may engage in any business or undertaking that is directly or indirectly in competition with that of the company and its affiliates or engage directly or indirectly in
any undertaking or activity prejudicial to the interests of the company or to the performance of his/her job or work assignments. The same provision will be implemented for a
period of two (2) years from the date of an employee’s resignation, termination or separation from the company.

8. That in clear violation and breach of his undertaking and agreement with the policies of petitioner, respondent joined Aspac International, within two years from his date of resignation,
whose business is directly in conflict with that of petitioner.

Petitioner thus prayed for a judgment enjoining respondent from “further pursuing his work at Aspac International.”

Apparently not to be outdone, respondent filed against petitioner a case for illegal dismissal before the National Labor Relations Commission.

Meanwhile, instead of filing his answer in Civil Case, respondent filed a Motion to Dismiss arguing that the RTC has no jurisdiction over the subject matter of said case because an
employer-employee relationship is involved.

TRIAL COURT The trial court issued an order dismissing petitioner’s complaint for lack of jurisdiction over the subject matter thereof on the ground that the action was for damages arising from
employer-employee relations. Citing Article 217 of the Labor Code, the trial court ruled that it is the labor arbiter which had jurisdiction over the petitioner’s complaint.

ISSUE RULING

Whether or not The 2-year prohibition against employment in a competing company which petitioner seeks to enforce through injunction, had already expired sometime in February 2004.
the petitioner's
claim for In a kindred case, Dai-Chi Electronics Manufacturing vs. Villarama, an action for breach of contractual obligation is intrinsically a civil dispute.
damages arose
from employer- There, a complaint for damages was filed with the regular court by an employer against a former employee who allegedly violated the non-compete provision of their employment
employee contract when, within two years from the date of the employee’s resignation, he applied with, and was hired by a corporation engaged in the same line of business as that of his former
relations employer. The employer sought to recover liquidated damages. The trial court ruled that it had no jurisdiction over the subject matter of the controversy because the complaint was for
between the damages arising from employer-employee relations, citing Article 217 (4) of the Labor Code, as amended by R.A. No. 6715, which stated that it is the Labor Arbiter who had original and
parties. exclusive jurisdiction over the subject matter of the case.

When the case was elevated to this Court, we held that the claim for damages did not arise from employer-employee relations, to wit:

Petitioner does not ask for any relief under the Labor Code of the Philippines. It seeks to recover damages agreed upon in the contract as redress for private respondent’s breach of his
contractual obligation to its "damage and prejudice". Such cause of action is within the realm of Civil Law, and jurisdiction over the controversy belongs to the regular courts. More so
when we consider that the stipulation refers to the post-employment relations of the parties.

[W]hile seemingly the cause of action arose from employer-employee relations, the employer’s claim for damages is grounded on wanton failure and refusal without just cause to report
to duty coupled with the averment that the employee maliciously and with bad faith violated the terms and conditions of the contract to the damage of the employer. Such averments
removed the controversy from the coverage of the Labor Code of the Philippines and brought it within the purview of Civil Law.
 Indeed, jurisprudence has evolved the rule that claims for damages under paragraph 4 of Article 217, to be cognizable by the Labor Arbiter, must have a reasonable causal connection with
any of the claims provided for in that article. Only if there is such a connection with the other claims can a claim for damages be considered as arising from employer-employee relations.
Article 217, as amended by Section 9 of RA 6715, provides:

Art. 217. Jurisdiction of Labor Arbiters and the Commission. — (a) Except as otherwise provided under this Code, the Labor Arbiters shall have original and exclusive jurisdiction
to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the
following cases involving all workers, whether agricultural or non-agricultural:
xxx xxx xxx
4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations;"
xxx xxx xxx

In San Miguel Corporation vs. National Labor Relations Commission, we had occasion to construe Article 217, as amended by B.P. Blg. 227. Article 217 then provided that the Labor Arbiter
had jurisdiction over all money claims of workers, but the phrase ‘arising from employer-employee relation’ was deleted. We ruled thus:

While paragraph 3 above refers to "all money claims of workers," it is not necessary to suppose that the entire universe of money claims that might be asserted by workers against their
employers has been absorbed into the original and exclusive jurisdiction of Labor Arbiters. In the first place, paragraph 3 should be read not in isolation from but rather within the context
formed by paragraph 1 (relating to unfair labor practices), paragraph 2 (relating to claims concerning terms and conditions of employment), paragraph 4 (claims relating to household
services, a particular species of employer-employee relations), and paragraph 5 (relating to certain activities prohibited to employees or employers). It is evident that there is a unifying
element which runs through paragraph 1 to 5 and that is, that they all refer to cases or disputes arising out of or in connection with an employer-employee relationship. This is, in other
words, a situation where the rule of noscitur a sociis may be usefully invoked in clarifying the scope of paragraph 3, and any other paragraph of Article 217 of the Labor Code, as amended.
We reach the above conclusion from an examination of the terms themselves of Article 217, as last amended by B.P. Blg 227, and even though earlier versions of Article 217 of the Labor
Code expressly brought within the jurisdiction of the Labor Arbiters and the NLRC "cases arising from employer-employee relations," which clause was not expressly carried over, in
printer’s ink, in Article 217 as it exists today. For it cannot be presumed that money claims of workers which do not arise out of or in connection with their employer-employee
relationship, and which would therefore fall within the general jurisdiction of regular courts of justice, were intended by the legislative authority to be taken away from the jurisdiction of
the courts and lodged with Labor Arbiters on an exclusive basis. The Court, therefore, believes and so holds that the "money claims of workers" referred to in paragraph 3 of Article 217
embraces money claims which arise out of or in connection with the employer-employee relationship, or some aspect or incident of such relationship. Put a little differently, that
money claims of workers which now fall within the original and exclusive jurisdiction of Labor Arbiters are those money claims which have some reasonable causal connection with the
employer-employee relationship.
When, as here, the cause of action is based on a quasi-delict or tort, which has no reasonable causal connection with any of the claims provided for in Article 217, jurisdiction over the
action is with the regular courts.
As it is, petitioner does not ask for any relief under the Labor Code. It merely seeks to recover damages based on the parties’ contract of employment as redress for respondent's breach
thereof. Such cause of action is within the realm of Civil Law, and jurisdiction over the controversy belongs to the regular courts. More so must this be in the present case, what with the
reality that the stipulation refers to the post-employment relations of the parties.

For sure, a plain and cursory reading of the complaint will readily reveal that the subject matter is one of claim for damages arising from a breach of contract, which is within the ambit of
the regular court’s jurisdiction.

5. Independent Contractor
27. PCI Automation Center vs. NLRC

ISSUE RULING

Whether or not The petitioner, through PCIB, contracted Prime to provide it with qualified personnel to work on the computer conversion project of PCIB. The External Job Contract between Prime and
the private PCIB must be read in conjunction with the Computer Services Agreement between PCIB and the petitioner. Under the Computer Services Agreement, the petitioner shall direct and
respondent is an supervise the computer conversion project of PCIB while PCIB shall provide the petitioner with data encoders and computer attendants to work on the project. Pursuant to said
employee of Agreement, PCIB called on Prime to furnish the petitioner with the needed personnel, one of whom was private respondent. Hence, although the parties in the External Job Contract are
Prime and he only Prime and PCIB, the legal consequences of such contract must also be made to apply to the petitioner. Under the circumstances, PCIB merely acted as a conduit between the
was merely petitioner and Prime. The project was under the management and supervision of the petitioner and it was the petitioner which exercised control over the persons working on the
assigned by project.
Prime to the
petitioner to Under the law, any person (hereinafter referred to as the "principal employer") who enters into an agreement with a job contractor, either for the performance of a specified work or for
work on the 4th the supply of manpower, assumes responsibility over the employees of the latter.However, for the purpose of determining the extent of the principal employer's liability, the law makes a
GL Environment distinction between legitimate job contracting and labor-only contracting. Article 106 of the Labor Code states:
Conversion
Project of PCIB. Art. 106. Contractor or subcontractor. — Whenever an employer enters into a contract with another person for the performance of the former's work, the employees of the
contractor and of the latter's subcontractor, if any, shall be paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly
employed by him.

The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under this Code. In so
prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these types of contracting
and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this
Code.

There is "labor-only" contracting where 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 the workers recruited and placed by such persons are performing activities which are directly related to the principal business of such employer. In such
cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were
directly employed by him.

In legitimate job contracting, no employer-employee relationship exists between the employees of the job contractor and the principal employer. Even then, the principal employer
becomes jointly and severally liable with the job contractor for the payment of the employees' wages whenever the contractor fails to pay the same. In such case, the law creates an
employer-employee relationship between the principal employer and the job contractor's employees for a limited purpose, that is, to ensure that the employees are paid their wages.
Other than the payment of wages, the principal employer is not responsible for any claim made by the employees.
On the other hand, in labor-only contracting, an employer-employee relationship is created by law between the principal employer and the employees of the labor-only contractor. In this
case, the labor-only contractor is considered merely an agent of the principal employer. The principal employer is responsible to the employees of the labor-only contractor as if such
employees had been directly employed by the principal employer. The principal employer therefore becomes solidarily liable with the labor-only contractor for all the rightful claims of the
employees.
Thus, in legitimate job contracting, the principal employer is considered only an indirect employer, while in labor-only contracting, the principal employer is considered the direct employer
of the employees.
Considering the terms of the External Job Contract executed by Prime and PCIB, it cannot be doubted that Prime is a labor-only contractor. Under the contract, Prime merely acted as a
placement agency providing manpower to the petitioner through PCIB. The service rendered by Prime in favor of the petitioner was not the performance of a specific job, but the supply
of qualified personnel to work as data encoders and computer attendants in connection with the petitioner's project.

Rule VIII Book III of the Omnibus Implementing Rules and Regulations of the Labor Code defines job contracting and labor-only contracting:

Sec. 8. Job contracting. — There is job contracting permissible under the Code if the following conditions are met:
(1) The contractor carries on an independent business and undertakes the contract work on his own 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 the work except as to the results thereof; and
 (2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of his
business.

Sec. 9. Labor-only contracting. — (a) Any person who undertakes to supply workers to an employer shall be deemed to be engaged in labor-only contracting when such person:
(1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work premises and other materials; and
(2) The workers recruited and placed by such person are performing activities which are directly related to the principal business or operations of the employer in which workers are
habitually employed.

(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be considered merely as an agent or intermediary of the employer who shall be
responsible to the workers in the same manner and extent as if the latter were directly employed by him.

In short, the legitimate job contractor provides services while the labor-only contractor provides only manpower. The legitimate job contractor undertakes to perform a specific job for the
principal employer while the labor-only contractor merely provides the personnel to work for the principal employer.

As Prime is a labor-only contractor, the workers it supplied to the petitioner, including private respondent, should be considered employees of the petitioner. The admissions made by
private respondent in his affidavits and position paper that he is a regular employee of Prime are not conclusive on this Court as the existence of an employer-employee relationship is a
question of law which may not be made the subject of stipulation.
The petitioner solidarily liable with Prime for the payment of all the monetary claims of private respondent. This is in accord with Article 106 of the Labor Code, as amended.

28. DBP vs. NLRC

FACTS

LABOR ARBITER

NLRC

ISSUE RULING

29. Neri vs. NLRC and FEBTC

ISSUE RULING

Whether or not Respondent BCC need not prove that it made investments in the form of tools, equipment, machineries, work premises, among others, because it has established that it has sufficient
BCC is engaged capitalization. The Labor Arbiter and the NLRC both determined that BCC had a capital stock of P1 million fully subscribed and paid for. BCC is therefore a highly capitalized venture and
in “labor-only” cannot be deemed engaged in "labor-only" contracting.
contracting
because it failed It is well-settled that there is "labor-only" contracting where:
to adduce (1) 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,
evidence (2) the workers recruited and placed by such person are performing activities which are directly related to the principal business of the employer.
purporting to Article 106 of the Labor Code defines "labor-only" contracting thus —
show that it
invested in the Art. 106. Contractor or subcontractor. — . . . . There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or
form of tools, investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited by such persons are performing activities which are directly
equipment, related to the principal business of such employer.
machineries,
work premises Based on the foregoing, BCC cannot be considered a "labor-only" contractor because it has substantial capital. While there may be no evidence that it has investment in the form of tools,
and other equipment, machineries, work premises, among others, it is enough that it has substantial capital, as was established before the Labor Arbiter as well as the NLRC. In other words, the
materials which law does not require both substantial capital and investment in the form of tools, equipment, machineries, etc. This is clear from the use of the conjunction "or". If the intention was to
are necessary in require the contractor to prove that he has both capital and the requisite investment, then the conjunction "and" should have been used. But, having established that it has substantial
the conduct of capital, it was no longer necessary for BCC to further adduce evidence to prove that it does not fall within the purview of "labor-only" contracting. There is even no need for it to refute
its business. petitioners' contention that the activities they perform are directly related to the principal business of respondent bank.

Be that as it may, the Court has already taken judicial notice of the general practice adopted in several government and private institutions and industries of hiring independent
contractors to perform special services. These services range from janitorial, security and even technical or other specific services such as those performed by petitioners Neri and Cabelin.
While these services may be considered directly related to the principal business of the employer, nevertheless, they are not necessary in the conduct of the principal business of the
employer.

In fact, the status of BCC as an independent contractor was previously confirmed by this Court in Associated Labor Unions-TUCP v. National Labor Relations Commission, where we held
thus —
The public respondent ruled that the complainants are not employees of the bank but of the company contracted to serve the bank. Building Care Corporation is a big firm which
services, among others, a university, an international bank, a big local bank, a hospital center, government agencies, etc . It is a qualified independent contractor. The public
respondent correctly ruled against petitioner's contentions.

Even assuming ex argumenti that petitioners were performing activities directly related to the principal business of the bank, under the "right of control" test they must still be considered
employees of BCC. In the case of petitioner Neri, it is admitted that FEBTC issued a job description which detailed her functions as a radio/telex operator. However, a cursory reading of the
job description shows that what was sought to be controlled by FEBTC was actually the end-result of the task, e.g., that the daily incoming and outgoing telegraphic transfer of funds
received and relayed by her, respectively, tallies with that of the register. The guidelines were laid down merely to ensure that the desired end-result was achieved. It did not, however,
tell Neri how the radio/telex machine should be operated. In the Shipside case, we ruled —
. . . . If in the course of private respondents' work (referring to the workers), SHIPSIDE occasionally issued instructions to them, that alone does not in the least detract from the fact that
only STEVEDORES is the employer of the private respondents, for in legal contemplation, such instructions carry no more weight than mere requests, the privity of contract being between
SHIPSIDE and STEVEDORES . . . .

Besides, petitioners do not deny that they were selected and hired by BCC before being assigned to work in the Cagayan de Oro Branch of FFBTC. BCC likewise acknowledges that
petitioners are its employees. The record is replete with evidence disclosing that BCC maintained supervision and control over petitioners through its Housekeeping and Special Services
Division: petitioners reported for work wearing the prescribed uniform of BCC; leaves
of absence were filed directly with BCC; and, salaries were drawn only from BCC.
As a matter of fact, Neri even secured a certification from BCC on 16 May 1986 that she was employed by the latter. On the other hand, on 24 May 1988, Cabelin filed a complaint for
underpayment of wages, non-integration of salary adjustments mandated by Wage Orders Nos. 5 & 6 and R.A. 6640 as well as for illegal deduction against BCC alone which was
provisionally dismissed on 19 August 1988 upon Cabelin's manifestation that his money claim was negligible.

More importantly, under the terms and conditions of the contract, it was BCC alone which had the power to reassign petitioners. Their deployment to FEBTC was not subject to the bank's
acceptance. Cabelin was promoted to messenger because the FEBTC branch manager promised BCC that two (2) additional janitors would be hired from the company if the promotion was
to be effected. 18 Furthermore, BCC was to be paid in lump sum unlike in the situation in Philippine Bank of Communications 19 where the contractor, CESI, was to be paid at a daily rate on
a per person basis. And, the contract therein stipulated that the CESI was merely to provide manpower that would render temporary services. In the case at bar, Neri and Cabelin were to
 perform specific special services. Consequently, petitioners cannot be held to be employees of FEBTC as BCC "carries an independent business" and undertaken the performance of its
contract with various clients according to its "own manner and method, free from the control and supervision" of its principals in all matters "except as to the results thereof."

Indeed, the facts in Philippine Bank of Communications do not square with those of the instant case. Therein, the Court ruled that CESI was a "labor-only" contractor because upholding
the contract between the contractor and the bank would in effect permit employers to avoid the necessity of hiring regular or permanent employees and would enable them to keep their
employees indefinitely on a temporary or casual basis, thus denying them security of tenure in their jobs. This of course violates the Labor Code. BCC has not committed any violation.
Also, the former case was for illegal dismissal; this case, on the other hand, is for conversion of employment status so that petitioners can receive the same salary being given to regular
employees of FEBTC. But, as herein determined, petitioners are not regular employees of FEBTC but of BCC. At any rate, the finding that BCC in a qualified independent contractor
precludes us from applying the Philippine Bank of Communications doctrine to the instant petition.

30. Vinoya vs. NLRC

ISSUE RULING

Whether or not Labor-only contracting, a prohibited act, is an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a
PMCI is a labor principal. In labor-only contracting, the following elements are present:
only contractor
or an (a) The contractor or subcontractor does not have substantial capital or investment to actually perform the job, work or service under its own account and responsibility;
independent (b) The employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal. 15
contractor.
On the other hand, permissible job 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. A person is considered engaged in legitimate job contracting or subcontracting if the following conditions concur:

(a) The contractor or subcontractor carries on a distinct and independent business and undertakes to perform the job, work or service on its own account and under its own
responsibility according to its own manner and method, and free from the control and direction of the principal in all matters connected with the performance of the work
except as to the results thereof;
(b) The contractor or subcontractor has substantial capital or investment; and
(c) The agreement between the principal and 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 and welfare benefits.

Previously, in the case of Neri vs. NLRC, we held that in order to be considered as a job contractor it is enough that a contractor has substantial capital. In other words, once substantial
capital established it is no longer necessary for the contractor to show evidence that it has investment in the form of tools, equipment, machineries, work premises, among others. The
rational for this is that Article 106 of the Labor Code does not require that the contractor possess both substantial capital and investment in the form of tools, equipment, machineries,
work premises, among others. The decision of the Court in Neri, thus, states:

Respondent BCC need not prove that it made investments in the form of tools, equipment, machineries, work premises, among others, because it has established that it has
sufficient capitalization. The Labor Arbiter and the NLRC both determined that BCC had a capital stock of P1 million fully subscribed and paid for. BCC is therefore a highly
capitalized venture and cannot be deemed engaged in "labor-only" contracting.
However, in declaring that Building Care Corporation ("BCC") was an independent contractor, the Court considered not only the fact that it had substantial capitalization. The
Court noted that BCC carried on an independent business and undertook the performance of its contract according to its own manner and method, free from the control and
supervision of its principal in all matters except as to the results thereof. 21 The Court likewise mentioned that the employees of BCC were engaged to perform specific special
services for its principal.22 Thus, the Court ruled that BCC was an independent contractor.
The Court further clarified the import of the Neri decision in the subsequent case of Philippine Fuji Xerox Corporation vs. NLRC. In the said case, petitioner Fuji Xerox implored the Court to
apply the Neri doctrine to its alleged job-contractor, Skillpower, Inc., and declare the same as an independent contractor. Fuji Xerox alleged that Skillpower, Inc. was a highly capitalized
venture registered with the Securities and Exchange Commission, the Department of Labor and Employment, and the Social Security System with assets exceeding P5,000,000.00
possessing at least 29 typewriters, office equipment and service vehicles, and its own pool of employees with 25 clerks assigned to its clients on a temporary basis. 24 Despite the evidence
presented by Fuji Xerox the Court refused to apply the Neri case and explained:

Petitioners cite the case of Neri v. NLRC, in which it was held that the Building Care Corporation (BCC) was an independent contractor on the basis of finding that it had substantial capital,
although there was no evidence that it had investments in the form of tools, equipment, machineries and work premises. But the Court in that case considered not only the capitalization
of the BCC but also the fact that BCC was providing specific special services (radio/telex operator and janitor) to the employer; that in another case, the Court had already found that BCC
was an independent contractor; that BCC retained control over the employees and the employer was actually just concerned with the end-result; that BCC had the power to reassign the
employees and their deployment was not subject to the approval of the employer; and that BCC was paid in lump sum for the services it rendered. These features of that case make it
distinguishable from the present one.
Not having shown the above circumstances present in Neri, the Court declared Skillpower, Inc. to be engaged in labor-only contracting and was considered as a mere agent of the
employer.
From the two aforementioned decisions, it may be inferred that it is not enough to show substantial capitalization or investment in the form of tools, equipment, machineries and work
premises, among others, to be considered as an independent contractor. In fact, jurisprudential holdings are to the effect that in determining the existence of an independent contractor
relationship, several factors might be considered such as, but not necessarily confined to, whether 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 workers; the power of
the employer with respect to the hiring, firing and payment of the workers of the contractor; the control of the premises; the duty to supply premises, tools, appliances, materials and
labor; and the mode, manner and terms of payment.
Given the above standards and the factual milieu of the case, the Court has to agree with the conclusion of the Labor Arbiter that PMCI is engaged in labor-only contracting.
First of all, PMCI does not have substantial capitalization or investment in the form of tools, equipment, machineries, work premises, among others, to qualify as an independent
contractor. While it has an authorized capital stock of P1,000,000.00, only P75,000.00 is actually paid-in, which, to our mind, cannot be considered as substantial capitalization. In the case
of Neri, which was promulgated in 1993, BCC had a capital stock of P1,000,000.00 which was fully subscribed and paid-for. Moreover, when the Neri case was decided in 1993, the rate of
exchange between the dollar and the peso was only P27.30 to $1 27 while presently it is at P40.390 to $1. 28 The Court takes judicial notice of the fact that in 1993, the economic situation in
the country was not as adverse as the present, as shown by the devaluation of our peso. With the current economic atmosphere in the country, the paid-in capitalization of PMCI
amounting to P75,000,00 cannot be considered as substantial capital and, as such, PMCI cannot qualify as an independent contractor.

Second, PMCI did not carry on an independent business nor did it undertake the performance of its contract according to its own manner and method, free from the control and
supervision of its principal, RFC. The evidence at hand shows that the workers assigned by PMCI to RFC were under the control and supervision of the latter. The Contract of Service itself
provides that RFC can require the workers assigned by PMCI to render services even beyond the regular eight hour working day when deemed necessary. 29 Furthermore, RFC undertook to
assist PMCI in making sure that the daily time records of its alleged employees faithfully reflect the actual working hours. 30 With regard to petitioner, RFC admitted that it exercised control
and supervision over him.31 These are telltale indications that PMCI was not left alone to supervise and control its alleged employees. Consequently, it can be, concluded that PMCI was not
an independent contractor since it did not carry a distinct business free from the control and supervision of RFC.

Third, PMCI was not engaged to perform a specific and special job or service, which is one of the strong indicators that an entity is an independent contractor as explained by the Court in
the cases of Neri and Fuji. As stated in the Contract of Service, the sole undertaking of PMCI was to provide RFC with a temporary workforce able to carry out whatever service may be
required by it.32 Such venture was complied with by PMCI when the required personnel were actually assigned to RFC. Apart from that, no other particular job, work or service was
required from PMCI. Obviously, with such an arrangement, PMCI merely acted as a recruitment agency for RFC. Since the undertaking of PMCI did not involve the performance of a specific
job, but rather the supply of manpower only, PMCI clearly conducted itself as labor-only contractor.

Lastly, in labor-only contracting, the employees recruited, supplied or placed by the contractor perform activities which are directly related to the main business of its principal. In this
case, the work of petitioner as sales representative is directly related to the business of RFC. Being in the business of food manufacturing and sales, it is necessary for RFC to hire a sales
representative like petitioner to take charge of booking its sales orders and collecting payments for such. Thus, the work of petitioner as sales representative in RFC can only be
categorized as clearly related to, and in the pursuit of the latter's business. Logically, when petitioner was assigned by PMCI to RFC, PMCI acted merely as a labor-only contractor.
Based on the foregoing, PMCI can only be classified as a labor-only contractor and, as such, cannot be considered as the employer of petitioner.
31. Fuji Television Network vs. Espiritu

FACTS

LABOR ARBITER

NLRC

ISSUE RULING

6. Labor Dispute
Article 219 (l) of the Labor Code

“Labor dispute” includes any controversy or matter concerning terms and conditions of employment or the association or representation of persons in negotiating, fixing, maintaining, changing or arranging
the terms and conditions of employment, regardless of whether the disputants stand in the proximate relation of employer and employee.

32. SMC Employee Union vs. Bersamira

SAN MIGUEL CORPORATION EMPLOYEES UNION-PTGWO, VS. HON. JESUS G. BERSAMIRA

FACTS SanMig entered into contracts for merchandising services with Liperson and D’Rite. These companies are independent contractors duly licensed by the Department of Labor and
Employment (DOLE). In said contracts, it was expressly understood and agreed that the workers employed by the contractors were to be paid by the latter and that none of them were to
be deemed employees or agents of SanMig. There was to be no employer-employee relation between the contractors and/or its workers, on the one hand, and SanMig on the other.

Petitioner San Miguel Corporation Employee Union-PTWGO (Union) is the duly authorized representative of the monthly paid rank-and-file employees of SanMig with whom the latter
executed a Collective Bargaining Agreement (CBA). Section 1 of their CBA specifically provides that “temporary, probationary, or contract employees and workers are excluded from the
bargaining unit and, therefore, outside the scope of this Agreement.”

In a letter, the Union advised SanMig that some Lipercon and D’Rite workers had signed up for union membership and sought the regularization of their employment with SMC. The Union
alleged that this group of employees, while appearing to be contractual workers supposedly independent contracts, have been continuously working for SanMig for a period ranging from
six (6) months to fifteen (15) years and their work is neither casual nor seasonal as they are performing work or activities necessary or desirable in the usual business or trade of SanMig.
Thus, it was contended that there exists a “labor-only” contracting situation. It was then demanded that the employment status of these workers be regularized.

On the ground that it had failed to receive any favorable responses from SanMig, the Union filed a notice to strike for unfair labor practice, CBA violations, and union busting.

The Union again filed a second notice of strike for unfair labor practice.
 ISSUE RULING

Whether or not A "labor dispute" as defined in Article 212 (1) of the Labor Code includes "any controversy or matter concerning terms and conditions of employment or the association or representation
there is a labor of persons in negotiating, fixing, maintaining, changing, or arranging the terms and conditions of employment, regardless of whether the disputants stand in the proximate relation of
dispute. employer and employee."

While it is SanMig's submission that no employer-employee relationship exists between itself, on the one hand, and the contractual workers of Lipercon and D'Rite on the other, a labor
dispute can nevertheless exist "regardless of whether the disputants stand in the proximate relationship of employer and employee" (Article 212 [1], Labor Code, supra) provided the
controversy concerns, among others, the terms and conditions of employment or a "change" or "arrangement" thereof ( ibid). Put differently, and as defined by law, the existence of a
labor dispute is not negative by the fact that the plaintiffs and defendants do not stand in the proximate relation of employer and employee.

That a labor dispute, as defined by the law, does exist herein is evident. At bottom, what the Union seeks is to regularize the status of the employees contracted by Lipercon and D'Rite in
effect, that they be absorbed into the working unit of SanMig. This matter definitely dwells on the working relationship between said employees vis-a-vis SanMig. Terms, tenure and
conditions of their employment and the arrangement of those terms are thus involved bringing the matter within the purview of a labor dispute.

Further, the Union also seeks to represent those workers, who have signed up for Union membership, for the purpose of collective bargaining. SanMig, for its part, resists that Union
demand on the ground that there is no employer-employee relationship between it and those workers and because the demand violates the terms of their CBA. Obvious then is that
representation and association, for the purpose of negotiating the conditions of employment are also involved. In fact, the injunction sought by SanMig was precisely also to prevent such
representation. Again, the matter of representation falls within the scope of a labor dispute. Neither can it be denied that the controversy below is directly connected with the labor
dispute already taken cognizance of by the NCMB-DOLE.

Whether or not the Union demands are valid; whether or not SanMig's contracts with Lipercon and D'Rite constitute "labor-only" contracting and, therefore, a regular employer-employee
relationship may, in fact, be said to exist; whether or not the Union can lawfully represent the workers of Lipercon and D'Rite in their demands against SanMig in the light of the existing
CBA; whether or not the notice of strike was valid and the strike itself legal when it was allegedly instigated to compel the employer to hire strangers outside the working unit; — those are
issues the resolution of which call for the application of labor laws, and SanMig's cause's of action in the Court below are inextricably linked with those issues.

The precedent in Layno vs. de la Cruz (G.R. No. L-29636, 30 April 1965, 13 SCRA 738) relied upon by SanMig is not controlling as in that case there was no controversy over terms, tenure or
conditions, of employment or the representation of employees that called for the application of labor laws. In that case, what the petitioning union demanded was not a change in working
terms and conditions, or the representation of the employees, but that its members be hired as stevedores in the place of the members of a rival union, which petitioners wanted
discharged notwithstanding the existing contract of the arrastre company with the latter union. Hence, the ruling therein, on the basis of those facts unique to that case, that such a
demand could hardly be considered a labor dispute.

As the case is indisputably linked with a labor dispute, jurisdiction belongs to the labor tribunals. As explicitly provided for in Article 217 of the Labor Code, prior to its amendment by R.A.
No. 6715 on 21 March 1989, since the suit below was instituted on 6 March 1989, Labor Arbiters have original and exclusive jurisdiction to hear and decide the following cases involving all
workers including "1. unfair labor practice cases; 2. those that workers may file involving wages, hours of work and other terms and conditions of employment; ... and 5. cases arising from
any violation of Article 265 of this Code, including questions involving the legality of striker and lockouts. ..." Article 217 lays down the plain command of the law.

The claim of SanMig that the action below is for damages under Articles 19, 20 and 21 of the Civil Code would not suffice to keep the case within the jurisdictional boundaries of regular
Courts. That claim for damages is interwoven with a labor dispute existing between the parties and would have to be ventilated before the administrative machinery established for the
expeditious settlement of those disputes. To allow the action filed below to prosper would bring about "split jurisdiction" which is obnoxious to the orderly administration of justice
(Philippine Communications, Electronics and Electricity Workers Federation vs. Hon. Nolasco, L-24984, 29 July 1968, 24 SCRA 321).

We recognize the proprietary right of SanMig to exercise an inherent management prerogative and its best business judgment to determine whether it should contract out the
performance of some of its work to independent contractors. However, the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted
activities, including the right to strike in accordance with law (Section 3, Article XIII, 1987 Constitution) equally call for recognition and protection. Those contending interests must be
placed in proper perspective and equilibrium.
 The status quo ante declaration of strike ordered by the Court on 24 May 1989 shall be observed pending the proceedings in the National Conciliation Mediation Board-Department of
Labor and Employment, docketed as NCMB-NCR-NS-01-02189 and NCMB-NCR-NS-01-093-83. No costs.

III. Management Prerogatives

33. Philippine-Singapore Transit vs. NLRC

PHILIPPINE-SINGAPORE TRANSPORT SERVICES, INC., VS. NATIONAL LABOR RELATIONS COMMISSION

FACTS Petitioner Philippine-Singapore Transport Services, Inc. (PSTS), a manning agency, hired private respondent Estrada as master of the vessel Sea Carrier I for its foreign principal, Intra-Oil
Supplies Sbn Bhd (Intra-Oil). Intra-Oil had a charter agreement, then, with a company which was engaged of oil-drilling in the high seas of Bombay, India.

Barely two months following his employment, private respondent Estrade was informed by a representative of Modest Shipping, an agent of Intra-Oil, that he would be relieved from his
employment and repatriated back to the Philippines. He was not given any explanation or reason for his relief. On that same day, someone took over as captain of Sea Carrier I, which
prompted Estrada to relinquish his post. On the account of this unfortunate incident, he decided to return to Manila the following day. Upon his arrival, he readily went to petitioner PSTS
to ask about his dismissal from employment and to claim for his unpaid salary and the sum corresponding to his plane fare which was deducted from his salary. Petitioner PSTS informed
him that his service was terminated due to his incompetence. It also denied his claim for the sums of money.

Private respondent Estrada filed with the POEA Adjudication Department a complaint against PSTS and Intra-Oil for illegal dismissal. He asked for the reimbursement of his plane fare and
payment of his leave pay and of the remaining salaries for the unexpired portion of his six-contractual period.

In its answer, PSTS alleged that the dismissal of private respondent Estrada was due to a valid cause, which is incompetency. It asserted that his incompetency is evidenced by the telexes
of the charterer to PSTS complaining about the private respondent's incompetency in handling the vessel for any tow or even approaching the oil drilling platforms, and informing about its
(charterer's) decision to terminate the services of private respondent as master of the vessel and to off-hire the Sea Carrier I due to private respondent's incompetence. According to PSTS,
it had no choice but to give its consent to the dismissal of private respondent by the charterer because the latter was in a best position to determine the qualification of the private
respondent.

In his position paper, private respondent revealed that his termination from service was an offshoot of his justified refusal to obey the order of the charterer's to tow another of its vessel.
He explained that during the voyage from Singapore to Bombay, in the course of maneuvering the charterer's barge, specifically along side jetties, quays and in navigational channels, all
the ropes on board the Sea Carrier I suffered extreme wear and tear, that when the charterer ordered him to tow its barge, he refused to do so since the ropes were worn out and
inadequate to maneuver a barge in close water situation and, in his professional opinion, damage would result from using inadequate ropes. This shortage of ropes was made known to
Mr. Bala of Essar Shipping, who was asked by the private respondent to supply additional mooring ropes. According to the private respondent, the relationship between him and the
charterer degenerated rapidly following this particular incident.

POEA POEA Adjudication Department ruled in favor of the private respondent by holding that his dismissal from service was illegal.
ADJUDICATION
DEPARTMENT

NLRC The NLRC, however, through its questioned Resolution held that the charge of private respondent’s incompetence was unmeritorious. The real reason for private respondent’s repatriation
was not due to his incompetence but due to his refusal to tow another barge belonging to the charterer and which refusal had been shown to be justified and fully explained by the private
respondent.

Thus, the NLRC affirmed the decision of the POEA and dismissed the appeal of the petitioner for lack of merit.
 ISSUE RULING

Whether or not It is noteworthy to state that an employer is free to manage and regulate, according to his own discretion and judgment, all phases of employment, which includes hiring, work
private assignments, working methods, time, place and manner of work, supervision of workers, working regulations, transfer of employees, lay-off of workers, and the discipline, dismissal and
respondent recall of work. While the law recognizes and safeguards this right of an employer to exercise what are clearly management prerogatives, such right should not be abused and used as a tool
Wenefredo N. of oppression against labor. The company's prerogatives must be exercised in good faith and with due regard to the rights of labor. A priori, they are not absolute prerogatives but are
Estrada, the subject to legal limits, collective bargaining agreements and the general principles of fair play and justice.
complainant in The power to dismiss an employee is a recognized prerogative that is inherent in the employer's right to freely manage and regulate his business. Corollarily, an employer can not
POEA Case No. rationally be expected to retain the employment of a person whose lack of morals, respect and loyalty to his employer, regard for his employer's rules and appreciation of the dignity and
M-88-02-102 responsibility of his office, has so plainly and completely been bared. He may not be compelled to continue to employ such person whose continuance in the service will patently be
entitled "Capt. inimical to his employer's interest. The right of the company to dismiss an employee is a measure of self-protection. Such right, however, is subject to regulation by the State, basically in
Wenefredo N. the exercise of its paramount police power. Thus, the dismissal of employees must be made within the parameters of the law and pursuant to the basic tenets of equity, justice and
Estrada vs. fairplay. It must not be done arbitrarily and without just cause.
Philippine- Due process must be observed because the dismissal affects not only the employee's position but also his means of livelihood. Truly, unemployment brings untold misery and hardship not
Singapore only to the workingmen but also to those who are dependent on the voyage earners. When a person has no property, his job may possibly be his only possession or means of livelihood.
Transport Therefore he should be protected against arbitrary deprivation of his job.
Services, Inc. et.
al.", is validly No less than the Constitution recognizes and guarantees the labor's right to security of tenure. Under the Labor Code of the Philippines, as amended, specifically, Article 279 of the said
dismissed from Code, the security of tenure has been construed to mean as that "the employer shall not terminate the services of an employee except for a just cause or when authorized" by the Code.
the service on The two facets of this legal provision are:
account of his (a) the legality of the act of dismissal; and
alleged (b) the legality in the manner of dismissal.
incompetence as
the The illegality of the act of dismissal constitutes discharge without just cause, while illegality in the manner of dismissal is dismissal without due process. If an employee is dismissed without
master/captain just cause, he is entitled to reinstatement with backwages up to the time of his actual reinstatement, if the contract of employment is not for a definite period; or to the payment of his
of the vessel salaries corresponding to the unexpired portion of the employment contract, if the contract is for a definite period. If the dismissal is for a just cause but it was made without due process,
"Sea Carrier I". the employee is entitled to the payment of an indemnity.

Guided by the foregoing rules and principles, this Court holds that the dismissal of private respondent from service is done without just cause, in apparent violation of Article 279 in
relation to Article 282 of the Labor Code of the Philippines, as amended, and without due process, in obvious contravention of Article 277 (b) of the said Code.

Petitioner's imputation of incompetence on the part of the private respondent due to his lack of foresight to anticipate the number of mooring ropes to be used is unworthy of being given
credence. As explained by private respondent, the Sea Carrier I was sufficiently furnished with mooring ropes prior to the voyage. It so happened that the ropes would later on "suffer(ed)
extreme wear and tear" during its voyage from Singapore to Bombay especially along jetties and quays, and in navigational channels. Faced by such problem, he immediately reported the
situation to, and at the same time, requested for new mooring ropes from, Mr. Bala of Essar Shipping, a person whom the private respondent alleged to be connected with the petitioner
and its principal. No new ropes came, however. So, when the charterer ordered private respondent to tow its barge, he explained that the ropes were worn out and, in his professional
opinion, inadequate for maneuvering a barge in close water situation, hence, damage would result if towing of tile barge would proceed. Evidently, as called for by the circumstances of
the situation, the private respondent complied with his responsibility as master of the vessel. To ask for more from him is to require an undertaking that is beyond or in excess of the scope
of his duty as master of the vessel.

Even the NLRC belied the claim of petitioner that private respondent was incompetent, thus:
To our mind, respondent's charge of incompetence is rather sweeping . . . Complainant's refusal to carry out the towing order on the basis of his professional opinion that there
was a shortage in towing ropes, a situation which was known to a certain "Mr. Bala of Essar Shipping", or that they were inadequate and that it might result in an accident or
cause damage certainly does not prove that he was incompetent. On the other hand, it would even show that he was very professional in his job as Master, regardless of the
intrusions of the charterer into his area of responsibility. It would have been a different story had complainant refused the towing order simply because he didn't know how to,
in which case he could be said to be incompetent in that area of expertise.
 Petitioner argued that private respondent is a project employee whose term of service depends upon the charter of Sea Carrier I, hence, the cancellation of the charter agreement carries
with it the termination from service of the private respondent. This argument has no leg to stand on because the cancellation of the charter agreement, which was the very basis for
terminating the services of the private respondent, was unjustifiable. It must be pointed out that the charterer decided to off-hire the Soa Carrier I and eventually canceled the charter
agreement because of the alleged incompetence of the master of the vessel. But as discussed earlier, the imputation of incompetence on the part of the private respondent is bereft of
any basis. Thus, the alleged incompetence can not the utilized as a valid and justifiable reason to dismiss the private respondent from employment, much less, to cancel the charter
agreement. In like manner, the procedural aspect of private respondent's termination from employment leaves much to be desired.

Before an employee can be dismissed, the Labor Code, as amended, requires the employer to furnish the employee a written notice containing a statement of the causes for
termination and to afford said employee ample opportunity to be heard and to defend himself with the assistance of his representative if he so desires. If the employer decides to
terminate the services of the employee, the employer must notify the worker in writing of the decision to dismiss him, stating clearly the reasons therefor. The record of the instant case
clearly shows that the foregoing requirements are not complied with. Private respondent Estrada was caught by surprise when on January 21, 1988 he was told by the agent of the
principal that he would be replaces as master of the vessel and would be repatriated to the Philippines. He was not given any explanation or reason for his dismissal. His replacement as
master of the vessel came in the afternoon of the same day he was informed of his repatriation. He was thus forced to disembark from the vessel. Obviously, the dismissal of private
respondent was impetuously made without the benefit of the required notice and hearing.

Petitioner seeks to justify the absence of the said notice and hearing by invoking a provision in the contract of employment which authorizes the company to terminate the employment
without notice The pertinent provision of the said employment contract reads as follows:

(1) However, in the event of serious misconduct or neglect of duty or breach by you of any rules or regulations imposed by the Company, the Company may without notice or
payment in lieu of notice, terminate your employment and all expenses for your repatriation will be borne by you.

The foregoing contractual provision is inapplicable in the situation of private respondent. The said provision applies only when the employee is liable for serious misconduct, neglect of
duty or violation of company rules and regulations. Apparently, private respondent Estrada was not found guilty of any of these offenses. The allegation of petitioner that the private
respondent committed neglect of duty or serious misconduct for refusing to obey the order of the charterer to tow the barge is unmeritorious. It was the professional opinion of private
respondent that the mooring ropes which had been worn out during the vessel's voyage were inadequate for maneuvering in close water situations and that an accident might result from
using the said ropes. Thus, the private respondent, in refusing to tow the other vessel, wanted to secure the vessel of its safety and to save it from an impending peril. He simply did what a
prudent and careful master of the vessel ought to do under the circumstances. By faithfully complying with his duty as master of the vessel, it would not be justified to punish him by
terminating his employment for reasons not sanctioned by law and maritime usage.

34. Chu vs. NLRC

CHU, VS. NATIONAL LABOR RELATIONS COMMISSION

FACTS Petitioner retired from the service of private respondent upon reaching the age of sixty under its regular retirement program. He was granted an extension of service by the Board of
Directors of private respondents under a “Special Contract of Employment.” The contract provided, inter alia, that its term was for a period of one year commencing from August 1, 1998;
that petitioner was employed as Head of the Warehousing, Sugar, Shipping and Marine Department; and that he was to receive a basic salary of ₱ 6,941.00 per month.

Private respondent issued Memorandum No. 1012-PS and Memorandum No. 1028-PS, both providing for a rotation of the personnel and other organizational changes. Pursuant to the
memoranda, petitioner was transferred to Sugar Sales Department.

Petitioner protested his transfer and requested a reconsideration thereof, which was denied. Consequently, petitioner filed a complaint for illegal dismissal, contending that he was
constructively dismissed from his employment.
LABOR ARBITER In support of his decision holding that there was no constructive dismissal of petitioner, the Labor Arbiter said that:

(1) Petitioner was transferred to the Sugar Sales Department from the Warehousing, Sugar, Shipping and Marine Department, both of which are under the Sugar Sales Area;
(2) Petitioner’s transfer was without change in rank or salary;
(3) Petitioner’s designation in either department was the same;
(4) The personnel rotation was pursuant to organizational changes done in the valid exercise of management prerogatives;
(5) There was no bad faith in the transfer of petitioner, as other employees similarly situated as he were likewise affected; and
(6) Petitioner failed to show he was prejudiced by the changes or transferred to a demeaning or humiliating position.

NLRC Petitioner appealed to the NLRC which, in a resolution, affirmed the Labor Arbiter’s decision.

ISSUE RULING

Whether or not An owner of a business enterprise is given considerable leeway in managing his business because it is deemed important to society as a whole that he should succeed. Our law, therefore,
there was no recognizes certain rights as inherent in the management of business enterprises. These rights are collectively called management prerogatives or acts by which one directing a business is
valid exercise of able to control the variables thereof so as to enhance the chances of making a profit. "Together, they may be taken as the freedom to administer the affairs of a business enterprise such
management that the costs of running it would be below the expected earnings or receipts. In short, the elbow room in the quest for profits.”
prerogatives
because: One of the prerogatives of management, and a very important one at that, is the right to transfer employees in their work station. In Philippine Japan Active Carbon Corporation v.
National Labor Relations Commission, 171 SCRA 164 (1989), we held:
(1) His
transfe It is the employer’s prerogative, based on its assessment and perception of its employees’ qualifications, aptitudes, and competence to move them around in the various areas of
r its business operations in order to ascertain where they will function with maximum benefit to the company. An employee’s right to security of tenure does not give him such a
violate vested right in his position as would deprive the company of its prerogative to change his assignment or transfer him where he will be most useful. When his transfer is not
d the unreasonable, nor inconvenient, nor prejudicial to him, and it does not involve a demotion in rank or a diminution of his salaries, benefits, and other privileges, the employee
“Speci may not complain that it amounts to a constructive dismissal.
al
Contra In Abbot Laboratories (Phils.) Inc. v. NLRC, 154 SCRA 713 (1987), we also held in referring to the prerogative of transfer of employees, that:
ct of
Emplo This is a function associated with the employer’s inherent right to control and manage effectively its enterprise. Even as the law is solicitous of the welfare of employees, it
yment must also protect the right of an employer to exercise what are clearly management prerogatives. The free will of management to conduct its own business affairs to achieve its
” purpose cannot be denied.
which
was Of course, like other prerogatives, the right to transfer or re-assign is subject to limitations arising under the law, contract or general principles of fair play and justice (Abbot Laboratories
the (Phil.) Inc. v. NLRC, 154 SCRA 713 [1987]). Jurisprudence proscribes transfers or re-assignments of employees when such acts are unreasonable and cause inconvenience or prejudice to
law them (Philippine Japan Active Carbon Corporation v. NLRC, supra).
betwe
en the We find nothing in the "Special Contract of Employment" invoked by petitioner wherein private respondent had waived its right to transfer or re-assign petitioner to any other position in
parties the company. Before such right can be deemed to have been waived or contracted away, the stipulation to that effect must be clearly stated so as to leave no room to doubt the
; and intentions of the parties. The mere specification in the employment contract of the position to be held by the employee is not such stipulation.
(2) Said
transfe As held in Philippine Japan Active Carbon Corporation v. National Labor Relations Commission, supra:
r was
unreas An employee’s right to security of tenure does not give him such a vested right in his position as would deprive the company of its prerogatives to change his assignment or
onable transfer him where he will be most useful.
and
 caused Petitioner’s bare assertion that the transfer was unreasonable and caused him inconvenience cannot override the fact, as found by the Labor Arbiter and respondent Commission, that
inconv the rotation was made in good faith and was not discriminatory, and that there was no demotion in rank or a diminution of his salary, benefits and privileges.
enienc
e to
him.

35. Union Carbide Labor Union vs. Union Carbide

UNION CARBIDE LABOR UNION (NLU), VS. UNION CARBIDE PHILIPPINES, INC.

FACTS The company is operating on three (3) shifts namely, morning, afternoon, and night shifts. The workers in the third shifts work from Monday to Saturday, the last working day being Friday
or forty (40) hours a week or from Monday to Friday.

There seems to be a change in the working schedule from Monday to Friday as contained in the collective bargaining agreement aforecited to Sunday thru Thursday. The change became
effective July 5, 1972. The third shirt employees were required to start the new work schedule from Sunday thru Thursday.

The night shift employees filed a demand to maintain that old working schedule from Monday thru Friday. The demand was referred to the Labor Management Relation Committee. In the
discussions had, it was arrived at that all night shift operating personal were allowed to start their work Monday and on Saturday. This excepted the employees in the maintenance and
preparation crews whose work schedule is presumed to be maintained from Sunday to Thursday. The work schedule between management representatives and alleged officers of the
Union was approved and disseminated to take effect on November 26, 1972.

In manifestation of their dissension to the new work schedule, the three respondent Duro, Torio, and Javillonar did not report for work on November 26, 1972 which was a Sunday since it
was not a working day according to the provisions of the Collective Bargaining Agreement. Their absence caused their suspension for fourteen (14) days.
Complaint Agapito Duro, Alfredo Torio, and Rustico Javillonar, were dismissed from their employment after an application for clearance to terminate them was approved by the Secretary
of Labor. Respondent’s application for clearance was premised on “willful violation of Company regulations, gross insubordination and refusal to submit to a Company Investigation. . . . .”

LABOR ARBITER The Arbitrator rendered a decision ordering the reinstatement with backwages of the complainants.

NLRC The NLRC dismissed respondent company’s appeal for having been filed out of time.

ISSUE RULING

Whether or not Verily and wisely, management retained the prerogative, whenever exigencies of the service so require, to change the working hours of its employees. And as long as such prerogative is
the exercised in good faith for the advancement of the employer's interest and not for the purpose of defeating or circumventing the rights of the employees under special laws or under
complainants valid agreements, this Court will uphold such exercise (San Miguel Brewery Sales Force Union (PTGWO) vs. Ople, 170 SCRA 25 [1989]).
could be validly
dismissed from Thus, in the case of Abbott Laboratories (Phil.), Inc. vs. NLRC (154 SCRA 713 [1987]), We ruled:
their . . . Even as the law is solicitous of the welfare of employees, it must also protect the right of an employer to exercise what are clearly management prerogatives. The free will of
employment on management to conduct its own business affairs to achieve its purpose cannot be denied.
the ground of
insubordination Further, the incident complained of took place sometime in 1972, so there is no violation of the 1973 Constitution to speak of because the guarantee of security of tenure embodied under
for refusing to Section 9, Article II may not be given a retroactive effect. It is the basic norm that provisions of the fundamental law should be given prospective application only, unless legislative intent
comply with the for its retroactive application is so provided.
new work
 schedule. As pointed out by Justice Isagani Cruz, to wit:
(1) Finally, it should be observed that the provisions of the Constitution should be given only a prospective application unless the contrary is clearly intended. Were the rule
otherwise, rights already acquired or vested might be unduly disturbed or withdrawn even in the absence of an unmistakable intention to place them within the scope of the
Constitution.

We agree with the findings arrived at by both Arbitrator and the Secretary of Labor that there is no unfair labor practice in this case. Neither was there gross and habitual neglect of
complainants' duties. Nor did the act of complainants in refusing to follow the new working hours amount to serious misconduct or willful disobedience to the orders of respondent
company.

Although no serious objections may be offered to the Arbitrator's conclusion to order reinstatement with backwages of the complainants, We now refrain from doing so considering that
reinstatement is no longer feasible due to the fact that the controversy started more than 20 years ago aside from the obviously strained relations between the parties.

36. San Miguel Brewery Sales vs. Ople

SAN MIGUEL BREWERY SALES FORCE UNION (PTGWO), VS. HON. BLAS F. OPLE.

FACTS A collective bargaining agreement was entered into by petitioner San Miguel Corporation Sales Force Unit (PTGWO), and the private respondent, San MIguel Corporation, Section 1, of
Article IV.

In September 1979, the company introduced a marketing scheme known as the “Complementary Distribution System” (CDS) whereby its beer products were offered for sale directly to
wholesalers through San Miguel's sales offices.

The labor union (herein petitioner) filed a complaint for unfair labor practice in the Ministry of Labor, with a notice of strike on the ground that the CDS was contrary to the existing
marketing scheme whereby the Route Salesmen were assigned specific territories within which to sell their stocks of beer, and wholesalers had to buy beer products from them, not
from the company. It was alleged that the new marketing scheme violates Section 1, Article IV of the collective bargaining agreement because the introduction of the CDS would reduce
the take-home pay of the salesmen and their truck helpers for the company would be unfairly competing with them.

MINISTER OF In its order of February 28, 1980, the Minister of Labor found:
LABOR
... We see nothing in the record as to suggest that the unilateral action of the employer in inaugurating the new sales scheme was designed to discourage union organization or diminish its
influence, but rather it is undisputable that the establishment of such scheme was part of its overall plan to improve efficiency and economy and at the same time gain profit to the
highest. While it may be admitted that the introduction of new sales plan somewhat disturbed the present set-up, the change however was too insignificant as to convince this Office to
interpret that the innovation interferred with the worker's right to self-organization.

Petitioner's conjecture that the new plan will sow dissatisfaction from its ranks is already a prejudgment of the plan's viability and effectiveness. It is like saying that the plan will not work
out to the workers' [benefit] and therefore management must adopt a new system of marketing. But what the petitioner failed to consider is the fact that corollary to the adoption of the
assailed marketing technique is the effort of the company to compensate whatever loss the workers may suffer because of the new plan over and above than what has been provided in
the collective bargaining agreement. To us, this is one indication that the action of the management is devoid of any anti-union hues.

The dispositive part of the Minister's Order reads:

WHEREFORE, premises considered, the notice of strike filed by the petitioner, San Miguel Brewery Sales Force Union-PTGWO is hereby dismissed. Management however is hereby ordered
to pay an additional three (3) months back adjustment commissions over and above the adjusted commission under the complementary distribution system. (p. 26, Rollo.)

NLRC
 ISSUE RULING

Whether or not Public respondent was correct in holding that the CDS is a valid exercise of management prerogatives:
the CDS is a valid
exercise of Except as limited by special laws, an employer is free to regulate, according to his own discretion and judgment, all aspects of employment, including hiring, work assignments,
management working methods, time, place and manner of work, tools to be used, processes to be followed, supervision of workers, working regulations, transfer of employees, work supervision,
prerogatives. lay-off of workers and the discipline, dismissal and recall of work. ... (NLU vs. Insular La Yebana Co., 2 SCRA 924; Republic Savings Bank vs. CIR 21 SCRA 226, 235.) (Perfecto V. Hernandez,
Labor Relations Law, 1985 Ed., p. 44.) (Emphasis ours.)

Every business enterprise endeavors to increase its profits. In the process, it may adopt or devise means designed towards that goal. In Abbott Laboratories vs. NLRC, 154 SCRA 713, We
ruled:
... Even as the law is solicitous of the welfare of the employees, it must also protect the right of an employer to exercise what are clearly management prerogatives. The free will
of management to conduct its own business affairs to achieve its purpose cannot be denied.

So long as a company's management prerogatives are exercised in good faith for the advancement of the employer's interest and not for the purpose of defeating or circumventing the
rights of the employees under special laws or under valid agreements, this Court will uphold them (LVN Pictures Workers vs. LVN, 35 SCRA 147; Phil. American Embroideries vs.
Embroidery and Garment Workers, 26 SCRA 634; Phil. Refining Co. vs. Garcia, 18 SCRA 110). San Miguel Corporation's offer to compensate the members of its sales force who will be
adversely affected by the implementation of the CDS by paying them a so-called "back adjustment commission" to make up for the commissions they might lose as a result of the CDS
proves the company's good faith and lack of intention to bust their union.

37. GSIS vs. Supervisor’s Union

GOVERNMENT SERVICE INSURANCE SYSTEM, VS. GOVERNMENT SERVICE INSURANCE SYSTEM SUPERVISORS’ UNION

FACTS A strike was called and staged by the Government Service Insurance System Supervisors' Union GSISSU in protest against the discriminatory acts constituting unfair labor practices in
matters of promotion, among others, committed by the management of the Government Service Insurance System against the GSISSU and its members.

The labor dispute was certified by the President of the Philippines to the Court of Industrial Relations for compulsory arbitration. The Court of Industrial Relations issued a return-to- work
order which, among others, required the General Manager of the GSIS and the President of the GSISSU to sit down together and amicably settle the disputes relative to questioned
appointments and promotions complained of by the GSISSU as discriminatory. The General Manager thereafter met and rectified many of the demands of the Union but the dispute
continued.

The Government Service Insurance System Supervisors' Union filed a petition with the Court of industrial Relations stating the stand of the GSISSU on the strike and the causes thereof as
follows:
(1) consistent refusal of the GSIS to bargain with the petitioner and
(2) union busting activities of the GSIS and its continuing commission of unfair labor practices on 11 specific and separate counts.

It alleged that promotions are based on union affiliation and that to further discourage membership in the GSISSU the GSIS bargained with a rank and file union in the GSIS on the terms
and conditions of employment of employees who pertain to the certified supervisory bargaining unit, such that promotions to positions in Pay Classes 7 to 13 were processed by a CBA
Personnel, Pool composed of rank and file employees.

The GSIS through the Government Corporate Counsel answered the petition and denied the imputed acts of discrimination; the GSIS alleged that it did not interfere in the employees' right
to self-organization and never considered union affiliation as a ground for promotion; that promotions are made on the basis of competence, merit and qualification to hold the position
and on the basis of appropriate civil service eligibility; that promotions to position in Pay Classes 7 to 13 are not processed by the CBA Personnel Pool composed of rank and file
 employees; and it finally prayed that the strike be declared illegal.

Thereafter, the GSISSU Med a supplemental petition, specifying, among others, that the GSIS had failed and refused to revoke or amend several questionable office orders so as to enable
the substitution of personnel as in the case of Orlando Misa as Acting Assistant Manager, Medical Department, to be replaced by Demetrio Lopez or Andrea Moral.

Answering the supplemental petition, the GSIS averred in its answer that in point of qualification, Dr. Orlando Misa had the highest points over the other aspirants and that in the
judgment of the GSIS, Dr. Misa was best qualified to occupy the position of Acting Assistant Manager, Medical Department, GSIS.

It is clear that Dr. Misa has the highest points. He had undergone a special training in Madrid where he participated in a course "La Especialization Medico de la Seguridad Social" of the
Central International de Formacion de Technics of the Organization Ibero-Americano de Seguridad Social.

Before a designation was made, the qualifications of Dr. Misa and those of Drs. Demetrio Lopez, Andrea Moral and other all medical supervisors in the Medical Department, were carefully
scrutinized and evaluated.

In the selection of officials for such a high position in the supervisory level it is always part of the objective to choose one among prospective appointees who has demonstrated some
qualities of leadership. This is obviously an essential element because a super visor accomplishes things not only by himself but mostly thru others. A supervisor should be a good leader.
Believe the Office Order designating Dr. Misa is justified.

The Court of Industrial Relations thereupon commissioned Atty. Francisco de los Reyes as Hearing Officer to receive the evidence and submit his report on the specification, among others,
"... (5) that the respondent (GSIS) to discourage membership in the petitioning union discriminated against its members by said respondent's failure and refusal to upgrade and/or convert
the position of ... (e) Dr. Orlando Misa as Acting Assistant Manager, Medical Department, to be replaced by Demetrio Lopez or Andrea Moral."
After receiving the evidence, the Hearing Officer submitted his report, and recommended that "it would seem to be equitable that Dra. Andrea Moral should have been appointed Acting
Assistant Medical Director rather than Dr. Orlando Misa." Accordingly, the Court thru Acting Associate Judge Pedro F. Perez in his Order dated October 8, 1974 approved the Report and
adopted it as the Court's Order in the case, for the GSIS to appoint Dra. Andrea Moral as Acting Assistant Medical Director in place of Dr. Orlando Misa, present incumbent.
The GSIS and the private respondent, Dr. Orlando Misa, moved for reconsideration of the Order above-cited which the GSISSU oppose On October 25, 1974, the Court en banc denied the
motions for reconsideration and affirmed the Order of October 8, 1974. The GSIS now comes to Us on appeal assailing the legality and/or validity of the aforementioned Order and the
Resolution en banc of the Court of Industrial Relations.

ISSUE RULING

38. PT&T vs. CA

PHILIPPINE TELEGRAPH & TELEPHONE CORPORATION, VS. COURT OF APPEALS

FACTS The petitioner is a domestic corporation engaged in the business of providing telegraph and communication services thru its branches all over the country. It employed various employees.
Sometime in 1997, after conducting a series of studies regarding the profitability of its retail operations, its existing branches and the number of employees, the petitioner came up with a
Relocation and Restructuring Program designed to

(a) Sustain its (PT&T) retail operations;

(b) Decongest surplus workforce in some branches, to promote efficiency and productivity;
(c) Lower expenses incidental to hiring and training new personnel; and
(d) Avoid retrenchment of employees occupying redundant positions.
 Private respondents received separate letters from the petitioner, giving them the option to choose the branch on which they could be transferred. Thereafter, through HRAG Bulletin
No. 97-06-16, the private respondent and other petitioner’s employees were directed to “relocate” to their new PT&T Branches. The affected employees were directed to report to their
respective relocation assignments in a Letter. The petitioner offered benefits/allowances to those employees who would agree to be transferred under its new program. Moreover, the
employees who would agree to the transfer would be considered promoted.

The private respondents rejected the petitioner’s offer. The petitioner sent letters to the private respondent requiring them to explain in writing why no disciplinary action should be
taken against them for their refusal to be transferred/relocated.

In their respective replies to the petitioner’s letters, the private respondents explained that:rtual 1aw library

The transfers imposed by the management would cause enormous difficulties on the individual complainants. For one, their new assignment involve distant places which would require
their separation from their respective families. For instance, in the case of Avelino Acha who would be coming from Bicol Region, he would have to take a boat in going to his new
assignment in Odiongan, Romblon. The voyage would take a considerable period of time and it would be imperative for him to relocate to Romblon to be able to attend to his new
assignment.

The same holds true with the other complainants. Romeo Tee for instance, will have to take an overnight boat trip from his previous assignment in Zamboanga to his new assignment in
Jolo, Sulu. He would have to part with his family and resettle to Jolo in connection with his transfer. Cristina Rodiel on the other hand, would be transferred to Baguio City which is quite
distant from her previous workbase and residence at Cabanatuan. Jesus Paracale finds himself in the same difficult situation as he would be transferred from General Santos City at the
Southern tip of Mindanao to Butuan City, almost a day’s travel by bus and located at the northernmost tip of the island. Benjamin Lakandula and Guillermo Demigillo, are also in the same
situation as their new assignments are quite distant from their previous places of work.

Dissatisfied with this explanation, the petitioner considered the private respondents’ refusal as insubordination and willful disobedience to a lawful order; hence, the private
respondents were dismissed from work. They forthwith filed their respective complaints against the petitioner before the appropriate sub-regional branches of the NLRC.
Subsequently, the private respondents’ bargaining agent, PT&T Workers Union-NAFLU-KMU, filed a complaint against the petitioner for illegal dismissal and unfair labor practice for and in
behalf of the private respondents, including Ignacio Dela Cerna, before the arbitration branch of the NLRC.

In their position paper, the complainants (herein private respondents) declared that their refusal to transfer could not possibly give rise to a valid dismissal on the ground of willful
disobedience, as their transfer was prejudicial and inconvenient; thus unreasonable. The complainants further asserted that since they were active union members, the petitioner was
clearly guilty of unfair labor practice especially considering their new work stations:.

For its part, the petitioner (respondent therein) alleged that the private respondents’ transfers were made in the lawful exercise of its management prerogative and were done in good
faith. The transfers were aimed at decongesting surplus employees and detailing them to a more demanding branch.

In their reply to the petitioner’s position paper, the private respondents opined that since their respective transfers resulted in their promotion, they had the right to refuse or decline the
positions being offered to them. Resultantly, the refusal to accept the transfers could not have amounted to insubordination or willful disobedience to the "lawful orders of the employer."

LABOR ARBITER After the parties filed their respective pleadings, the Honorable Labor Arbiter rendered a Decision dismissing the complaint for lack of merit.

The labor arbiter ratiocinated that an employer, in the exercise of his management prerogative, may cause the transfer of his employees provided that the same is not attended by bad
faith nor would result in the demotion of the transferred employees. The labor arbiter ruled in favor of the petitioner, finding that the aforesaid transfers indeed resulted in the private
respondents’ promotion, and that the complaint for unfair labor practice was not fully substantiated and supported by evidence.

NLRC Aggrieved, the private respondents appealed the aforesaid decision to the NLRC.chanrob1es virtua1 1aw 1ibrary
 On May 31, 1999, the NLRC issued a Resolution which reversed and set aside the decision of the labor arbiter. The NLRC ruled that the petitioner illegally dismissed the private
respondents, thus:chanrob1es virtual 1aw library

WHEREFORE, premises considered, the Appeal is hereby GRANTED. Accordingly, the Decision appealed from is REVERSED and SET ASIDE and a new one entered declaring respondent-
appellee guilty of illegal dismissal and ordering Philippine Telegraph and Telephone Corporation to reinstate individual complainants-appellants to their former positions without loss of
seniority rights and other privileges and to pay them full backwages from the date of their dismissal up to the date of their actual reinstatement, computed as follows.

The NLRC interpreted the said transfers of the respondents as a promotion; that the movement was not merely lateral but of scalar ascent, considering the movement of the job grades,
and the corresponding increase in salaries. As such, the respondents had the right to accept or refuse the said promotions. The NLRC concluded that in the exercise of their right to refuse
the promotions given them, they could not be dismissed.

COURT OF The Court of Appeals rendered a Decision, affirming the resolution of the NLRC.
APPEALS

ISSUE RULING

In its position paper with the labor arbiter, the petitioner adverted that when the private respondents were transferred, they were also promoted, thus:

Clearly, the transfer of the complainants is not unreasonable nor does it involve demotion in rank. They are being moved to branches where the complainants will function with
maximum benefit to the company and they were in fact promoted not demoted from a lower job-grade to a higher job-grade and receive even higher salaries than before. Thus, transfer
of the complainants would not also result in diminution in pay benefit and privilege since the salaries of the complainant would be receiving a bigger salary if not the same salary plus
additional special relocation package. Although the increase in the pay is not significant this however would be translated into an increase rather than decrease in their salary because the
complainants who were transferred from the city to the province would greatly benefit because it is of judicial notice that the cost of living in the province is much lower than in the city.
This would mean a higher purchasing power of the same salary previously being received by the complainants.
Indeed, the increase in the respondents’ responsibility can be ascertained from the scalar ascent of their job grades. With or without a corresponding increase in salary, the respective
transfers of the private respondents were in fact promotions, following the ruling enunciated in Homeowners Savings and Loan Association, Inc. v. NLRC:

. . . [P]romotion, as we defined in Millares v. Subido, is "the advancement from one position to another with an increase in duties and responsibilities as authorized by law, and
usually accompanied by an increase in salary." Apparently, the indispensable element for there to be a promotion is that there must be an "advancement from one position to
another" or an upward vertical movement of the employee’s rank or position. Any increase in salary should only be considered incidental but never determinative of whether or
not a promotion is bestowed upon an employee. This can be likened to the upgrading of salaries of government employees without necessarily conferring upon them the
concomitant elevation to higher positions. . . .

The admissions of the petitioner are conclusive on it. An employee cannot be promoted, even if merely as a result of a transfer, without his consent. A transfer that results in promotion
or demotion, advancement or reduction or a transfer that aims to ‘lure the employee away from his permanent position cannot be done without the employees’ consent.

There is no law that compels an employee to accept a promotion for the reason that a promotion is in the nature of a gift or reward, which a person has a right to refuse. Hence, the
exercise by the private respondents of their right cannot be considered in law as insubordination, or willful disobedience of a lawful order of the employer. As such, there was no valid
cause for the private respondents’ dismissal.

As the questioned dismissal is not based on any of the just or valid grounds under Article 282 of the Labor Code, the NLRC correctly ordered the private respondents’ reinstatement
without loss of seniority rights and the payment of backwages from the time of their dismissal up to their actual reinstatement.

39. Mendoza vs. Rural Bank of Lucban

 MENDOZA, VS. RURAL BANK OF LUCBAN

FACTS The Board of Directors of the Rural Bank of Lucban, Inc., issued Board Resolution Nos. 99-52 and 99-53, which read:

"that in line with the policy of the bank to familiarize bank employees with the various phases of bank operations and further strengthen the existing internal control system[,] all officers
and employees are subject to reshuffle of assignments. Moreover, this resolution does not preclude the transfer of assignment of bank officers and employees from the branch office to
the head office and vice-versa."

"Pursuant to Resolution No. 99-52, the following branch employees are hereby reshuffled to their new assignments without changes in their compensation and other benefits.

In a letter, Alejo B. Daya, the bank's board chairman, directed Briccio V. Cada, the manager of the bank's Tayabas branch, to implement the reshuffle. The new assignments were to "be
effective on May 1, 1999 without changes in salary, allowances, and other benefits received by the aforementioned employees."
In an undated letter addressed to Daya, Petitioner Elmer Mendoza expressed his opinion on the reshuffle, as follows:

"Needless to state, the reshuffling of the undersigned from the present position as Appraiser to Clerk-Meralco Collection is deemed to be a demotion without any legal basis. Before this
action on your part[,] the undersigned has been besieged by intrigues due to [the] malicious machination of a certain public official who is bruited to be your good friend. These malicious
insinuations were baseless and despite the fact that I have been on my job as Appraiser for the past six (6) years in good standing and never involved in any anomalous conduct, my
being reshuffled to [C]lerk-[M]eralco [C]ollection is a blatant harassment on your part as a prelude to my termination in due time. This will constitute an unfair labor practice.
Daya replied:
"Please be informed that it was never the intention (of management) to downgrade your position in the bank considering that your due compensation as Bank Appraiser is maintained
and no future reduction was intended.
"Aside from giving bank employees a wider experience in various banking operations, the reshuffle will also afford management an effective tool in providing the bank a sound internal
control system/check and balance and a basis in evaluating the performance of each employee. A continuing bankwide reshuffle of employees shall be made at the discretion of
management which may include bank officers, if necessary as expressed in Board Resolution No. 99-53, dated April 25, 1999. Management merely shifted the duties of employees, their
position title [may be] retained if requested formally.

"Being a standard procedure in maintaining an effective internal control system recommended by the Bangko Sentral ng Pilipinas, we believe that the conduct of reshuffle is also a
prerogative of bank management."
Petitioner submitted to the bank's Tayabas branch manager a letter in which he applied for a leave of absence from work:
"I wish I could continue working but due to the ailment that I always feel every now and then, I have the honor to apply for at least ten (10) days sick leave effective June 7, 1999.
Petitioner again submitted a letter asking for another leave of absence for twenty days effective on the same date.

LABOR ARBITER While on his second leave of absence, petitioner filed a Complaint before Arbitration Branch No. IV of the National Labor Relations Commission (NLRC). The Complaint -- for illegal
dismissal, underpayment, separation pay and damages -- was filed against the Rural Bank of Lucban and/or its president, Alejo B. Daya; and its Tayabas branch manager, Briccio V. Cada.

The labor arbiter's Decision upheld petitioner's claims.

NLRC On appeal, the NLRC reversed the labor

COURT OF Finding that no grave abuse of discretion could be attributed to the NLRC, the CA Decision ruled thus:
APPEALS
"When Mendoza was reshuffled to the position of clerk at the bank, he was not demoted as there was no [diminution] of his salary benefits and rank. He could even retain his
position title, had he only requested for it pursuant to the reply of the Chairman of the bank's board of directors to Mendoza's letter protesting the reshuffle. There is, therefore,
no cause to doubt the reasons which the bank propounded in support of its move to reshuffle its employees, viz:
(a) to 'familiarize bank employees with the various phases of bank operations,' and
(b) to 'further strengthen the existing internal control system' of the bank.
 "The reshuffling of its employees was done in good faith and cannot be made the basis of a finding of constructive dismissal.

"The fact that Mendoza was no longer included in the bank's payroll for July 1 to 15, 1999 does not signify that the bank has dismissed the former from its employ. Mendoza separated
himself from the bank's employ when, on June 24, 1999, while on leave, he filed the illegal dismissal case against his employer for no apparent reason at all.

ISSUE RULING

Whether or not Jurisprudence recognizes the exercise of management prerogatives. For this reason, courts often decline to interfere in legitimate business decisions of employers. ndeed, labor laws
the reshuffling of discourage interference in employers' judgments concerning the conduct of their business. The law must protect not only the welfare of employees, but also the right of employers.
private
respondent'[s] In the pursuit of its legitimate business interest, management has the prerogative to transfer or assign employees from one office or area of operation to another -- provided there is no
employees was demotion in rank or diminution of salary, benefits, and other privileges; and the action is not motivated by discrimination, made in bad faith, or effected as a form of punishment or
done in good demotion without sufficient cause. This privilege is inherent in the right of employers to control and manage their enterprise effectively. The right of employees to security of tenure does
faith and cannot not give them vested rights to their positions to the extent of depriving management of its prerogative to change their assignments or to transfer them.
be made as the
basis of a finding Managerial prerogatives, however, are subject to limitations provided by law, collective bargaining agreements, and general principles of fair play and justice. The test for determining
of constructive the validity of the transfer of employees was explained in Blue Dairy Corporation v. NLRC as follows:
dismissal, even
as the "[L]ike other rights, there are limits thereto. The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion, bearing in mind the basic
[petitioner's] elements of justice and fair play. Having the right should not be confused with the manner in which that right is exercised. Thus, it cannot be used as a subterfuge by the
demotion in employer to rid himself of an undesirable worker. In particular, the employer must be able to show that the transfer is not unreasonable, inconvenient or prejudicial to the
rank is admitted employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges and other benefits. Should the employer fail to overcome this burden of proof, the
by both parties; employee's transfer shall be tantamount to constructive dismissal, which has been defined as a quitting because continued employment is rendered impossible, unreasonable or
unlikely; as an offer involving a demotion in rank and diminution in pay. Likewise, constructive dismissal exists when an act of clear discrimination, insensibility or disdain by an
employer has become so unbearable to the employee leaving him with no option but to forego with his continued employment.

The employer bears the burden of proving that the transfer of the employee has complied with the foregoing test. In the instant case, we find no reason to disturb the conclusion of the
NLRC and the CA that there was no constructive dismissal. Their finding is supported by substantial evidence -- that amount of relevant evidence that a reasonable mind might accept as
justification for a conclusion.
Petitioner's transfer was made in pursuit of respondent's policy to "familiarize bank employees with the various phases of bank operations and further strengthen the existing internal
control system" of all officers and employees. We have previously held that employees may be transferred -- based on their qualifications, aptitudes and competencies -- to positions in
which they can function with maximum benefit to the company. There appears no justification for denying an employer the right to transfer employees to expand their competence and
maximize their full potential for the advancement of the establishment. Petitioner was not singled out; other employees were also reassigned without their express consent.

Neither was there any demotion in the rank of petitioner; or any diminution of his salary, privileges and other benefits. This fact is clear in respondent's Board Resolutions, the April 30,
1999 letter of Bank President Daya to Branch Manager Cada, and the May 10, 1999 letter of Daya to petitioner.

On the other hand, petitioner has offered no sufficient proof to support his allegations. Given no credence by both lower tribunals was his bare and self-serving statement that he had
been positioned near the comfort room, made to work without a table, and given no work assignment. Purely conjectural is his claim that the reshuffle of personnel was a harassment in
retaliation for an alleged falsification case filed by his relatives against a public official. While the rules of evidence prevailing in courts of law are not controlling in proceedings before the
NLRC, parties must nonetheless submit evidence to support their contentions.

40. PT&T vs. Laplana

 PHILIPPINE TELEGRAPH AND TELEPHONE CORPORATION, VS. LAPLANA

FACTS Alicia Laplana was the cashier of the Baguio City Branch Office of the Philippine Telegraph and Telephone Corporation (PT&T). PT&T’s treasurer directed Laplana to transfer to the
company’s office at Laoag City. Laplana refused the reassignment and proposed instead that qualified clerks in the Baguio Branch be trained for the purpose. She set out her reasons
therefore in her letter:

1. I have established Baguio City as my permanent residence. Working in Laoag City will involve additional expenses like for my board and lodging, fare, and other miscellaneous
expenses. My salary alone will not be enough - there will be no savings and my family will spend more on account of my transfer.
2. I will be away from my family.
3. Since I have been with PT&T for more than six years, I have learned to work with my co-employees here effectively.

Mrs. Arogo reiterated her directive for Laplana’s transfer to the Laoag Branch, this time in the form of written Memorandum, informing Laplana that “you will be reassigned to Laoag
Branch assuming the same position of branch cashier,” and ordering her “to turn over your accountabilities such as PCF, undeposited collections, used and unused official receipts, other
accountable forms and files to Rose Caysido who will be in charge of cashiering in Baguio.”

Apparently, Laplana was not allowed to resume her work as Cashier of Baguio Branch. She thereupon wrote again to Mrs. Arogo advising that the directed transfer was unacceptable,
reiterating the reasons already given by her in her first letter. Laplana received a telegram from Mrs. Arogo, asking her to report to Manila for new job assignment and if she doesn't
report, they will consider it as abandonment of her job and they might be constraint to impose disciplinary action against her and she can get her cash advance for transportation petition
from Mrs. Bautista.

Laplana in turn sent a telex message to Mrs. Arogo which reads as “I cannot accept you job offer in Manila and retrench me instead.” Thereafter, Laplana sent a letter to Mrs. Arogo,
expatiating on her telex message and reiterating her request to be retrenched. Termination of Laplana’s employment on account of retrenchment thereupon followed. PT&T issued an
“Employe’s Service Report” which constraint the following remarks regarding Laplana: “Services terminated due to retrenchment with corresponding termination pay.” and Mrs. Arogo
sent a Memorandum to the company’s Baguio Branch Manager embodying the computation of the separation and 13th month pay due to Laplana, together with a check for the amount
thereof. Laplana signed the quitclaim and received the check representing her 13th month and separation pay.

Laplana filed with the Labor Arbiters’ Office at Baguio City, thru the CLAO, a complaint against PT&T. In her complaint, she set forth substantially the facts just narrated, and alleged, as a
right of action, that “when she insisted on her right of refusing to be transferred, the Defendants made good its warning by terminating her services on alleged ground of “ retrenchment;”
although the truth is, she was forced to be terminated and that there was no ground at all for the retrenchment ;” that the company’s “act of transferring is not only without any valid
ground but also arbitrary and without any purpose but to harass and force . . her to eventually resign.”

In anser, the defendants alleged that -

1) Laplana “was being transferred to Laoag City because of increase in sales due to the additional installations of vodex lines;”
2) In connection with her transfer, Laplana had been informed “that she would be given ten (10) days relocation allowance and transportation expenses from Baguio to Laoag City;”
3) The company “was exercising management prerogatives in transferring complaint . . . and there is no showing that this exercise was arbitrarily and whimsically done;”
4) Laplana’s services were terminated on her explicit declaration that “she was willing to be retrenched rather than be assigned to Laoag City or Manila;”
5) In any event, the company had been actually suffering losses; in fact, several employees “were retrenched because of losses incurred due to rising costs in wages, rentals,
production supplies and other operational costs.”

LABOR ARBITER Upon the issues thus raised, judgment was rendered by the Labor Arbiter in Laplana’s favor.

Transferring an employee from one place to another is not by itself unlawful. It is within the inherent right of an employer to transfer or assign an employee in the pursuit of its
legitimate business interests. However, this right is not absolute.

Transfer becomes unlawful where it is motivated by discrimitation or in bad faith, or is effected as a form of punishment or denomination without sufficient cause.
 The transfer of the complainant from Baguio City to Laoag City or to Manila is patently a dmonition and a form of punishment without just cause and would cause untole
suffering on the part of the complainant . . . .

With these premises in mind, the Arbiter ruled “that the complainant was illegally dismissed . . . and her acceptance of separation pay . . . cannot cure the illegality of her dismissed
because it was forced upon her.

NLRC The NLRC affirmed the Arbiter’s judgment and dismissed the respondent;s appeal by resolution.

ISSUE RULING

. . . Except as limited by special laws, the employer is free to regulate, according to his own discretion and judgment, all aspects of employment, including hiring, work assignments,
working methods, time, place and manner of work, tools to be used, processes to be followed, supervision of workers, working regulations, transfer of employees, work supervision, lay-
off of workers, and the discipline, dismissal and recall of workers. This flows from the established rule that labor law does not authorize the substitution of the judgment of the employer in
the conduct of his business and does not deprive the employer of the right to select or dismiss his employees for any cause, except in cases of unlawful discrimination.

. . . The employer has the prerogative of making transfers and reassignment of employees to meet the requirements of the business. Thus, where the rotation of employees from the day
shift to the night shift was a standard operating procedure of management, an employee who had been on the day shift for some time may be transferred to the night shift (Castillo v. CIR,
39 SCRA 81). Similarly, transfers effected pursuant to a company policy to transfer employees from one theater to other theaters operated by the employer, in order to prevent
connivance among them, was sustained (Cinema, Stage and Radio Entertainment Free Workers v. CIR, 18 SCRA 1071). Similar transfers and re-assignments of employees have been upheld
such as the re-assignment of one from a position of supervisor to that of engineer at the power house (Interwood Employees Assn. v. Interwood, 99 Phil. 82), or the transfer of the union
president from his position of messenger clerk in a hotel to purely office work and two other unionists from the position of hotel guard to line and elevator men, without diminution of pay
or other employee's rights (Bay View Hotel Employees Union v. Bay View Hotel, L-10393, March 30, 1960), or the temporary assignment of a sales clerk to another section of the store
(Marcaida v. PECO, 63 O.G. 8559).

It is the employer's prerogative, based on its assessment and perception of its employees' qualifications, aptitudes, and competence, to move them around in the various areas of its
business operations in order to ascertain where they will function with maximum benefit to the company. An employee's right to security of tenure does not give him such a vested right
in his position as would deprive the company of its prerogative to change his assignment or transfer him where he will be most useful. When his transfer is not unreasonable, nor
inconvenient, nor prejudicial to him, and it does not involve a demotion in rank or diminution of his salaries, benefits, and other privileges, the employee may not complain that it
amounts to a constructive dismissal.

. . . In a number of cases, the Court has recognized and upheld the prerogative of management to transfer an employee from one office to another within the business establishment
provided that there is no demotion in rank or diminution of his salary, benefits and other privileges. This is a privilege inherent in the employer's right to control and manage its enterprise
effectively. Even as the law is solicitous of the employees' welfare, it cannot ignore the right of the employer to exercise what are clearly and obviously management prerogatives. The
freedom of management to conduct its business operations to achieve its purpose cannot be denied.

But like all other rights, there are limits. The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion and putting to mind the basic elements of
justice and fair play. Having the right should not be confused with the manner in which that right must be exercised. Thus it cannot be used as a subterfuge by the employer to rid himself
of an undesirable worker. Nor when the real reason is to penalize an employee for his union activities and thereby defeat his right to self-organization. But the transfer can be upheld
when there is no showing that it is unnecessary, inconvenient and prejudicial to the displaced employee.

In this case, the employee (Laplana) had all intents and purpose to resigned from her position. She had unequivocally asked that she be considered dismissed, herself suggesting the
reason therefor - retrenchment. When so dismissed, she accepted separation pay. On the other hand, the employer has not been shown to be acting otherwise than in good faith, and in
the legitimate pursuit of what it considered its best interests, in deciding to transfer her to another office. There is no showing whatever that the employer was transferring Laplana to
another work place, not because she would be more useful there, but merely "as a subterfuge to rid . . . (itself) of an undesirable worker," or "to penalize an employee for . . . union
activities. . . ." The employer was moreover not unmindful of Laplana's initial plea for reconsideration of the directive for her transfer to Laoag; in fact, in response to that plea not to
 be moved to the Laoag Office, the employer opted instead to transfer her to Manila, the main office, offering at the same time the normal benefits attendant upon transfers from an
office to another.

The situation here presented is of an employer transferring an employee to another office in the exercise of what it took to be sound business judgment and in accordance with pre-
determined and established office policy and practice, and of the latter having what was believed to be legitimate reasons for declining that transfer, rooted in considerations of personal
convenience and difficulties for the family. Under these circumstances, the solution proposed by the employee herself, of her voluntary termination of her employment and the delivery to
her of corresponding separation pay, would appear to be the most equitable. Certainly, the Court cannot accept the proposition that when an employee opposes his employer's decision
to transfer him to another work place, there being no bad faith or underhanded motives on the part of either party, it is the employee's wishes that should be made to prevail.

41. Yuco Chemicals vs. Minister of Labor

YUCO CHEMICAL INDUSTRIES, INC, VS. MINISTRY OF LABOR AND EMPLOYMENT

FACTS Private respondent George Halili and Amado Magno were employed by petitioner company which is engaged in the manufacture/assembly of ice boxes in Tarlac. They were assigned to
make aluminum handles for the ice boxes.

After obtaining a favorable legal opinion from Tarlac provincial office of MOLE concerning the legality of moving the production of aluminum handles from Tarlac to Manila, petitioner
addressed a memorandum to private respondents directing them to work within one week from notice to their new place of work at Manila. The memorandum further states that private
respondents would be paid with a salary of Php. 27.00 and an additional allowance of Php. 2.00 “to meet the higher cost of living in Manila.

Instead of complying with the memorandum, private respondents filed a complaint with the provincial labor office for illegal dismissal, 13th month pay and service incentive leave pay.

As a countermove, petitioner filed an application for clearance to terminate the two employees on the ground of abandonment. The OIC of Tarlac labor office issued an order directing
petitioner to give private respondents their separation pay within ten (10) days from receipt of notice.

MINISTER OF Private respondent appealed to the Office of the Minister of MOLE who rendered the order in quation.
LABOR
1. At the time of acceptance of the employment relation between the parties, it was assumed that the place of work was in Matatalaib, Tarlac, Tarlac. Thus, to transfer the place of
work at such a distant place as Manila without the consent of the employees concerned can no longer be construed as a reasonable exercise of management prerogative in the
assignment of personnel dictated by business exigencies;

2. If petitioner company had indeed relocated its operations from Tarlac to Manila, it is puzzling why out of the 50 employees, it singled out the two (2) plain laborers to man the
Manila operations. Such actuation tended to support the allegation that private respondents were discriminated against because of their union activities and their refusal to
disaffiliate from the union.

ISSUE RULING

First, some general principles on transfer. In a number of cases, the Court has recognized and upheld the prerogative of management to transfer an employee from one office to another
within the business establishment provided that there is no demotion in rank or a diminution of his salary, benefits and other privileges. This is a privilege inherent in the employer's
right to control and manage its enterprise effectively. Even as the law is solicitous of the employees' welfare, it cannot ignore the right of the employer to exercise what are clearly and
obviously management prerogatives. The freedom of management to conduct its business operations to achieve its purpose cannot be denied.

But like all other rights, there are limits. The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion and putting to mind the basic elements of
justice and fair play. Having the right should not be confused with the manner in which that right must be exercised. Thus it cannot be used as a subterfuge by the employer to rid himself
 of an undesirable worker. Nor when the real reason is to penalize an employee for his union activities and thereby defeat his right to self-organization. But the transfer can be upheld
when there is no showing that it is unnecessary, inconvenient and prejudicial to the displaced employee.

The reassignment of Halili and Magno to Manila is legally indefensible on several grounds. Firstly, it was grossly inconvenient to private respondents. They are working students. When
they received the transfer memorandum directing their relocation to Manila within seven days from notice, classes had already started. The move from Tarlac to Manila at such time
would mean a disruption of their studies. Secondly, there appears to be no genuine business urgency that necessitated their transfer. As well pointed out by private respondents' counsel,
the fabrication of aluminum handles for ice boxes does not require special dexterity. Many workers could be contracted right in Manila to perform that particular line of work.

Altogether, there is a strong basis for public respondent's conclusion that the controversial transfer was not prompted by legitimate reasons. Petitioner company had indeed discriminated
against Magno and Halili when the duo was selected for reassignment to Manila. The transfer was timed at the height of union concerted activities in the firm, deliberately calculated to
demoralize the other union members. Under such questionable circumstances, private respondents had a valid reason to refuse the Manila re-assignment. Public respondent did not err or
abuse his discretion in upholding the employees' cause.

42. Caltex Refinery vs. NLRC

CALTEX REFINERY EMPLOYEES ASSOCIATION (CREA), VS. NATIONAL LABOR RELATIONS COMMISSION.

FACTS Petitioner Arnelio M. Clarete was hired by respondent Caltex Philippine, Inc. (Caltex) as Mechanic C. He was later promoted to the position of Mechanic B and assigned to the
Mechanical/Metal Grade Section of respondent Caltex’ refinery in Batangas.

According to Clarete, on his way to the refinery’s main gate after completing a day’s work at the Maintenance Area IV, he saw on a pile of rubbish a bottle of lighter fluid, which mechanics
use to remove grease from their hands. He picked up the bottle and placed it in the basket attached to the handlebar of his bicycle with the intention of asking the security guard at the
gate to allow him to bring it home.

Upon reaching the gate, he took the bottle of lighter fluid from the basket, punched out his time card at the bundy clock and then asked Juan de Villa, the security guard on duty,
permission to take home the bottle. Replying that he was not authorize to grant permission sought, de Villa referred Clarete to Dominador Castillo, the security supervisor. When so
approached, however, Castillo told Clarete to leave the bottle in his office. Clarete complied and left for home.

Respondent Caltex gave a different version of the incident: On said date, de Villa notice a black bag which Clarete did not submit for inspection. When requested by de Villa to open the
same for inspection, Clarete retorted that it was not necessary to inspect the bag as it contained only dirty clothes. Unconvinced, de Villa opened the bag and found one-liter sample bottle
filled with lighter fluid surreptitiously hidden inside in the sleeves of Clarete’s working clothes, which, in turn, were covered by other clothes. When asked it he had a gate pass to bring the
bottle out of premises, Clarete replied that he did not secure a gate pass as the lighter fluid was for his personal use.
Clarete received a letter from his immediate supervisor, requiring him to explain in writing why he should not be subjected to disciplinary action for violation of company rules and
regulations. In his written explanation, Clarete stated:
(1) that he had no intention of bringing the bottle of lighter fluid out of the company premises without the guard's permission;
(2) that he did seek permission but was denied; and
(3) that he left the bottle behind with the guard when told to do so.

Clarete was charged with the crime of theft before the Municipal Trial Court of San Pascual, Batangas. Fe received a letter from Antonio Z. Palad, Section Head, Mechanical/Metal Section,
requiring him to explain why his services should not be terminated for cause in view of Criminal Case No. 3331 and his violation of the "policy on disciplinary action per G.M. Circular No.
484 of August 28, 1974, specifically '(f) Removing or attempting to remove Company property from the Refinery without authorization.'"
In reply, Clarete requested time to consult his lawyer, which request respondent Caltex granted on November 14, 1989. Clarete was given up to November 30, 1989 to submit his
explanation. However, instead of submitting a written explanation, petitioner served a letter on Palad, requesting a formal investigation of the allegations against him, at the same time,
invoking his right to be represented by the Union and his legal counsel. The request was granted and a hearing was scheduled on January 5, 1990. Said hearing, as well as a subsequent
 one, was however deferred upon the request of Clarete.

Believing that Clarete has been given enough time to consult his lawyer and to prepare his explanation, a final meeting was scheduled on February 27, 1990. At the said meeting, Clarete,
through counsel, requested a formal trial-type investigation of the case. A letter reiterating that request was addressed by Clarete's counsel to Palad on March 12, 1990. In his letter
dated April 26, 1990, Palad denied the request on the ground that a trial-type hearing and confrontation of witnesses were not applicable to the company's administrative fact-finding
investigation. Clarete was then given only up to May 4, 1990 to submit his written explanation. He finally did so on May 3, 1990.

In the meantime, a decision was rendered in Criminal Case No. 3331, acquitting Clarete of the crime charged based on the insufficiency of the evidence to establish his guilt beyond
reasonable doubt.

Clarete was informed that his services were being terminated effective August 24, 1990 for "serious misconduct and loss of trust and confidence resulting from your having violated a
lawful order of the Company, i.e., GM Circular No. 484 of 8-28-74 which gave notice that the Company considers 'removing or attempting to remove Company property from the
Refinery without authorization' to be sufficiently serious that the erring employee be dismissed." Clarete was placed under preventive suspension with pay upon notice up to the
termination of his services on August 24, 1990.

LABOR ARBITER Clarete filed a complaint for illegal dismissal against private respondents Caltex and/or Edgardo C. Cataquio, in his capacity as Vice President of the Company with the Regional Arbitration
Branch IV of the National Labor Relations Commission. On January 15, 1991, Labor Arbiter Joaquin A. Tanodra rendered a decision, finding Clarete neither culpable of theft nor of
violating GM Circular No. 484 of August 28, 1974 as "his purpose in going to security guard de Villa was precisely to ask the latter's permission to bring out the lighter fluid from the
Refinery Compound." (Rollo, p. 27). He, therefore, directed the reinstatement of Clarete with full back wages which then totaled P40,081.60, without loss of seniority rights and other
privileges.

NLRC On appeal by private respondents, NLRC rendered judgment, vacating the decision of the Labor Arbiter and entering a new one dismissing the complaint for lack of merit. NLRC gave
credence to the version of respondent Caltex of the incident. It found no reason to doubt the veracity of the narration of the security guard, who was simply doing his job of protecting
the property of private respondent and who was not shown to hold a personal grudge or ill motive to testify falsely against Clarete. Nonetheless, NLRC awarded Clarete financial assistance
equivalent to one month salary for every year of service in the amount of P76,752.00.

Both parties moved for reconsideration — Clarete, on the ground that his dismissal was without valid cause as there was no violation of company rules, and private respondents on the
ground that Clarete was not entitled to the award of financial assistance pursuant to the ruling in Philippine Long Distance Telephone Company v. National Labor Relations Commission,
164 SCRA 671 (1988).

ISSUE RULING

The prerogative of employers to regulate all aspects of employment subject to the limitation of special laws is recognized. A valid exercise of management prerogative encompasses
hiring, work assignments, working methods, time, place and manner of work, tools to be used, procedure to be followed, supervision of workers, working regulations, transfer of
employees, discipline, dismissal and recall of workers. This prerogative must, however, be exercised in good faith for the advancement of the employer's interest and not for the
purpose of defeating the rights of the employees granted by law or contract. There are restrictions to guide the employers in the exercise of management prerogatives, particularly the
right to discipline or dismiss employees, for both the Constitution and the law guarantee employees' security of tenure. Thus, employees may be dismissed only in the manner provided by
law. The right of the employer must not be exercised arbitrarily and without just cause. Otherwise, the constitutional mandate of security of tenure of the workers would be rendered
nugatory.

We concur in NLRC's conclusion that the version of respondent Caltex of the incident under consideration is more credible. As correctly pointed out by NLRC, there is no reason to doubt
the veracity of the Report of Security Guard Juan de Villa dated April 14, 1989 and his Sinumpaang Salaysay dated April 21, 1989 as "he simply did what he was primarily tasked to do — to
protect the company property and to apprehend misdeeds committed thereat — neither ill motive nor personal grudge against complainant-appellee (Clarete) was attributed to him to
falsely testify against the former" Undoubtedly, the lighter fluid is a property of private respondent and to take the same out of its premises without the corresponding gate pass is a
violation of company rules on theft and pilferage of company property.
 But while Clarete may be guilty of violation of company rules, we find the penalty of dismissal imposed upon him by respondent Caltex too harsh and unreasonable. As enunciated in
Radio Communications of the Philippines, Inc. v.National Labor Relations Commission, supra, "such a penalty (of dismissal) must be commensurate with the act, conduct or omission
imputed to the employee and imposed in connection with the employer's disciplinary authority".Even when there exist some rules agreed upon between the employer and employee on
the subject of dismissal, we have ruled in Gelmart Industries Phils., Inc. v. National Labor Relations Commission, 176 SCRA 295 (1989), that the same cannot preclude the State from
inquiring on whether its rigid application would work too harshly on the employee.

Of the same mind is the Solicitor General who, invoking Gelmart Industries, prayed in his Manifestation, in lieu of Comment, that the assailed decision of NLRC be set aside and
reinstatement of petitioner Clarete be ordered.

Indeed, considering that Clarete has no previous record in his eight years of service; that the value of the lighter fluid, placed at P8.00, is very minimal compared to his salary of P325.00 a
day; that after his dismissal, he has undergone mental torture; that respondent Caltex did not lose anything as the bottle of lighter fluid was retrieved on time; and that there was no
showing that Clarete's retention in the service would work undue prejudice to the viability of employer's operations or is patently inimical to its interest, we hold that the penalty of
dismissal imposed on Clarete is unduly harsh and grossly disproportionate to the reason for terminating his employment. Hence, we find that the preventive suspension imposed upon
private respondent is a sufficient penalty for the misdemeanor committed by petitioner.
Since the dismissal took place on August 24, 1990, or after the passage of R.A. No. 6715, Clarete is entitled to reinstatement without loss of seniority rights and other privileges and his full
back wages inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual
reinstatement. As in the case of Pines City v. National Labor Relations Commission, 224 SCRA 110 (1993) and Pines City Educational Center v. National Labor Relations Commission, 227
SCRA 655 (1993), the Court stated that in ascertaining the total amount of back wages payable to them, we go back to the rule prior to the Mercury Drugrule that the total amount derived
from employment elsewhere by the employee from the date of dismissal up to the date of reinstatement, if any, should be deducted therefrom. Inasmuch as petitioner received pay
during his preventive suspension, the same must also be deducted from the monetary awards to be received by him.

43. Firestone Tire and Rubber vs. Lariosa

FIRESTONE TIRE AND RUBBER COMPANY OF THE PHILIPPINES, VS. CARLOS LARIOSA

FACTS Carlos Lariosa started working with Firestone as a factory worker. At the time of his dismissal, he was a tire builder.

As he was about to leave the company premises Lariosa submitted himself to a routine check by the security guards at the west gate. He was frisked by Security Guard Ambrosio Liso while
his personal bag was inspected by Security Guard Virgilio Olvez. In the course of the inspection, sixteen wool flannel swabs, all belonging to the company, were found inside his bag,
tucked underneath his soiled clothes.

As a result of the incident, Firestone terminated Lariosa’s services citing as grounds therefor: “stealing company property and loss of trust.” Firestone also filed a complaint against him
with the Rizal provincial fiscal for attempted theft.

Lariosa, on the other hand, sued Firestone before the Ministry of Labor and Employment for illegal dismissal, violation of B.P. Blg. 130 and its related rules and regulations, and damages.

LABOR ARBITER The Labor Arbiter, in his decision, found Lariosa’s dismissal justified.

NLRC However, on appeal, the NLRC reversed the decision of the Labor Arbiter and held that the dismissal of Lariosa was too severe a penalty. It therefore ordered Lariosa’s reinstatement but
without backwages, the period when he was out of work to be considered a suspension.

ISSUE RULING
 A review of the record shows that Lariosa was indubitably involved in the attempted theft of the flannel swabs. During the investigation called by the company's industrial relations
manager Ms. Villavicencio on July 28, 1983, or one day after the incident, Security Guards Liso and Olvez contradicted Lariosa's bare claim that he had no intention to bring home the
swabs and that he had simply overlooked that he had earlier placed them inside his bag after they were given to him by his shift supervisor while he was busy at work. Guard Olvez stated
that when he confronted Lariosa with the swabs, the latter replied that they were for "home use." And when he requested Lariosa to stay behind while he reported the matter to the
authorities, Lariosa refused and hurriedly left the premises and boarded a passing jeepney.

From the records, it is likewise clear that Firestone did not act arbitrarily in terminating Lariosa's services. On the contrary, there are transcripts to prove that an investigation of the
incident was promptly conducted in the presence of the employee concerned, the union president and the security guards who witnessed the attempted asportation. Records also
belie the allegation that Lariosa was shown his walking papers on the very day of the incident. The letter of Ms. Villavicencio to Lariosa dated August 1, 1983 informing the latter of his
dismissal effective August 2, 1983 conclusively shows that he was discharged only on August 2, 1983, after an investigation was held to ventilate the truth about the July 27 incident.
Thus, we cannot agree with the NLRC's conclusion that even if Firestone had found substantial proof of Lariosa's misconduct, it did not observe the statutory requirements of due process.

There is no gainsaying that theft committed by an employee constitutes a valid reason for his dismissal by the employer. Although as a rule this Court leans over backwards to help workers
and employees continue with their employment or to mitigate the penalties imposed on them, acts of dishonesty in the handling of company property are a different matter.

Thus, under Article 283 of the Labor Code, an employer may terminate an employment for "serious misconduct" or for "fraud or willful breach by the employee of the trust reposed in him
by his employer or representative."
If there is sufficient evidence that an employee has been guilty of a breach of trust or that his employer has ample reasons to distrust him, the labor tribunal cannot justly deny to the
employer the authority to dismiss such an employee.

As a tire builder, Lariosa was entrusted with certain materials for use in his job. On the day in question, he was given two bundles of wool flannel swabs [ten pieces per bundle] for
cleaning disks. He used four swabs from one pack and kept the rest [sixteen pieces] in his "blue travelling bag." Why he placed the swabs in his personal bag, which is not the usual
receptacle for company property, has not been satisfactorily explained.

If Lariosa, by his own wrong-doing, could no longer be trusted, it would be an act of oppression to compel the company to retain him, fully aware that such an employee could, in the
long run, endanger its very viability.

The employer's obligation to give his workers just compensation and treatment carries with it the corollary right to expect from the workers adequate work, diligence and good conduct.
In view of the foregoing, We rule that Firestone had valid grounds to dispense with the services of Lariosa and that the NLRC acted with grave abuse of discretion in ordering his
reinstatement. However, considering that Lariosa had worked with the company for eleven years with no known previous bad record, the ends of social and compassionate justice
would be served if he is paid full separation pay but not reinstatement without backages as decreed by the NLRC.

44.Duncan Association of Detailman vs. Glaxo Wellcome

DUNCAN ASSOCIATION OF DETAILMAN - PTGWO, VS. GLAXO WELLCOME PHILIPPINES, INC.

FACTS Petitioner Pedro A. Tecson was hired by respondent Glaxo Wellcome Philippines, Inc. (Glaxo) as medical representative after Tecson had undergone training and orientation.

Thereafter, Tecson signed a contract of employment which stipulates, among others, that he agrees to study and abide by existing company rules; to disclose to management any existing
or future relationship by consanguinity or affinity with co-employees or employees of competing drug companies and should management find such relationship poses a possible conflict
of interest, to resign from the company.

The Employee Code of Conduct of Glaxo similarly provides that an employee is expected to inform management of any existing or future relationship by consanguinity or affinity with co-
employees or employees of competing drug companies. If management perceives a conflict of interest or a potential conflict between such relationship and the employee’s employment
 with the company, the management and the employee will explore the possibility of a "transfer to another department in a non-counterchecking position" or preparation for employment
outside the company after six months.

Tecson was initially assigned to market Glaxo’s products in the Camarines Sur-Camarines Norte sales area.

Subsequently, Tecson entered into a romantic relationship with Bettsy, an employee of Astra Pharmaceuticals (Astra), a competitor of Glaxo. Bettsy was Astra’s Branch Collector in Albay.
She supervised the district managers and medical representatives of her company and prepared marketing strategies for Astra in that area.

Even before they got married, Tecson received several reminders from his District Manager regarding the conflict of interest which his relationship with Bettsy might engender. Still, love
prevailed, and Tecson married Bettsy in September 1998.

Tecson’s superiors informed him that his marriage to Bettsy gave rise to a conflict of interest. Tecson’s superiors reminded him that he and Bettsy should decide which one of them would
resign from their jobs, although they told him that they wanted to retain him as much as possible because he was performing his job well.

Tecson requested for time to comply with the company policy against entering into a relationship with an employee of a competitor company. He explained that Astra, Bettsy’s employer,
was planning to merge with Zeneca, another drug company; and Bettsy was planning to avail of the redundancy package to be offered by Astra. With Bettsy’s separation from her
company, the potential conflict of interest would be eliminated. At the same time, they would be able to avail of the attractive redundancy package from Astra.
Tecson again requested for more time to resolve the problem. Tecson applied for a transfer in Glaxo’s milk division, thinking that since Astra did not have a milk division, the potential
conflict of interest would be eliminated. His application was denied in view of Glaxo’s “least-movement-possible” policy.

Glaxo transferred Tecson to the Butuan City-Surigao City-Agusan del Sur sales area. Tecson asked Glaxo to reconsider its decision, but his request was denied.

GLAXO’S Tecson sought Glaxo’s reconsideration, regarding his transfer and brought the matter to Glaxo’s Grievance Committee. Glaxo, however, remained firm in its decision and gave Tescon until
GRIEVANCE February 7, 2000 to comply with the transfer order. Tecson defied the transfer order and continued acting as medical representative in the Camarines Sur-Camarines Norte sales area.
COMMITTEE
During the pendency of the grievance proceedings, Tecson was paid his salary, but was not issued samples of products which were competing with similar products manufactured by Astra.
He was also not included in product conferences regarding such products.

VOLUNTARY Because the parties failed to resolve the issue at the grievance machinery level, they submitted the matter for voluntary arbitration. Glaxo offered Tecson a separation pay of one-half (½)
ARBITRATION month pay for every year of service, or a total of ₱50,000.00 but he declined the offer. On November 15, 2000, the National Conciliation and Mediation Board (NCMB) rendered its
Decision declaring as valid Glaxo’s policy on relationships between its employees and persons employed with competitor companies, and affirming Glaxo’s right to transfer Tecson to
another sales territory.

COURT OF Aggrieved, Tecson filed Petition for Review with the Court of Appeals assailing the NCMB Decision.
APPEALS
The Court of Appeals promulgated its Decision denying the Petition for Review on the ground that the NCMB did not err in rendering its Decision. The appellate court held that Glaxo’s
policy prohibiting its employees from having personal relationships with employees of competitor companies is a valid exercise of its management prerogatives.

ISSUE RULING

Whether or not The Glaxo’s policy prohibiting an employee from having a relationship with an employee of a competitor company is a valid exercise of management prerogative.
Glaxo’s policy
prohibiting an Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other confidential programs and information from competitors, especially so that it and Astra
employee from are rival companies in the highly competitive pharmaceutical industry.
having a
relationship with The prohibition against personal or marital relationship with employees of competitor companies upon Glaxo’s employees is reasonable under the circumstances because relationships of
an employee of that nature might compromise the interests of the company. In laying down the assailed company policy, Glaxo only aims to protect its interests against the possibility that a competitor
a competitor company will gain access to its secrets and procedures.
company is a
valid exercise of That Glaxo possesses the right to protect its economic interests cannot be denied. No less than the Constitution recognize the right of enterprise to adopt and enforce such a policy to
management protect its right to reasonable returns on investments and to expansion and growth. Indeed, while our laws endeavor to give life to the constitutional policy on social justice and the
prerogative. protection of labor, it does not mean that every labor dispute will be decided in favor of the workers. The law also recognizes that management has rights which are also entitled to
respect and enforcement in the interest of fair play.
The challenged company policy does not violate the equal protection clause of the Constitution as petitioners erroneously suggest. It is a settled principle that the commands of the equal
protection clause are addressed only to the state or those acting under color of its authority. Corollarily, it has been held in a long array of U.S. Supreme Court decisions that the equal
protection clause erects no shield against merely private conduct, however, discriminatory or wrongful. The only exception occurs when the state in any of its manifestations or actions has
been found to have become entwined or involved in the wrongful private conduct. Obviously, however, the exception is not present in this case. Significantly, the company actually
enforced the policy after repeated requests to the employee to comply with the policy. Indeed, the application of the policy was made in an impartial and even-handed manner, with due
regard for the lot of the employee.

In any event, from the wordings of the contractual provision and the policy in its employee handbook, it is clear that Glaxo does not impose an absolute prohibition against relationships
between its employees and those of competitor companies. Its employees are free to cultivate relationships with and marry persons of their own choosing. What the company merely
seeks to avoid is a conflict of interest between the employee and the company that may arise out of such relationships. As succinctly explained by the appellate court, thus:

The policy being questioned is not a policy against marriage. An employee of the company remains free to marry anyone of his or her choosing. The policy is not aimed at
restricting a personal prerogative that belongs only to the individual. However, an employee’s personal decision does not detract the employer from exercising management
prerogatives to ensure maximum profit and business success. . .

The Court of Appeals also correctly noted that the assailed company policy which forms part of respondent’s Employee Code of Conduct and of its contracts with its employees, such as
that signed by Tescon, was made known to him prior to his employment. Tecson, therefore, was aware of that restriction when he signed his employment contract and when he entered
into a relationship with Bettsy. Since Tecson knowingly and voluntarily entered into a contract of employment with Glaxo, the stipulations therein have the force of law between them and,
thus, should be complied with in good faith."He is therefore estopped from questioning said policy.

Whether or not The Court finds no merit in petitioners’ contention that Tescon was constructively dismissed when he was transferred from the Camarines Norte-Camarines Sur sales area to the Butuan
Tecson was City-Surigao City-Agusan del Sur sales area, and when he was excluded from attending the company’s seminar on new products which were directly competing with similar products
constructively manufactured by Astra. Constructive dismissal is defined as a quitting, an involuntary resignation resorted to when continued employment becomes impossible, unreasonable, or unlikely;
dismissed. when there is a demotion in rank or diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee. None of these
conditions are present in the instant case. The record does not show that Tescon was demoted or unduly discriminated upon by reason of such transfer. As found by the appellate court,
Glaxo properly exercised its management prerogative in reassigning Tecson to the Butuan City sales area:

(1) . . . In this case, petitioner’s transfer to another place of assignment was merely in keeping with the policy of the company in avoidance of conflict of interest, and thus valid…
Note that [Tecson’s] wife holds a sensitive supervisory position as Branch Coordinator in her employer-company which requires her to work in close coordination with District
Managers and Medical Representatives. Her duties include monitoring sales of Astra products, conducting sales drives, establishing and furthering relationship with customers,
collection, monitoring and managing Astra’s inventory…she therefore takes an active participation in the market war characterized as it is by stiff competition among
pharmaceutical companies. Moreover, and this is significant, petitioner’s sales territory covers Camarines Sur and Camarines Norte while his wife is supervising a branch of her
employer in Albay. The proximity of their areas of responsibility, all in the same Bicol Region, renders the conflict of interest not only possible, but actual, as learning by one
spouse of the other’s market strategies in the region would be inevitable. [Management’s] appreciation of a conflict of interest is therefore not merely illusory and wanting in
factual basis

In Abbott Laboratories (Phils.), Inc. v. National Labor Relations Commission, which involved a complaint filed by a medical representative against his employer drug company for illegal
dismissal for allegedly terminating his employment when he refused to accept his reassignment to a new area, the Court upheld the right of the drug company to transfer or reassign its
employee in accordance with its operational demands and requirements. The ruling of the Court therein, quoted hereunder, also finds application in the instant case:
 By the very nature of his employment, a drug salesman or medical representative is expected to travel. He should anticipate reassignment according to the demands of their
business. It would be a poor drug corporation which cannot even assign its representatives or detail men to new markets calling for opening or expansion or to areas where the
need for pushing its products is great. More so if such reassignments are part of the employment contract.
As noted earlier, the challenged policy has been implemented by Glaxo impartially and disinterestedly for a long period of time. In the case at bar, the record shows that Glaxo gave
Tecson several chances to eliminate the conflict of interest brought about by his relationship with Betts y. When their relationship was still in its initial stage, Tecson’s supervisors at
Glaxo constantly reminded him about its effects on his employment with the company and on the company’s interests. After Tecson married Bettsy, Glaxo gave him time to resolve the
conflict by either resigning from the company or asking his wife to resign from Astra. Glaxo even expressed its desire to retain Tecson in its employ because of his satisfactory performance
and suggested that he ask Bettsy to resign from her company instead. Glaxo likewise acceded to his repeated requests for more time to resolve the conflict of interest. When the problem
could not be resolved after several years of waiting, Glaxo was constrained to reassign Tecson to a sales area different from that handled by his wife for Astra.

Notably, the Court did not terminate Tecson from employment but only reassigned him to another area where his home province, Agusan del Sur, was included. In effecting Tecson’s
transfer, Glaxo even considered the welfare of Tecson’s family. Clearly, the foregoing dispels any suspicion of unfairness and bad faith on the part of Glaxo.

45.Union of Nestle Workers CDO Factory vs. Nestle Philippines

UNION OF NESTLE WORKERS CAGAYAN DE ORO FACTORY (UNWCF), VS. NESTLE PHILIPPINES, INC.

FACTS Nestle Philippines, Inc. (Nestle) adopted Policy No. HRM 1.8, otherwise known as the “Drug Abuse Policy.” Pursuant to this policy, the management shall conduct simultaneous drugs tests
on all employees from different factories and plants. Thus, drug testing commenced at the Lipa City factory, then followed by the other factories and plants.

However, there was resistance to the policy in the Nestle Cagayan de Oro factory. Out of 496 employees, only 141 or 28.43% submitted themselves to drug testing. The Union of Nestle
Workers Cagayan de Oro Factory and its officers, petitioners, wrote to Nestle challenging the implementation of the policy and branding it as a mere subterfuge to defeat the employees’
constitutional rights. Nestle claimed that the policy is in keeping with the government’s trusts to eradicate the proliferation of drug abuse, explaining that the company has the right:

(a) To ensure that its employees are of sound physical and mental health; and
(b) To terminate the services of an employee who refuses to undergo the drug test.

Petitioner filed with the Regional Trial Court (RTC) a complaint for injunction with prayer for the issuance of a temporary restraining order against Nestle.

The RTC issued a temporary restraining order enjoining respondents from proceedings with the drug test. Forthwith, they filed a motion to dismiss the complaint on the ground that the
RTC has no jurisdiction over the case as it involves a labor dispute or enforcement of a company personnel policy cognizable by the Voluntary Arbitrator or Panel of Voluntary Arbitrators.

REGIONAL TRIAL The RTC dismissed the complaint for lack of jurisdiction.
COURT
“The issue involved in the instant case is more constitutional than labor. It was convinced that the dispute involves violation of employees’ constitutional rights to self-
incrimination, due process and security of tenure. Hence, the issuance of the Temporary Restraining Order.

However, based on the pleadings and pronouncements of the parties, a close scrutiny of the issues would actually reveal that the main issue boils down to a labor dispute.

COURT OF The Appellate Court rendered its Decision dismissing the petition.
APPEALS
 ISSUE RULING

Whether or not Respondent Nestle’s Drug Abuse Policy states that "(i)llegal drugs and use of regulated drugs beyond the medically prescribed limits are prohibited in the workplace. Illegal drug use puts
the at risk the integrity of Nestle operations and the safety of our products. It is detrimental to the health, safety and work-performance of employees and is harmful to the welfare of families
implementation and the surrounding community." This pronouncement is a guiding principle adopted by Nestle to safeguard its employees’ welfare and ensure their efficiency and well-being. To our
of the said drug minds, this is a company personnel policy. In San Miguel Corp. vs. NLRC, this Court held:
testing is a valid
exercise of "Company personnel policies are guiding principles stated in broad, long-range terms that express the philosophy or beliefs of an organization’s top authority regarding
management personnel matters. They deal with matter affecting efficiency and well-being of employees and include, among others, the procedure in the administration of wages, benefits,
prerogative. promotions, transfer and other personnel movements which are usually not spelled out in the collective agreement."

Considering that the Drug Abuse Policy is a company personnel policy, it is the Voluntary Arbitrators or Panel of Voluntary Arbitrators, not the RTC, which exercises jurisdiction over this
case. Article 261 of the Labor Code, as amended, pertinently provides:

Art. 261. Jurisdiction of Voluntary Arbitrators or Panel of Voluntary Arbitrators. – The Voluntary Arbitrator or panel of Voluntary Arbitrators shall have original and exclusive
jurisdiction to hear and decide all unresolved grievances arising from the interpretation or implementation of the Collective Bargaining Agreement and those arising from the
interpretation or enforcement of company personnel policies x x x."

46. MERALCO vs. Secretary of Labor

MANILA ELECTRIC COMPANY, VS. HON. SECRETARY OF LABOR

FACTS

LABOR ARBITER

NLRC

ISSUE RULING

47 GTE Directories vs. Sanchez

GTE DIRECTORIES CORPORATION, VS. HON. AUGUSTO S. SANCHEZ

FACTS To enable it to catch up with the increasing competition for the sale of ad space in various media units, GTE Directories Corp., a foreign corporation in the business of publishing PLDT
telephone directories, drew up a new policy for its sales representatives.

● Old policy: Sales representatives were given work assignments within specific territories by the so-called "draw method."
● New policy: Cancelled accounts, or accounts that cannot be renewed within a specific period, can be referred for handling to outside agencies or contractual salespersons.
 The GTE Directories Employees Union disapproved of the new policy, arguing that making accounts available to outside agencies will result in the reduction of pay of sales representatives.
Thereafter, the union filed a notice of strike.

Despite the union's opposition, the company issued six memoranda ordering sales representatives to hand in their sales reports. No one complied. Consequently, the company terminated
14 of its sales representatives, including the union president. The union held a strike to protest the management's decision.

When conciliation efforts failed, then Acting Labor Minister Vicente Leogardo, Jr. assumed jurisdiction over the dispute, holding that since the company was a major tax contributor (it paid
a total of P10M in income tax alone), the ongoing dispute adversely affected national interest.

Labor Minister Blas Ople: Unless shown to be grossly oppressive or contrary to law, company policies are generally binding and valid on the parties and must be complied with until finally
revised or amended unilaterally or preferably, through negotiations or by competent authorities.

Labor Minister Augusto Sanchez (succeeded Ople and adjudicated the dispute on the merits): Parties are ordered to negotiate and effect a voluntary settlement on the questioned dispute.
In the meantime, the company is ordered to reinstate the 14 terminated employees.

ISSUE RULING

Whether or not The Labor Minister found nothing to suggest that the employer's unilateral action of inaugurating a new sales scheme "was designed to discourage union organization or diminish its
the effectivity of influence;" that on the contrary, it was "part of its overall plan to improve efficiency and economy and at the same time gain profit to the highest;" that the union's "conjecture that the
an employer’s new plan will sow dissatisfaction from its rank is already a prejudgment of the plan's viability and effectiveness, . . . like saying that the plan will not work out to the workers' (benefit) and
regulations and therefore management must adopt a new system of marketing." The Minister accordingly dismissed the strike notice, although he ordered a slight revision of the CDS which the employer
policies is evidently found acceptable.
dependent upon
the acceptance This Court approved of the Minister's findings, and declared correct his holding that the CDS was "a valid exercise of management prerogatives," viz.:
and consent of
the employees Except as limited by special laws, an employer is free to regulate, according to his own discretion and judgment, all aspects of employment, including hiring, work assignments,
thereby sought working methods, time, place and manner of work, tools to be used, processes to be followed, supervision of workers, working regulations, transfer of employees, work
to be bound. supervision, lay-off of workers and the discipline, dismissal and recall of work.

Whether or not The Court then closed its decision with the following pronouncements: 5
the union’s
objections to, or Every business enterprise endeavors to increase its profits. In the process, it may adopt or devise means designed towards that goal. In Abbott Laboratories vs. NLRC, 154 SCRA
request for 713, We ruled:
reconsideration . . . Even as the law is solicitous of the welfare of the employees, it must also protect the right of an employer to exercise what are clearly management prerogatives.
of those The free will of management to conduct its own business affairs to achieve its purpose cannot be denied.
regulations or
policies So long as a company's management prerogatives are exercised in good faith for the advancement of the employer's interest and not for the purpose of defeating or circumventing the
automatically rights of the employees under special laws or under valid agreements, this Court will uphold them.
suspend
enforcement In the case at bar, it must thus be conceded that its adoption of a new "Sales Evaluation and Production Policy" was within its management prerogative to regulate, according to its own
thereof and discretion and judgment, all aspects of employment, including the manner, procedure and processes by which particular work activities should be done. There were, to be sure,
execute the objections presented by the union, i.e., that the schedule had not been "drawn (up) as a result of an agreement of all concerned," that the new policy was incomprehensible,
employees’ discriminatory and whimsical, and "would result to further reduction" of the sales representatives' compensation. There was, too, the union's accusation that GTE had committed unfair
refusal to labor practices, such as—
comply with the 1. Refusal to bargain on unjust sales policies particularly on the failure to meet the 75% of the average sales production for two consecutive years;
same. 2. Open territory of accounts;
 3. Illegal suspension of Brian Pineda, a union officer; and
4. Non-payment of eight days' suspension pay increase.

This Court fails to see, however, how these objections and accusations justify the deliberate and obdurate refusal of the sales representatives to obey the management's simple
requirement for submission by all Premise Sales Representatives (PSRs) of individual reports or memoranda requiring reflecting target revenues—which is all that GTE basically
required — and which it addressed to the employees concerned no less than six (6) times. The Court fails to see how the existence of objections made by the union justify the studied
disregard, or wilful disobedience by the sales representatives of direct orders of their superior officers to submit reports. Surely, compliance with their superiors' directives could not
have foreclosed their demands for the revocation or revision of the new sales policies or rules; there was nothing to prevent them from submitting the requisite reports with the
reservation to seek such revocation or revision.

To sanction disregard or disobedience by employees of a rule or order laid down by management, on the pleaded theory that the rule or order is unreasonable, illegal, or otherwise
irregular for one reason or another, would be disastrous to the discipline and order that it is in the interest of both the employer and his employees to preserve and maintain in the
working establishment and without which no meaningful operation and progress is possible. Deliberate disregard or disobedience of rules, defiance of management authority cannot be
countenanced. This is not to say that the employees have no remedy against rules or orders they regard as unjust or illegal. They may object thereto, ask to negotiate thereon, bring
proceedings for redress against the employer before the Ministry of Labor. But until and Unless the rules or orders are declared to be illegal or improper by competent authority, the
employees ignore or disobey them at their peril. It is impermissible to reverse the process: suspend enforcement of the orders or rules until their legality or propriety shall have been
subject of negotiation, conciliation, or arbitration.

These propositions were in fact adverted to in relation to the dispute in question by then Minister Blas Ople in his Order dated January 21, 1986, to the effect among others, that
"promulgations of company policies and regulations are basic management prerogatives" and that it is a "recognized principle of law that company policies and regulations are, unless
shown to be grossly oppressive or contrary to law, generally binding (and) valid on the parties and must be complied with until finally revised or amended unilaterally or preferably
through negotiations or by competent authorities."

Minister Sanchez however found GTE to have "acted evidently in bad faith" in firing its 14 salespersons "for alleged violations of the reportorial requirements of its sales policies which was
then the subject of conciliation proceedings between them;" 6 and that "(w)hile the company, in merely implementing its challenged sales policies did not ipso facto commit an unfair labor
practice, it did so when it in mala fide dismissed the fourteen salesmen, all union members, while conciliation proceedings were being conducted on disputes on its very same policies,
especially at that time when a strike notice was filed on the complaint of the union alleging that said sales policies are being used to bust the union; thus precipitating a lawful strike on the
part of the latter." No other facts appear on record relevant to the issue of GTE's dismissal of the 14 sales representatives. There is no proof on record to demonstrate any underhanded
motive on the part of GTE in formulating and imposing the sales policies in question, or requiring the submission of reports in line therewith. What, in fine, appears to be the Minister's
thesis is that an employer has the prerogative to lay down basic policies and rules applicable to its employees, but may not exact compliance therewith, much less impose sanctions on
employees shown to have violated them, the moment the propriety or feasibility of those policies and rules, or their motivation, is challenged by the employees and the latter file a strike
notice with the Labor Department — which is the situation in the case at bar.

When the strike notice was filed by the union, the chain of events which culminated in the termination of the 14 sales persons' employment was already taking place, the series of defiant
refusals by said sales representatives to comply with GTE's requirement to submit individual reports was already in progress. At that time, no less than three (3) of the ultimate six (6)
direct orders of the employer for the submission of the reports had already been disobeyed. The filing of the strike notice, and the commencement of conciliation activities by the Bureau
of Labor Relations did not operate to make GTE's orders illegal or unenforceable so as to excuse continued non-compliance therewith. It does not follow that just because the employees
or their union are unable to realize or appreciate the desirability of their employers' policies or rules, the latter were laid down to oppress the former and subvert legitimate union
activities. Indeed, the overt, direct, deliberate and continued defiance and disregard by the employees of the authority of their employer left the latter with no alternative except to
impose sanctions. The sanction of suspension having proved futile, termination of employment was the only option left to the employer.

To repeat, it would be dangerous doctrine indeed to allow employees to refuse to comply with rules and regulations, policies and procedures laid down by their employer by the simple
expedient of formally challenging their reasonableness or the motives which inspired them, or filing a strike notice with the Department of Labor and Employment, or, what amounts to
the same thing, to give the employees the power to suspend compliance with company rules or policies by requesting that they be first subject of collective bargaining, It would be well
nigh impossible under these circumstances for any employer to maintain discipline in its establishment. This is, of course, intolerable. For common sense teaches, as Mr. Justice Gregorio
Perfecto once had occasion to stress that:
Success of industries and public services is the foundation upon which just wages may be paid. There cannot be success without efficiency. There cannot be efficiency without discipline.
Consequently, when employees and laborers violate the rules of discipline they jeopardize not only the interest of the employer but also their own. In violating the rules of discipline they
aim at killing the hen that lays the golden eggs. Laborers who trample down the rules set for an efficient service are, in effect, parties to a conspiracy, not only against capital but also
against labor. The high interest of society and of the individuals demand that we should require everybody to do his duty. That demand is addressed not only to employer but also to
employees.
Minister Sanchez decided the dispute in the exercise of the jurisdiction assumed by his predecessor in accordance with Article 263 (g) of the Labor Code, 8 providing in part as follows:
(g) When in his opinion there exists a labor dispute causing or likely to cause strikes or lockouts adversely affecting the national interest, such as may occur in but not limited to public
utilities, companies engaged in the generation or distribution of energy, banks, hospitals, and export-oriented industries, including those within export processing zones, the Minister of
Labor and Employment shall assume jurisdiction over the dispute and decide it or certify the same to the Commission for compulsory arbitration. . . .
Even that assumption of jurisdiction is open to question.

The production and publication of telephone directories, which is the principal activity of GTE, can scarcely be described as an industry affecting the national interest. GTE is a publishing
firm chiefly dependent on the marketing and sale of advertising space for its not inconsiderable revenues. Its services, while of value, cannot be deemed to be in the same category of such
essential activities as "the generation or distribution of energy" or those undertaken by "banks, hospitals, and export-oriented industries." It cannot be regarded as playing as vital a role in
communication as other mass media. The small number of employees involved in the dispute, the employer's payment of "P10 million in income tax alone to the Philippine government,"
and the fact that the "top officers of the union were dismissed during the conciliation process," obviously do not suffice to make the dispute in the case at bar one "adversely affecting the
national interest.