G.R. No.
82249 February 7, 1991 respondent was said to have been embarrassed before his immediate family and other acquaintance due to his
WILTSHIRE FILE CO., INC., petitioner, vs. THE NATIONAL LABOR RELATIONS COMMISSION and VICENTE T.
ONG, respondents
FELICIANO, J.:
Private respondent Vicente T. Ong was the Sales Manager of petitioner Wiltshire File Co., Inc. ("Wiltshire")
from 16 March 1981 up to 18 June 1985. As such, he received a monthly salary of P14,375.00 excluding
commissions from sales which averaged P5,000.00 a month. He also enjoyed vacation leave with pay
equivalent to P7,187,50 per year, as well as hospitalization privileges to the extent of P10,000.00 per year.
On 13 June 1985, upon private respondent's return from a business and pleasure trip abroad, he was informed
by the President of petitioner Wiltshire that his services were being terminated. Private respondent maintains
that he tried to get an explanation from management of his dismissal but to no avail. On 18 June 1985, when
private respondent again tried to speak with the President of Wiltshire, the company's security guard handed
him a letter which formally informed him that his services were being terminated upon the ground of
redundancy.
Private respondent filed, on 21 October 1985, a complaint before the Labor Arbiter for illegal dismissal alleging
that his position could not possibly be redundant because nobody (save himself) in the company was then
performing the same duties. Private respondent further contended that retrenching him could not prevent further
losses because it was in fact through his remarkable performance as Sales Manager that the Company had an
unprecedented increase in domestic market share the preceding year. For that accomplishment, he continued, he
was promoted to Marketing Manager and was authorized by the President to hire four (4) Sales Executives five
(5) months prior to his termination.
In its answer, petitioner company alleged that the termination of respondent's services was a cost-cutting
measure: that in December 1984, the company had experienced an unusually low volume of orders: and that it
was in fact forced to rotate its employees in order to save the company. Despite the rotation of employees,
petitioner alleged; it continued to experience financial losses and private respondent's position, Sales Manager
of the company, became redundant.
On 2 December 1986, during the proceedings before the Labor Arbiter, petitioner, in a letter1 addressed to the
Regional Director of the then Ministry of Labor and Employment, notified that official that effective 2 January
1987, petitioner would close its doors permanently due to substantial business losses.
In a decision dated 11 March 1987, the Labor Arbiter declared the termination of private respondent's services
illegal and ordered petitioner to pay private respondent backwages in the amount of P299,000.00, unpaid
salaries in the amount of P22,352.11, accumulated sick and vacation leaves in the amount of P12,543.91,
hospitalization benefit package in the amount of P10,000.00, unpaid commission in the amount of P57,500,00,
moral damages in the amount of P100,000.00 and attorney's fees in the amount of P51,639.60.
On appeal by petitioner Wiltshire, the National Labor Relations Commission ("NLRC") affirmed in toto on 9
February 1988 the decision of the Labor Arbiter. The NLRC held that:
The termination letter clearly spelled out that the main reason in terminating the services of
complainant is REDUNDANT and not retrenchment.
The supposed duplication of work of herein complainant and Mr. Deliva, the Vice-President is absent
that would justify redundancy. . . .
On the claim for moral damages, the NLRC pointed out that the effective date of private respondent's
termination was 18 July 1985, although it was only 18 June 1985 that he received the letter of termination, and
concluded that he was not given any opportunity to explain his position on the matter. The NLRC held that the
termination was attended by malice and bad faith on the part of petitioner, considering the manner of private
respondent was ordered by the President to pack up and remove his personal belongings from the office. Private
inability to explain the reasons behind the termination of his services.
In this Petition for Certiorari, it is submitted that private respondent's dismissal was justified and not illegal.
Petitioner maintains that it had been incurring business losses beginning 1984 and that it was compelled to
reduce the size of its personnel force. Petitioner also contends that redundancy as a cause for termination does
not necessarily mean duplication of work but a "situation where the services of an employee are in excess of
what is demanded by the needs of an undertaking . . ."
Having reviewed the record of this case, the Court has satisfied itself that indeed petitioner had serious financial
difficulties before, during and after the termination of the services of private respondent. For one thing, the
audited financial statements of the petitioner for its fiscal year ending on 31 July 1985 prepared by a firm of
independent auditors, showed a net loss in the amount of P4,431,321.00 and a total deficit or capital impairment
at the end of year of P6,776,493.00.2
In the preceding fiscal year (1983-1984), while the company showed a net after tax income of P843,506.00, it
actually suffered a deficit or capital impairment of P2,345,172.00. Most importantly, petitioner Wiltshire finally
closed its doors and terminated all operations in the Philippines on January 1987, barely two (2) years after the
termination of private respondent's employment. We consider that finally shutting down business operations
constitutes strong confirmatory evidence of petitioner's previous financial distress. The Court finds it very
difficult to suppose that petitioner Wiltshire would take the final and irrevocable step of closing down its
operations in the Philippines simply for the sole purpose of easing out a particular officer or employee, such as
the private respondent.
Turning to the legality of the termination of private respondent's employment, we find merit in petitioner's basic
argument. We are unable to sustain public respondent NLRC's holding that private respondent's dismissal was
not justified by redundancy and hence illegal. In the first place, we note that while the letter informing private
respondent of the termination of his services used the word "redundant", that letter also referred to the company
having "incur[red] financial losses which [in] fact has compelled [it] to resort to retrenchment to prevent further
losses".3
Thus, what the letter was in effect saying was that because of financial losses, retrenchment was necessary,
which retrenchment in turn resulted in the redundancy of private respondent's position
In the second place, we do not believe that redundancy in an employer's personnel force
necessarily or even ordinarily refers to duplication of work. That no other person was holding the
same position that private respondent held prior to the termination of his services, does not show that
his position had not become redundant. Indeed, in any well-organized business enterprise, it would
be surprising to find duplication of work and two (2) or more people doing the work of one person.
We believe that redundancy, for purposes of our Labor Code, exists where the services of an
employee are in excess of what is reasonably demanded by the actual requirements of the enterprise.
Succinctly put, a position is redundant where it is superfluous, and superfluity of a position or
positions may be the outcome of a number of factors, such as overhiring of workers, decreased
volume of business, or dropping of a particular product line or service activity previously
manufactured or undertaken by the enterprise.4
The employer has no legal obligation to keep in its payroll more employees than are necessarily for the
operation of its business.
In the third place, in the case at bar, petitioner Wiltshire, in view of the contraction of its volume of sales and in
order to cut down its operating expenses, effected some changes in its organization by abolishing some
positions and thereby effecting a reduction of its personnel. Thus, the position of Sales Manager was abolished
and the duties previously discharged by the Sales Manager simply added to the duties of the General Manager,
to whom the Sales Manager used to report.
It is of no legal moment that the financial troubles of the company were not of private respondent's making.
Private respondent cannot insist on the retention of his position upon the ground that he had not contributed to
the financial problems of Wiltshire. The characterization of private respondent's services as no longer necessary
or sustainable, and therefore properly terminable, was an exercise of business judgment on the part of petitioner
company. The wisdom or soundness of such characterization or decision was not subject to discretionary
review on the part of the Labor Arbiter nor of the NLRC so long, of course, as violation of law or merely
arbitrary and malicious action is not shown. It should also be noted that the position held by private respondent,
Sales Manager, was clearly managerial in character. In D.M. Consunji, Inc. v. National Labor Relations
Commission,5 the Court held:
An employer has a much wider discretion in terminating the employment relationship of managerial
personnel as compared to rank and file employees. However, such prerogative of management to
dismiss or lay off an employee must be made without abuse of discretion, for what is at stake is not
only the private respondent's position but also his means of livelihood . . . .
The determination of the continuing necessity of a particular officer or position in a business corporation is
management's prerogative, and the courts will not interfere with the exercise of such so long as no abuse of
discretion or merely arbitrary or malicious action on the part of management is shown.7
On the issue of moral damages, petitioner assails the finding of the NLRC that the dismissal was done in bad
faith. Petitioner argues that it had complied with the one-month notice required by law; that there was no need
for private respondent to be heard in his own defense considering that the termination of his services was for a
statutory or authorized cause; and that whatever humiliation might have been suffered by private respondent
arose from a lawful cause and hence could not be the basis of an award of moral damages.
Termination of an employee's services because of retrenchment to prevent further losses or redundancy, is
governed by Article 283 of the Labor Code which provides as follows:
Art. 283. Closure of establishment and reduction of personnel. –– The employer may also terminate
the employment of any employee due to the installation of labor saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by
serving a written notice on the workers and the Ministry of Labor and Employment at least one (1)
month before the intended date thereof. In case of termination due to the installation of labor saving
devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to
at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is
higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the separation
pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every of service,
whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.
Termination of services for any of the above described causes should be distinguished from termination of
employment by reason of some blameworthy act or omission on the part of the employee, in which case the
applicable provision is Article 282 of the Labor Code which provides as follows:
Art. 282. Termination by employer. –– An employer may terminate an employment for any of the
following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized
representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any immediate
member of his family or his duly authorized representative; and
(e) Other causes analogous to the foregoing.
Sections 2 and 5 of Rule XIV entitled "Termination of Employment:" of the "Rules to Implement the Labor
Code" read as follows:
Sec. 2. Notice of dismissal. –– Any employer who seeks to dismiss a worker shall furnish him a
written notice stating the particular acts or omission constituting the grounds for his dismissal. In
cases of abandonment of work, the notice shall be served at the worker's last known address.
Sec. 5. Answer and hearing. –– The worker may answer the allegations stated against him in the
notice of dismissal within a reasonable period from receipt of such notice. The employer shall afford
the worker ample opportunity to be heard and to defend himself with the assistance of his
representative if he so desires. (emphasis supplied)
We note that Section 2 of Rule XIV quoted above requires the notice to specify "the particular acts or omissions
constituting the ground for his dismissal", a requirement which is obviously applicable where the ground for
dismissal is the commission of some act or omission falling within Article 282 of the Labor Code. Again,
Section 5 gives the employee the right to answer and to defend himself against "the allegations stated against
him in the notice of dismissal". It is such allegations by the employer and any counter-allegations that the
employee may wish to make that need to be heard before dismissal is effected. Thus, Section 5 may be seen to
envisage charges against an employee constituting one or more of the just causes for dismissal listed in Article
282 of the Labor Code. Where, as in the instant case, the ground for dismissal or termination of services does
not relate to a blameworthy act or omission on the part of the employee, there appears to us no need for an
investigation and hearing to be conducted by the employer who does not, to begin with, allege any malfeasance
or non-feasance on the part of the employee. In such case, there are no allegations which the employee should
refute and defend himself from. Thus, to require petitioner Wiltshire to hold a hearing, at which private
respondent would have had the right to be present, on the business and financial circumstances compelling
retrenchment and resulting in redundancy, would be to impose upon the employer an unnecessary and inutile
hearing as a condition for legality of termination.
This is not to say that the employee may not contest the reality or good faith character of the retrenchment or
redundancy asserted as grounds for termination of services. The appropriate forum for such controversion
would, however, be the Department of Labor and Employment and not an investigation or hearing to be held by
the employer itself. It is precisely for this reason that an employer seeking to terminate services of an employee
or employees because of "closure of establishment and reduction of personnel", is legally required to give a
written notice not only to the employee but also to the Department of Labor and Employment at least one
month before effectivity date of the termination. In the instant case, private respondent did controvert before the
appropriate labor authorities the grounds for termination of services set out in petitioner's letter to him dated 17
June 1985.
We hold, therefore, that the NLRC's finding that private respondent had not been accorded due process, is
bereft of factual and legal bases. The award of moral damages that rests on such ground must accordingly fall.
While private respondent may well have suffered personal embarrassment by reason of termination of his
services, such fact alone cannot justify the award of moral damages. Moral damages are simply a species of
damages awarded to compensate one for injuries brought about by a wrongful act.8 As discussed above, the
termination of private respondent's services was not a wrongful act. There is in this case no clear and
convincing evidence of record showing that the termination of private respondent's services, while due to an
authorized or statutory cause, had been carried out in an arbitrary, capricious and malicious manner, with
evident personal ill-will. Embarrassment, even humiliation, that is not proximately caused by a wrongful act
does not constitute a basis for an award of moral damages.
Private respondent is, of course, entitled to separation pay and other benefits under Act 283 of the Labor Code
and petitioner's letter dated 17 June 1985.
ACCORDINGLY, the Court Resolved to GRANT due course to the Petition for Certiorari. The Resolutions of
the National Labor Relations Commission dated 9 February 1988 and 7 March 1988 are hereby SET ASIDE
and NULLIFIED. The Temporary Restraining Order issued by this Court on 21 March 1988 is hereby made
[G.R. No. 99359. September 2, 1992.]
ORLANDO M. ESCAREAL, Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION, HON.
MANUEL P. ASUNCION, Labor Arbiter, NLRC, National Capital Region, PHILIPPINE REFINING
COMPANY, INC., CESAR BAUTISTA and GEORGE B. DITCHING, Respondents.
R.S. Arlanza & Associates for Petitioner.
Siguion Reyna, Montecillo & Ongsiako for Private Respondents.
SYLLABUS
2. ID.; ID.; ID.; NOT JUSTIFIED IN CASE AT BAR; REASON THEREFOR. — Private respondent PRC had
no valid and acceptable basis to declare the position of Pollution Control and Safety Manager redundant as the
same may not be considered as superfluous; by the express mandate of the provisions earlier cited, said
positions are required by law. Thus, it cannot be gainsaid that the services of the petitioner are in excess of what
is reasonably required by the enterprise. Otherwise, PRC would not have allowed ten (10) long years to pass
before opening its eyes to that fact; neither would it have increased the petitioner’s salary to P23,100.00 a
month effective 1 April 1988. The latter by itself is an unequivocal admission of the specific and special need
for the position and an open recognition of the valuable services rendered by the petitioner. Such admission and
recognition are inconsistent with the proposition that petitioner’s positions are redundant. If based on the
ground of redundancy, a substitution of the petitioner by Miguelito S. Navarro would be invalid as the creation
of said position is mandated by the law; the same cannot therefore be declared redundant. If the change was
effected to consolidate the functions of the pollution control and safety officer with the duties of the Industrial
Engineering Manager, as private respondent postulates, such substitution was done in bad faith for as had
already been pointed out, Miguelito S. Navarro was hardly qualified for the position. If the aim was to generate
savings in terms of the salaries that PRC would not be paying the petitioner any more as a result of the
streamlining of operations for improved efficiency, such a move could hardly be justified in the face of PRC’s
hiring of ten (10) fresh graduates for the position of Management Trainee and advertising for vacant positions
in the Engineering/Technical Division at around the time of the termination. Besides, there would seem to be no
compelling reason to save money by removing such an important position. As shown by their recent financial
statements, PRC’s year-end net profits had steadily increased from 1987 to 1990. While concededly, Article
283 of the Labor Code does not require that the employer should be suffering financial losses before he can
terminate the services of the employee on the ground of redundancy, it does not mean either that a company
which is doing well can effect such a dismissal whimsically or capriciously. The fact that a company is
suffering from business losses merely provides stronger justification for the termination.
3. ID.; ID.; RIGHT OF EMPLOYEE ILLEGALLY DISMISSED; RULE; CASE AT BAR. — Since We have
concluded that the petitioner’s dismissal was illegal and can not be justified under a valid redundancy initiative,
Article 283 of the Labor Code, as amended, on the benefits to be received by the dismissed employee in the
case of redundancy, retrenchment to prevent losses, closure of business or the installation of labor saving
devices, is not applicable. Instead, We apply Article 279 thereof which provides, in part, that an "employee who
is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other
privileges and to his full backwages, 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.
4. ID.; RIGHT OF EMPLOYEE TO SECURITY OF TENURE; CONSTRUED IN CASE AT BAR. — It is
evident that petitioner’s right to security of tenure was violated by the private respondent PRC. Both the
Constitution (Section 3, Article XIII) and the Labor Code (Article 279, P.D. 442, as amended) enunciate this
right as available to an employee. In a host of cases, this Court has upheld the employee’s right to security of
tenure in the face of oppressive management behavior and management prerogative. (Dosch v. NLRC, 123
SCRA 296 [1983]; Tolentino v. NLRC, 152 SCRA 717 [1987]; Cebu Royal Plant v. Deputy Minister of Labor,
153 SCRA 38 [1987]; PT&T v. NLRC, 183 SCRA 451 [1990]; Filipinas Manufacturers Bank v. NLRC, 182
SCRA 848 [1990]; Batongbacal v. Associated Bank, 168 SCRA 600 [1988]; International Harvester Macleod v.
NLRC, 149 SCRA 641 [1987]; Remerco Garments v. Minister of Labor, 135 SCRA 167 [1985]; Cebu Royal
Plant v. Deputy Minister of Labor, 153 SCRA 38 [1987]) Security of tenure is a right which may not be denied
on mere speculation of any unclear and nebulous basis. (Tolentino v. NLRC, 152 SCRA 717 [1987]) In this
regard, it could be concluded that the respondent PRC was merely in a hurry to terminate the services of the
petitioner as soon as possible in view of the latter’s impending retirement; it appears that said company was
merely trying to avoid paying the retirement benefits the petitioner stood to receive upon reaching the age of
sixty (60). PRC acted in bad faith.
5. ID.; EMPLOYMENT CONTRACT; PERIOD OF EMPLOYMENT STIPULATED THEREIN;
EXPLAINED; CASE AT BAR. — An examination of the contents of the contract of employment yields the
conclusion arrived at by the Solicitor General. There is no indication that PRC intended to offer uninterrupted
employment until the petitioner reached the mandatory retirement age; it merely informs the petitioner of the
compulsory retirement age and the terms pertaining to the retirement. In Brent School, Inc. v. Zamora, (181
SCRA 702 [1990]) this Court, in upholding the validity of a contract of employment with a fixed or specific
period, declared that the "decisive determinant in term employment should not be the activities that the
employee is called upon to perform, but the day certain agreed upon by the parties for the commencement and
termination of their employment relationship, a day certain being understood to be ‘that which must necessarily
come, although it may not ‘be known when.’" (Id., citing Article 1193 (third paragraph), Civil Code) The term
period was further defined to be, "Length of existence; duration. A point of time marking a termination as of a
cause or an activity; an end, a limit, a bound; conclusion; termination. A series of years, months or days in
which something is completed. A time of definite length. . . . the period from one fixed date to another fixed
date . . . ." (Id., citing Capiral v. Manila Electric Co., 119 Phil. 124 [1963], cited in MORENO, Philippine Law
Dictionary, 3rd ed.)
DECISION
DAVIDE, JR., J.:
Petitioner seeks to set aside the Decision dated 14 January 1991 and the Resolution dated 13 May
1991 of the respondent National Labor Relations Commission (hereinafter, NLRC) in NLRC Case No. 00-08-
03412-88 entitled Orlando M. Escareal v. Philippine Refining Company, Inc. The said Decision affirmed with
modification the 19 February 1990 Decision of the respondent Labor Arbiter Manuel P. Asuncion while the
Resolution denied the motion for a reconsideration of the former
The dispositive portion of the respondent Labor Arbiter’s Decision read
"WHEREFORE, the respondent is hereby ordered to pay the complainant his redundancy pay in
accordance with existing company policy on the matter. This is without prejudice to the grant of additional
benefits offered by the respondent during the negotiation stage of the case, though it never materialized for
failure of the parties to reach an agreement.
 SO ORDERED.
The controversy stemmed from the dismissal of the petitioner from the private respondent Philippine
Refining Company, Inc. (hereinafter, PRC) after almost eleven (11) years of gainful employment.
Petitioner was hired by the PRC for the position of Pollution Control Manager effective on 16
September 1977 with a starting monthly pay of P4,230 00; the employment was made permanent effective on
16 March 1978. The contract of employment provides, inter alia, that his "retirement date will be the day you
reach your 60th birthday, but there is provision (sic) for voluntary retirement when you reach your 50th
birthday. Bases for the hiring of the petitioner are Letter of Instruction (LOI) No. 588 implementing the
National Pollution Control Decree, P.D No. 984, dated 19 August 1977, the pertinent portion of which reads:
"1. All local governments, development authorities, government-owned or controlled corporations,
industrial, commercial and manufacturing establishments, and all other public and private entities, whose
functions involve the discharge or emission of pollutants into the water, air and/or land resources or the
operation, installation or construction of any anti-pollution device, treatment work or facility, sewerage or
sewerage disposal system, shall each appoint and/or designate a Pollution Control Officer." and Memorandum
Circular No. 02, dated 3 August 1981 and implementing LOI No. 588, which amended Memorandum Circular
No. 007, Series of 1977, issued by the National Pollution Control Commission (NPCC), the pertinent portions
of which read
"Section 3. Appointment/Designation of Pollution Control Officer. — All local governments,
development authorities, government-owned or controlled corporations, industrial and manufacturing
establishments, and public and private entities falling within the purview of Letter of Instruction No. 588, shall
each appoint and/or designate a Pollution Control Officer.
Section 6. Employment Status-In the employment of Pollution Control Officer, the following
additional requirements shall be observed:
(b) Private Entities —
1. Industrial and Manufacturing establishment and other private entities with capitalization of one
million pesos and above shall employ a full time pollution control officer
Section 9. Accreditation of Pollution Control Officer. — A (sic) duly appointed and/or designated
pollution control officers shall submit copies of their designation and/or appointments to the Commission
within thirty (30) days from the date of such designation/appointment together with their biodata and
curriculum vitae for accreditation purposes. In case of the termination of the appointment/designation of a
pollution control officer for any reason whatsoever, it shall be the responsibility of his employer to inform the
Commission of the same immediately to appoint/designate his successor within thirty (30) days after said
termination. (Emphasis supplied)"
On 1 April 1979, petitioner was also designated as Safety Manager pursuant to Article 162 of the
Labor Code (P.D. 442, as amended) and the pertinent implementing rule thereon. At the time of such
designation, petitioner was duly accredited as a Safety Practitioner by the Bureau of Labor Standards,
Department of Labor and Employment (DOLE) and the Safety Organization of the Philippines. Article 162 of
the Labor Code, as amended, provides
ARTICLE 162. Safety and Health Standard. — The Secretary of Labor shall, by appropriate orders,
set and enforce mandatory occupational safety and health standards to eliminate or reduce occupational safety
and health hazards in all workplaces and institute new, and update existing, programs to ensure safe and
healthful working conditions in all places of employment."
In addition, the pertinent rules on Occupational Health and Safety implementing the Labor Code
provide for the designation of full-time safety men to ensure compliance with the safety requirements
prescribed by the Bureau of Labor Standards. Consequently, petitioner’s designation was changed to Pollution
Control and Safety Manager.
In the course of his employment, petitioner’s salary was regularly upgraded; the last pay hike was
granted on 28 March 1988 when he was officially informed that his salary was being increased to P23,100.00
per month effective 1 April 1988. This last increase is indisputably a far cry from his starting monthly salary of
P4,230.00.
Sometime in the first week of November 1987, private respondent George B. Ditching, who was then
PRC’s Personnel Administration Manager, informed petitioner about the company’s plan to declare the position
of Pollution Control and Safety Manager redundant. Ditching attempted to convince petitioner to accept the
redundancy offer or avail of the company’s early retirement plan. Petitioner refused and instead insisted on
completing his contract as he still had about three and a half (3 1/2) years left before reaching the mandatory
retirement age of sixty (60).
On 15 June 1988, Jesus P. Javelona, PRC’s Engineering Department Manager and petitioner’s
immediate superior, formally informed the petitioner that the position of "Safety and Pollution Control Manager
will be declared redundant effective at the close of work hours on 15th July 1988." Petitioner was also notified
that the functions and duties of the position to be declared redundant will be absorbed and integrated with the
duties of the Industrial Engineering Manager; as a result thereof, the petitioner "will receive full separation
benefits provided under the PRC Retirement Plan and additional redundancy payment under the scheme
applying to employees who are 50 years old and above and whose jobs have been declared redundant by
Management."
Petitioner protested his dismissal via his 22 June 1988 letter to Javelona. This notwithstanding, the
PRC unilaterally circulated a clearance dated 12 July 1988, to take effect on 15 July 1988, indicating therein
that its purpose is for the petitioner’s "early retirement" — and not redundancy. Petitioner confronted Javelona;
the latter, in his letter dated 13 July 1988, advised the former that the employment would be extended for
another month, or up to 15 August 1988. Petitioner responded with a letter dated 25 July 1988 threatening legal
action.
Subsequently, or on 14 July 1988, Bernardo N. Jambalos III, respondent company’s Industrial
Relations Manager, sent a Notice of Termination to the Ministry of Labor and Employment (MOLE) informing
the latter that the petitioner was being terminated on the ground of redundancy effective 15 August 1988.
On 5 August 1988, petitioner had a meeting with private respondent Cesar Bautista and Dr. Reynaldo
Alejandro, PRC’s President and Corporate Affairs Director, respectively. To his plea that he be allowed to
finish his contract of employment as he only had three (3) years left before reaching the mandatory retirement
age, Bautista retorted that the termination was final.
On 8 August 1988, petitioner presented to Javelona a computation 15 showing the amount of
P2,436,534.50 due him (petitioner) by way of employee compensation and benefits.
On the date of the effectivity of his termination, petitioner was only fifty-seven (57) years of age. He
had until 21 July 1991, his sixtieth (60th) birth anniversary, before he would have been compulsorily retired.
Also, on the date of effectivity of petitioner’s termination, 16 August 1988, Miguelito S. Navarro,
PRC’s Industrial Engineering Manager, was designated as the Pollution Control and Safety Officer. Such
appointment is evidenced by two (2) company correspondences. In its letter dated 6 September 1988 to the
Laguna Lake Development Authority, PRC informed the said Authority, to wit:jgc:chanrobles.com.ph
 "With effect from 16 August 1988 the functions and duties of our Safety and Pollution Control
Officer has (sic) been integrated and absorbed with those of our Industrial Engineering Manager.
The main tasks of our Industrial Engineering Manager, Mr. Miguelito S. Navarro, now includes (sic)
safety and pollution control.
Attached to (sic) the bio-data of Mr. Navarro for your accreditation as our designated Pollution
Control Officer."
In its letter to the Safety Organization of the Philippines dated 14 December 1988, PRC articulated
Mr. Miguelito S. Navarro’s designation as "Safety Officer of Phil. Refining Company."
In view of all this, petitioner filed a complaint for illegal dismissal with damages against the private
respondent PRC before the Arbitration Branch, NLRC, National Capital Region; the case was docketed as
NLRC-NCR Case No. 00-08-03412-88. 18 After trial, respondent Labor Arbiter Manuel P. Asuncion rendered
a decision dated 19 February 1990, the dispositive portion of which was quoted earlier.
Petitioner appealed the said decision to the NLRC which, in its decision of 14 January 1991, made
the following findings:
"Respondent contended that complainant Orlando M. Escareal was employed as Safety and Pollution
Control Engineer on September 16, 1977; that as part of the Company’s policy to streamline the work force and
to keep the Organization more effective, it allegedly declared redundant several positions from all levels and
departments of the company; that the position of ‘Safety and Pollution Control Manager’ which the herein
complainant was holding at the time of dismissal, is one of those that were affected; that the functions of Mr.
Escareal were fused with the Industrial Engineering Department, the latter being under the control and
supervision of Mr. Miguelito S. Navarro; that no replacement and/or new appointment to said questioned
position have (sic) been made; that respondent terminated complainant on the ground of redundancy and
offered him P458,929.00 a separation pay; and that the above mentioned amount, is far above what complainant
can get under the Labor Code, as amended
The determination as to the usefulness of a particular department or section as an integral aspect of
company prerogative, may not be questioned, the objective of which being to (sic) achieve profitability.
(Special Events Control Shipping Office Workers Union v. San Miguel Corporation, 122 SCRA 557)
To submit to the argument of herein Complainant that there is no basis in the management’s decision
to declare his position redundant is to deny the company of its inherent prerogative, without due process of law
Turning to another issue of whether or not a fixed period of employment has been concluded, suffice
it to say that it lacks legal and factual basis
If indeed, a fixed period of contract of employment has been concluded under the circumstances, the
complainant would not have acceded to have undergone a probationary period. The (sic) latter being a
condition sine-qua non before he became regular worker. Consequently, the averment of breach of Contract
pursuant to Article 1159, 1306 and 1308 of the New Civil Code of the Phils., is not in point. Additionally, to
subscribe to the protestation of herein complainant that the reference of the retirement age at 60 in the
company’s letter dated August 22, 1977 meant fixed duration is to tie the hands of management in doing what
is necessary to meet the exigencies of the business . . ."
and then ruled that:
"WHEREFORE, the appealed decision is hereby Affirmed, with modification ordering respondent-
company to pay complainant his retirement pay in accordance with the company policy and other benefits
granted to him thereunder, less outstanding obligations of the complainant with the company at the time of his
dismissal."
Undaunted by this second setback, the petitioner filed a Motion for Reconsideration 20 of this
decision on 25 January 1991. Private respondent PRC also filed its own motion for reconsideration on the
ground that petitioner is entitled to only one (1) benefit, and not to both. In a Resolution promulgated on 13
May 1991, the NLRC’s First Division 21 ruled as follows:
"WHEREFORE, in view thereof, the complainant’s motion for reconsideration other than his
pecuniary interest is hereby Dismissed for lack of merit. Accordingly, respondent-company (PRC) is ordered to
pay Mr. Escareal’s redundancy benefits in accordance with the company policy on the matter as follows:
(a) Retirement credit of 1.5 months pay for every year of service in the amount of P363,825.00; and
(b) Ex-gratia, amounting to:
P81,496.80
——————
TOTAL P445,321.80"
As a consequence thereof, the instant petition was filed on 29 May 1991. Private respondent PRC
filed its Comment on 21 August 1991 while the public respondent, through the Office of the Solicitor General,
filed its Comment on 10 October 1991.
On 16 October 1991, this Court resolved, inter alia, to give due course to the petition and require the
parties to file their respective Memoranda Petitioner complied with this Resolution on 12 December 1991;
public respondent NLRC, on the other hand, filed its Memorandum only on 24 March 1992.
In his thorough and exhaustive Memorandum, herein petitioner makes the following assignment of
errors:
"I
RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR IN
(sic) EXCESS OF JURISDICTION IN AFFIRMING THE DECISION OF THE RESPONDENT LABOR
ARBITER THAT PETITIONER’S TERMINATION AS POLLUTION CONTROL AND SAFETY
MANAGER OF RESPONDENT PRC ON THE GROUND OF REDUNDANCY WAS VALID — TOTALLY
IGNORING THE FACT THAT PETITIONER’S POSITION WAS NEVER ABOLISHED BUT WAS
MERELY GIVEN TO ANOTHER EMPLOYEE (MIGUELITO S. NAVARRO) WHO WAS IMMEDIATELY
DESIGNATED AS A REPLACEMENT.
II
RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR IN
(sic) EXCESS OF JURISDICTION IN DECLARING THAT PETITIONER’S WRITTEN CONTRACT OF
EMPLOYMENT WITH RESPONDENT PRC WAS NOT FOR A DEFINITE PERIOD, AND THAT IT IS
NOT VIOLATED NOTWITHSTANDING THE FACT THAT RESPONDENT PRC PREMATURELY
SHORTENED PETITIONER’S RETIREMENT AGE AT 57 INSTEAD OF 60.
III

RESPONDENT NLRC COMMITTED A VERY SERIOUS ERROR AMOUNTING TO LACK OR IN (sic)
EXCESS OF JURISDICTION IN DECLARING THAT THE PETITIONER IS NOT ENTITLED TO ANY
SEPARATION PAY SUCH AS CASH EQUIVALENT OF HIS ACCUMULATED VACATION AND SICK
LEAVE CREDITS, REDUNDANCY PAY, BONUSES, ETC., BUT ONLY TO HIS RETIREMENT
BENEFITS UNDER THE PRC RETIREMENT PLAN UP TO AUGUST 16, 1988 (DATE OF HIS
TERMINATION).
IV
RESPONDENT NLRC SERIOUSLY ERRED IN DECLARING THAT PETITIONER IS NOT ENTITLED
TO DAMAGES, NOTWITHSTANDING RESPONDENT PRC’S AND ITS OFFICERS’ EVIDENT BAD
FAITH, WANTON AND PATENT VIOLATION OF PETITIONER’S WRITTEN CONTRACT OF
EMPLOYMENT.
V
RESPONDENT NLRC GRAVELY ERRED IN NOT AWARDING PETITIONER AN AMOUNT FOR
ATTORNEY’S FEE EQUIVALENT TO TEN (10%) PERCENT OF THE AMOUNT DUE,
NOTWITHSTANDING THAT PETITIONER WAS COMPELLED TO LITIGATE BY REASON OF HIS
ILLEGAL DISMISSAL AND OF RESPONDENT PRC’S AND ITS OFFICERS’ MALICIOUS AND
WANTON ACTS."
We find for the petitioner.
Article 283 of the Labor Code provides
"ARTICLE 283. Closure of establishment and reduction of personnel. — The employer may also
terminate the employment of any employee due to the installation of labor saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking
unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on
the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof.
In case of termination due to the installation of labor saving devices or redundancy, the worker affected thereby
shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay
for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures
or cessation of operations of establishment or undertaking not due to serious business losses or financial
reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for
every year of service, whichever is higher A fraction of at least six (6) months shall be considered one (1)
whole year."
In Wiltshire File Co., Inc. v. NLRC, this Court held that redundancy, for purposes of the Labor
Code, exists where the services of an employee are in excess of what is reasonably demanded by the actual
requirements of the enterprise; a position is redundant when it is superfluous, and superfluity of a position or
positions may be the outcome of a number of factors, such as the overhiring of workers, a decreased volume of
business or the dropping of a particular product line or service activity previously manufactured or undertaken
by the enterprise. Redundancy in an employer’s personnel force, however, does not necessarily or even
ordinarily refer to duplication of work. That no other person was holding the same position which the dismissed
employee held prior to the termination of his services does not show that his position had not become
redundant.
Private respondent PRC had no valid and acceptable basis to declare the position of Pollution Control
and Safety Manager redundant as the same may not be considered as superfluous; by the express mandate of the
provisions earlier cited, said positions are required by law. Thus, it cannot be gainsaid that the services of the
petitioner are in excess of what is reasonably required by the enterprise. Otherwise, PRC would not have
allowed ten (10) long years to pass before opening its eyes to that fact; neither would it have increased the
petitioner’s salary to P23,100.00 a month effective 1 April 1988. The latter by itself is an unequivocal
admission of the specific and special need for the position and an open recognition of the valuable services
rendered by the petitioner. Such admission and recognition are inconsistent with the proposition that
petitioner’s positions are redundant. It cannot also be argued that the said functions were duplicative, and hence
could be absorbed by the duties pertaining to the Industrial Engineering Manager. If indeed they were, and
assuming that the Industrial Engineering department of the PRC had been created earlier, petitioner’s positions
should not have been created and filled up. If, on the other hand, the department was created later, and there is
no evidence to this effect, and it was to absorb the petitioner’s positions, then there would be no reason for the
unexplained delay in its implementation, the restructuring then should have been executed long before the
salary increases in petitioner’s favor. That petitioner’s positions were not duplicitous is best evidenced by the
PRC’s recognition of their imperative need thereof, this is underscored by the fact that Miguelito S. Navarro,
the company’s Industrial Engineering Manager, was designated as Pollution Control and Safety Manager on the
very same day of petitioner’s termination. While the petitioner had over ten (10) years of experience as a
pollution control and safety officer, Navarro was a virtual greenhorn lacking the requisite training and
experience for the assignment. A cursory perusal of his bio-data reveals that it was only several months after his
appointment that he attended his first Occupational Safety & Health Seminar (14-17 November 1988),
moreover, it was only after his second seminar (Loss Control Management Seminar — 6-9 December 1988)
that the PRC requested his accreditation with the Safety Organization of the Philippines. In trying to prop up
Navarro’s competence for the position, PRC alleges that the former finished from the University of the
Philippines with a degree in Chemical Engineering, took some units in pollution in the process and had
"undergone job training in pollution in cement firms through the Bureau of Mines." Compared to the training
and experience of the petitioner, Navarro’s orientation would seem to pale.
The private respondent alleges further that its decision to declare petitioner’s position as redundant
"stemmed from its well-considered view that in order for the corporation’s safety and pollution program to be
more effective, such program would have to be tied up with the functions of the Industrial Engineering
Manager." It is further posited that since the job of safety and pollution engineer "requires coordination with
operating departments, knowledge of the manufacturing processes, and adequate presence in plant areas, a task
which the company’s safety and pollution control officer would not be up to as he works singlehandedly, it is
only the Industrial Engineer, commanding a department of five (5) engineers and one (1) clerk, who can live up
to corporate expectations. Indeed, the proposition that a department manned by a number of engineers
presumably because of the heavy workload, could still take on the additional responsibilities which were
originally reposed in an altogether separate section headed by the petitioner, is difficult to accept. It seems more
reasonable to view the set-up which existed before the termination as being more conducive to efficient
operations. And even if We were to sustain PRC’s explanation, why did it so suddenly incorporate functions
after the separate position of Pollution and Safety Control Manager had existed for over ten (10) years? No
effort whatsoever was undertaken to gradually integrate both functions over this span of time. Anent this
specific point, all that the private respondent has to say is that the declaration of redundancy was made pursuant
to its continuing program, which has been ongoing for the past ten (10) years, of streamlining the personnel
complement and maintaining a lean and effective organization.
Furthermore, if PRC felt that either the petitioner was incompetent or that the task could be
performed by someone more qualified, then why is it that the person designated to the position hardly had any
experience in the field concerned? And why reward the petitioner, barely five (5) months before the dismissal,
with an increase in salary? Assuming PRC’s good faith, it would still seem quite surprising that it did not at
least provide a transition period wherein the Industrial Engineering Manager would be adequately trained for
his new assignment; such reckless conduct is not the expected behavior of a well-oiled and progressive
multinational company. Petitioner himself could have very well supervised a training and familiarization
program which could have taken the remaining three (3) years of his employment. But no such move was
initiated. Instead, a clever scheme to oust the petitioner from a position held for so long was hatched and
implemented. On the very same day of petitioner’s termination, the position vacated was resurrected and
reconstituted as a component of the position of Industrial Engineering Manager. After more than ten (10) years
of unwavering service and loyalty to the company, the petitioner was so cruelly and callously dismissed.
 What transpired then was a substitution of the petitioner by Miguelito S. Navarro. If based on the An examination of the contents of the contract of employment yields the conclusion arrived at by the
ground of redundancy, such a move would be invalid as the creation of said position is mandated by the law; Solicitor General. There is no indication that PRC intended to offer uninterrupted employment until the
the same cannot therefore be declared redundant. If the change was effected to consolidate the functions of the petitioner reached the mandatory retirement age, it merely informs the petitioner of the compulsory retirement
pollution control and safety officer with the duties of the Industrial Engineering Manager, as private respondent age and the terms pertaining to the retirement.
postulates, such substitution was done in bad faith for as had already been pointed out, Miguelito S. Navarro
was hardly qualified for the position. If the aim was to generate savings in terms of the salaries that PRC would In Brent School, Inc. v. Zamora, this Court, in upholding the validity of a contract of employment
not be paying the petitioner any more as a result of the streamlining of operations for improved efficiency, such with a fixed or specific period, declared that the "decisive determinant in term employment should not be the
a move could hardly be justified in the face of PRC’s hiring of ten (10) fresh graduates for the position of activities that the employee is called upon to perform, but the day certain agreed upon by the parties for the
Management Trainee 36 and advertising for vacant positions in the Engineering/Technical Division at around commencement and termination of their employment relationship, a day certain being understood to be ‘that
the time of the termination. 37 Besides, there would seem to be no compelling reason to save money by which must necessarily come, although it may not ‘be known when.’" The term period was further defined to
removing such an important position. As shown by their recent financial statements, PRC’s year-end net profits be, "Length of existence; duration. A point of time marking a termination as of a cause or an activity; an end, a
had steadily increased from 1987 to 1990. While concededly, Article 283 of the Labor Code does not require limit, a bound; conclusion; termination. A series of years, months or days in which something is completed. A
that the employer should be suffering financial losses before he can terminate the services of the employee on time of definite length. . . . the period from one fixed date to another fixed date . . ."
the ground of redundancy, it does not mean either that a company which is doing well can effect such a
dismissal whimsically or capriciously. The fact that a company is suffering from business losses merely
The letter to the petitioner confirming his appointment does not categorically state when the period
provides stronger justification for the termination.
of employment would end. It stands to reason then that petitioner’s employment was not one with a specific
period.
The respondent NLRC relied on Wiltshire File Co., v. NLRC in declaring that the employer has no
legal obligation to keep in its payroll more employees than are necessary for the operation of its business. Aside
Coming to the third assigned error, since We have concluded that the petitioner’s dismissal was
from the fact that in the case at bar, there was no compelling reason to dismiss the petitioner as the company
illegal and can not be justified under a valid redundancy initiative, Article 283 of the Labor Code, as amended,
was not incurring any losses, the position declared redundant in the Wiltshire case was that of a Sales Manager,
on the benefits to be received by the dismissed employee in the case of redundancy, retrenchment to prevent
a management created position. In the case at bar, petitioner’s position is one created by law.
losses, closure of business or the installation of labor saving devices, is not applicable. Instead, We apply
Article 279 thereof which provides, in part, that an "employee who is unjustly dismissed from work shall be
The NLRC adds further that the termination was effected in the exercise of management prerogative entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive
and that account should also be taken of the "life of the company which is . . . an active pillar of our economy of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation
and upon whose existence still depends the livelihood of a great number of workers." It goes on to observe was withheld from him up to the time of his actual reinstatement."
that" [t]he records are bereft of proof which could have been the basis of vengeful termination other than the
company’s legitimate objective to trim its work force." In the face of the circumstances surrounding the
In Torillo v. Leagardo, Jr., 50 an amplification was made on Article 279 of the Labor Code and the
dismissal, this Court finds it extremely difficult to give credence to such conclusions.
distinction between separation pay and backwages. Citing the case of Santos v. NLRC, 51 We held in the
former:
Thus, it is evident from the foregoing that petitioner’s right to security of tenure was violated by the
private respondent PRC. Both the Constitution (Section 3, Article XIII) and the Labor Code (Article 279, P.D.
"The normal consequences of a finding that an employee has been illegally dismissed are, firstly, that
442, as amended) enunciate this right as available to an employee. In a host of cases, this Court has upheld the
the employee becomes entitled to reinstatement to his former position without loss of seniority rights and,
employee’s right to security of tenure in the face of oppressive management behavior and management
secondly, the payment of backwages corresponding to the period from his illegal dismissal up to actual
prerogative. Security of tenure is a right which may not be denied on mere speculation of any unclear and
reinstatement
nebulous basis.
Though the grant of reinstatement commonly carries with it an award of backwages, the
In this regard, it could be concluded that the respondent PRC was merely in a hurry to terminate the
inappropriateness or non-availability of one does not carry with it the inappropriateness or non-availability of
services of the petitioner as soon as possible in view of the latter’s impending retirement; it appears that said
the other
company was merely trying to avoid paying the retirement benefits the petitioner stood to receive upon
reaching the age of sixty (60). PRC acted in bad faith.
Put a little differently, payment of backwages is a form of relief that restores the income that was lost
by reason of unlawful dismissal, separation pay, in contrast, is oriented towards the immediate future, the
Both the Labor Arbiter and the respondent NLRC clearly acted with grave abuse of discretion in
transitional period the dismissed employee must undergo before locating a replacement job
disregarding the facts and in deliberately closing their eyes to the unlawful scheme resorted to by the PRC.
Reinstatement then of the petitioner would have been proper. However, since he reached the
We cannot, however, subscribe to the theory of petitioner that his employment was for a fixed
mandatory retirement age on 21 July 1991, reinstatement is no longer feasible. He should thus be awarded his
definite period to end at the celebration of his sixtieth (60th) birthday because of the stipulation as to the
backwages from 16 August 1988 to 21 July 1991, inclusive of allowances and the monetary equivalent of the
retirement age of sixty (60) years. The Solicitor General’s refutation, to wit:
other benefits due him for that period, plus retirement benefits under the PRC’s compulsory retirement scheme
which he would have been entitled to had he not been illegally dismissed.
"A perusal of the provision in the August 22, 1977 letter cited by petitioner merely informs him of
the company policy which pegs the compulsory retirement age of its employees at 60 and which commences on
Finally, anent the last two (2) assigned errors, this Court notes that in his complaint and the attached
the date of the employee’s 60th birthday. It likewise informs him that the company recognizes the right of the
Affidavit-Complaint, 52 petitioner does not mention any claim for damages and attorney s fees; furthermore, no
employee to retire voluntarily, which option can be availed of when the employee reaches his 50th birthday.
evidence was offered to prove them. An award therefor would not be justified.
Clearly, the cited provision is limited solely to the pertinent issue of retirement." is correct.
 WHEREFORE, judgment is hereby rendered GRANTING the petition, SETTING ASIDE the
Decision and Resolution of respondent National Labor Relations Commission, dated 14 January 1991 and 13
May 1991, respectively in Labor Case No. NLRC-NCR-00-08-03412-88 and ORDERING private respondent
Philippine Refining Co., Inc. to pay petitioner Orlando M. Escareal his backwages from 16 August 1988 to 21
July 1991 inclusive of allowances and the monetary equivalent of other benefits due him for that period, as well
as his retirement pay and other benefits provided under the former’s compulsory retirement scheme. The
respondent Labor Arbiter or his successor is hereby directed to make the appropriate computation of these
awards within twenty (20) days from receipt of a copy of this Decision, which respondent Philippine Refining
Co., Inc. shall pay to the petitioner within ten (10) days from notice thereof.
Costs against private respondent Philippine Refining Co., Inc.
SO ORDERED
[G.R. NO. 148195 : May 16, 2005]
LOPEZ SUGAR CORPORATION, Petitioner, v. LEONITO G. FRANCO, ROGELIO R. PABALAN,
ROMEO T. PERRIN and EDUARDO T. CANDELARIO, Respondents.
CALLEJO, SR., J.:
This is a Petition for Review on Certiorariof the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No.
49964, which affirmed the decision of the National Labor Relations Commission (NLRC) in NLRC Case No.
V-0138-97, which, in turn, reversed the decision of the Labor Arbiter in RAB Case Nos. 06-01-10047-96, 06-
64-10164-96 and 06-07-10292-96.
The Antecedents
Private respondents Leonito G. Franco, Rogelio R. Pabalan, Romeo T. Perrin and Eduardo T. Candelario were
supervisory employees of the Lopez Sugar Corporation (the Corporation, for brevity). Franco was barely 20
years old when he was employed in 1974 as Fuel-in-Charge. His co-employee, Pabalan, was about 28 years old
when he was hired by the Corporation as Shift Supervisor in the Sugar Storage Department in 1975.2 On the
other hand, Perrin and Candelario were employed in 1975 and 1976, respectively, as Planter Service
Representatives (PSRs), who rose from the ranks and, by 1994, occupied supervisory positions in the
Corporation's Cane Marketing Section.3
Franco supervised the fuel tenders, monitored fuel and lubricant requirements of the central, as well as those of
the planters who ordered their requirements from the central. He also ensured the adequate supply of oil
products. For his part, Pabalan supervised the delivery of sugar and molasses to and from the storage during his
shift; he likewise supervised the regular, contractual and casual employees who were engaged in handling
sugar. Perrin and Candelario, on the other hand, were tasked to convince planters to mill their canes using the
services of the Corporation, provide technical assistance to planters, and attend to their various needs.4
By 1994, the supervisory employees of the Corporation, spearheaded by Franco, Pabalan, Perrin and
Candelario, decided to form a labor union called Lopez Sugar Corporation Supervisor's Association. On
December 29, 1994, the Department of Labor and Employment (DOLE) in Iloilo City, Regional Office No. VI,
issued a Certificate of Registration5 to the union. During its organizational meeting, Franco was elected
president and Pabalan as treasurer. Perrin and Candelario, on the other hand, were among its active members.
Out of the 108 members, 105 had agreed to authorize the check-off6 of union dues against their salaries even
before any Collective Bargaining Agreement (CBA) had been executed by the union and management.
In January 1995, the officers of the union and the management held a meeting, which led to the submission of
the union's proposals for a CBA on July 24, 1995.7
Meantime, on August 8, 1995, the Corporation's president issued a Memorandum8 to the vice-president and
department heads for the adoption of a special retirement program for supervisory and middle level managers.
He emphasized that the management shall have the final say on who would be covered, and that the program
would be irrevocable once approved.
In a Letter9 dated August14, 1995, the Corporation requested for more time to study the union's proposals for a
CBA. The union was made to understand that the management's counter-proposals would be presented during
their conference on August 30, 1995.
Perrin and Candelario were on leave when they were invited by Juan Masa, Jr., the head of the Cane Marketing
Section, to the Northeast Beach Resort in Escalante, Negros Occidental. The latter informed them that they
were all included in the special retirement program and would receive their respective notices of dismissal
shortly.10
True enough, Masa, Pabalan, Franco, Perrin and Candelario received copies of the Memorandum dated August
25, 1995 from the Corporation's Vice-President for Administration and Finance, informing them that they were
included in the "special retirement program" for supervisors and middle level managers; hence, their
employment with the Corporation was to be terminated effective September 29, 1995, and they would be paid
their salaries until September 27, 1995, thus:
In line with the memorandum of the President dated August 8, 1995, announcing the adoption of a special
retirement program for the supervisors and the middle level managers, and our earlier discussion with you, we
wish to formalize our advice that you are one of the employees who will be covered by the Program. Your
inclusion in the Program is primarily due to the fact that our study of our current organizational set-up reveals
that the organization is presently over-staff[ed]. There are actually duplication of functions and responsibilities,
and some duties could actually be performed by just one person. Management therefore had no choice but to
reduce the present number of employees and you were selected as among those who will be separated from the
service.
As stated in the memorandum, you will be entitled to a separation package equivalent to two months pay for
every year of service, in addition to the conversion of your unused/earned sick leave and vacation leave credits
and pro-rated 13th month pay. This generous non-precedent setting separation package, which is twice what the
law provides, is being offered in consideration of your acceptance of your separation, thereby relieving the
company from the trouble of any court litigation.11
The private respondents received their respective separation pays and executed their respective Release Waiver
and Quitclaim12 after receiving their clearances from the Corporation.
On August 31, 1995, the management wrote the union that its proposals for a CBA had been referred to its
counsel.
Thereafter, the private respondents filed separate complaints against the corporation with the NLRC for illegal
dismissal, unfair labor practice, reinstatement and damages.13
In their position paper, the private respondents claimed that they were made to understand that their
employment was terminated on the ground of redundancy; however, they were not informed of the criteria,
guidelines or standard in the implementation of the special retirement program. They were thus led to conclude
that their dismissal was capricious. They pointed out that Perrin and Candelario, who had been with the
corporation for already 20 years, were included in the special program, while others who had been employed
with the corporation for only one to six years had been retained. Moreover, one year before the program was
implemented, the Corporation hired two more PSRs, thus increasing their number; and even after the
termination of Perrin and Candelario's employment, the Corporation hired two more on a contractual basis.
Candelario was then rehired on a contractual basis only until January 1996 when the complaint was filed
against the Corporation. Franco, on the other hand, had rejected a similar offer to work on a contractual basis.
The private respondents also alleged that their inclusion in the said program was resorted to in order to
intimidate the union and its members from pursuing their objective of institutionalizing a collective bargaining
mechanism for supervisory employees in the company, thus, aborting the birth of a labor organization capable
of bargaining with the management on the terms and conditions of employment. The complainants averred that
for all intents and purposes, "the collective bargaining process [was] over, having failed to progress beyond the
proposal stage, a pathetic end for an enterprise that started with such great enthusiasm from 105 of the 108
supervisors."14
They further averred that the connection between the untimely demise of the negotiations and the dismissal of
32 employees, who were officers and members of the union, was too obvious to be ignored considering further
that the claim of redundancy was untenable. The complainants also averred that they were all in their late 40s,
and had served the petitioner for about 20 years; although still in their productive years, their prospects for
other employment were very slim.15
In its position paper, the Corporation maintained that the termination of the employment of the complainants
was in response to the challenges brought about by the General Agreement on Tariff and Trade (GATT), the
AFTA and other international trade agreements, which greatly affected the local sugar industry. The respondent
summarized its position, thus:
12.0 Complainants' separation from employment was made pursuant to a legitimate exercise by the Company of
its prerogatives to adopt measures to cut cost and to maintain its profitability and competitiveness.
13.0 The inclusion of the complainants in the special retirement or right sizing program has nothing to do with
their exercise of their right to self-organization; hence, there is no unfair labor practice being committed by the
Company.
14.0 Complainants' separation from service was done in good faith and in complete compliance with procedural
and substantive legal requirements; hence, legal and justified.
15.0 Complainants are barred by the release waiver and quitclaim that they have executed in favor of the
Company from further contesting the validity of their separation from service.16
The Corporation also averred that in July 1995, it commissioned Sycip, Gorres, Velayo and Company (SGV) to
conduct a study of the Corporation and its operations to identify changes that could be implemented to achieve
cost effectiveness and global competitiveness.
In their Reply-Affidavit, the complainants averred that they signed their respective Release Waiver and
Quitclaim because their employer had driven them to the wall, and found themselves in no position to resist, as
they were no longer employed. They insisted that it was "a case of adherence, not of choice." They averred that
they did not relent on their claim, nor did they waive any of their rights.
They further emphasized that nowhere in the SGV study was it recommended that they be dismissed from
employment, or that their positions be abolished. In the case of the Sugar and Molasses Storage Department
(SMSD), for instance, the recommendation to save cost was not implemented; instead Pabalan and another shift
supervisor who was also a union officer (Bitera), were dismissed, and replacements were hired on December 1,
1996. As to the Cane Marketing Department where Perrin and Candelario were assigned as PSRs, the study, in
fact, recommended the strengthening of the said unit; the respondent dismissed such employees who had been
employed from 13 to 25 years. The private respondents pointed out that this was an evidence of the
Corporation's intention to contract out the work of the PSRs, considering further that those who had been
employed for only one to six years were retained.17
On February 26, 1997, the Labor Arbiter rendered judgment in favor of the Corporation and ordered the
dismissal of the complainants. According to the Labor Arbiter, there was a real and factual basis to declare
redundancy, thus:
'Based on this study, the position and functions of fuel-in-charge, held by complainant Franco, are basically the
same as that of Fuel Tenders and therefore his activities could well be done by existing Fuel Tenders who
would be directly under the General Warehouse Supervisor. In the case of complainant Pabalan, whose position
was Shift-in-Charge/Supervisor, it was observed that his tasks could be merged in the functions of the Property
Warehouse Supervisor. With respect to complainants Perrin and Candelario, who were Planters' Service
Representatives, it was observed that the job was more complementary to the marketing aspect, wherein they
are tasked to maintain good and harmonious relations with the company's sugar planters, to ensure continued
patronage of the mill's services. It was found that these PSR functions could well be handled by agents or
consultants, who would be paid on commission basis.18
The Labor Arbiter noted that the complainants received their separation pay and other monetary benefits from
the Corporation, and thereafter, voluntarily executed their respective Deeds of Release Waiver and
Quitclaim19 in its favor.
The complainants appealed to the NLRC which rendered judgment on December 9, 1997 granting their appeal
and reversing the decision of the Labor Arbiter. The NLRC ruled that there was no factual and legal basis for
the termination of the employment of the private respondents based on retrenchment or redundancy, and that
the Deeds of Release Waiver and Quitclaim executed by the complainants were ineffective. The Corporation
filed a motion for reconsideration of the decision, which was denied by the NLRC.
Unsatisfied, the Corporation filed a Petition for Certiorariwith the CA, insisting that:
PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT SET ASIDE AND
OVERRULED THE DECISION OF THE LABOR ARBITER ON THE BASIS OF COINCIDENCES AND
BASELESS ACCUSATION OF BAD FAITH, COMPLETELY MISAPPRECIATING THE SUBSTANTIAL
EVIDENCE WHICH SUPPORTED THE LABOR ARBITER'S DECISION.
PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION IN OVERRIDING THE
LEGITIMATE EXERCISE BY THE PETITIONER OF ITS MANAGEMENT PREROGATIVE OF
REDUCING ITS WORK FORCE TO ADDRESS CURRENT BUSINESS AND ECONOMIC REALITIES.
PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION IN DISREGARDING BASIC
PRINCIPLES OF LAW AND JURISPRUDENCE LAID DOWN BY THE SUPREME COURT TO THE
EFFECT THAT:
i. The matter of evaluating the merits of the issues presented in a labor case is primarily addressed to the sound
discretion of the Labor Arbiter. Thus, when the decision of the Labor Arbiter is amply supported by substantial
evidence, his findings and conclusions should not be disturbed but must be accorded with respect by the NLRC
and even by the Supreme Court.
ii. The determination that a position is redundant and therefore legally terminable, is basically an exercise of
management prerogative, and for as long as it is done in good faith, the wisdom or soundness thereof is beyond
the review power of the Labor Arbiter nor of the NLRC, which by law and jurisprudence are not vested with
managerial functions.
iii Termination on ground of redundancy is anchored on the superfluity of a position and not on the fact that
actual loss is incurred by a company.
iv. A waiver and quitclaim, when voluntarily and intelligently executed, is binding upon the employee, more so
if he is not just an ordinary employee.20
On April 28, 2000, the CA rendered judgment dismissing the petition, on the ground that the NLRC did not
commit grave abuse of discretion in rendering judgment against the Corporation. The Corporation's motion for
reconsideration thereof was, likewise, denied by the CA.
The Corporation, now the petitioner, assails the ruling of the CA, contending that the decision of the Labor
Arbiter should prevail, as it is supported by substantial evidence and the law. The petitioner, thus, maintains
that the Labor Arbiter correctly ruled that '
(1) the separation of the Respondents from employment was for a valid and authorized cause;
(2) the positions of the Respondents were redundant;
(3) there was a real and factual basis to declare redundancy;
(4) there is no evidence to show that the right sizing program was deliberately intended to stifle union activities;
(5) the confluence of events was just a coincidence;
(6) there is no evidence of deviousness in the right sizing program;
(7) the Respondents received their individual separation benefits, and there is no evidence that either moral or
physical compulsion or both made them accept the benefits offered; andcralawlibrary
(8) Petitioner Company has complied with the legal requisites of terminating the employment of the
Respondents.21
The petitioner further argues that the decision of the NLRC is essentially flawed because the private
respondents were terminated on the ground of redundancy, and not retrenchment which is an entirely different
concept. There is absolutely no evidence on record, save the bare allegations of the private respondents that
they were singled out as victims of retrenchment. The other redundant positions were, likewise, eliminated. It
insists that unlike retrenchment, redundancy does not require business losses to be an authorized cause for
dismissal. Moreover, the law does not give any criteria, guidelines or standard for the selection of employees
who are to be dismissed on the ground of redundancy. It insists that Article 283 of the Labor Code merely
requires that "in case of termination due to the installation of labor-saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to, at least,
one (1) month pay for every year of service, whichever is higher."
The petitioner further posits that the law does not require a corporation to adopt radical cost-cutting measures
prior to a termination on the ground of redundancy. It avers that the mere fact that the termination took place at
a time when the private respondents had just organized the union does not automatically render their
termination invalid. It theorizes that the union could have been organized as leverage to the implementation of
the redundancy program which the supervisory employees knew was forthcoming. It further claims that it is
clearly not within the discretion of the NLRC to say that the termination was "prematurely resorted to," as such
determination was clearly within the business discretion of the petitioner corporation. It adds that, as evidenced
by the generous separation packages given to the private respondents, their welfare was amply considered by it.
Thus, the petitioner concludes, there was patent partiality and bias on the part of the NLRC when it sweepingly
declared that the dismissal of the private respondents "was illegal and without valid and authorized cause."22
The Ruling of the Court
The petition is denied for lack of merit.
In the main, the issues in this case are factual. Under Rule 45 of the Rules of Court, only questions of law may
be raised in this Court; such factual issues may be considered and resolved only when the findings of facts and
the conclusions of the Labor Arbiter are inconsistent with those of the NLRC and the CA.
Nevertheless, we have meticulously reviewed the records in this case and find that the NLRC did not commit
any grave abuse of its discretion amounting to lack or excess of jurisdiction in rendering its decision in favor of
the private respondents. The CA acted in accord with the evidence on record and case law when it dismissed the
petitioner's Petition for Certiorariand affirmed the assailed decision and resolution of the NLRC.
We reiterate that it is the burden of the petitioner, as employer, to prove the factual and legal basis for the
dismissal of its employees on the ground of redundancy.
In Asian Alcohol Corporation v. National Labor Relations Commission,23 the Court ruled that redundancy exists
when the service capability of the work force is in excess of what is reasonably needed to meet the demands on
the enterprise. The Court proceeded to expound, as follows:
A redundant position is one rendered superfluous by any number of factors, such as over-hiring of workers,
decreased volume of business, dropping of a particular product line previously manufactured by the company or
phasing out of a service activity priorly undertaken by the business. Under these conditions, the employer has
no legal obligation to keep in its payroll more employees than are necessary for the operation of its business.24
Contrary to the petitioner's claim, the employer must comply with the following requisites to ensure the validity
of the implementation of a redundancy program: (1) a written notice served on both the employees and the
Department of Labor and Employment at least one month prior to the intended date of retrenchment; (2)
payment of separation pay equivalent to at least one month pay or at least one month pay for every year of
service, whichever is higher; (3) good faith in abolishing the redundant positions; and (4) fair and reasonable
criteria in ascertaining what positions are to be declared redundant and accordingly abolished.25
The Court emphasized in the earlier case of Panlilio v. National Labor Relations Commission26 that it is
imperative for the employer to have fair and reasonable criteria in implementing its redundancy program, such
as but not limited to (a) preferred status; (b) efficiency; and (c) seniority.27
The general rule is that the characterization by an employer of an employee's services as no longer necessary or
sustainable is an exercise of business judgment on the part of the employer. The wisdom or soundness of such
characterization or decision is not, as a general rule, subject to discretionary review on the part of the Labor
Arbiter, the NLRC and the CA.28 Such characterization may, however, be rejected if the same is found to be in
violation of the law or is arbitrary or malicious.29
In Dangan v. National Labor Relations Commission,30 the Court ruled that the hiring, firing or demotion of
employees is a management prerogative, but is subject to limitations stated in the collective bargaining
agreement, if any, or general principles of fair play and justice. Indeed, the Court will not hesitate to strike
down a redundancy program structured by a corporation to downsize its personnel, solely for the purpose of
weakening the union leadership, thereby preventing it from securing reasonable terms and conditions of
employment in their CBA with the employer.
In this case, we agree with the ruling of the CA that the petitioner illegally dismissed the private respondents
from their employment by including them in its special retirement program, thus, debilitating the union,
rendering it pliant by decapacitating its leadership. As such, the so-called "downsizing" of the Cane Marketing
Department and SMSD based on the SGV Study Report was a farce - capricious and arbitrary.
The Court agrees with the private respondents' averments in their position paper, as follows:
Complainants are not in a position to anticipate how respondent will present its case for redundancy
particular[ly] because no standard, criteria or guidelines for the selection of dismissed employees was made
known to them, and all that they were told was that "you were selected as among those who will be separated
from the service;" nonetheless, this early, it is possible to point out certain facts which throw light on the
plausibility or want of it, of the ground relied upon.
1. No contingency has occurred, of the kind mentioned by the Supreme Court in the Wiltshire case, (over-hiring
of workers, decreased volume of business or dropping of a particular service line) which would explain the
dismissal on the ground of redundancy; over-hiring of workers cannot conceivably occur in the level of the
supervisors; on the other hand, it would have required an event of cataclysmic proportion to justify the
dismissal for redundancy of a full one-third of the supervisors in an establishment, and if such an event were to
occur it would have resulted in tremendous losses which is not true here because the dismissal is not on account
of or to prevent losses;
2. In no other category of employees did positions suddenly become redundant except among the supervisors
who have just organized themselves into a labor union and were working for their first-ever CBA in the
establishment;
3. The dismissal came at the precise time when the Lopez Sugar Central Supervisors Association (LSCA) had
presented its CBA proposals and was expecting the company's reply as mandated by law; in fact, the reply was
overdue, being required to be submitted by management within ten (10) days from receipt of the union
proposal; there is no better proof that the dismissals have served their hidden purpose than that the CBA
negotiation has ended to all intents and purpose, before management could even present its counterproposal.
Certainly, it would be farfetched to say that the remaining union officers and members have abandoned its
objective of having a CBA for reasons other than the fear of suffering the fate of those who had been dismissed.
The absence of criteria, guidelines, or standard for selection of dismissed employees renders the dismissals
whimsical, capricious and vindictive; in the case of the complainants Franco and Pabalan, who are the Union
President and Treasurer, respectively, the reason for their inclusion is obvious. Additionally, it must be
mentioned that in the case of Pabalan, there were three shift supervisors, one for each 8-hour shift before the
"program" was implemented, namely, Pabalan, Bitera and Lopez; Pabalan and Bitera (a union director) were
terminated, leaving Lopez alone, who worked on 12-hour shift duty with Henry Villa, department head who
was forced to perform the work of shift supervisor; Pabalan was offered to be rehired as an employee of
BUGLAS, a labor-only contractor but he refused; an employee, Eugenio Bolanos was assigned from another
department to do the work of shift supervisor and three of them (Lopez, Villa and Bolanos) now divide shift
duties among themselves. There is no explanation why among the shift supervisors it was Pabalan and Bitera
who were included in the program.
In the case of complainants [P]errin and Candelario, both Planter Service Representatives, the manipulation is
even more apparent; one year before the "program" was instituted, two new PSRs were hired (Labrador and
Cambate) bringing to six the total number of PSRs; after the termination of [P]errin and Candelario, who have
served for nearly 20 years, two new PSRs were hired (Oropel and Jeres) on contractual basis and whose
compensation is based on pakiao; additionally, Candelario was hired after his dismissal under the same
arrangement as Oropel and Jeres, which lasted only up to January 1996 when management learned of the filing
of the first of these cases; [P]errin, on his part, was offered the same arrangement but he refused.
4. The rehiring of dismissed employees through a labor-only contractor exposes the "program" as a
circumvention of the law. This is true in the case of the following supervisors who were terminated with
complainant but were subsequently employed to do exactly the same work, but as employees of BUGLAS, a
labor-only contractor which supplies laborers to respondent LSC:
A. Juanito Lanos, Supervisor, Electrical Department.
B. Raymundo Llenos, Community Development Officer.
C. Joseph Nicolas, Supervisor, Refrigeration and Air Conditioning.
The above re-hiring in addition to other circumstances earlier mentioned, such as the hiring of 2 men PSRs after
Candelario and [P]errin were terminated; the short-lived rehiring of the former and the offer to hire the latter
which he refused, all indicate that there was no redundancy.
None of the work has been phased out or rendered obsolete by any event that took place. As to duplication of
functions, it must be mentioned that the positions of complainants have existed for a long time judging from
their years of service with respondent; the observation of the Supreme Court in the Wiltshire case to the effect
that in a well-organized establishment, duplication of functions is hardly to be expected is pertinent.31
Foremost, the petitioner failed to formulate fair and reasonable criteria in ascertaining what positions were
declared redundant and accordingly obsolete, such as preferred status, efficiency or seniority. It, likewise, failed
to formulate fair and reasonable parameters to determine who among the supervisors and middle-level
managers should be "retired" for redundancy. Using the SGV report as anchor, the petitioner came out with a
special retirement program for its 108 supervisors and middle-level managers, making it clear that its decision
to eliminate them was final and irrevocable. Moreover, the private respondents were not properly apprised of
the existence of the special retirement program, as well as the criteria for the selection of the supervisors to be
"retired," and those to be retained or transferred or demoted.
Contrary to its submissions, the petitioner downsized the Cane Marketing Department by eliminating private
respondents Perrin and Candelario; and Franco and Candelario from the Sugar and Molasses Storage
Department, respectively, without due regard to the SGV report. The following recommendations relating to the
Sugar and Molasses Storage Department were made:
RECOMMENDATIONS
=================
2.4 Sugar and Molasses Storage
2.4.1 Renovate old bulk warehouse to improve ventilation, lighting and raw sugar handling
2.4.2 Install a conveyor/scale before bag sewing of refined sugar to check weight conformity
2.4.3 Renovate bagging room of refined sugar to enforce strict hygiene/sanitation
2.4.4 Install a marking mechanism that would indicate production date on bagged refined sugar
2.4.5 Conduct weekly checks and adjustment on the bag sewing and conveyor equipment 32
The downsizing of personnel was not among the foregoing recommendations, and yet this was what the
petitioner did, through its special retirement program, by including private respondents Franco and Pabalan,
thereby terminating their employment. It is too much of a coincidence that the two private respondents were
active members of the union.
On the other hand, the following recommendations were made relating to the Cane Marketing Department:
CANE MARKETING AND TRANSPORT
1.0 Cane Marketing
1.1.1 Expand SC's farm leasing operations (by 6,292 hectares)
1.1.2 Establish cane supply planning system
1.1.3 Beef up SC's cane marketing efforts by hiring more effective PSRs to replace ineffective PSRs
1.1.4 Acquire 6 motorcycles instead of second-hand jeeps
1.1.5 Apply marketing techniques used by other companies/industries.33
As can be gleaned from the above, the report recommended the beefing up of the petitioner's planter service
representative force, while eliminating those who were ineffective. There is no showing in the record that
respondents Perrin and Candelario were eliminated solely because they were inefficient. Neither is there any
substantial evidence on record that the private respondents' performance had been deteriorating; on the
contrary, they had been so far so efficient that they had been given promotions from time to time during their
employment. Yet, the petitioner eliminated private respondents Perrin and Candelario and retained three PSRs,
namely, Danilo Villanueva, Roberto Combate and Danilo Labrador, who were employed with the petitioner
from one to three years and transferred Raymundo de la Rosa, who had been working there for only six
years.34 Again, it is too much of a coincidence that Franco and Pabalan, the President and Treasurer,
respectively, of the union, were included in the special retirement program.
We agree with the findings of the CA that the private respondents were unilaterally included in the said
program for the following reasons:
As evidenced by various documents attached to the affidavit of Leonito Franco and Rogelio Pabalan, as well as
supporting affidavits of complainants, the supervisory employees of LSC organized a labor union called Lopez
Sugar Corporation Supervisor's Associations which was issued a certificate of registration by the DOLE
Regional Office No. VI, Iloilo City on December 29, 1994. Complainant Franco was elected President and
complainant, Pabalan, Treasurer, during the organizational meeting. Complainants [P]errin and Candelario are
active union members. Management was duly informed about this fact and in January 1995 a conference was
conducted between the union and management where the status of the union was clarified and some problems
in the workplace were discussed. The management was also informed subsequently that 105 out of 108
supervisory employees have joined the union and authorized check-off of the union dues starting March 1995.
The check-off was effected.
On July 24, 1995, the union formally submitted its CBA proposal to respondent with request for a reply in ten
(10) days pursuant to the Labor Code. The management in a letter expressed willingness to meet the union
panel on August 30, 1995, which the latter understood to mean that the management would present its counter-
proposal during the said conference.
To the surprise of the complainants, they received instead on August 26, 1995 a letter of termination stating
that, in accordance with the "special retirement program" of respondent, their services will be terminated
effective September 27, 1995. The letter also stated that according to a study conducted by the respondent of its
organizational set-up, it is over-staffed and there are duplications of functions which left it no choice but to
reduce personnel.
As to the CBA counter-proposal, the management wrote the union on August 31, 1995 that the matter was
referred to its external counsel for appropriate disposition "in the light of the recent development in this
company."
The special retirement program affected 32 employees or roughly one-third of the supervisory personnel. They
included the union President and Treasurer and majority of the Board of Directors and active union members.
No clarification was made as to how the terminated employees were chosen, and no guidelines, criteria or
standard was shown to lend coherence to the program.
As may be expected, the dismissals generated a general perception that management was sending a strong
message that all employees hold their position at its pleasure, and that it was within its power to dismiss anyone
anytime. With the dismissal of the union officers and with the membership now effectively threatened, the
union virtually collapsed as an organization. Out of fear, no one would even assume the position of union
President. An indication of this sad state of affairs into which the union has fallen is that nothing came out of its
CBA proposal. It has been a year and three months as of this writing since the respondent informed the union
that its proposal had been referred to the company's external counsel, but no counter-proposal has been
submitted and no single conference has been held since then.35
While it may be true that the private respondents signed separate Deeds of Release Waiver and Quitclaim and
received separation pay, nonetheless, we find and so hold that the NLRC did not err in nullifying the decision
of the Labor Arbiter, thus:
The Release Waiver and Quitclaim were not verified by the complainants. "Under prevailing jurisprudence, the
fact that an employee has signed a satisfaction receipt of his claims does not necessarily result in the waiver
thereof. The law does not consider as valid any agreement whereby a worker agrees to receive less
compensation than what he is entitled to recover. A deed of release or quitclaim cannot bar an employee from
demanding benefits to which he is legally entitled. We have herefore (sic) explained that the reason why
quitclaims are commonly frowned upon as contrary to public policy and why they are held to be ineffective to
bar claims for the full measures of the workers' legal rights is the fact the employer and the employee obviously
do not stand on the same footing. The employer drove the employees to the wall. The latter must have to get
hold of the money. Because out of job, they had to face the harsh necessities of life. x x x" (Marcos v. NLRC,
G.R. No. 111744, September 8, 1995)36
Private respondents Franco and Pabalan protested the termination of their employment. Private respondents
Candelario and Perrin were shocked when, although they were on leave, they were invited to the Northeast
Beach Resort by Juan Masa, Jr., the head of the Cane Marketing Department, on August 25, 1996, only to be
told that, after spending a considerable number of years under the petitioner's employ, they were suddenly out
of jobs. The private respondents had no other recourse but to execute the said Release Waiver and Quitclaim
because the petitioner made it clear in its Memorandum dated August 8, 1995 that it had the final say on who
would be included in its special retirement program. Their dismissal from the petitioner corporation was a fait
accompli, solely because they organized a union that would bargain for reasonable terms and conditions of
employment sought to be included in a CBA. In fine, the private respondents were left to fend for themselves,
with no source of income from then on; prospects for new jobs were dim. Their backs against the wall, the
private respondents were forced to sign the said documents and receive their separation pay.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit.
SO ORDERED. In October, 1992, they received individual notices of termination effective November 30, 1992. 7 They were
paid the equivalent of one month salary for every year of service as separation pay, the money value of their
unused sick, vacation, emergency and seniority leave credits, thirteenth (13th) month pay for the year 1992,
medicine allowance, tax refunds, and goodwill cash bonuses for those with at least ten (10) years of
service. 8 All of them executed sworn releases, waivers and quitclaims. 9 Except for Verayo and Tormo, they all
signed sworn statements of conformity to the company retrenchment program. 10 And except for Martinez, they
all tendered letters of resignation. 11

On December 18, 1992 the six (6) private respondents filed with the NLRC Regional Arbitration Branch VI,
Bacolod City, complaints for illegal dismissal with a prayer for reinstatement with backwages, moral damages
and attorney's fees. They alleged that Asian Alcohol used the retrenchment program as a subterfuge for union
busting. They claimed that they were singled out for separation by reason of their active participation in the
union. They also asseverated that Asian Alcohol was not bankrupt as it has engaged in an aggressive scheme of
contractual hiring.
G.R. No. 131108 March 25, 1999
The executive Labor Arbiter dismissed the complainants. He explained, thus:
ASIAN ALCOHOL CORPORATION, petitioner,
vs. The fact that respondent AAC incurred losses in its business operations was not seriously
NATIONAL LABOR RELATIONS COMMISSION, FOURTH DIVISION, CEBU CITY and challenged by the complainants. The fact that it incurred losses in its business operations
ERNESTO A. CARIAS, ROBERTO C. MARTINEZ, RAFAEL H. SENDON, CARLOS A. AMACIO, prior to the implementation of its retrenchment program is amply supported by the
LEANDRO O. VERAYO and ERENEO S. TORMO, respondents. documents on records, (sic) namely: (1) Balance Sheet of AAC as December 31, 1991 . . .
, (2) Statement of Income and Deficit for the year ended December 31, 1991 . . . , (3)
Income Tax for Fiscal Year ending September 30, 1989 . . . , (4) Income Tax Return for
Fiscal Year ending December 31, 1989 . . . , (5) Income Tax Return for Fiscal Year ending
December 31, 1990 . . . , and (6) Income Tax Return for Fiscal Year ending December 31,
PUNO, J.: 1991 . . . , indicating an accumulated deficit of P26,117,889.00.

Contending that the dismissal of private respondents Ernesto A. Carias, Roberto C. Martinez, Rafael H.
Sendon, Carlos A. Amacio, Leandro O. Verayo and Ereneo S. Tormo, was valid on the twin grounds of
redundancy and retrenchment to prevent business losses, petitioner Asian Alcohol Corporation (hereinafter
referred to as Asian Alcohol) filed this petition for certiorari. Asian Alcohol ascribes grave abuse of discretion
to public respondent National Labor Relations Commission 1 (hereinafter referred to as NLRC) when, on May
30, 1997, it set aside 2 the decision 3 of the Executive Labor Arbiter dismissing the illegal termination
complaints filed by private respondents.
We first unfurl the facts.
In September, 1991, the Parsons family, who originally owned the controlling stocks in Asian Alcohol, were
driven by mounting business losses to sell their majority rights to Prior Holdings, Inc. (hereinafter referred to as
Prior Holdings). The next month, Prior Holdings took over its management and operation. 4
To thwart further losses, Prior Holding implemented are organizational plan and other cost-saving measures.
Some one hundred seventeen (117) employees out of a total workforce of three hundred sixty (360) were
separated. Seventy two (72) of them occupied redundant positions that were abolished. Of these positions,
twenty one (21) held by union members and fifty one (51) by non-union members.
The six (6) private respondents are among those union members 5 whose positions were abolished due to
redundancy. Private respondents Carias, Martinez, and Sendon were water pump tenders; Amacio was a
machine shop mechanic; Verayo was a briquetting plant operator while Tormo was a plant helper under him.
They were all assigned at the Repair and Maintenance Section of the Pulupandan plant. 6
It has to be emphasized that the law allows an employer to retrench some of its employees
to prevent of its employees to prevent losses. In the case of respondent AAC, it
implemented its retrenchment program not only to prevent losses but to prevent further
losses as it was then incurring huge losses in it operations.
Complainants would want us to believe that their positions were abolished because they
are union members, and that they were replaced by casual employees. Complainants'
pretense is rather untenable. For one thing, the retrenchment program of AAC affected not
only union members but also the non-union members. As earlier said, there were 117
employees of AAC who were affected by the reorganization. Of the 117 positions, 72
positions were abolished due to redundancy, 21 of which were occupied by unions
members, while 51 were held by non-union members. Thus, the theory of complainants
that they were terminated from work on ground of their union membership is far from the
truth.
On the contrary, we find that complainants Ernesto Carias, Roberto Martinez and Rafael
Sendon who were all Water Pump Tenders assigned to AAC's water wells in Ubay,
Pulupandan, Negros Occidental which were drilled and operated before under the old
management by virtue of a right-of-way with the landowner, were retrenchment as an
offshoot to the termination of the lease agreement as the water thereunder had become
salty due to extensive prawn farming nearby, so that AAC could no longer use the water
for its purpose. As a consequence, the services of Ernesto Carias, Roberto Martinez and
Rafael Sendon had become unnecessary, redundant and superfluous.
 As regards complainants Leandro Verayo and Ereneo Tormo, the grounds cited by
respondent AAC in support of its decision to retrench them are too convincing to be
ignored. According to respondent AAC, its boiler before was 100% coal fired. The boiler
was manned by a briquetting plant operator in the person of Leandro Verago and three (3)
briquetting helpers, namely, Ereneo Tormo, Eriberto Songaling, Jr. and Rudy Javier, Jr.
Since AAC had shifted to the use of bunker fuel by about 70% to fire its boiler, its usage
of coal had been drastically reduced to only 30% of its total fuel usage in its production
plant, thereby saving on fuel cost. For this reason, there was no more need for the position
of briquetting plant operator and the services of only two briquetting helpers were
determined to be adequate for the job of briquetting coal. Of the three (3) briquetting
helpers, Ereneo Tormo was the oldest, being already 41 years old, the other two, Javier
and Songaling, being only 28 and 35, respectively. Considering the manual nature of the
work of coal briquetting, younger workers are always preferred for reasons of efficiency
[sic]. Hence the abolition of the position of Ereneo Tormo. We have to stress that Eriberto
Songaling, Jr. and Rudy Javier, Jr. are also union member. . . .
With respect to Carlos Amacio, he was retrenched not because of his being a union
member but because of his poor health condition which greatly affect[ed] his work
efficiency. Records show that Carlos Amacio was among the ten machine shop mechanics
employed by respondent AAC. Under AAC's reorganization plan, it needs only nine
mechanics.
xxx xxx xxx
On the whole, therefore, the dismissal of complainants on ground of redundancy /
retrenchment was perfectly valid or legal. 12
Private respondents appealed to the NLRC.
On May 30,·1997, the NLRC rendered the challenged decision. It rejected the evidence proffered by Asian
Alcohol to prove its business reversals. It ruled that the positions of private respondents were not redundant for
the simple reason that they were replaced by casuals. The NLRC essayed this explanation:
In this case, [that] the respondent terminated complainants "to protect the company from
future losses," does not create an impression of imminent loss. The company at the time of
retrenchment was not then in the state of business reverses. There is therefore no reason to
retrench. . . .
The alleged deficits of the corporation did not prove anything for the respondent. The
financial status as shown in the Statement of Income and Deficits and Income Tax Returns
from 1989 to 1991, submitted by respondent was before the respondent, new management
of Prior Holdings, Inc., took over the operation and management of the corporation in
October, 199[1]. This is no proof that on November 30, 1992 when the termination of
complainant[s] took effect the company was experiencing losses or at least imminent
losses. Possible future losses do not authorize retrenchment.
Secondly in the case of REDUNDANCY.
Redundancy exists where the service[s] of . . . employee[s] are in excess of what is
reasonably demanded by the actual requirements of the enterprise. The evidence, however,
proved that, in truth and in fact, the positions of the complainants were not redundant for
the simple reason that they were replaced by casuals.
xxx xxx xxx
Admittedly, from the testimonies of Engr. Palmares, the wells of the respondent were
operated by contractors. Otherwise stated, complainant[s] who are regular workers of the
respondent, performing jobs necessary and desirable to the business or redundancy [so
that] their jobs [will be performed by workers belonging to a contractor.
In summation, retrenchment and/or redundancy not having been proved, complainants,
therefore, were illegally dismissed. 13
The dispositive portion of the decision of the NLRC provides as follows:
WHEREFORE, premises considered, the Decision appealed from is hereby ordered SET
ASIDE and VACATED and in lieu thereof, the respondent Asian Alcohol Corporation is
hereby ordered to reinstate complainants with full backwages from the time they were
dismissed on November 30, 1992 and up to actual reinstatement. Plus 10% attorney's fees.
SO ORDERED. 14
On July 2, 1997, Asian Alcohol moved for reconsideration of the foregoing decision. On September 25, 1997,
the NLRC denied the motion. 15
On January 12 l998, Asian Alcohol filed in this Court a petition for certiorari assailing both the decision of the
NLRC and the resolution denying its reconsideration. It invoked the following grounds:
6. GROUNDS FOR PETITION
6.1 Public respondent has committed as hereinafter shown, a manifest grave abuse of
discretion amounting to lack or excess of jurisdiction in declaring in its assailed Decision .
. . and Resolution . . . that the termination of the employment of private respondents by the
petitioner herein is illegal and ordering their reinstatement with full backwages from the
time they were dismissed on November 30, 1992 up to their actual reinstatement, plus
10% attorney's fees, said Decision and Resolution of the public respondent being contrary
to the established facts of the case, well settled jurisprudence and the law on the matter.
6.2 Public respondent has likewise committed, as hereinafter shown, a manifest grave
abuse of discretion amounting to lack or excess of jurisdiction by totally disregarding and
refusing to consider the factual findings of the Executive Labor Arbiter with respect to the
circumstances which rendered the positions of the private respondents unnecessary
redundant and superfluous, thereby justifying the termination of their employment.
6.3 Public respondent has furthermore committed, as hereinafter shown, a manifest grave
abuse of discretion amounting to lack or excess of jurisdiction in giving full credit to the
oral testimonies quoted in its assailed Decision . . . and taking them as conclusive proof of
the alleged replacement of the private respondents with casual workers despite the fact that
said quoted testimonies clearly amount to nothing but speculations, surmises and
conjectures. 16
On March 25, 1998 we issued a Temporary Restraining Order 17 enjoining the NLRC from enjoining its
Decision and Resolution dated May 30, 1997 and September 25, 1997, respectively.
We find the petition meritorious.
Out of its concern for those with less privilege in life, this Court has inclined towards the worker and upheld his
cause in his conflicts with the employer. 18 This favored treatment is directed by the social justice policy of the
Constitution. 19 But while tilting the scales of justice in favor of workers, the fundamental law also guarantees
the right of the employer to reasonable returns from his investment. 20 Corollarily, the law allows an employer
to downsize his business to meet clear and continuing economic threats. 21 Thus, this Court has upheld
reductions in the work force to forestall business losses or stop the hemorrhaging of capital. 22
The right of management to dismiss workers during periods of business recession and to install labor saving
devices to prevent losses is governed by Art. 283 of the labor Code, as amended. It provides, viz.:
Art. 283. Closure of establishment and reduction of personnel. — The employer may also
terminate the employment of any employee due to the installation of labor saving devices,
redundancy, retrenchment, to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the Ministry of
Labor and Employment at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at least one (1) month
pay or to at least one (1) month pay for every year of service, whichever is higher. In case
of retrenchment to prevent losses and in case of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay at least one-half (1/2), month pay
for every year of service, whichever is higher. A fraction of at least six (6) month shall be
considered one (1) whole year. [emphasis ours]
Under the foregoing provision, retrenchment and redundancy are just causes for the employer to terminate the
services of workers to preserve the viability of the business. In exercising its right, however, management must
faithfully comply with the substantive and procedural requirements laid down law and jurisprudence. 23
The requirements for valid retrenchment which must be proved by clear and convincing evidence are: (1) that
the retrenchment is reasonably necessary and likely to prevent business losses, which, if already incurred, are
not merely de minimis, but substantial, serious, actual and real, or if only expected, are reasonably imminent as
perceived objectively and in good faith by the
employer; 24 (2) that the employer served written notice both to the employees and to the Department of Labor
and Employment at least one month prior to the intend date of retrenchment; 25 (3) that the employer pays the
retrenched employees separation pay equivalent to one month pay or at least 1/2 month pay for every year of
service, whichever is higher; 26 (4) that the employer exercises its prerogative to retrench employees in good
faith for the advancement of its interest of its interest and not to defeat or circumvent the employees' right to
security of tenure; 27 and (5) that the employer used fair and reasonable
criteria 28 in ascertaining who would be dismissed and who would be retained among the employees, such as
status (i.e., whether they are temporary, casual, regular or managerial employees), efficiency,
seniority, 29 physical fitness, age, and financial hardship for certain workers. 30
The condition of business losses is normally shown by audited financial documents like yearly balance sheets
and profit and loss statements as well as annual income tax returns. 31 It is our ruling that financial statements
must be prepared and signed by independent auditors. 32 Unless duly audited, they can be assailed as self-
serving documents. 33 But it is not enough that only the financial statements for the year during which
retrenchment was undertaken, are, presented in evidence. For it may happen that while the company has indeed
been losing, its losses may be on a downward trend, indicating that business is picking up and retrenchment,
being a drastic move, should no longer be resorted to. 34 Thus, the failure of the employer to show its income or
loss for the immediately preceding year or to prove that it expected no abatement of such losses in the coming
years, may be speak the weakness of its cause. 35 It is necessary that the employer also show that its losses
increased through a period of time and that the condition of the company is not likely to improve in the near
future. 36
In the instant case, private respondents never contested the veracity of the audited financial documents
proffered by Asian Alcohol before the Executive Labor Arbiter. Neither did they object to their admissibility.
They show that petitioner has accumulated losses amounting to P306,764,349.00 and showing nary a sign of
abating in the near future. The allegation of union busting is bereft of proof. Union and non-union members
were treated alike. The records show that the positions of fifty one (51) other non-union members were
abolished due to business losses.
In rejecting petitioner's claim of business losses, the NLRC stated that "the alleged deficits, of the corporation
did not prove anything for the [petitioner]" 37 since they were incurred before the take over of Prior Holdings.
Theorizing that proof of losses before the take over is no proof of losses after the take over, it faulted Asian
Alcohol for retrenching private respondents on the ground of mere "possible future losses." 38
We do not agree. It should be observed that Article 283 of the Labor Code uses the phrase "retrenchment to
prevent losses". In its ordinary connotation, this phrase means that retrenchment must be undertaken by the
employer before losses are actually sustained. 39 We have, however, interpreted the law to mean that the
employer need not keep all his employees until after his losses shall have materialized. 40 Otherwise, the law
could be vulnerable of attack as undue taking of property for the benefit of another. 41
In the case at bar, Prior Holdings took over the operations of Asian Alcohol in October 1991. Plain to see, the
last quarter losses in 1991 were already incurred under the new management. There were no signs that these
losses would abate. Irrefutable was the fact that losses have bled Asian Alcohol incessantly over a span of
several years. They were incurred under the management of the Parsons family and continued to be suffered
under the new management of Prior Holdings. Ultimately, it is Prior Holdings that will absorb all the losses,
including those incurred under the former owners of the company. The law gives the new management every
right to undertake measures to save the company from bankruptcy.
We find that the reorganizational plan and comprehensive cost-saving program to turn the business around were
not designed to bust the union of the private respondents. Retrenched were one hundred seventeen (117)
employees. Seventy two (72) of them including private respondents were separated because their positions had
become redundant. In this context, what may technically be considered as redundancy may verily be considered
as retrenchment
measures. 42 Their positions had to be declared redundant to cut losses.
Redundancy exists when the service capability of the work force is in excess of what is reasonably needed to
meet the demands on the enterprise. A redundant position is one rendered superfluous by any number of
factors, such as overhiring of workers, decreased volume of business, dropping of a particular product line
previously manufactured by the company or phasing out of a service activity priorly undertaken by the
business.43 Under these conditions, the employer has no legal obligation to keep in its payroll more employees
than are necessary for the operation of its business. 44
For the implementation of a redundancy program to be valid, the employer must comply with the following
requisites: (1) written notice served on both the employees and the Department of Labor and Employment at
least one month prior to the intended date of retrenchment; 45 (2) payment of separation pay equivalent to at
least one month pay or at least one month pay for every year of service, whichever is higher; (3) good faith in
abolishing the redundant
positions; 46 and (4) fair and reasonable criteria in ascertaining what positions are to be declared redundant and
accordingly abolished. 47
In the case at bar, private respondents Carias, Martinez and Sendon were water pump tenders. They tended the
water wells of Asian Alcohol located in Ubay, Pulupanban, Negros Occidental. However, Asian Alcohol did
not own the land where the wells stood. It only leased them.
In 1992, the lease contract, which also provided for a right of way leading to the site of the wells, was
terminated. Also, the water from the wells had become salty due to extensive prawn farming nearby and could
no longer be used by Asian Alcohol for its purpose. The wells had to be closed and needless to say, the services
of Carias, Martinez and Sendon had to be terminated on the twin grounds of redundancy and retrenchment.
Private respondent Verayo was the briquetting plant operator in charge of the coal-fired boiler. Private
respondent Tormo was one of the three briquetting helpers. To enhance production efficiency, the new
management team shifted to the use of bunker fuel by about seventy percent (70%) to fire its boiler. The shift
meant substantial fuel cost savings. In the process, however, the need for a briquetting plant operator ceased as
the services of only two (2) helpers were all that was necessary to attend to the much lesser amount of coal
required to run the boiler. Thus, the position of private respondent Verayo had to be abolished. Of the three (3)
briquetting helpers, Tormo was the oldest, being already 41 years old. The other two, Rudy Javier, Jr. and
Eriberto Songaling, Jr., were younger, being only 28 and 35, respectively. Age, with the physical strength that
comes with it, was particularly taken into consideration by the management team in deciding whom to separate.
Hence, it was private respondent Tormo who was separated from service. The management choice rested on a
rational basis.
Private respondent Amacio was among the ten (10) mechanics who manned the machine shop at the plant site.
At their current production level, the new management found that it was more cost efficient to maintain only
nine (9) mechanics. In choosing whom to separate among the ten (10) mechanics, the management examined
employment records and reports to determine the least efficient among them. It was private respondent Amacio
who appeared the least efficient because of his poor health condition.
Not one of the private respondents refuted the foregoing facts. They only contend that the new management
should have followed the policy of "first in, last out" in choosing which positions to declare as redundant or
whom to retrench to prevent further business losses. No law mandates such a policy. And the reason is simple
enough. A host of relevant factors come into play in determining cost efficient measures and in choosing the
employees who will be retained or separated to save the company from closing shop. In determining these
issues, management has to enjoy a pre-eminent role. The characterization of positions as redundant is an
exercise of business judgment on the part of the employers. 48 It will be upheld as long as it passes the test of
arbitrariness. 49
Private respondents call our attention to their allegation that casuals were hired to replace Carias, Martinez and
Sendon as water pump tenders at the Ubay wells. They rely on the testimony of Engr. Federico Palmares, Jr.,
the head of the Mechanical Engineering Services Department who admitted the engagement of independent
contractors to operate the wells. A reading of the testimony of Engr. Palmares, however, will reveal that he
referred not to the Ubay wells which were tended by private respondent Carias, Martinez and sendon, but to the
Laura wells. Thus, he declared in cross examination:
ATTY. YMBALLA: (cross-examination of respondent witness,
Federico Palmares)
Q But in the Laura well?
WITNESS:
A Mansteel was hired as contractor.
ATTY. YMBALLA:
Q In other words, the persons mentioned are all workers of
independent contractors?
WITNESS:
A I am not sure, maybe. 50
In any event, we have held that an employer's good faith in implementing a redundancy program is not
necessarily destroyed by availment of the services of an independent contractor to replace the services of the
terminated employees. We have previously ruled that the reduction of the number of workers in a company
made necessary by the introduction of an independent contractor is justified when the latter is undertaken in
order to effectuate more economic and efficient methods of production. 51 In the case at bar, private respondents
failed to proffer any proof that the management acted in a malicious or arbitrary manner in engaging the
services of an independent contractor to operate the Laura wells. Absent such proof, the Court has no basis to
interfere with the bona fide decision of management to effect more economic and efficient methods of
production.
Finally, private respondent now claim that they signed the quitclaims, waivers and voluntary resignation letters
only to get their separation package. They maintain that in principle, they did not believe that their dismissal
was valid.
It is true that this Court has generally held that quit claims and releases are contrary to public policy and
therefore, void. Nonetheless, voluntary agreements that represent a reasonable settlement are binding on the
parties and should not later be disowned. It is only where there is clear proof that the waiver was wangled from
an unsuspecting or gullible person, or the terms of the settlement are unconscionable, that the law will step in to
bail out the employee. While it is our duty to prevent the exploitation of employees, it also behooves us to
protect the sanctity of contracts that do not contravene our laws.
In the case at bar, there is no showing that the quitclaims, waivers and voluntary resignation letters were
executed by the private respondents under force or duress. In truth, the documents embodied separation benefits
that were well beyond what the company was legally required to give private respondents. We note that out of
the more than one hundred workers that were retrenched by Asian Alcohol, only these six (6) private
respondents were not impressed by the generosity of their employer. Their late complainants have no basis and
deserves our scant consideration.
In VIEW WHEREOF, the petition is GRANTED. The Decision of the National Labor Relations Commission
dated May 30, 1997 and its Resolution dated September 25, 1997 are ANNULLED AND SET ASIDE. The
Decision of the Executive Labor Arbiter dated January 10, 1996 in RAB Case No. 06-12-10893-92 is
ORDERED REINSTATED. The complainants for illegal dismissal filed by private respondents against Asian
Alcohol Corporation are hereby ORDERED DISMISSED FOR LACK OF MERIT. No costs.
SO ORDERED.

[G.R. No. 108259. November 29, 1996.]
AG & P UNITED RANK & FILE ASSOCIATION (AG & P URFA) REYNALDO V. REYES,
MARCELINO ADLIT, QUINTIN ONG III, TEOFILO C. RAMOS, FELIMON R. VALIENTE, MA.
MAGDALENA MAGALONG, TORIBIO B. DE LEON, SEVERO C. BALBASTRO, JULIO F.
MONTANO, CONRADO D. MANGARAN, JESUS M. CANONIGO, SARAH S. DELA PENA, ANITA
A. CAINTIC, ASUNCION L. CORDERO JAIME B. SANDOVAL, OSCAR O. GOMEZ, BONIFACIO
A. ESPIRITU, JESUS E. AMARANTE, RICARDO M. LANDAYAN, FAUSTINO C. SAN ESTEBAN,
FRANCISCO M. MANALO, ROLAND C. TUPALAR, IRENEO T. ANDAN, MARIA G. GUEVARRA,
ERLINA B. SANCHEZ, SATURNINO C. QUINTO, DEOGENES F. SENORIN, OSCAR B.
PALATTAO, AUGUSTO A. RIUS, ANNIE J. NAPICOL, CECILIA D. FORNALIZA, ANANIAS S.
CAHILIG, CONSTANCIO R. PELIAS, JUANITO A. PIMENTEL, ROLANDO L. HOLGADO,
RAMON M. PERMICILLO, Petitioners, v. NLRC (First division) and ATLANTIC GULF and PACIFIC
COMPANY OF MANILA, INC., Respondents.
SYLLABUS
1. LABOR AND SOCIAL LEGISLATION; THE NLRC HAS THE POWER TO ADMIT ON
APPEAL ADDITIONAL EVIDENCE TO SHOW LAWFUL CAUSE FOR DISMISSAL, PROVIDED THAT
THE DELAY IN THE SUBMISSION THEREOF IS EXPLAINED AND THE SAME CLEARLY PROVES
THE EMPLOYER’S ALLEGATION OF VALID CAUSE FOR DISMISSING HIS EMPLOYEES; CASE AT
BAR. — It is now settled that the NLRC has the power to admit on appeal additional evidence to show lawful
cause for dismissal, provided that the delay in the submission of said evidence is explained and the same clearly
proves the employer’s allegation of a valid cause for dismissing his employees. In the case at bar, evidence of
losses for the years 1987 up to 1990 was belatedly introduced in the NLRC. But the delay was satisfactorily
explained by respondent company, as the audit conducted on its financial report by Sycip Gorres Velayo and
Co., was completed only in 1991. The additional evidence presented confirmed private respondent’s allegation
that the losses expected by the company were substantial and reasonably imminent justify the layoff of the
individual petitioners.
2. ID.; TERMINATION OF EMPLOYMENT; AUTHORIZED CAUSES; REDUNDANCY
DISTINGUISHED FROM RETRENCHMENT. — At this point, it is necessary to distinguish "redundancy"
from "retrenchment." Both are mentioned in Art. 283 of the Labor Code as just causes for the closing of
establishments or reduction of personnel. "Redundancy" exists when the services of an employee are in excess
of what is required by an enterprise. "Retrenchment," on the other hand, is one of the economic grounds for
dismissing employees and is resorted to primarily to avoid or minimize business losses. Private respondent’s
"redundancy program," while denominated as such, is more precisely termed "retrenchment" because it is
primarily intended to prevent serious business losses.
3. ID.; ID.; RETRENCHMENT, AS AN AUTHORIZED CAUSE FOR TERMINATING ONE’S
EMPLOYMENT; AN EXERCISE OF MANAGEMENT PREROGATIVE. — The labor Code recognizes
retrenchment as one of the authorized causes for terminating the employer-employee relationship and the
decision to retrench or not to retrench is a management prerogative. In the case at bar, the company losses were
duly established by the financial statements presented by both parties.
4. CIVIL LAW; EFFECT AND APPLICATION OF LAWS; NOT ALL QUITCLAIMS AND
RELEASES ARE CONTRARY TO PUBLIC POLICY; DOCUMENTS OF WAIVER VOLUNTARILY
EXECUTED ARE VALID AND BINDING; CASE AT BAR. — Petitioners insist that the documents of
waiver are without any effect because quitclaims and releases are contrary to public policy and therefore, null
and void. Not all quitclaims and releases are, however, contrary to public policy. As we have stated: Not all
waivers and quitclaims are invalid as against public policy. If the agreement was voluntarily entered into and
represents a reasonable settlement, it is binding on the parties and may not later be disowned simply because of
a change of mind. It is only where there is clear proof that the waiver was wangled form an unsuspecting or
gullible person, or the terms of settlement are unconscionable on its face, that the law will step in to annul the
questionable transaction. But where it is shown that the person making the waiver did so voluntarily, with full
understanding of what he was doing, and the consideration for the quitclaim is credible and reasonable, the
transaction must be recognized as a valid and binding undertaking. In the case at bar, the documents of waiver
were executed by the affected employee without any force or duress used against them by private respondents
or its representatives. To the contrary, the employees waived their claims because of awareness of the
precarious financial condition of the company as shown by a steady decline in its income. The documents
embodied reasonable settlements of the parties’ claims. As matter of fact, the employees received separation
pay equivalent to one month pay for every year of service, which was more than what they were entitle to
receive under the law which provides for separation pay equivalent to one month pay or one-half (1/2) month
pay for every year of service, whichever is higher.
DECISION
MENDOZA, J.:
This is a special civil action for certiorari to set aside the resolution, dated May 29, 1992, of the First
Division of the NLRC and its resolution promulgated on October 29, 1992, reconsidering the decision of the
Third Division of the same body and reinstating that of Labor Arbiter Quintin Mendoza who dismissed
petitioners complaint for illegal dismissal and unfair labor practice.
The facts are as follows:
Petitioner union is the duly certified bargaining agent of the rank and file employees of the
respondent corporation. The individual complainants are officers and members of petitioner. As a result of a
deadlock in the negotiations for a collective bargaining agreement, the union declared a strike on September 22,
1987.
Less than a month later, the Department of Labor and Employment assumed jurisdiction over the
dispute. Then Secretary Franklin Drilon rendered a decision on February 10, 1988 from which both parties
appealed.
 On January 11, 1988, prior to the rendition of the decision of the Secretary of Labor and
Employment, the president of respondent company announced the adoption by the company of several cost-
cutting measures to forestall impending financial losses. Among these was a socalled "redundancy program,"
which, as implemented on March 1, 1988, resulted in the layoff of around 177 employees, some of whom were
officers and members of the petitioner union. The affected employees were given separation pay equivalent to
one month pay for every year of service, for which they signed documents of waiver.
On March 14, 1988, however, petitioners filed a complaint for unfair labor practice and illegal
dismissal. After trial, Labor Arbiter Mendoza found the complaint to be without merit and accordingly
dismissed it. He found the "redundancy program" necessary for the company’s existence and considered private
respondent’s practice of rehiring or reemploying dismissed employees under the said program as a managerial
prerogative, made not only in pursuance of the company’s policy of giving preference to its dismissed workers,
but actually beneficial to the workers as well. Moreover, he held that petitioners’ acceptance of termination pay
and other benefits constituted a waiver of their right to question their dismissal.
On appeal, the Third Division of the National Labor Relations Commission reversed the labor
arbiter’s ruling. It found that the company did not incur losses but instead made substantial profits from 1983 to
1986. Consequently, it held private respondent guilty of unfair labor practice and illegal dismissal of petitioners
and ordered it to reinstate the individual petitioners to their former positions without loss of seniority rights and
to pay them full backwages, plus ten percent (10%) of the total award as attorney’s fees.
The company moved for a reconsideration. On May 29, 1992, the First Division, to which the case
was reassigned after the reorganization of the NLRC under R.A. No. 6715, reconsidered the decision of the
Third Division and reinstated the decision of the labor arbiter It admitted on appeal evidence of losses sustained
by the company from 1987 up to 1990. The admission of the evidence strengthened private respondent’s claim
that the petitioners had not been illegally dismissed but had been separated from employment as a result of the
"redundancy program" implemented in accordance with the conditions for retrenching, to wit:chanrob1es
virtual 1aw library
(1) The losses expected should be substantial and not merely de minimis in extent.
(2) The substantial loss apprehended must be reasonably imminent, as such imminence can be
perceived objectively and in good faith by the employer.
(3) The retrenchment must be reasonably necessary and likely to effectively prevent the expected
losses.
Petitioners filed a motion for reconsideration but their motion was denied in a resolution promulgated
on October 29, 1992. Hence, this petition.
Petitioners contend that the NLRC gravely abused its discretion by:chanrob1es virtual 1aw library
(1) admitting evidence of losses, which was not introduced in the proceedings before the labor arbiter
(2) declaring the legality of the redundancy program implemented by private respondent on March
31, 1988;
(3) not declaring the private respondent guilty of illegal dismissal and unfair labor practice;
(4) not declaring as null and void the quitclaims and releases issued by petitioners.
The petition has no merit.
It is now settled that the NLRC has the power to admit on appeal additional evidence to show lawful
cause for dismissal, provided that the delay in the submission of said evidence is explained and the same clearly
proves the employer’s allegation of a valid cause for dismissing his employees.
In the case at bar, evidence of losses for the years 1987 up to 1990 was belatedly introduced in the
NLRC. But the delay was satisfactorily explained by respondent company, as the audit conducted on its
financial report by Sycip Gorres Velayo and Co. was completed only in 1991. The additional evidence
presented confirmed private respondent’s allegation that the losses expected by the company were substantial
and reasonably imminent to justify the layoff of the individual petitioners.
At this point, it is necessary to distinguish "redundancy" from "retrenchment." Both are mentioned in
Art. 283 of the Labor Code as just causes for the closing of establishments or reduction of personnel.
"Redundancy "exists when the services of an employee are in excess of what is required by an enterprise.
"Retrenchment," on the other hand, is one of the economic grounds for dismissing employees and is resorted to
primarily to avoid or minimize business losses. Private respondent’s "redundancy program," while denominated
as such, is more precisely termed "retrenchment" because it is primarily intended to prevent serious business
losses.
As already stated, the Labor Code recognizes retrenchment as one of the authorized causes for
terminating the employer-employee relationship and the decision to retrench or not to retrench is a management
prerogative. In the case at bar, the company losses were duly established by the financial statements presented
by both parties. As the NLRC (First Division) noted:
In the case at bar, there is no question that respondent’s income had been continuously decreasing
P205 million in 1984; P175 million in 1985 and P101 million in 1986. In 1987, however, it declared a loss of
P34 million. The declining trend in respondent income and losses in 1987, confirms its allegation that
respondent is predicting a bleak future considering the slump not only in foreign contracts but with respect to
domestic contracts as well. True enough, respondent incurred further tremendous losses in 1990 in the amount
of P176,181,505.00 In other words, the losses or abrupt down fall in income which respondent wanted to abate
by resorting to the reduction in the number of employees was imminent and real.
Indeed, the records show that aside from its "redundancy program," respondent company had to
resort to other cost-cutting measures in order to stave off impending losses.
Petitioners contend that the "redundancy program" was actually a union-busting scheme of
management, aimed at removing union officers who had declared a strike. This contention cannot stand in the
face of evidence of substantial losses suffered by the company. Moreover, while it is true that the company
rehired or reemployed some of the dismissed workers, it has been shown that such action was made only as
company projects became available and that this was done in pursuance of the company’s policy of giving
preference to its former workers in the hiring of project employees. The rehiring or reemployment does not
negate the imminence of losses, which prompted private respondent to retrench.
Lastly, it is not disputed that petitioners signed documents of waiver which, in part, read:
I do hereby further acknowledge and declare that I have been paid by the Atlantic Gulf & Pacific
Company of Manila, Inc. all amounts due me by way of compensation arising out and in the course of my
employment; and that this separation from the service has no relations whatsoever with my union affiliations or
activities; that I admit the regularity of my separation and that I signed these presents after having fully
understood its contents.
Petitioners insist that the documents are without any effect because quitclaims and releases are
contrary to public policy and therefore, null and void. Not all quitclaims and releases are, however, contrary to
public policy. As we have stated:
Not all waivers and quitclaims are invalid as against public policy. If the agreement was voluntarily
entered into and represents a reasonable settlement, it is binding on the parties and may not later be disowned
simply because of a change of mind. It is only where there is clear proof that the waiver was wangled from an
unsuspecting or gullible person, or the terms of settlement are unconscionable on its face, that the law will step
in to annul the questionable transaction. But where it is shown that the person making the waiver did so
voluntarily, with full understanding of what he was doing, and the consideration for the quitclaim is credible
and reasonable, the transaction must be recognized as a valid and binding and undertaking.
In the case at bar, the documents of waiver were executed by the affected employees without any
force or duress used against them by private respondent or its representatives. To the contrary, the employees
waived their claims because of awareness of the precarious financial condition of the company as shown by a
steady decline in its income. The documents embodied reasonable settlements of the parties’ claims. As matter
of fact, the employees received separation pay equivalent to one month pay for every year of service, which
was more than what they were entitled to receive under the law which provides for separation pay equivalent to
one month pay or one-half (1/2) month pay for every year of service, whichever is higher.
In sum, there is substantial evidence supporting the decisions of both the labor arbiter and the NLRC,
consisting of the company’s audited financial reports, its policy of preferring former workers in the recruitment
of project employees and the documents of waiver voluntarily executed, which negates petitioners’ charge of
grave abuse of discretion.
WHEREFORE, the petition is DISMISSED.
SO ORDERED.
G.R. No. 148340 January 26, 2004
J.A.T. GENERAL SERVICES and JESUSA ADLAWAN TOROBU, Petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION and JOSE F. MASCARINAS, Respondents.
DECISION
QUISUMBING, J.:
For review are the Decision1 dated February 27, 2001 of the Court of Appeals in CA-G.R. SP No. 60337, and its
Resolution2 dated May 28, 2001, denying the motion for reconsideration. The Court of Appeals dismissed the
petition for certiorari filed by petitioners and affirmed the Resolution3 of the National Labor Relations
Commission (NLRC), Third Division, which affirmed the Decision4 of Labor Arbiter Jose G. De Vera in
NLRC-NCR Case No. 00-03-02279-98, which found petitioners liable for illegal dismissal and ordered
petitioners to pay private respondent Jose Mascarinas separation pay, backwages, legal holiday pay, service
incentive leave pay and 13th month pay in the aggregate sum of ₱85,871.00.
The facts, as culled from the records, are as follows:
Petitioner Jesusa Adlawan Trading & General Services (JAT) is a single proprietorship engaged in the business
of selling second-hand heavy equipment. JAT is owned by its namesake, co-petitioner Jesusa Adlawan Torobu.
Sometime in April 1997, JAT hired private respondent Jose F. Mascarinas as helper tasked to coordinate with
the cleaning and delivery of the heavy equipment sold to customers. Initially, private respondent was hired as a
probationary employee and was paid ₱165 per day that was increased to ₱180 in July 1997 and ₱185 in January
1998.
In October 1997, the sales of heavy equipment declined because of the Asian currency crisis. Consequently,
JAT temporarily suspended its operations. It advised its employees, including private respondent, not to report
for work starting on the first week of March 1998. JAT indefinitely closed shop effective May 1998.
A few days after, private respondent filed a case for illegal dismissal and underpayment of wages against
petitioners before the NLRC.
In his Complaint, private respondent alleged that he started as helper mechanic of JAT on January 6, 1997 with
an initial salary rate of ₱165.00 per day, which was increased to ₱180.00 per day after six (6) months in
employment. He related that he was one of those retrenched from employment by JAT and was allegedly
required to sign a piece of paper which he refused, causing his termination from employment.
On December 14, 1998, JAT filed an Establishment Termination Report with the Department of Labor and
Employment (DOLE), notifying the latter of its decision to close its business operations due to business losses
and financial reverses.
After due proceedings, the Labor Arbiter rendered a decision on March 25, 1999, finding the dismissal of
herein private respondent unjustified and ordering JAT to pay private respondent separation pay and
backwages, among others. The decretal portion of the decision reads as follows:
WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered ordering the
respondents [herein petitioners] to pay complainant the aggregate sum of ₱85,871.00.
SO ORDERED.5
The Labor Arbiter ruled that (1) private respondent Jose F. Mascarinas’ dismissal was unjustified because of
petitioners’ failure to serve upon the private respondent and the DOLE the required written notice of
termination at least one month prior to the effectivity thereof and to submit proof showing that petitioners
suffered a business slowdown in operations and sales effective January 1998; (2) private respondent may
recover backwages from March 1, 1998 up to March 1, 1999 or ₱66,924.006 and separation pay, in lieu of
reinstatement, at the rate of one (1) month pay for every year of service, or ₱10,296.00;7 (3) the payrolls
submitted by JAT showed that effective May 1, 1997, private respondent’s wages did not conform to the
prevailing minimum wage, hence, private respondent is entitled to salary differentials from May 1, 1997 to
January 6, 1998, in the amount of ₱1,066.00;8 (4) that private respondent be awarded legal holiday pay in the
amount of ₱1,850.00,9 service incentive leave pay in the amount of ₱925.0010 and 13th month pay for 1997 in
the amount of ₱4,810.00.11
On appeal, the NLRC affirmed the decision of the labor arbiter.12 The NLRC found that the financial statements
submitted on appeal were questionable, unreliable and inconsistent with petitioners’ allegations in the
pleadings, particularly as to the date of the alleged closure of operation; hence, they cannot be used to support
private respondent’s dismissal. The NLRC also affirmed the monetary awards because petitioners failed to
prove the payment of benefits claimed by private respondent.
Dissatisfied, petitioners filed a Petition for Certiorari under Rule 65 before the Court of Appeals, which the
latter dismissed. The decretal portion of the decision reads as follows:
WHEREFORE, foregoing premises considered, the instant petition, having no merit in fact and in law, is
hereby DENIED DUE COURSE, and ordered DISMISSED, and the assailed decision of the National Labor
Relations Commission AFFIRMED, with costs to petitioners.
SO ORDERED.13
The Court of Appeals affirmed the findings of the NLRC, particularly on the illegal dismissal of the private
respondent. The appellate court held that the petitioners failed to prove by clear and convincing evidence their
compliance with the requirements for valid retrenchment. It cited the findings of the NLRC on the belated
submission of the financial statements during appeal that could not be given sufficient weight, and that the
petitioners’ late submission of notice of closure is indicative of their bad faith.
Petitioners filed a Motion of Reconsideration, which was denied by the Court of Appeals.
Hence, the present petition alleging that the:
A. THE LOWER COURT (sic) ERRED IN RULING THAT A NOTICE TO THE DEPARTMENT
OF LABOR AND EMPLOYMENT (DOLE) IS NECESSARY IN CASE OF TEMPORARY
SUSPENSION OF BUSINESS;
B. THE LOWER COURT (sic) ERRED IN RULING THAT PRIVATE RESPONDENT IS
ENTITLED TO BACKWAGES DESPITE THE FACT THAT PRIVATE RESPONDENT WAS
NOT DISMISSED FROM SERVICE AT THE TIME THE COMPLAINT WAS FILED;
C. THE LOWER COURT (sic) ERRED IN RULING THAT THE EMPLOYER HAS THE
BURDEN OF PROVING THE EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP
BETWEEN THE PARTIES;
D. ASSUMING ARGUENDO THAT THE NOTICE TO THE LABOR DEPARTMENT FAILED
TO COMPLY WITH THE ONE-MONTH PERIOD, THE LOWER COURT (sic) ERRED IN
AWARDING BACKWAGES AND/OR SEPARATION PAY TO PRIVATE RESPONDENT
EVEN FOR PERIOD AFTER PETITIONERS FILED A NOTICE OF ACTUAL CLOSURE OF
THE COMPANY BEFORE THE LABOR DEPARTMENT.14
The relevant issues for our resolution are: (a) whether or not private respondent was illegally dismissed from
employment due to closure of petitioners’ business, and (b) whether or not private respondent is entitled to
separation pay, backwages and other monetary awards.
On the first issue, the petitioners claim that the Court of Appeals erroneously concluded that they are liable for
illegal dismissal because of non-compliance of the procedural and substantive requirements of terminating
employment due to retrenchment and cessation of business. They argued that there was no closure but only
suspension of operation in good faith in March 1998, when private respondent claimed to have been illegally
dismissed, due to the decline in sales and heavy losses incurred in its business arising from the 1997 Asian
financial crisis. Petitioners assert that under Article 286 of the Labor Code, a bona fide suspension of the
operation of a business for a period not exceeding six (6) months shall not terminate employment and no notice
to an employee is required. However, petitioners relate that JAT was compelled to permanently close its
operation eight (8) months later or on November 1998, when the hope of recovery became nil but only after
sending notices to all its workers and DOLE. Thus, petitioners argue that it cannot be held liable for illegal
dismissal in March 1998 since there was no termination of employment during suspension of operations and a
notice to employee is not required, unlike in the case of permanent closure of business operation.
We need not belabor the issue of notice requirement for a suspension of operation of business under Article
28615 of the Labor Code. This matter is not pertinent to, much less determinative of, the disposition of this case.
Suffice it to state that there is no termination of employment during the period of suspension, thus the
procedural requirement for terminating an employee does not come into play yet. Rather, the issue demanding a
sharpened focus here concerns the validity of dismissal resulting from the closure of JAT.
A brief discussion on the difference between retrenchment and closure of business as grounds for terminating
an employee is necessary. While the Court of Appeals defined the issue to be the validity of dismissal due to
alleged closure of business, it cited jurisprudence relating to retrenchment to support its resolution and
conclusion. While the two are often used interchangeably and are interrelated, they are actually two separate
and independent authorized causes for termination of employment. Termination of an employment may be
predicated on one without need of resorting to the other.
Closure of business, on one hand, is the reversal of fortune of the employer whereby there is a complete
cessation of business operations and/or an actual locking-up of the doors of establishment, usually due to
financial losses. Closure of business as an authorized cause for termination of employment aims to prevent
further financial drain upon an employer who cannot pay anymore his employees since business has already
stopped. On the other hand, retrenchment is reduction of personnel usually due to poor financial returns so as to
cut down on costs of operations in terms of salaries and wages to prevent bankruptcy of the company. It is
sometimes also referred to as down-sizing. Retrenchment is an authorized cause for termination of employment
which the law accords an employer who is not making good in its operations in order to cut back on expenses
for salaries and wages by laying off some employees. The purpose of retrenchment is to save a financially
ailing business establishment from eventually collapsing.16
In the present case, we find the issues and contentions more centered on closure of business operation rather
than retrenchment. Closure or cessation of operation of the establishment is an authorized cause for terminating
an employee under Article 283 of the Labor Code, to wit:
ART. 283. Closure of establishment and reduction of personnel. – The employer may also terminate the
employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is
for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the
Department of Labor and Employment at least one (1) month before the intended date thereof. … In case of
retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to
one (1) month pay or to at least one-half (1/2) month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1) whole year.
However, the burden of proving that such closure is bona fide falls upon the employer.17 In the present case,
JAT justifies its closure of business due to heavy losses caused by declining sales. It belatedly submitted its
1997 Income Statement18 and Comparative Statement of Income and Capital for 1997 and 199819 to the NLRC to
prove that JAT suffered losses starting 1997. However, as noted earlier, these were not given much evidentiary
weight by the NLRC as well as the Court of Appeals, to wit:
The financial statements submitted by the respondents on appeal are questionable for the following reasons: (1)
the figures in Annexes "D-2" and "E" of the appeal memorandum (which both refer to 1997) do not tally; (2)
they (the respondents) allegedly closed on March 1, 1998. Yet, their 1998 financial statement (Annex "E")
indicates operations up to and ending December 31, 1998. In view of the foregoing, the above-mentioned
financial statements do not justify the complainant’s dismissal. …20
The foregoing findings of the Court of Appeals is conclusive on us. We see no cogent reason to set it aside.
While business reverses or losses are recognized by law as an authorized cause for terminating employment, it
is an essential requirement that alleged losses in business operations must be proven convincingly. Otherwise,
said ground for termination would be susceptible to abuse by scheming employers, who might be merely
feigning business losses or reverses in their business ventures in order to ease out employees.21 In this case, the
financial statements were not only belatedly submitted but were also bereft of necessary details on the extent of
the alleged losses incurred, if any. The income statements only indicated a decline in sales in 1998 as compared
to 1997. These fell short of the stringent requirement of the law that the employer prove sufficiently and
convincingly its allegation of substantial losses. While the comparative income statement shows a net loss of
₱207,091 in 1998, the income statement of 1997 still shows JAT posting a net income of ₱19,361. Both
statements need interpretation as to their impact on the company’s termination of certain personnel as well as
business closure.
Having concluded that private respondent was not validly dismissed resulting from closure of business
operations due to substantial losses, we now proceed to determine whether or not private respondent was
validly dismissed on the ground of closure or cessation of operations for reasons other than substantial business
losses.
A careful examination of Article 283 of the Labor Code shows that closure or cessation of business operation as
a valid and authorized ground of terminating employment is not limited to those resulting from business losses
or reverses. Said provision in fact provides for the payment of separation pay to employees terminated because
of closure of business not due to losses, thus implying that termination of employees other than closure of
business due to losses may be valid.
Hence, in one case,22 we emphasized that:
…Art. 283 governs the grant of separation benefits "in case of closures or cessation of operation" of business
establishments "NOT due to serious business losses or financial reverses x x x." Where, however, the closure
was due to business losses–as in the instant case, in which the aggregate losses amounted to over ₱20
billion–the Labor Code does not impose any obligation upon the employer to pay separation benefits, for
obvious reasons. There is no need to belabor this point. Even the public respondents, in their Comment filed by
the Solicitor General, impliedly concede this point.
In another case,23 we held more emphatically that:
In any case, Article 283 of the Labor Code is clear that an employer may close or cease his business operations
or undertaking even if he is not suffering from serious business losses or financial reverses, as long as he pays
his employees their termination pay in the amount corresponding to their length of service. It would, indeed, be
stretching the intent and spirit of the law if we were to unjustly interfere in management’s prerogative to close
or cease its business operations just because said business operation or undertaking is not suffering from any
loss.
In the present case, while petitioners did not sufficiently establish substantial losses to justify closure of the
business, its income statement shows declining sales in 1998, prompting the petitioners to suspend its business
operations sometime in March 1998, eventually leading to its permanent closure in December 1998.
Apparently, the petitioners saw the declining sales figures and the unsustainable business environment with no
hope of recovery during the period of suspension as indicative of bleak business prospects, justifying a
permanent closure of operation to save its business from further collapse. On this score, we agree that undue
interference with an employer’s judgment in the conduct of his business is uncalled for. Even as the law is
solicitous of the welfare of employees, it must also protect the right of an employer to exercise what is clearly a
management prerogatives. As long as the company’s exercise of the same is in good faith to advance its interest
and not for the purpose of defeating or circumventing the rights of employees under the law or a valid
agreement such exercise will be upheld.24
In the event, under Article 283 of the Labor Code, three requirements are necessary for a valid cessation of
business operations, namely: (a) service of a written notice to the employees and to the DOLE at least one (1)
month before the intended date thereof; (b) the cessation of business must be bona fide in character; and (c)
payment to the employees of termination pay amounting to at least one-half (1/2) month pay for every year of
service, or one (1) month pay, whichever is higher.25
The closure of business operation by petitioners, in our view, is not tainted with bad faith or other circumstance
that arouses undue suspicion of malicious intent. The decision to permanently close business operations was
arrived at after a suspension of operation for several months precipitated by a slowdown in sales without any
prospects of improving. There were no indications that an impending strike or any labor-related union activities
precipitated the sudden closure of business. Further, contrary to the findings of the Labor Arbiter, petitioners
had notified private respondent26 and all other workers through written letters dated November 25, 1998 of its
decision to permanently close its business and had submitted a termination report to the DOLE.27 Generally,
review of labor cases elevated to this Court on a petition for review on certiorari is confined merely to questions
of law. But in certain cases, we are constrained to analyze or weigh the evidence again if the findings of fact of
the labor tribunals and the appellate court are in conflict, or not supported by evidence on record or the
judgment is based on a misapprehension of facts.28
In this case, we are persuaded that the closure of JAT’s business is not unjustified.1âwphi1 Further we hold that
private respondent was validly terminated, because the closure of business operations is justified.
Nevertheless in this case, we must stress that the closure of business operation is allowed under the Labor
Code, provided separation pay be paid to the terminated employee. It is settled that in case of closure or
cessation of operation of a business establishment not due to serious business losses or financial reverses, the
employees are always given separation benefits.29 The amount of separation pay must be computed from the
time private respondent commenced employment with petitioners until the time the latter ceased
operations.30 1âwphi1
Considering that private respondent was not illegally dismissed, however, no backwages need to be awarded.
Backwages in general are granted on grounds of equity for earnings which a worker or employee has lost due to
illegal dismissal.31 It is well settled that backwages may be granted only when there is a finding of illegal
dismissal.32
The other monetary awards to private respondent are undisputed by petitioners and unrefuted by any contrary
evidence. These awards, namely legal holiday pay, service incentive leave pay and 13th month pay, should be
maintained.
WHEREFORE, the petition is given due course. The assailed Resolutions of the Court of Appeals in CA-G.R.
SP No. 60337 are AFFIRMED with the MODIFICATION that the award of ₱66,924.00 as backwages is
deleted. The award of separation pay amounting to ₱10,296.00 and the other monetary awards, namely salary
differentials in the amount of ₱1,066.00, legal holiday pay in the amount of ₱1,850.00, service incentive leave
pay in the amount of ₱925.00 and 13th month pay in the amount of ₱4,910, or a total of ₱29,047.00 are
maintained. No pronouncement as to costs.
SO ORDERED.

G.R. No. 115394 September 27, 1995
FE S. SEBUGUERO, CARLOS ONG, NENE MANAOG, JUANITO CUSTODIO, CRISANTA LACSAM,
SATURNINO GURAL, WILMA BALDERA, LEONILA VALDEZ, FATIMA POTESTAD, EVANGELINE
AGNADO, RESTITUTO GLORIOSO, JANESE DE LOS REYES, RODOLFO SANCHEZ, WILMA
ORBELLO, DAISY PASCUA, and ALEX MASAYA, petitioners, vs.
NATIONAL LABOR RELATIONS COMMISSION, G.T.I. SPORTSWEAR CORPORATION and/or
BENEDICTO YUJUICO, respondents.
DAVIDE, JR., J.:
This is a special civil action for certiorari under Rule 65 of the Rules of Court to set aside for having been
rendered with grave abuse of discretion the decision of 29 November 19931 and resolution of 9 February
19942 of public respondent National Labor Relations Commission (NLRC) in NLRC NCR CA Case No.
004673-93. The former modified the decision of 26 February 1993 of the Labor Arbiter3 by setting aside the
award of back wages, proportionate 13th month pay for 1991 and attorney's fees, while the latter denied the
motion to reconsider the former.
The antecedent facts as disclosed by the decisions of the Labor Arbiter and the NLRC, as well as by the
pleadings of the parties, are not complicated.
The petitioners were among the thirty-eight (38) regular employees of private respondent GTI Sportswear
Corporation (hereinafter GTI), a corporation engaged in the manufacture and export of ready-to-wear garments,
who were given "temporary lay-off" notices by the latter on 22 January 1991 due to alleged lack of work and
heavy losses caused by the cancellation of orders from abroad and by the garments embargo of 1990.
Believing that their "temporary lay-off" was a ploy to dismiss them, resorted to because of their union activities
and was in violation of their right to security of tenure since there was no valid ground therefor, the 38 laid-off
employees filed with the Labor Arbiter's office in the National Capital Region complaints for illegal dismissal,
unfair labor practice, underpayment of wages under Wage Orders Nos. 01 and 02, and non-payment of
overtime pay and 13th month pay.4
Private respondent GTI denied the claim of illegal dismissal and asserted that it was its prerogative to lay-off its
employees temporarily for a period not exceeding six months to prevent losses due to lack of work or job orders
from abroad, and that the lay-off affected both union and non-union members. It justified its failure to recall the
38 laid-off employees after the lapse of six months because of the subsequent cancellations of job orders made
by its foreign principals, a fact which was communicated to the petitioners and the other complainants who
were all offered severance pay. Twenty-two (22) of the 38 complainants accepted the separation pay. The
petitioners herein did not.
The cases then involving those who accepted the separation pay were pro tanto dismissed with prejudice.
In his decision of 26 February 1993 with respect to the claims of the petitioners, Labor Arbiter Pablo C.
Espiritu, Jr. found for them and disposed as follows:
WHEREFORE, above premises considered, judgment is hereby rendered finding Respondent, G.T.I.
Sportswear Corporation, liable for constructive dismissal, underpayment of wages under NCR 01 and 02, and
13th-month pay differentials and concomitantly, Respondent corporation is hereby ordered:
a. To pay the following complainants backwages from the time of their constructive dismissal (July 22, 1991)
till promulgation considering that reinstatement is no longer decreed: . . .
b. To pay complainants separation pay of 1/2 month for every year of service in lieu of reinstatement in the
following amounts: . . .
c. To pay complainants 13th-month pay differentials arising out of underpayment of wages and proportionate
13th-month pay for 1991 in the following amounts: . . .
d. To pay complainants underpayment of wages under NCR Wage 01 and NCR Wage 02 in the following
amounts: . . .
e. To pay complainants the amount of P120,618.87 representing 10% attorney's fees based on the total
judgment award of P1,326,807.63.
The claims for unfair labor practice, nonpayment of overtime pay, moral damages, and exemplary damages are
hereby denied for lack of merit.SO ORDERED.5
In support of the disposition, the Labor Arbiter made the following ratiocinations:
On the validity of the temporary lay-off, this Arbitration Branch finds that there was ample
justification on the part of Respondent company to lay-off temporarily some of its employees to prevent losses
as a result of the reduction of the garment quota allocated to Respondent company due to the garment embargo
of 1990. In fact, in the months of March, April, and May of 1991 respondent company received several
messages/correspondence from its foreign principals informing them (Respondent) that they are
canceling/transferring some of their quotas/orders to other countries. The evidence presented by Respondent
company proves this fact (Exhibits "12", "13", "14", "15", "15-A", "16", "17" and Annexes "5", "6", "7",
showing the different documentary evidence on cancellation of orders and forced leave schedules of workers
due to lack of work). This is sustainable, as in this case, where the Respondent found it unnecessary to continue
employing some of its workers because of business recession, lack of materials to work on due to government
controls (garments embargo) and due to the lack of the demand for export quota from its principal foreign
buyers.
 Although, as a general rule, Respondent company has the prerogative and right to resort to temporary
lay-off, such right is likewise limited to a period of six (6) months applying Art. 286 of the Labor Code on
suspension of employer-employee relationship not exceeding six (6) months
In this case, respondent company was justified in the temporary lay-off of some of its employees.
However, Respondent company should have recalled them after the end of the six month period or at the least
reasonably informed them (complainants) that the Respondent company is still not in a position to recall them
due to the continuous drop of demand in the export market (locally or internationally), thereby extending the
temporary lay-off with a definite period of recall and if the same cannot be met, then the company should
implement retrenchment and pay its employees separation pay. Failing in this regard, respondent company
chose not to recall nor send notice to the complainants after the lapse of the six (6) month period. Hence, there
is in this complaint a clear case of constructive dismissal. While there is a valid reason for the temporary lay-
off, the same is also limited to a duration of six months. Thereafter the employees, complainants herein, are
entitled under the law (Art. 286) to be recalled back to work. As result thereof, the temporary lay-off of the
complainants from January 22, 1991 (date of lay-off) to July 22, 1991 is valid, however, thereafter
complainants are already entitled to backwages, in view of constructive dismissal, due to the fact that they were
no longer recalled back to work. Complainants cannot be placed on temporary lay-off forever. The limited
period of six (6) months is based provisionally too prevent circumvention on the right to security of tenure and
to prevent grave abuse of discretion on the part of the employer. However, since during the trial it was proven,
as testified by the Vice-President for marketing and personnel manager, that the lack of work and selection of
personnel continued to persist and considering the antagonism and hostility displayed by both litigants, as
observed by this Arbiter, during the trial of this case and in view of the strained relations between the parties,
reinstatement of the complainants would not be prudent. (Divine Word High School vs. NLRC, G.R. 72207, 6
Aug. 1986; Esmalin vs. NLRC, G.R. 67880, 15 Sept. 1989; Hernandez vs. NLRC, G.R. 34302, 10 Aug. 1989).
Hence, separation pay of 1/2 month for every year of service in lieu of reinstatement is in order. . . .
On the issue of monetary claims this Arbitration Branch finds that Respondent is liable for
underpayment of wages under NCR Wage Order 01 and 02 considering that respondent failed to rebut the
claims of the complainants. Respondent failed to show proof by means of payrolls to disprove the claim of the
complainants. Complainants are also entitled to their proportionate 13th-month pay differentials as a result of
the underpayment of wages under NCR-01 and 02 and likewise to their proportionate 13th-month pay for 1991
for the month of January 1991. . . .
However, complainants are entitled to reasonable attorney's fees considering they were forced to
engage the services of counsel in order to fully ventilate their rights and grievances in accordance with the
Labor Code as amended.6
The Labor Arbiter found no sufficient evidence to prove the petitioners' charges of unfair labor practice,
overtime pay, and for moral and exemplary damages.
Private respondent GTI seasonably appealed the aforesaid decision to the NLRC, which docketed the appeal as
NLRC NCR CA Case No. 004673-93.
In its challenged decision, the NLRC concurred with the findings of the Labor Arbiter that there was a valid
lay-off of the petitioners due to lack of work, but disagreed with the latter's ruling granting back wages after 22
July 1991. The NLRC justified its postulation as follows:
However, we cannot sustain the findings of the Labor Arbiter in awarding the complainants backwages after
July 22, 1991 in view of constructive dismissal, it being acknowledged by him that ". . . during the trial it was
proven, as testified by the Vice-President for marketing and personnel manager, that the lack of work and
selection of personnel continued to persist . . ." Besides, it was not denied by the complainants that during the
proceeding of the case, the respondents conveyed to the complainants the impossibility of having them recalled
in view of the continued unavailability of work as the economic recession of the respondent's principal market
persisted. In fact, the respondent company offered to complainants payment of their separation pay which offer
[w]as accepted by 22 out of 38 complainants.
Having established lack of work, it necessarily follow[s] that retrenchment did take place and not constructive
dismissal. Dismissal by its term, presuppose that there was still work available and that the employer terminated
the services of the employee therefrom. The same cannot be said of the case at bar. The complainants did not
question the evidence of lack of work on account of reduction of government quota or cancellation of orders.
Art. 286 of the Labor Code is precised [sic] in this regards when it provided that:
Art. 286. When employment not deemed terminated. — The bona fide suspension of the operation of a business
or undertaking for a period not exceeding six (6) months, . . . shall not terminate employment . . . .
It is only after the six months period that an employee can be presumed to have been
terminated.7
It thus set aside the awards for back wages, proportionate 13th month pay for 1991, and for attorney's fees
which it found to be without basis, and disposed as follows:
WHEREFORE, premises considered the decision of the Labor Arbiter dated February 26,
1993 is hereby modified by deleting the award of backwages, the proportionate 13th
month pay for 1991 and attorney's fees for lack of legal basis and direct, the payment of
separation pay equal to one-half month salary for every year of service as of July 22,
1991.8
Unable to accept the NLRC judgment, the petitioners filed this special civil action for certiorari. They contend
that the NLRC acted without or in excess of jurisdiction or with grave abuse of discretion when it: (a) ruled that
there was a valid and legal reduction of business and in sustaining the theory of redundancy in justifying the
dismissal of the petitioners; (b) failed to apply in full the provisions of law and of jurisprudence as to the full
payment of back wages in cases of illegal dismissal; and (c) deleted the award of attorney's fees.
We gave due course to this petition after the filing of the separate comments to the petition by the public and
private respondents and the petitioners' reply to the public respondent's comment.
The petitioners' first contention is based on a wrong premise or on a miscomprehension of the statement of the
NLRC. What the NLRC sustained and affirmed is not redundancy, but retrenchment as a ground for
termination of employment. They are not synonymous but distinct and separate grounds under Article 283 of
the Labor Code, as amended.9
Redundancy exists where the services of an employee are in excess of what is reasonably demanded by the
actual requirements of the enterprise. A position is redundant where it is superfluous, and superfluity of a
position or positions may be the outcome of a number of factors, such as overhiring of workers, decreased
volume of business, or dropping of a particular product line or service activity previously manufactured or
undertaken by the enterprise.10
Retrenchment, on the other hand, is used interchangeably with the term "lay-off." It is the termination of
employment initiated by the employer through no fault of the employee's and without prejudice to the latter,
resorted to by management during periods of business recession, industrial depression, or seasonal fluctuations,
or during lulls occasioned by lack of orders, shortage of materials, conversion of the plant for a new production
program or the introduction of new methods or more efficient machinery, or of automation.11 Simply put, it is
an act of the employer of dismissing employees because of losses in the operation of a business, lack of work,
and considerable reduction on the volume of his business, a right consistently recognized and affirmed by this
Court.12
Article 283 of the Labor code which covers retrenchment, reads as follows:
Art. 283. Closure of establishment and reduction of personnel. — The employer may also
terminate the employment of any employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by servicing a written notice on the workers and the Ministry of
Labor and Employment at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at least his one (1)
month pay or to at least one (1) month pay for every year of service, whichever is higher.
In case of retrenchment to prevent losses and in cases of closure or cessation of operations
of establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month
pay for every year of service, whichever is higher. A fraction of at least six (6) months
shall be considered one (1) whole year.
This provision, however, speaks of a permanent retrenchment as opposed to a temporary lay-off as is
the case here. There is no specific provision of law which treats of a temporary retrenchment or lay-
off and provides for the requisites in effecting it or a period or duration therefor. These employees
cannot forever be temporarily laid-off. To remedy this situation or fill the hiatus, Article 286 may be
applied but only by analogy to set a specific period that employees may remain temporarily laid-off
or in floating status.13 Six months is the period set by law that the operation of a business or
undertaking may be suspended thereby suspending the employment of the employees concerned. The
temporary lay-off wherein the employees likewise cease to work should also not last longer than six
months. After six months, the employees should either be recalled to work or permanently retrenched
following the requirements of the law, and that failing to comply with this would be tantamount to
dismissing the employees and the employer would thus be liable for such dismissal.
To determine, therefore, whether the petitioners were validly retrenched or were illegally dismissed, we must
determine whether there was compliance with the law regarding a valid retrenchment at anytime within the six
month-period that they were temporarily laid-off.
Under the aforequoted Article 283 of the Labor Code, there are three basic requisites for a valid retrenchment:
(1) the retrenchment is necessary to prevent losses and such losses are proven;
(2) written notice to the employees and to the Department of Labor and Employment at
least one month prior to the intended date of retrenchment; and
(3) payment of separation pay equivalent to one month pay or at least 1/2 month pay for
every year of service, whichever is higher.
As for the first requisite, whether or not an employer would imminently suffer serious or substantial losses for
economic reasons is essentially a question of fact for the Labor Arbiter and the NLRC to determine.14 Here,
both the Labor Arbiter and the NLRC found that the private respondent was suffering and would continue to
suffer serious losses, thereby justifying the retrenchment of some of its employees, including the petitioners.
We are not prepared to disregard this finding of fact. It is settled that findings of quasi-judicial agencies which
have acquired expertise in the matters entrusted to their jurisdiction are accorded by this Court not only with
respect but with finality if they are supported by substantial evidence.15 The latter means that amount of relevant
evidence which a reasonable mind might accept as adequate to justify a conclusion.16 In the instant case, no
claim was made by any of the parties that such a finding was not supported by substantial evidence.
Furthermore, the petitioners did not appeal the finding of the Labor Arbiter that their temporary lay-off to
prevent losses was amply justified. They cannot now question this finding that there is a valid ground to lay-off
or retrench them.
The requirement of notice to both the employees concerned and the Department of Labor and Employment
(DOLE) is mandatory and must be written and given at least one month before the intended date of
retrenchment. In this case, it is undisputed that the petitioners were given notice of the temporary lay-off. There
is, however, no evidence that any written notice to permanently retrench them was given at least one month
prior to the date of the intended retrenchment. The NLRC found that GTI conveyed to the petitioners the
impossibility of recalling them due to the continued unavailability of work.17 But what the law requires is
a written notice to the employees concerned and that requirement is mandatory.18 The notice must also be given
at least one month in advance of the intended date of retrenchment to enable the employees to look for other
means of employment and therefore to ease the impact of the loss of their jobs and the corresponding
income.19 That they were already on temporary lay-off at the time notice should have been given to them is not
an excuse to forego the one-month written notice because by this time, their lay-off is to become permanent and
they were definitely losing their employment.
There is also nothing in the records to prove that a written notice was ever given to the DOLE as required by
law. GTI's position paper,20 offer of exhibits,21 Comment to the Petition,22 and Memorandum23 in this case do not
mention of any such written notice. The law requires two notices — one to the employee/s concerned and
another to the DOLE — not just one. The notice to the DOLE is essential because the right to retrench is not an
absolute prerogative of an employer but is subject to the requirement of law that retrenchment be done to
prevent losses. The DOLE is the agency that will determine whether the planned retrenchment is justified and
adequately supported by facts.24
With respect to the payment of separation pay, the NLRC found that GTI offered to give the petitioners their
separation pay but that the latter rejected such offer which was accepted only by 22 out of the 38 original
complainants in this case.25 As to when this offer was made was not, however, proven. All that the parties, the
Labor Arbiter and the NLRC stated in their respective pleadings and decisions was that the offer and payment
were made during the pendency of the illegal dismissal case with the Labor Arbiter. But with or without this
offer of separation pay, our conclusion would remain the same: that the retrenchment of the petitioners is
defective in the face of our finding that the required notices to both the petitioners and the DOLE were not
given.
The lack of written notice to the petitioners and to the DOLE does not, however, make the petitioners'
retrenchment illegal such that they are entitled to the payment of back wages and separation pay in lieu of
reinstatement as they contend. Their retrenchment, for not having been effected with the required notices, is
merely defective. In those cases where we found the retrenchment to be illegal and ordered the employees'
reinstatement and the payment of back wages, the validity of the cause for retrenchment, that is the existence of
imminent or actual serious or substantial losses, was not proven.26 But here, such a cause is present as found by
both the Labor Arbiter and the NLRC. There is only a violation by GTI of the procedure prescribed in Article
283 of the Labor Code in effecting the retrenchment of the petitioners.
It is now settled that where the dismissal of an employee is in fact for a just and valid cause and is so proven to
be but he is not accorded his right to due process, i.e., he was not furnished the twin requirements of notice and
the opportunity to be heard, the dismissal shall be upheld but the employer must be sanctioned for non-
compliance with the requirements of or for failure to observe due process. The sanction, in the nature of
indemnification or penalty, depends on the facts of each case and the gravity of the omission committed by the
employer and has ranged from P1,000.00 as in the cases of Wenphil vs. National Labor Relations
Commission,27 Seahorse Maritime Corp. vs. National Labor Relations Commission,28 Shoemart,
Inc. vs. National Labor Relations Commission,29 Rubberworld (Phils.), Inc. vs. National Labor Relations
Commission,30 Pacific Mills, Inc. vs. Alonzo, 31 and Aurelio vs. National Labor Relations Commission32 to
P10,000.00 in Reta vs. National Labor Relations Commission33 and Alhambra Industries, Inc. vs. National
Labor Relations Commission.34 More recently, in Worldwide Papermills, Inc. vs. National Labor Relations
Commission,35 the sum of P5,000.00 was awarded to the employee as indemnification for the employer's failure
to comply with the requirements of procedural due process.
Accordingly, we affirm the deletion by the NLRC of the award of back wages. But because the required notices
of the petitioners' retrenchment were not served upon the petitioners and the DOLE, GTI must be sanctioned for
such failure and thereby required to indemnify each of the petitioners the sum of P2,000.00 which we find to be
just and reasonable under the circumstances of this case.
As for the award of the 13th-month pay made by the Labor Arbiter and deleted by the NLRC, we do not find
anything in the decision of the NLRC to support the deletion of this award other than its opinion that there is
lack of legal basis to support such an award, without, however, furnishing any explanation for this finding.
Thus, the award of the 13th-month pay made and sufficiently justified by the Labor Arbiter must be reinstated
as prayed for by the petitioners.
Also, the petitioners are entitled to an award for attorney's fees pursuant to paragraph 7, Article 2208 of the
Civil Code which must, however, be reasonable. The award of P120,618.87, which is equivalent to ten percent
(10%) of the amounts recovered, as attorney's fees should be reduced to P25,000.00, an amount we find to be
reasonable. The ten percent (10%) attorney's fees provided for in Article 111 of the Labor Code and Section 11,
Rule VIII, Book III of the Implementing Rules is the maximum; hence, any amount less than that may be
awarded as the circumstances of the case may warrant.
WHEREFORE, the instant petition is partially GRANTED and the challenged decision of public respondent
National Labor Relations Commission in NLRC NCR CA Case No. 004673-93 is modified by reversing and
setting aside its deletion of the awards in the Labor Arbiter's decision of proportionate 13th month pay for 1991
and attorney's fees, the latter being reduced to P25,000.00. Separation pay equivalent to one-half (1/2) month
pay for every year of service shall be computed from the dates of the commencement of the petitioners'
respective employment until the end of their six-month temporary lay-off which is 22 July 1991. In addition,
private respondent G.T.I. Sportswear Corporation is ordered to pay each of the petitioners the sum of P2,000.00
as indemnification for its failure to observe due process in effecting the retrenchment.
Costs against the private respondent. SO ORDERED
G.R. No. 164582 March 28, 2007
PILAR ESPINA, ELEANOR G. AQUINO, LORENE C. BARNUEVO, MARICRIS S. J. BANDINO,
JULIO M. PETALIO, JR., NOEL T. DE BORJA, REMEGIO P. BASCO, MATEO D. DEOCAREZA,
EMILIANO A. EBREO, BENJAMIN PAZ, LEONORA PAZ, CLAUDIO DE LOS REYES, LEANDRO
R. CELIS, PATERNO FERNANDEZ, ANICETO M. RODRIGUEZ, DONATO M. PUNZALAN,
LOURDES ALFONSO Q., ALLAN PANLILIO, DAISY V. ARCEO, ALEJANDRO D. PASCUAL, MA.
CORAZON T. BAJO, ARNOLD M. BLANCO, CRISTITO S. ABELA, DIOSCORO FAJANILAG, and
AGUSTIN WONG, Petitioners, vs. HON. COURT OF APPEALS, MONDE M.Y. SAN BISCUIT CORP.,
M.Y. SAN BISCUIT INC., MRS. MHEW WHA LIM and MR. KENG SUN MAR, Respondents.
DECISION
CHICO-NAZARIO, J.:
This Petition for Review on Certiorari under Rule 45 of the Rules of Court seeks to reverse the following
Resolutions of the Court of Appeals in CA-G.R. SP No. 78797 entitled, "Pilar Espina, et al. v. National Labor
Relations Commission, et al.": (a) Resolution1 dated 23 September 2003 which dismissed petitioners’ appeal for
failure of all of the petitioners to sign the certification of non-forum shopping; (b) Resolution2 dated 3 March
2004, denying petitioners’ motion to drop the names of their co-workers who failed to sign the certification of
non-forum shopping; and (c) Resolution3 dated 23 June 2004, denying petitioners’ Motion for Reconsideration.
The factual antecedents of the case are as follows:
Respondent M.Y. San Biscuits, Inc. (M.Y. San) was previously engaged in the business of manufacturing
biscuits and other related products.
On 27 December 2000, in a conciliation proceeding before the Department of Labor and Employment (DOLE)
NCMB-NCR Director Leopoldo de Jesus, the duly authorized representative of M.Y. San Worker’s Union-
PTGWO and M.Y. San Sales Force Union-PTGWO was informed of the closure or cessation of business
operations of respondent M.Y. San as a result of the intended sale of the business and all the assets of
respondent M.Y. San to respondent Monde M.Y. San Corporation (Monde) and was notified of their
termination, effective 31 January 2001. It was agreed that:
In the interest of industrial peace, the union and management have agreed as follows:
1. In consideration of the length of service of the employees, the management will pay separation
package in accordance with their existing Collective Bargaining Agreement. In addition the company
will likewise grant nine (9) days per year of service on top of what is provided for in the CBA.
2. The computation of separation package shall be based on employees’ present basic daily rate for
year 2000 plus the increase of ₱15.00 per day for all employees.
3. The cut-off date of the length of service is on January 31, 2001.
4. The Company shall extend to all affected employees the cash equivalent of their vacation and sick
leaves, as follows:
Vacation leaves
1-5 years ----------- 17 days
5-10 years ----------- 17 days
10-20 years ----------- 17 days
20-30 years ----------- 30 days
30-35 years ----------- 32 days
Sick leaves
1-5 years ---------- 17 days
5-10 years ---------- 17 days
10-20 years ---------- 17 days
20-30 years ---------- 30 days
30-up ---------- 32 days
5. The Company will pay one-half of the total union dues for year 2001.
6. The existing local unions affiliated with PTGWO is directly and voluntarily recognized as the sole
and exclusive bargaining agent of the employees at Monde M.Y. San Corporation, the new
owner/name of M.Y. San Biscuits Inc. The company promises to give PTGWO a written
confirmation of recognition from the new owner/company.
 7. That the separation pay is Tax-Free.
8. That the SSS and PAG-IBIG loans shall be directly remitted by the employees’ concerned.
9. The company will submit list of all employees to the new owner for purposes of rehiring, subject
to the new qualifications that may be imposed by the new owner/company. The said employees,
however, shall be given hiring preference.
10. As requested, the company furnished the union with a copy of the list of affected employees and
announcement letter from the President of M.Y. San Biscuit.
11. The Company agrees to start the giving of separation pay by the second week of January 2001
but shall in no case beyond the third week of the said month.
12. The agreement of the parties in this proceeding shall be contained in the Memorandum of
Agreement that will be immediately prepared by the parties.
13. In view of this Agreement, the notices of strike filed with this Office are deemed settled and
withdrawn. The rights of the parties are, however, not waived should any of the terms of this
agreement are violated by any of the parties.
27 December 2001.4
On 28 December 2000, the written notice of the sale and purchase of the assets of respondent M.Y San to
respondent Monde and of the termination of all the employees of respondent M.Y. San were filed before the
DOLE Regional Office No. IV.5
On 22 January 2001, respondent M.Y. San and the Union signed a Memorandum of Agreement (MOA)
embodying the agreements set forth in the Minutes/Agreement, dated 27 December 2000. Embodied in the
MOA is an agreement that the existing Collective Bargaining Agreement shall cease to be effective on 31
January 2001 and shall in no way be binding upon the buyer, respondent Monde, and that respondent M.Y. San
shall provide respondent Monde a list of all its present employees who shall be given preference in employment
by the latter. Pertinent provisions of the Agreement:
9. The Company agrees to submit the list of all its present employees to the new corporation for purposes of
rehiring if said employee applies and qualifies, subject to such criteria as the new corporation may impose. In
the rehiring, the covered employees shall be given hiring preference, if qualified. The corresponding Notice as
to whom of the covered employees have been hired by the new corporation shall be issued immediately after
January 31, 2001. During the entire rehiring process and until the election and qualification of the new officers,
the PTGWO, through its National President, or his authorized representative, shall act as the TRUSTEE of the
UNION.
10. All employees hired by MONDE M.Y. SAN CORPORATION and/or the new owner of the COMPANY,
shall upon hiring, subject to the terms and conditions of their probationary employment, become members of
the UNION. The continued existence of the UNION in the company and/or MONDE M.Y. SAN
CORPORATION shall not be interrupted by the payment of the Company’s employees of their separation
package or the temporary closure of the Company’s operations.6
On 31 January 2001, all the employees of respondent M.Y. San received their separation pay and the cash
equivalent of their vacation and sick leaves. Thereafter, they signed their respective Quitclaims.
On 1 February 2001, an Asset Purchase Agreement was executed between respondents M.Y. San and Monde.
On 2 February 2001, respondent Monde commenced its operations. All the former employees of respondent
M.Y. San who were terminated upon its closure and who applied and qualified for probationary employment,
including petitioners herein, started working for respondent Monde on a contractual basis for a period of six
months.
Subsequently, petitioners were terminated on various dates.
Thus, petitioners filed a Complaint for illegal dismissal and underpayment, damages and attorney’s fees and
litigation cost with the National Labor Relations Commission (NLRC), Regional Arbitration Branch No. IV.
Petitioners alleged that respondent My San stopped its operations on 31 January 2001, but three days after,
resumed its operation with the same top management running the business; the union officers, in exchange for
being re-hired, acceded to bust the union; and the sale of respondent M.Y. San to respondent Monde was
merely a ploy to circumvent the provisions of the Labor Code.
Respondent M.Y. San insisted that its employer-employee relationship with petitioners had ceased to exist,
thus, the complaint for illegal dismissal against it could no longer prosper. It further contended that the power to
hire and fire employees is now lodged in the new business owner, respondent Monde.
On the other hand, respondent Monde alleged that petitioners had no cause of action against it, stating thus:
A few days before 02 May 2001, the respective supervisors of Monde conducted an evaluation of the
performance of all its probationary employees, including herein complainants, to determine their fitness to
qualify as regular employees therein.
On 02 May 2001, the probationary employees of Monde who passed the performance appraisal and who
qualified as regular employees thereof were accordingly appointed as such. Out of the one hundred sixteen
(116) probationary employees engaged by respondent Monde, a total of seventy-four employees qualified for
regular employment on 02 May 2001. x x x.
For those who did not qualify for regular employment on 02 May 2001, including herein complainants
[petitioners], respondent Monde gave complainants the remainder of their probationary period, or until 02 July
2001, within which to prove their qualification for regular employment therewith.
Notwithstanding the opportunity given to herein complainants [petitioners] to improve their performance to
qualify for regular employment with Monde, complainants [petitioners] either: (a) resigned from their
employment with Monde; (b) refused to report for work on 02 May 2001 and on the days following; or (c)
failed to qualify for regular employment at the expiration of the period of their probationary employment.
More specifically, the following complainants [petitioners] resigned from their employment with Monde and
for which they signed their respective release, waiver and quitclaims:
1. Lorene C. Barnuevo;
2. Lina P. Asugao;
3. Noel T. de Borja;
4. Claudio delos Reyes;
5. Eddie Ollorsa; and
6. Joey Cerbito
Complainants Barnuevo and Ollorsa refused to be transferred from the mixing department to the packing
department and consequently tendered their resignation letters and likewise signed their respective release,
waiver and quitclaims. x x x.
Seven (7) complainants opted not to report for work either on 02 May 2001 and the succeeding days thereafter
or even before the expiration of their probationary employment. After notice to explain was duly served upon
them, they deliberately failed/refused to explain their absences. Accordingly, individual notices informing them
of their dismissal due to AWOL/gross and habitual neglect of duties were personally delivered to their
respective addresses or by registered mail.
1. Pilar Espina;
2. Eleanor G. Aquino;
3. Maricris S.J. Bandino;
4. Julio M. Petalio, Jr.;
5. Emiliano A. Ebreo;
6. Benjamin Paz; and
7. Leonora Paz
Copies of the notices to explain and the notice of dismissal of the foregoing employees are hereto attached x x
x. In view of complainants Espino, Aquino and Bandino’s refusal to receive copies of the notice of dismissal
personally delivered to them, Monde likewise submitted copies of the same to he Rizal Province Labor and
Employment Office, DOLE Region 4 on 29 June 2001.
The following complainants failed to qualify as regular employees in accordance with the terms and conditions
of their probationary employment with Monde and were duly informed of their failure to qualify as regular
employees by letter dated 23 June 2001 terminating their probationary employment effective at the close of
business hours on 02 July 2001:
With respect to complainant Mateo Deocareza, he has been absent without official leave (AWOL) since 02 May
2001 and respondent Monde has yet to receive any information on him and/or his whereabouts.
Complainant Arlene Laguerta last reported for work on 26 May 2001 and has not reported back for work since
then.7
After evaluation of their respective pleadings, Labor Arbiter Vicente R. Layawen rendered a
Decision8 dismissing the case for lack of merit. It ruled that respondent M.Y. San’s Decision to shut down its
operations by selling its assets is its sole prerogative which must be respected, and that it had faithfully
complied with the requirements of the law, i.e., the notice and payment of separation pay. As to respondent
Monde, the Labor Arbiter ruled that the former satisfactorily discharged the burden of establishing a just and
authorized cause for terminating the services of petitioners.
On appeal, NLRC affirmed the Decision of the Labor Arbiter in a Resolution9 dated 30 August 2002.
Aggrieved, petitioners went to the Court of Appeals via a Petition for Certiorari10 under Rule 65 of the Rules of
Court. However, the appellate court dismissed11 the petition on the ground that the Special Power of Attorney
(SPA) executed by petitioners did not bear the signatures of their three other co-petitioners therein. A perusal of
the said SPA would reveal the apparent absence therein of the signatures of Eddie Ollorsa, Joey Cerbito and
George Quinquillera.
Subsequently, petitioners filed a motion12 to drop the names of their three co-petitioners who failed to sign the
SPA and prayed for the reconsideration of the dismissal of their petition. The Motion was denied13 by the Court
of Appeals on 3 March 2004, on the ground that subsequent compliance does not warrant a reconsideration of
the Order of dismissal. The appellate court further stated that there was no prima facie error committed by the
NLRC in affirming the Decision of the Labor Arbiter.

Petitioners again filed a Motion for Reconsideration14 of the 3 March 2004 Resolution, but the same was denied
1. Leandro F. Celis; by the Court of Appeals in a Resolution15 dated 23 June 2004. According to the appellate court, the said motion
2. Paterno Fernandez; for reconsideration was actually a second motion for reconsideration, which is a prohibited pleading under Sec.
3. Aniceto M. Rodriguez; 2, Rule 5216 of the Rules of Court.
4. Donato M. Punzalan;
5. George Quinquilleria;
6. Lourdes Alfonso; Petitioners are now before us imputing to the Court of Appeals the following errors, to wit17:
7. Allan Palilio;
8. Daisy V. Arceo; I.
9. Mario Ramos;
10. Alejandro Pascual;
11. Ma. Corazon Bajo; THE HONORABLE COURT OF APPEALS (FORMER FIFTEENTH DIVISION) SERIOUSLY ERRED IN
12. Arnold M. Blanco; DISMISSING THE PETITION FOR CERTIORARI FOR FAILURE OF ALL THE PETITIONERS TO SIGN
13. Cristito Abela; THE VERIFICATION AND CERTIFICATION OF NON-FORUM SHOPPING.
14. Dioscoro Fajanilag; and
15. Agustin Wong. II.

Representative copies of the letter dated 23 June 2001 terminating the probationary employment of the
foregoing employees effective at the close of business hours on 02 July 2001 are hereto attached x x x.
Anent complainant Remegio Basco, on 10 May 2001, Mr. Sandy B. Brillantes, the Employee Relation Officer
of Monde, chanced upon the former while serving the Notice of Termination of complainants Julio Petallo and
Emiliano Ebreo. Complainant Basco, in response to the query as to why he has not been reporting for work,
informed Mr. Brillantes that he had decided to stay home instead of reporting for work.
THE HONORABLE COURT OF APPEALS (FORMER FIFTEENTH DIVISION) SERIOUSLY ERRED IN
DENYING PETITIONERS’ MOTION TO DROP EDDIE OLLORSA, JOEY CERBITO AND GEORGE
QUINQUILLERA AS PETITIONERS.
III.
THE HONORABLE COURT OF APPEALS (FORMER FIFTEENTH DIVISION) SERIOUSLY ERRED IN
DENYING PETITIONERS’ MOTION FOR RECONSIDERATION.
IV.
THE HONORABLE COURT OF APPEALS (FORMER FIFTEENTH DIVISION) SERIOUSLY ERRED IN
NOT DECLARING THE ALLEGED SALE OF M.Y. SAN TO MONDE AS MERE PLOY TO
CIRCUMVENT THE PROVISIONS OF THE LABOR CODE AND THUS, VIOLATED THE TENURIAL
SECURITY OF THE PETITIONERS.
V.
THE HONORABLE COURT OF APPEALS (FORMER FIFTEENTH DIVISION) SERIOUSLY ERRED IN
NOT PIERCING THE VEIL OF THE CORPORATE PERSONALITIES OF M.Y. SAN AND/OR MONDE.
VI.
THE HONORABLE COURT OF APPEALS (FORMER FIFTEENTH DIVISION) SERIOUSLY ERRED IN
NOT DECLARING THAT THE PETITIONERS WERE ILLEGALY DISMISSED.18
Before resolving the substantive issues raised by petitioners, the Court will first address the procedural
infirmities. Petitioners assail the correctness and propriety of the dismissal by the Court of Appeals of their
Petition on the ground that the SPA executed by petitioners does not bear the signatures of their three other co-
petitioners therein.
While the general rule is that the certificate of non-forum shopping must be signed by all the plaintiffs or
petitioners in a case and the signature of only one of them is insufficient, this Court has stressed that the rules
on forum shopping, which were designed to promote and facilitate the orderly administration of justice, should
not be interpreted with such absolute literalness as to subvert its own ultimate and legitimate objective.19 Strict
compliance with the provision regarding the certificate of non-forum shopping underscores its mandatory
nature in that the certification cannot be altogether dispensed with or its requirements completely
disregarded.20 It does not, however, thereby interdict substantial compliance with its provisions under justifiable
circumstances.21
In the case of San Miguel Corporation v. Aballa,22 the dismissed employees filed with the NLRC a complaint
for declaration as regular employees of San Miguel Corporation (SMC) and for an illegal dismissal case,
following SMC’s closure of its Bacolod Shrimp Processing Plant. After an unfavorable ruling from the NLRC,
the dismissed employees filed a petition for certiorari with the Court of Appeals. Only three out of the 97
named petitioners signed the verification and certification of non-forum shopping. This Court ruled that given
the collective nature of the petition filed before the appellate court, which raised only one common cause of
action against SMC, the execution by the three petitioners, in behalf of all the other petitioners, of the certificate
of non-forum shopping constitutes substantial compliance with the Rules.
In the case at bar, the signatures of 25 out of the 28 employees who filed the Petition for Certiorari in the
appellate court, likewise, constitute substantial compliance with the Rules. Petitioners raised one common cause
of action against respondents M.Y. San and Monde, i.e., the illegal closure of respondent M.Y. San and its
subsequent sale to respondent Monde, which resulted in the termination of their services. They share a common
interest and common defense in the Complaint for illegal dismissal, which they filed with the NLRC. Thus,
when they appealed their case to the appellate court, they pursued the same as a collective body, raising only
one argument in support of their rights against the illegal dismissal allegedly committed by respondents M.Y.
San and Monde. There is sufficient basis, therefore, for the 25 petitioners, to speak for and in behalf of their co-
petitioners, to file the Petition in the appellate court.
Ordinarily, we would have remanded this case to the Court of Appeals for disposition on the merits. However,
so as not to needlessly prolong the resolution of a comparatively simple controversy, we deem it just and
equitable to decide the same on the merits.23
Based on the merits, the petition must, just the same, fail.
The substantive issue being presented by petitioners for resolution is whether they were illegally terminated
from work by respondents M.Y. San and Monde. Corollary to the above issue is whether the closure of business
by respondent M.Y. San was valid.
We shall first discuss the validity of the closure of business by respondent M.Y. San before tackling the alleged
illegal dismissal of petitioners by respondent M.Y. San.
Work is a necessity that has economic significance deserving legal protection. The provisions on social justice
and protection to labor in the Constitution24 dictate so.
However, employers are also accorded rights and privileges to assure their self-determination and independence
and reasonable return of capital. This mass of privileges comprises the so-called management prerogatives.
Although they may be broad and unlimited in scope, the State has the right to determine whether an employer’s
privilege is exercised in a manner that complies with the legal requirements and does not offend the protected
rights of labor. One of the rights accorded an employer is the right to close an establishment or
undertaking.25 Just as no law forces anyone to go into business, no law can compel anybody to continue the
same.26
The right to close the operations of an establishment or undertaking is explicitly recognized under the Labor
Code as one of the authorized causes in terminating employment of workers, the only limitation being that the
closure must not be for the purpose of circumventing the provisions on terminations of employment embodied
in the Labor Code. Article 283 of the Labor Code reads:
ART. 283. Closure of establishment and reduction of personnel.—The employer may also terminate the
employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is
for the purpose of circumventing the provisions of this Title, by serving a written notice on the worker and the
Ministry of Labor and Employment at least one (1) month before the intended date thereof. x x x. In case of
retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to
one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction
of at least six (6) months shall be considered as one (1) whole year. (Emphasis supplied.)
The phrase "closure or cessation of operations of establishment or undertaking" includes a partial or total
closure or cessation.
x x x Ordinarily, the closing of a warehouse facility and the termination of the services of employees there
assigned is a matter that is left to the determination of the employer in the good faith exercise of its
management prerogatives. The applicable law in such a case is Article 283 of the Labor Code which permits
"closure or cessation of operation of an establishment or undertaking not due to serious business losses or
financial reverses," which, in our reading includes both the complete cessation of operations and the cessation
of only part of a company’s business.27
And the phrase "closure or cessation not due to serious business losses or financial reverses" recognizes the
right of the employer to close or cease its business operations or undertaking even in the absence of serious
business losses or financial reverses, as long as he pays his employees their termination pay in the amount
corresponding to their length of service.
It would indeed be stretching the intent and spirit of the law if a court were to unjustly interfere in
management’s prerogative to close or cease its business operations just because said business operation or
undertaking is not suffering from any loss.28 The determination to cease operations is a prerogative of
management which the State does not usually interfere with, as no business or undertaking must be required to
continue operating simply because it has to maintain its workers in employment, and such act would be
tantamount to a taking of property without due process of law.29 As long as the company’s exercise of the same
is in good faith to advance its interest and not for the purpose of circumventing the rights of employees under
the law or a valid agreement, such exercise will be upheld.30
Clearly then, the right to close an establishment or undertaking may be justified on grounds other than business
losses but it cannot be an unbridled prerogative to suit the whims of the employer.31
Under Article 283 of the Labor Code, three requirements are necessary for a valid cessation of business
operations, namely:
(1) service of a written notice to the employees and to the DOLE at least one (1) month before the
intended date thereof;
(2) the cessation must be bona fide in character; and
(3) payment to the employees of termination pay amounting to at least one half (1/2) month pay for
every year of service, or one (1) month pay, whichever is higher.
The records reveal that private respondent M.Y. San complied with the aforecited requirements. M.Y. San
employees were adequately informed of the intended business closure and a written notice to the Regional
Director of DOLE was filed by respondent M.Y. San, informing the DOLE that M.Y. San will be closed
effective 31 January 2001.
The ultimate test of the validity of closure or cessation of establishment or undertaking is that it must be bona
fide in character.32 And the burden of proving such falls upon the employer.33
Respondent M.Y. San in good faith complied with the requirements for closure; sold and conveyed all its assets
to respondent Monde for valuable consideration; and there were no previous labor problems. It has been ruled
that an employer may adopt policies or changes or adjustments in the operations to insure profit to itself or
protect the investments of its stockholders, and in the exercise of such management prerogative, the employer
may merge or consolidate its business with another, or sell or dispose all or substantially all of its assets and
properties which may bring about the dismissal or termination of its employees in the process.34
Lastly, the petitioners received their termination pay which was even beyond the amount required by law. The
computation of their separation pay was 15 days for every year of service plus an additional nine days for every
year of service, and cash equivalent of their vacation and sick leaves.35 Petitioners received their separation pay
and accordingly signed their quitclaims.
The closure, therefore, of the business operation of respondent M.Y. San was not tainted with bad faith or other
circumstance that would give rise to suspicions of malicious intent. Other than their mere allegations,
petitioners failed to present independent evidence that would otherwise show that the closure of M.Y. San was
without factual basis and done in utter bad faith. Mere allegation is not evidence. It is a basic rule in evidence
that each party must prove his affirmative allegation.36
Thus, since private respondent M.Y. San’s closure and cessation of business was lawful, there was no illegal
dismissal of petitioners to speak of.
We shall now proceed to discuss the validity of the termination of the employment of petitioners by respondent
Monde.
There is no dispute that petitioners were probationary employees as stated in their individual contracts of
employment with respondent Monde.
Article 281 of the Labor Code governs probationary employment:
Art. 281. Probationary employment. – Probationary employment shall not exceed six (6) months from the date
the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period.
The services of an employee who has been engaged on a probationary basis may be terminated for a just cause
or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the
employer to the employee at the time of his engagement. An employee who is allowed to work after a
probationary period shall be considered a regular employee.
While petitioners were only probationary employees who do not enjoy permanent status, nonetheless, they were
still entitled to the constitutional protection of security of tenure. As may be gleaned in the abovequoted
provision, their employment may only be terminated for a valid and just cause or for failing to qualify as a
regular employee in accordance with the reasonable standards made known to him by the employer at the time
of engagement and after being accorded due process.37
Procedural due process requires that the employee be given two written notices before he is terminated,
consisting of a notice which apprises the employee of the particular acts/omissions for which the dismissal is
sought and the subsequent notice which informs the employee of the employer’s decision to dismiss him.38
In the case at bar, petitioners were notified of the standards they have to meet to qualify as regular employees of
respondent Monde when the latter apprised them, at the start of their employment, that:
1. You shall be under probation for a maximum period of six (6) months or until Jul. 03, 2001.
During this period, you are expected to learn your job, perform your duties and responsibilities to the
best of your ability, and observe all company rules and regulations; if during this period, you fail to
meet company standards, your appointment may be terminated earlier or at the expiration of your
probationary period at the discretion of the company.
xxxx
5. To determine your fitness to assume your position on a permanent status, when considered due,
your supervisor shall rate your performance during your probationary period.39
Significantly, petitioners Lorene C. Barnuevo, Claudio delos Reyes, Eddie Ollorsa, and Joey Cerbito
voluntarily resigned from respondent Monde and signed their respective release, waiver and quitclaims.
Respondent Monde exercised its management prerogative in good faith when it dismissed petitioners Pilar
Espina, Eleanor G. Aquino, Maricris S.J. Bandino, Julio M. Petalio, Jr., Emiliano A. Ebreo, Benjamin Paz, and
Leonora Paz, due to absence without leave (AWOL), gross and habitual neglect of duties, and only after the
personal delivery of the notices to their respective addresses or by registered mail. With respect to petitioner
Mateo Deocareza, he has been AWOL since 2 May 2001 and respondent Monde has yet to receive any
information on him and/or his whereabouts. There were two notices sent to petitioners individually – a notice
apprising them of the particular acts or omissions for which their dismissal was sought and a memorandum
informing them that they were terminated from work.
In the case of petitioners Leandro R. Celis, Paterno Fernandez, Aniceto M. Rodriguez, Donato M. Punzalan,
Lourdes Alfonso Q., Allan Panlilio, Daisy V. Arceo, Alejandro Pascual, Ma. Corazon Bajo, Arnold M. Blanco,
Cristito Abela, Dioscoro Fajanilag, and Agustin Wong, they failed to qualify as regular employees in
accordance with the terms and conditions of their probationary employment with respondent Monde and were
duly informed of their failure to qualify as regular employees by letter dated 23 June 2001 terminating their
probationary employment effective at the close of the business on 2 July 2001. Again, there were two notices
sent to petitioners individually – a notice apprising them of the particular acts or omissions for which their
dismissal was sought and a memorandum informing them that they were terminated from work.
It must be noted that petitioners were terminated prior to the expiration of their probationary contracts on 3 July
2001. As probationary employees, they enjoyed only temporary employment status. In general terms, this
meant that they were terminable anytime, permanent employment not having been attained in the meantime.
The employer could well decide if he no longer needed the probationary’s service or his performance fell short
of expectations, as a probationary employee is one who, for a given period of time, is under observation and
evaluation to determine whether or not he is qualified for permanent employment. During the probationary
period, the employer is given the opportunity to observe the skill, competence and attitude of the employee to
determine if he has the qualification to meet the reasonable standards for permanent employment. The length of
time is immaterial in determining the correlative rights of both the employer and the employee in dealing with
each other during said period. Thus, as long as the termination was made before the expiration of the six-month
probationary period, the employer was well within his rights to sever the employer-employee relationship. A
contrary interpretation would defeat the clear meaning of the term "probationary."40
Terminating employment is one of respondent Monde’s prerogatives. As an employer, respondent Monde has
the right to regulate, according to its discretion and best judgment, including work assignment, working
methods, processes to be followed, working regulations, transfer of employees, work supervision, lay-off of
workers and the discipline, dismissal and recall of workers. Management has the prerogative to discipline its
employees and to impose appropriate penalties on erring workers pursuant to company rules and regulations.41
This Court has upheld a company’s management prerogatives so long as they 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 and valid agreements.42
The law imposes many obligations on the employer such as providing just compensation to workers,
observance of the procedural requirements of notice and hearing in the termination of employment. On the
other hand, the law recognizes the right of the employer to expect from its workers not only good performance,
adequate work and diligence, but also good conduct and loyalty. The employer may not be compelled to
continue to employ such persons whose continuance in the service will patently be inimical to his interest. 43
Thus, respondent Monde exercised in good faith its management prerogative as there is no dispute that
petitioners had been habitually absent, neglectful of their work, and rendered unsatisfactory service, to the
damage and prejudice of the company.
Anent the validity of quitclaims signed by petitioners.
To be sure, the law looks with disfavor upon quitclaims and releases by employees who are inveigled or
pressured into signing them by unscrupulous employers seeking to evade their legal responsibilities. But
quitclaims and releases are not per se invalid.
We have clarified the standards for determining the validity of quitclaim or waiver in the case of Periquet v.
National Labor Relations Commission,44 to wit:
If the agreement was voluntarily entered into and represents a reasonable settlement, it is binding on the parties
and may not later be disowned simply because of a change of mind. It is only where there is clear proof that the
waiver was wangled from an unsuspecting or gullible person, or the terms of settlement are unconscionable on
its face, that the law will step in to annul the questionable transaction. But where it is shown that the person
making the waiver did so voluntarily, with full understanding of what he was doing, and the consideration for
the quitclaim is credible and reasonable, the transaction must be recognized as a valid and binding undertaking.
x x x.
In the case at bar, there is no showing that petitioners were coerced into signing the quitclaims. In their sworn
quitclaims, they freely declared that they received to their satisfaction all that are due them by reason of their
employment and that they were voluntarily releasing respondents M.Y. San and Monde, for any liability in
relation to their employment. Nothing on the face of their quitclaims would show that they were
unconscionable. Further, petitioners did not present evidence that they had been forced or intimidated in signing
the same.
Finally, it is significant to note that both the Labor Arbiter and the NLRC were unanimous in their findings that
the closure of respondent M.Y. San is valid and that the employees of respondents M.Y. San and Monde were
not illegally dismissed. The issue as to whether there was a valid ground for petitioners’ dismissal is factual in
nature.45 We have always held that factual findings of the NLRC affirming those of the Labor Arbiter, who are
deemed to have acquired expertise in matters within their jurisdiction, when sufficiently supported by evidence
on record, are accorded respect if not finality, and are considered binding on this Court. As long as their
Decisions are devoid of any unfairness or arbitrariness in the process of their deduction from the evidence
proffered by the parties before them, all that is left is the Court’s stamp of finality by affirming the factual
findings made by the NLRC and the Labor Arbiter.46 We find no reason to depart from this Rule.
WHEREFORE, this Court grants the instant Petition insofar as it REVERSES the Resolutions of the Court of
Appeals dated 23 September 2003, 3 March 2004, and 23 June 2004 and DECLARES the signing of the
certification of non-forum shopping by 25 of the 28 named petitioners substantial compliance with the Rules.
This Court though finds it unnecessary to remand the case to the Court of Appeals and proceeds to RESOLVE
the same based on the merits. This Court thus AFFIRMS the Decision dated 30 August 2002 of the National
Labor Relations Commission affirming the Decision dated 25 April 2002 of the Labor Arbiter finding that the
closure of respondent M.Y. San was valid and bona fide and in accordance with statutory requirements, and that
petitioners were not illegally dismissed by either respondent M.Y. San or Monde. No costs.
SO ORDERED.

G.R. No. 122876. February 17, 2000
CHENIVER DECO PRINT TECHNICS CORPORATION, Petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION (SECOND DIVISION), CFW-MAGKAKAISANG LAKAS NG MGA
MANGGAGAWA SA CHENIVER DECO PRINT TECHNIC CORPORATION, EDGARDO
VIGUESILLA, Respondents.
QUISUMBING, J.:
This special civil action for certiorari seeks to annul the resolution of public respondent promulgated on May
31, 1995, in NLRC NCR CA 007946-94, and its resolution dated August 14, 1995, which denied petitioners
motion for reconsideration.
Petitioner is a duly organized corporation operating its printing business in Visita St., Barangay Sta. Cruz,
Makati. Private respondent CFW-Magkakaisang Lakas ng mga Manggagawa sa Cheniver Deco Print Technic
Corporation is a registered labor union affiliated with the Confederation of Free Workers (CFW). Private
respondent Edgardo Viguesilla and twenty-two (22) others are members of aforesaid union and former
employees of petitioner.
The records disclose that on June 5, 1992, petitioner informed its workers about the transfer of the company
from its site in Makati to Sto. Tomas, Batangas. Petitioner decided to relocate its business in view of the
expiration of the lease contract on the premises it occupied in Makati and the refusal of the lessor to renew the
same. Earlier, the local authorities also took action to force out petitioner from Makati because of the alleged
hazards petitioners plant posed to the residents nearby.
In view of the impending transfer, petitioner gave its employees up to the end of June 1992 to inform
management of their willingness to go with petitioner, otherwise, it would hire replacements. On June 27, 1992,
petitioner reminded its workers of the following schedule to be followed:
June 29, 1992 - last day of operation in Makati
July 1-31, 1992 - temporary shutdown to give way to transfer of operation
August 1, 1992 - start of operation at new site in Sto. Tomas, Batangas.
On August 4, 1992, petitioner wrote its employees to report to the new location within seven days, otherwise,
they would be considered to have lost interest in their work and would be replaced. Five days later, the union
advised petitioner that its members are not willing to go along with the transfer to the new site. Nonetheless,
petitioner gave its workers additional time within which to report to the new work place. Later on, the labor
federation informed petitioner that the employees decided to continue working for petitioner. However, not one
reported for work at petitioners new site. It appears that several employees namely, Edgar Paquit, Dexter
Mitschek, Nicanor Quebec, Maricris Polvorosa, Vicente Solis, Eugene De la Cruz, Rodel Gomez, Marylin
Macaraig, Diomedis Poblio, Albert Pimentel, Marieta Ramos, Gilbert Saquibal, Marlon Tafalla, Eduardo
Jolbitado, Solitario Andres, Maria Cecilia Perez and Wilfredo Flores, decided not to work at the new site but
just opted to be paid financial assistance offered by petitioner.
On the other hand, the remaining workers (private respondents herein) filed a complaint against petitioner for
unfair labor practice, illegal dismissal, underpayment of wages, non-payment of legal holiday pay, 13th month
pay, incentive leave pay and separation pay. On October 27, 1994, the labor arbiter rendered a decision
declaring the transfer of petitioners operation valid and absolving petitioner of the charges of unfair labor
practice and illegal dismissal. However, the labor arbiter directed petitioner to pay private respondents their
separation pay and other money claims as well as attorneys fees, decreeing as follows:
"WHEREFORE, premises considered, judgment is hereby rendered:
1. Declaring respondent company not guilty of unfair labor practice. (ULP);
2. Declaring respondent company not guilty of illegal dismissal and illegal lay-off but directing it to pay the
individual complaints their separation pay, to wit:
a) Adeser, Tarcisio ----------- P 20,280.00
b) Albino, Silveria ----------- 36,816.00
c) Arizala, Imelda ----------- 18,408.00
d) Canares, Danilo ----------- 36,816.00 SO ORDERED."1cräläwvirtualibräry
e) Carin, Elena ---------- 12,272.00
f) Cabanatan, Lourdes ----------- 9,204.00 On appeal, respondent NLRC affirmed with modification the decision of the labor arbiter by deleting the award
g) Dizon, Juanito ----------- 12,272.00 of attorneys fees, thus:
h) Domingo, Salome -------- 24,544.00
i) Esguerra, Bonifacio ---------- 21,476.00
j) Famillaran, Benjamin ----------- 27,612.00 "For all of the foregoing the decision appealed from is hereby AFFIRMED with modification that the award of
k) Gabucan, Amelia ------------ 15,340.00 attorneys fees be deleted for lack of legal and factual basis.
l) Ibardolaza, Hadjie ------------- 21,476.00
m) Jores, Nelita ------------- 18,408.00 SO ORDERED."2cräläwvirtualibräry
n) Largadas, Mario ------------- 9,204.00
o) Mitschek, Dexter ------------- 33,748.00
p) Paquit, Edgar ------------- 15,340.00 Its motion for reconsideration having been denied, petitioner filed the instant petition alleging that public
q) Panotes, Roel ------------- 12,272.00 respondent committed grave abuse of discretion in:
r) Pedrigosa, Lerma ------------- 18,408.00
s) Pedrigosa, Liza ------------- 18,408.00 "I
t) Ulzoron, Yolanda ------------- 9,204.00 AFFIRMING THE LABOR ARBITERS AWARD OF SEPARATION PAY TO PRIVATE RESPONDENTS;
u) Viguesilla, Edgardo ------------ 21,476.00
v) Viray, Ruel ---------------- 9,204.00
_____________ II
P 422,188.00 AFFIRMING THE AWARD OF OTHER MONEY CLAIMS TO PRIVATE RESPONDENTS WITHOUT
BASIS IN FACT AND [IN] LAW AS SHOWN BY LACK OF COMPUTATION OF THE SAME."

3. Directing respondent company to pay complainants the sum of P280,010.00 as to their other money claims
aforestated, distributed as follows: Petitioner contends that the transfer of its business is neither a closure nor retrenchment, hence, separation pay
should not be awarded to the private respondents. It also avers that private respondents were not terminated
from the service but they resigned from their job because they find the new work site too far from their
a) Adeser, Tarcisio ---------------- P 5,330.00 residences.
b) Albino, Silveria -------------- 13,080.00
c) Arizala, Imelda -------------- 13,080.00
d) Canares, Danilo -------------- 13,080.00 The foregoing contention lacks factual and legal basis, hence, bereft of merit.
e) Carin, Elena -------------- 13,080.00
f) Cabanatan, Lourdes ------------- 13,080.00 Broadly speaking, there appears no complete dissolution of petitioners business undertaking but the relocation
g) Dizon, Juanito -------------- 13,080.00 of petitioners plant to Batangas, in our view, amounts to cessation of petitioners business operations in Makati.
h) Domingo, Salome -------------- 13,080.00 It must be stressed that the phrase "closure or cessation of operation of an establishment or undertaking not due
i) Esguerra, Bonifacio ------------- 13,080.00 to serious business losses or reverses" under Article 283 of the Labor Code includes both the complete
j) Famillaran, Benjamin ----------- 13,080.00 cessation of all business operations and the cessation of only part of a companys business.4 In Philippine
k) Gabucan, Amelia -------------- 13,080.00 Tobacco Flue-Curing & Redrying Corp. vs. NLRC,[5] a company transferred its tobacco processing plant in
l) Ibardolaza, Hadjie -------------- 13,080.00 Balintawak, Quezon City to Candon, Ilocos Sur. The company therein did not actually close its entire business
m) Jores, Nelita -------------- 13,080.00 but merely relocated its tobacco processing and redrying operations to another place. Yet, this Court considered
n) Largadas, Mario -------------- 13,080.00 the transfer as closure not due to serious business losses for which the workers are entitled to separation pay.
o) Mitschek, Dexter -------------- 13,080.00
p) Paquit, Edgar -------------- 13,080.00
There is no doubt that petitioner has legitimate reason to relocate its plant because of the expiration of the lease
q) Panotes, Roel -------------- 13,080.00
contract on the premises it occupied. That is its prerogative. But even though the transfer was due to a reason
r) Pedrigosa, Lerma -------------- 13,080.00
beyond its control, petitioner has to accord its employees some relief in the form of severance pay. Thus, in E.
s) Pedrigosa, Liza -------------- 13,080.00
Razon, Inc. vs. Secretary of Labor and Employment,6 petitioner therein provides arrastre services in all piers in
t) Ulzoron, Yolanda -------------- 13,080.00
South Harbor, Manila, under a management contract with the Philippine Ports Authority. Before the expiration
u) Viguesilla, Edgardo ------------ 13,080.00
of the term of the contract, the PPA cancelled the said contract resulting in the termination of employment of
v) Viray, Ruel -------------- 13,080.00
workers engaged by petitioner. Obviously, the cancellation was not sought, much less desired by petitioner.
______________
Nevertheless, this Court required petitioner therein to pay its workers separation pay in view of the cessation of
P 280,010.00
its arrastre operations.

4. Directing respondent company to pay complainants attorneys fees of ten (10%) percent based on the totality
Now, let it be noted that the termination of employment by reason of closure or cessation of business is
of the monetary award.
authorized under Article 283 of the Labor Code which provides:

Other claims are hereby dismissed for lack of factual and legal basis.
"ART. 283. Closure of establishment and reduction of personnel. -- The employer may terminate the
employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is
for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the
Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be
entitled to a separation pay equivalent to at least his one (1) month pay or at least one (1) month pay for every
year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not due to serious business losses or financial
reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for
every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1)
whole year."
Consequently, petitioner herein must pay his employees their termination pay in the amount corresponding to
their length of service. Since the closure of petitioners business is not on account of serious business losses,
petitioner shall give private respondents separation pay equivalent to at least one (1) month or one-half (1/2)
month pay for every year of service, whichever is higher.
Petitioners contention that private respondents resigned from their jobs, does not appear convincing. As public
respondent observed, the subsequent transfer of petitioner to another place hardly accessible to its workers
resulted in the latters untimely separation from the service not to their own liking, hence, not construable as
resignation.7 Resignation must be voluntary and made with the intention of relinquishing the office,
accompanied with an act of relinquishment.8 Indeed, it would have been illogical for private respondents herein
to resign and then file a complaint for illegal dismissal. Resignation is inconsistent with the filing of the said
complaint.9cräläwvirtualibräry
As to petitioners assertion that private respondents resorted to forum shopping, the same deserves scant
consideration. As noted by the Solicitor General, private respondents claims in this case are based on
underpayment of wages, legal holiday pay, service incentive leave pay and 13th month pay. On the other hand,
the other cases separately filed in different fora by Danilo Canares, Aurelia Gabucan, Dexter Mitschek and Ruel
Viray involved different issues which are distinct and have no bearing on the case at bar.10 The case pursued by
Canares is for diminution of salary on account of his demotion which was decided in his favor with finality by
this Court;11 Gabucans case involves reinstatement to her job; Mitscheks case pertains to diminution of his
salary; and Virays complaint was dismissed without prejudice for failure to prosecute. Thus, there is no basis
for petitioners forum shopping charge as the instant case and the others do not raise identical causes of action,
subject matter and issues.12cräläwvirtualibräry
Lastly, petitioner alleges that claims of other private respondents have already been paid upon the enforcement
of the order dated February 26, 1992 in case number NRC-00-9112-CI-001. This is not correct. As correctly
pointed out by the Solicitor General, the aforesaid order refers to the enforcement of Wage Order No. NCR-02
mandating P2.00 wage increase.13 Certainly, the wage differential received by private respondents by virtue of
the mandated wage increase is different from the monetary benefits herein being claimed by private
respondents. Hence, public respondent cannot be faulted for grave abuse of discretion on this score.
WHEREFORE , the instant petition is DENIED, and the assailed RESOLUTIONS of public respondent are
AFFIRMED. Costs against petitioner.SO ORDERED
[G.R. No. 104624. October 11, 1996.]
SAN PEDRO HOSPITAL OF DIGOS, Petitioner, v. SECRETARY OF LABOR, THE SAN PEDRO
HOSPITAL EMPLOYEES UNION — NATIONAL FEDERATION OF LABOR, Respondents.
PANGANIBAN, J.:
When is temporary suspension of business considered not done in good faith? Can the Secretary of
Labor compel management to enter into a new collective bargaining agreement with the union while the
business enterprise is undergoing a temporary, suspension of operations? Can the Secretary grant backwages
without deciding the legality of a strike?
\These questions are addressed by the Court in resolving this Petition for Certiorari, which seeks
nullification of the Orders dated October 16, 1991 and January 31, 1992 of the Secretary of Labor and
Employment rendered in DOLE Case No. NCMB-RBXI-NS-03-017-91 entitled "In Re: Labor Dispute at San
Pedro Hospital of Digos." Said orders directed herein petitioner hospital to pay backwages for the period from
June 21, 1991, to December 15, 1991 to returning workers who are members of the San Pedro Hospital
Employees Union and to enter into a new collective bargaining agreement with the union.
The Facts
Petitioner San Pedro Hospital of Digos, Inc. is a charitable, non-stock, non-profit medical and
educational training corporation. Petitioner had a three-year collective bargaining agreement (CBA) covering
the period December 15, 1987 until December 15, 1990, with herein private respondent, Nagkahiusang
Mamumuo sa San Pedro Hospital of DIGOS — National Federation of Labor (NAMASAP-NFL), the exclusive
bargaining agent of the hospital’s rank-and-file workers.
On February 12, 1991, the parties formally commenced negotiations for the renewal of their CBA.
and presented their respective proposals. The union’s demands included wage increases and inclusion in the
CBA of a provision for union shop.
Respondent union proposed a cumulative salary increase of Sixty pesos per day for three years,
broken down as follows: (a) thirty pesos per day for the first year; (b) twenty pesos per day for the second year;
and (c) ten pesos per day for the third year. Petitioner, claiming it was incurring losses on account of a serious
financial crisis, counter-offered an increase of two pesos per day for each of the three years of the new CBA,
with a wage reopening clause. Petitioner also adamantly opposed the proposal for a union security clause
After the parties failed to reach agreement on the issues, the union during the meeting of February
19, 1991 declared a deadlock
On February 20, 1991, respondent union saturated petitioner’s premises with streamers and picketed
the hospital. The operations of the hospital having, come to a grinding halt, the hospital management
considered the union actions as tantamount to a strike. However, it was only on March 4, 1991 that respondent
union filed a Notice of Strike with the National Conciliation and Mediation Board (NCMB). On April 10, 11,
and 18, 1991, the NCMB held conciliation conferences but failed to settle the deadlock, as the parties remained
adamant in their positions.
On May 28, 1991, respondent union struck. Despite the NCMB’s call for a conciliation conference,
nurses and nurse aides who were members of the union abandoned their respective departments and joined the
picket line a week later. Doctors began leaving the hospital and the number of patients dwindled. The last
patient was discharged on June 10, 1991.
On June 12, 1991, a "Notice of Temporary Suspension of Operations" was issued by petitioner
hospital and submitted to the local office of the NCMB on June 14, 1991. Similar notices were individually
delivered to union members, but only fourteen out of the seventy-four rank-and-file employees/union members
acknowledged receipt thereof. Petitioner also alleged that on June 13, 1991, the resident/consultant physicians
abandoned the hospital because there were no more patients.
On the same day, June 13, 1991, then Secretary of Labor Nieves Confesor assumed jurisdiction over
the labor dispute and issued an order providing that:
"WHEREFORE, ABOVE PREMISES CONSIDERED, this Office hereby assumes jurisdiction over
the entire labor dispute at the San Pedro Hospital of Digos.
Accordingly, all striking workers are hereby directed to return to work within twenty-four (24) hours
from receipt of a copy of this Order and for the Hospital to accept all returning workers under the same terms
and conditions of employment existing prior to the work stoppage
The parties are likewise directed to cease and desist from committing any act that may aggravate the
prevailing precarious situation.
To expedite the resolution of this dispute, the parties are directed to submit their respective position
papers and evidence within ten (10) days from receipt of this Order."
 However, this order was received by petitioner only on June 20, 1991. In the meantime, it had
already notified the DOLE via its letter dated June 13, 1991, which was received by the DOLE on June 14,
1991, that it would temporarily suspend operations for six (6) months effective June 15, 1991, or up to
December 15, 1991. Petitioner thus refused the return of its striking workers on account of such suspension of
operations
Several conferences were held by the NCMB Conciliator where petitioner stated that it would submit
the necessary documents showing its serious financial condition "should the need be in earnest."
On June 24, 1991, respondent union through its legal counsel wrote the Executive
Conciliator/Mediator of the NCMB in Davao City informing the latter that the union members were willing to
return to their former work assignments at the hospital in compliance with the June 13, 1991 order of the Labor
Secretary.
On June 27, 1991, petitioner filed its position paper in which it maintained that the aforementioned
order to accept all returning workers had become moot and academic in view of the suspension of its
operations. Moreover, said order could not substitute for (and override) the decision of the petitioner hospital’s
Board of Trustees to suspend operations for six months, such decision being purely a management prerogative.
Respondent union filed its own position paper on July 13, 1991 alleging that its very existence was
threatened because management was convincing new employees not to join respondent union; that the union
shop provision was necessitated precisely because of management’s actuations; that petitioner was not in
serious financial condition; and that petitioner acted in bad faith and circumvented the return-to-work order
when it suspended operations.
On October 11, 1991, DOLE Secretary Ruben D. Torres went to Digos, Davao del Sur and met
respondent union’s officers and members in a restaurant; petitioner was not represented in that meeting. The
Secretary also visited the hospital without notice to petitioner.
Shortly thereafter, on October 16, 1991, Secretary Torres resolved the labor dispute and issued the
questioned Order, wherein he ruled that the suspension of operations was not for a valid or justifiable cause but
was actually for the purpose of defeating the workers’ right to self-organization. But because the hospital had
actually ceased operations, he held that it would be unjust and a sheer abuse of discretion to compel the hospital
to continue operations and accept the returning workers, as it would infringe on petitioner’s inherent right to
manage and conduct its own business affairs. He thus decided to grant, by way of penalty, backwages for the
workers from June 21, 1991, the date they were refused admittance by petitioner, until December 15, 1991, the
expiration of the temporary suspension of the hospital’s operation.
Sec. Torres also enjoined petitioner to enter into a new CBA with respondent union and to adopt and
incorporate therein a union shop provision because it was proven that petitioner had intervened in the workers’
right to join or not to join a labor organization of their own choosing. Petitioner was also directed to grant a
wage increase of P3.00 each for the first three years of the new CBA. This last directive was prompted by the
finding, that petitioner’s Financial Statements for the years 1989 and 1990 (copies of which, incidentally, were
submitted not by petitioner but by respondent union) showed that although petitioner incurred a loss of some
P200,000 in 1990, its Balance Sheet revealed that it had a Fund Balance (Retained Earnings) of P3,159,791.00
as of year-end 1990, and therefore, it was financially capable of granting an increase in its employees’ wages.
The dispositive portion of Secretary Torres’ Order reads:
"WHEREFORE, judgment is hereby rendered:
1. Ordering the hospital to pay the wages of the returning workers who are members of the Union
covering the period 21 June 1991 to 15 December 1991; and,
2. Ordering the parties to enter and formalize a new collective bargaining agreement (CBA)
embodying therein the dispositions hereinabove set forth as well as the provisions of the old CBA not otherwise
touched upon by this Order.
On November 4, 1991, petitioner filed a Motion for Reconsideration of the abovequoted Order
alleging that: (1) the Office of the Secretary of Labor had no jurisdiction to resolve the issue of the legality or
illegality of the unions strike [since, in ordering the payment of backwages, he in effect ruled on the legality of
the strike, which he was not authorized to do, jurisdiction therefor pertaining only to labor arbiters]; (2) the
union members were not entitled to backwages because the temporary cessation of petitioners operation
suspended the employer-employee relationship between the union members and petitioner; and (3) petitioner
could not be obligated to enter into a new CBA because said employer-employee relationship no longer existed.
On December 15, 1991, petitioner formally ceased operations. Notices of its permanent closure were
sent to NCMB and individual rank-and-file employees.
On January 31, 1992, the Secretary denied the Motion for Reconsideration, holding among other
things that his Order of October 16, 1991 did not rule on the legality of the strike. Hence, this petition filed
under Rule 65 of the Revised Rules of Court.
The Issues
Petitioner alleges that the Secretary of Labor gravely abused his discretion thus:
"1. . . . when he issued the two orders, subject of this case, without affording the hospital the opportunity to
present evidence on its behalf.
2. . . . in ordering the hospital to execute a new collective bargaining agreement with the union knowing fully
well, as he himself conceded, that the hospital had actually ceased operations.
3. . . . in ordering the hospital to pay backwages to the members of the union; for in doing so, said public
respondent to all intents and purposes ruled that the strike staged by the union was legal."
The main question is whether the Secretary of Labor and Employment acted correctly in issuing the
Orders of October 16, 1991 and January 31, 1992.
The Court’s Ruling
First Issue: Petitioner Was Afforded Opportunity to Present Evidence
Petitioner alleges that it was never given an opportunity to present its evidence, and that the Order of
October 16, 1991 was influenced by the Secretary of Labor’s meeting with the officers and members of
respondent union when the former went to Digos, Davao del Sur on October 11, 1991.
Admittedly, Secretary Torres did visit petitioner’s premises without notice to see for himself the
actual situation therein obtaining. However, the evidence on record clearly shows that, contrary to petitioner’s
allegation, it was afforded opportunity to present its evidence, and that the Secretary’s visit and meeting were
not the reasons for the ruling in favor of respondent union, nor did they affect said Order. One, the assumption
order of Secretary Confessor inter alia directed the parties to submit their respective position papers and
evidence to enable the Secretary to resolve the dispute. 17 Two, petitioner submitted its position paper where it
questioned the authenticity of the said order claiming that it (petitioner) received only an uncertified photocopy,
and informed the Secretary of its suspension of operations. 18 It did not bother to prove its serious financial
condition and thereby justify its suspension of operations and its refusal to accede to the demanded wage
increases. Respondent union, on the other hand, attached a copy of petitioner’s financial statements to its
position paper to show that petitioner was not in dire financial straits as it had a significant fund balance in
1990. Respondent union further alleged that petitioner could have afforded the wage increases since it had
previously proposed an increase of P2.00 every year for each year of the new CBA which it later reduced to just
P2.00 for three years. Also attached were the affidavits of Armand Anthony Gallardo, staff nurse, and
Evangeline Montues, pharmacist, to show that petitioner had been persuading the new regular workers not to
join respondent union.
(In its Supplemental Position Paper, respondent union also alleged that when it struck, it complied
fully with the law on strikes because a skeletal force was left to man the hospital and the gate was left open and
not barricaded, and that it was petitioner that refused to admit patients and hired replacements for the strikers. It
also alleged that the doctors did not withdraw from the hospital because it happened to be the best equipped in
the locality.
Three, based on these pleadings and supporting papers, the Secretary noted that petitioner hospital
did not discuss and support its claim of serious financial crisis on account of losses incurred, necessitating
temporary suspension of operations. He thus found that the temporary suspension was to avoid compliance with
the return-to-work order, and not due to the supposed financial hemorrhage. His October 16, 1991 Order stated
as follows:
"In the case under consideration, the Hospital failed to meet the conditional requirements that would
justify the temporary cessation of its operations. To be sure, the facts and circumstances attendant to this case
do not warrant a finding that the temporary suspension of the hospital’s operations was for a valid or justifiable
cause, and not for the purpose of defeating the rights of the workers to self-organization. This conclusion finds
support from the following undisputed facts:
First, during the CBA negotiation and immediately prior to the closure, the Hospital never brought
the issue of its alleged financial losses necessitating the temporary suspension of its operations
Secondly, the notice of temporary suspension dated 13 June 1991 filed by the Hospital made mention
of its intention to submit the necessary documents of its alleged financial losses (Annex "A", Hospital’s
position paper). Until the present, however, the Hospital has not submitted these documents thereby creating
serious doubts on the validity of the suspension of its operations. Be that as it may, a copy of the Financial
Statements of the Hospital for the years 1989 and 1990, submitted by the Union, reveals that it (hospital) was
not actually losing in its operations. While the Hospital may have incurred losses of P200,942.00 in 1990, its
Balance Sheet reveals a Fund Balance (Retained Earnings) of P3,159,791.00 for the year 1990 (Annex "G-2"
Union’s Position Paper dated 4 July 1991); and
Thirdly, the Union was not furnished a copy of the notice of temporary suspension. Worse still, the
notice was filed on 14 June 1991 and was made effective the following day or on 15 June 1991, leaving the
Union without sufficient time to adjust to the sudden and unexpected cessation of the hospital’s operations,
much less the opportunity to controvert the same
In the light of the undisputed facts narrated above, we are more inclined to sustain the view that the
temporary suspension of the hospital’s operations (was done) by the hospital, not because it is in financial
crisis, but merely for the purpose of avoiding compliance with our Order dated 13 June 1991, directing it to
accept all returning workers under the same terms and conditions of employment existing prior to the work
stoppage. This being the case, we cannot give imprimatur to the actuation exhibited herein by the Hospital. For
indeed, the Hospital had shown scant regard to the constitutional right of the members of the Union to self-
organization and to negotiate for better terms and conditions of employment."
The foregoing excerpt clearly shows that Secretary Torres’ visit was not the turning point insofar as
his Order was concerned. On the contrary said Order is clearly based on substantial evidence on record.
Petitioner also attacks Secretary Torres’ conclusion that its temporary cessation of operations was not
legitimate but for the purpose of circumventing the return-to-work order previously issued.
We are not persuaded. Temporary suspension of operations is recognized as a valid exercise of
management prerogative provided it is not carried out in order to circumvent the provisions of the Labor Code
or to defeat the rights of the employees under the Code. 22 The determination to cease or suspend operations is
a prerogative of management that the State usually does not interfere with, as no business can be required to
continue operating at a loss simply to maintain the workers in employment. Such an act would be tantamount to
a taking of property without due process of law, which the employer has a right to resist. But where it is shown
that the closure is motivated not by a desire to prevent further losses, but to discourage the workers from
organizing themselves into a union for more effective negotiations with management, the State is bound to
intervene
The burden of proving that such a temporary suspension is bona fide falls upon the employer. In this
instance, petitioner had to establish the fact of its precarious financial health, that its cessation of operations was
really necessitated by its financial condition, and that said condition would probably be alleviated or improved,
or its losses abated, by undertaking such suspension of operation. Petitioner could have at least partly met the
foregoing requirements by submitting its financial statements or records as proof of its financial crisis, since the
purported financial hemorrhage would definitely have been reflected therein. Thus, petitioner’s unexplained
and continued failure to submit its financial statements could not but raise grave doubts as to the truth of the
claimed financial crisis and the real purpose of the suspension of operations. It is not enough to merely raise
this issue nor to discuss it only in passing. The precarious financial condition must be established by evidence,
e.g., balance sheets and income statements, and the figures therein must be interpreted and discussed at length.
Petitioner was recklessly pushing its luck when it believed that the Secretary could be convinced without first
obtaining and examining petitioner’s financial statements and the notes thereto. The fact that the conciliator
never asked for them is no sufficient excuse for not presenting the same, as such was petitioner’s duty. Neither
is it acceptable for petitioner to allege that the latest financial statements (for the year 1991) were still being
prepared by its accountants and not yet ready for submission, since the financial statements for the prior years
1989 and 1990 would have sufficed.
It is a hornbook rule that employers who contemplate terminating the services of their workers must
base their decisions on more than just flimsy excuses, 24 considering that the dismissal of an employee from
work involves not only the loss of his position but, what is more important, his means of livelihood. The same
principle applies in temporary suspension of operations, as in this case, considering that it involves laying off
employees for a period of six months.
Petitioner, having wretchedly failed to justify by even the most rudimentary proof its temporary
suspension of operations, must bear the consequences thereof. We thus hold that the Secretary of Labor and
Employment did not act with grave abuse of discretion in finding the temporary suspension unjustified and
illegal.
Second Issue: New CBA DespiteTemporary Suspension?
Petitioner alleges that respondent Secretary acted in grave abuse of discretion when he ordered
petitioner to enter into a new CBA despite his knowledge that it had actually ceased operations. As proof
thereof, petitioner cites the portion of the assailed Order which reads that:
"It must be noted, however, that the hospital had actually ceased operations. It would thus be sheer
abuse of discretion on our part to compel the hospital to continue its operations and admit the returning
workers,
We disagree. Clearly, the respondent Secretary was of the impression that petitioner would operate
again after the lapse of the six-month suspension of operations on December 16, 1991, and so ordered the
parties to enter into and formalize a new CBA to govern their relations upon resumption of operations. On the
other hand, the aforequoted portion of the Order must be understood in the context of the Secretary’s finding
that the temporary suspension was only for circumventing the return-to-work order, but in spite of which he
held that he could not order petitioner to continue operations as "this would infringe on its inherent right to
manage and conduct its own business affairs" ; he thus ordered instead the payment of backwages to the
returning workers who were refused admittance by petitioner on June 21, 1991. And as above adverted to, he
also ordered the parties to execute a new CBA to govern their relations upon the expiry of the period of
suspension and the resumption of normal operations.
Art. 286 of the Labor Code provides: "The bona fide suspension of the operation of a business or
undertaking for a period not exceeding six (6) months . . . shall not terminate employment." Section 12, Rule 1,
Book VI of the Omnibus Rules Implementing the Labor Code provides that the employer-employee
relationship shall be deemed suspended in case of the suspension of operation referred to above, it being
implicitly assumed that once operations are resumed, the employer-employee relationship is revived and
restored
If a legitimate, valid and legal suspension of operations does not terminate but merely suspends the
employee-employer relationship, with more reason will an invalid and illegal suspension of operations as in this
case not affect the employment relationship
The foregoing premises considered, it is clear that there is no basis for petitioner to claim that a new
CBA should not be entered into or that collective bargaining should not be conducted during the effectivity of a
temporary suspension of operations. In this instance, petitioner expressly represented that the suspension was to
be for six months only. In the absence of any other information, the plain and natural presumption will be that
petitioner would resume operations after six months, and therefore, it follows that a new CBA will be needed to
govern the employment relations of the parties the old one having already expired. Clearly then, under the
circumstances, the respondent Secretary cannot be faulted nor considered to have gravely abused his discretion
for ordering the parties to enter into a new CBA
Did the Secretary act in excess of jurisdiction in imposing the wage increases and union shop
provision on the petitioner? We hold that he did not. While petitioner cannot be forced to abandon its
suspension of operations even if said suspension he declared unjustified illegal and invalid, neither can
petitioner evade its obligation to bargain with the union, using the cessation of its business as reason therefor.
For, as already indicated above, the employer-employee relationship was merely suspended (and not
terminated) for the duration of the temporary suspension. Using the suspension as an excuse to evade the duty
to bargain is further proof of its illegality. It shows abuse of this option and bad faith on the part of petitioner.
And since it refused to bargain, without valid and sufficient cause, the Secretary in the exercise of his powers
under Article 263(i) of the Labor Code to decide and resolve labor disputes, properly granted the wage increase
and imposed the union shop provision
Considering that after the lapse of the six-month period on December 16, 1991, petitioner did not
resume operations, it would border on the ridiculous to still try to enforce the October 16, 1991 Order and
require the parties to negotiate the terms and conditions of employment. It goes without saying that the said
Order directing the parties to enter into a new CBA is already moot and academic. We shall delve more into the
complete cessation of business when discussing the fourth issue below
Third Issue: Grant of Backwages Is Not A Adjudication on the Legality of the Strike
Petitioner charges the respondent Secretary with having gravely abused his discretion in ordering it
to pay backwages to the union members because it is tantamount to ruling that the union’s strike was legal —
jurisdiction over which question pertains to the labor arbiter.
As support, petitioner cites Philippine Airlines, Inc. v. Secretary of Labor and Employment, 25
where this Court ruled that:
"Under Art. 263 of the Labor Code, the Labor Secretary’s authority to resolve a labor dispute within
30 days from the date of assumption of jurisdiction, encompasses only the issues in the dispute, not the legality
or illegality of any strike that may have been resorted to in the meantime (Binamira v. Ogan-Occena, 148
SCRA 677, 685 [1987]).
In ruling on the legality of the PALEA strike, the Secretary of Labor acted without or in excess of his
jurisdiction.
There is merit in PAL’s contention that the Labor Secretary erred in declaring the strike valid and in
prohibiting PAL from taking retaliatory or disciplinary action against the strikers for the damages suffered by
the Airline as a result of the illegal work stoppage.
The Labor Secretary exceeded his jurisdiction when he restrained PAL from taking disciplinary
action against its guilty employees, for, under Art. 263 of the Labor Code, all that the Secretary may enjoin is
the holding of the strike, but not the company’s right to take action against union officers who participated in
the illegal strike and committed illegal acts. The prohibition which the Secretary issued to PAL constitutes an
unlawful deprivation of property and denial of due process for it prevents PAL from seeking redress for the
huge property losses that it suffered as a result of the union’s illegal mass action.
We disagree. As pointed out by the Solicitor General, the said case is not in point because in this case
the Secretary did not rule on the legality of the strike
Respondent union struck before the Secretary of Labor assumed jurisdiction over the dispute. Thus,
at first glance, the grant of backwages was not only dependent on the legality of the temporary suspension of
operations by petitioner but also on the legality of the strike of respondent union.
However, it is undisputed that petitioner never questioned the legality of the strike. When Secretary
Confessor assumed jurisdiction over the labor dispute, she ordered the immediate return to work of the striking
employees in order to restore the conditions of employment prior to the strike. The legality of the strike was not
in question as far as Secretary Torres was concerned, when he assumed the office, and was not within the ambit
of the jurisdiction conferred upon him by law. His concern was the labor dispute, i.e., the deadlock and the
temporary suspension of operations. Thus, he ruled only on these matters, and not, as claimed by petitioner, on
the legality or illegality of the strike. On the other hand, the grant of backwages was due to the illegality of the
temporary suspension, not the illegality of the strike.
Under Article 263 (g) of the Labor Code, the Secretary is authorized to penalize an erring employer
who refuses to accept returning employees by ordering such employer to pay backwages. This is within his
jurisdiction and is warranted by his finding as to the invalidity of the temporary suspension.
In fine, the respondent Secretary of Labor did not act with grave abuse of discretion in ordering
petitioner to pay backwages because it is not an adjudication on the legality of the strike
Fourth Issue: Supervening Event
Notwithstanding that respondent Secretary did not act with grave abuse of discretion in issuing the
challenged Orders, we cannot ignore the supervening event which occurred after December 15, 1991, i.e., the
subsequent permanent cessation of operation of petitioner on account of losses.
Business reverses or losses are recognized by law as a just cause for terminating employment. This
Court held in Columbia Development Corporation v. Minister of Labor and Employment
"Precisely because reverses in a business venture are expected, the law recognizes the same as a just
cause for terminating an employment [Art. 283(a) of the Labor Code] and in many instances, this Court has
‘affirmed the right of an employer to lay off or dismiss employees because of losses in the operation of its
business, lack of work and considerable reduction in the volume of his business.’ [LVN Pictures and Workers
Asso. v. LVN Pictures, Inc., 35 SCRA 147 and the cases cited therein].
Since this ground can be abused by scheming employers feigning business losses to ease out
employees, substantive and procedural requirements are imposed before it can be resorted to. The Labor Code
provides that:
"Art. 283. Closure of establishment and reduction of personnel. — The employer may also terminate
the employment of any employee due to the . . . cessation of operation of the establishment or undertaking
unless the closing is for the purpose of circumventing the provisions of this title, by serving a written notice on
the workers and the Department of Labor and Employment at least one (1) month before the intended date
thereof . . ."
Further, it is necessary that business reverses or losses be serious, actual and real. The burden of
establishing the truth as to these losses or reverses falls upon the employer.
Petitioner finally submitted its financial statements for 1990 as an annex to its petition. And attached
to its Reply to Comment were its financial statements for 1991. The Statements of Revenues and Expenses
revealed that in 1989, petitioner had a net profit of P106,102.00, but this was due to other income of
P202,772.00, which offset losses from operations of P96,670.00. In the following years, operating losses could
not be offset by other income. In 1990, petitioner sustained a net loss of P200,942.00 despite other income of
P203,092.00. In 1991, net loss mounted to P3,180,268.00, completely wiping out its entire Fund Balance
(retained earnings) of P3,159,791.00 from the previous year, and leaving a negative figure of P20,477.00. I his
means that nothing was left of the entire capital of petitioner, which is why petitioner contends that it is not in
any position to resume operations. Furthermore, petitioner s external auditors reported that the 1991 financial
statements have not yet made any provisions for petitioner’s liability resulting from this and other labor
disputes.
In both 1989 and 1990, the hospital’s costs and operating expenses exceeded gross revenues,
signaling serious financial trouble. When petitioner suspended operations in the second half of 1991, its gross
revenues covered only 56% of operating expenses. The decrease in expenses to about half the prior years’ was
still too small to offset the revenues foregone. It seems that the temporary suspension turned out to have been
more costly rather than beneficial. Eventually, its financial troubles resulted in the demise of petitioner as a
going concern.
Petitioner’s total assets in 1991 registered a drop of about P2.5 million from the previous year’s P7.8
million, a staggering decline. It had exhausted its Fund Balance completely. Considering that it had been
operating mainly on the revenues it generated, the high risks of continuing operations were enough to make
petitioner bail out.
 We should mention that this case is different from Union of Filipino Workers v. National Labor
Relations Commission because in the case at bar, financial trouble is reflected in petitioner’s financial
statements since 1989 and the cessation of operations was total.
The losses registered in 1989, 1990 and 1991 cannot be deemed "paltry." Consider also the loss of
doctors and patients prior to the temporary suspension. It is beyond cavil then that petitioner suffered serious
and actual business reverses. In such a case, management has the final say as to whether it will continue to risk
its capital in its business or not. This is properly its prerogative. Since there is basis for the permanent closure of
the business, we cannot read into it any attempt to defeat the rights of its employees under the law, nor any
oppressive and high-handed motives.
Thus, despite the absence of grave abuse of discretion on the part of the respondent Secretary, this
Court cannot impose upon petitioner the directive to enter into a new CBA with the union for the very simple
reason that to do so would be to compel petitioner to continue its business when it had already decided to close
shop, and that would be judicial tyranny on our part.
Epilogue
It will be noted that while the Court ruled as improper the temporary suspension of petitioner’s
operation, it nonetheless sustained its permanent closure thereafter. To resolve this seeming contradiction, we
repeat: we found no arbitrariness in the ruling of the then Secretary of Labor finding the suspension of
operations as unwarranted because petitioner failed to adduce evidence before the conciliator to show that the
hospital’s financial condition at that time justified such suspension. On the other hand, before us, by presenting
its later financial statements, petitioner was able to prove conclusively a supervening event, i.e., that its
financial health had deteriorated to such an extent as to justify the complete cessation of its operations, and its
permanent closure. Ironically, it was petitioner’s temporary suspension of operations that made inevitable and
irreversible (as well as legally tenable) its subsequent permanent closure.
The Court is grieved by the closure of the petitioner hospital, and what such closure meant, not only
to petitioner, but to the public and especially patients and those in need of medical attention. It is even more sad
that, by reason of such closure, petitioner’s employees and staff, including doctors, nurses and other hospital
workers, have had to be laid off. We would have wanted to see the parties amicably settle their differences and
patch things up, in view of the crucial public service they rendered, particularly since, up to the time of its
suspension of operation, the hospital was "the best equipped in the locality." However, all that is water under
the bridge now, and there is really not much that this Court can do in the premises and at this time except to
decide the instant case on the basis of the legal issues raised.
WHEREFORE, the petition is partially GRANTED. The assailed Orders, insofar as they grant
backwages from June 21, 1991 until December 15, 1991, are AFFIRMED. However, they are MODIFIED
insofar as they directed the parties to enter into a new collective bargaining agreement, which directives are
hereby SET ASIDE for being moot and academic.
SO ORDERED.
G.R. No. 82341 December 6, 1989
SUNDOWNER DEVELOPMENT CORPORATION, petitioner,
vs.
HON. FRANKLIN M. DRILON, in his capacity as Secretary of the Department of Labor and
Employment, NATIONAL UNION OF WORKERS IN HOTEL, RESTAURANT AND ALLIED
INDUSTRIES, (NUWHRAIN), HOTEL MABUHAY CHAPTER, THE CHAPTER OFFICERS AND
MEMBERS, HOTEL MABUHAY, INC. and MR. MARIANO PENANO, President of Hotel Mabuhay,
Inc., respondents.
GANCAYCO, J.:
The principal issue in this case is whether or not the purchaser of the assets of an employer corporation can be
considered a successor employer of the latter's employees.
Private respondent Hotel Mabuhay, Inc. (Mabuhay for short,) leased the premises belonging to Santiago
Syjuco, Inc. (Syjuco for short) located at 1430 A. Mabini St., Ermita, Manila. However, due to non-payment of
rentals, a case for ejectment was filed by Syjuco against Mabuhay in the Metropolitan Trial Court of Manila.
Mabuhay offered to amicably settle the case by surrendering the premises to Syjuco and to sell its assets and
personal property to any interested party.
Syjuco offered the said premises for lease to petitioner. The negotiation culminated with the execution of the
lease agreement on April 16, 1987 to commence on May 1, 1987 and to expire on April 30,1992.1 Mabuhay
offered to sell its assets and personal properties in the premises to petitioner to which petitioner agreed. A deed
of assignment of said assets and personal properties was executed by Mabuhay on April 29,1987 in favor of
petitioner. 2
On same date Syjuco formally turned over the possession of the leased premises to petitioner who actually took
possession and occupied the same on May 1, 1987.
On May 4, 1987, respondent National Union of Workers in Hotel, Restaurant and Allied Services
(NUWHRAIN for short) picketed the leased premises, barricaded the entrance to the leased premises and
denied petitioner's officers, employees and guests free access to and egress from said premises. Thus, petitioner
wrote a letter-complaint to Syjuco.
A complaint for damages with preliminary injunction and/or temporary restraining order was filed by petitioner
on May 7, 1987 with the Regional Trial Court of Manila docketed as Civil Case No. 87-40436. On the same
day, the Executive Judge of said court issued a restraining order against respondent NUWHRAIN and its
officers and members as prayed for in the petition. Nevertheless, NUWHRAIN maintained their strike on the
subject premises but filed an answer to the complaint.
On May 14, 1987, an order was issued by public respondent Secretary of Labor assuming jurisdiction over the
labor dispute pursuant to Article 263(g) of the Labor Code as amended and in the interim, requiring all striking
employees to return to work and for respondent Mabuhay to accept all returning employees pending final
determination of the issue of the absorption of the former employees of Mabuhay. The parties were also
directed to submit their respective position papers within ten (10) days from receipt of the order.
On May 25, 1987, Mabuhay submitted its position paper alleging among others that it had sold all its assets and
personal properties to petitioner and that there was no sale or transfer of its shares whatsoever and that
Mabuhay completely ceased operation effective April 28,1987 and surrendered the premises to petitioner so
that there exists a legal and physical impossibility on its part to comply with the return to work order
specifically on absorption.
On June 26, 1987, petitioner in order to commence its operation, signed a tri-partite agreement so the workers
may lift their strike, by and among petitioner, respondents NUWHRAIN and Mabuhay whereby the latter paid
to respondent NUWHRAIN the sum of P 638,000.00 in addition to the first payment in the sum of P
386,447.11, for which reason respondent NUWHRAIN agreed to lift the picket .3
Respondent NUWHRAIN on July 13, 1987 filed its position paper alleging connivance between Mabuhay and
petitioner in selling the assets and closing the hotel to escape its obligations to the employees of Mabuhay and
so it prays that petitioner accept the workforce of Mabuhay and pay backwages from April 15,1986 to April
28,1987, the day Mabuhay stopped operation.
On the other hand, petitioner filed a "Partial Motion for Reconsideration and Position Paper," alleging that it
was denied due process; that there were serious errors in the findings of fact which would cause grave and
irreparable damage to its interest; as well as on questions of law. On January 20, 1988, the public respondent
issued an order requiring petitioner to absorb the members of the union and to pay backwages from the time it
started operations up to the date of the order. 4
Petitioner filed on January 27,1988 a motion for reconsideration of the aforesaid order alleging that the theory
of implied acceptance and assumption of statutory wrong does not apply in the instant case; that the prevailing
doctrine that there is no law requiring bona fide purchasers of the assets of an on-going concern to absorb in its
employ the employees of the latter should be applied in this case; that the order for absorption of the employees
of Mabuhay as well as the payment of their backwages is contrary to law. Respondent NUWHRAIN also filed a
motion for clarification of the aforesaid order.
On March 8, 1988, the public respondent denied said motion for reconsideration and motion for clarification for
lack of merit.
Hence, this petition for review by certiorari with prayer for preliminary injunction and/or temporary restraining
order filed by petitioner in this Court. Petitioner presents seven issues for resolution which all revolve about the
singular issue of whether or not under the circumstances of this case the petitioner may be compelled to absorb
the employees of respondent Mabuhay.
On March 23, 1988, this Court, without giving due course to the petition, required respondents to comment
thereon within ten (10) days from notice and issued a temporary restraining order enjoining public respondent
or his duly authorized representatives from executing and implementing the orders dated January 20, 1988 and
March 8, 1988.
The petition is impressed with merit.
The rule is that unless expressly assumed, labor contracts such as employment contracts and collective
bargaining agreements are not enforceable against a transferee of an enterprise, labor contracts being in
personam, thus binding only between the parties .5 A labor contract merely creates an action in personally and
does not create any real right which should be respected by third parties. This conclusion draws its force from
the right of an employer to select his employees and to decide when to engage them as protected under our
Constitution, and the same can only be restricted by law through the exercise of the police power.6
As a general rule, there is no law requiring a bona fide purchaser of assets of an on-going concern to absorb in
its employ the employees of the latter. 7
However, although the purchaser of the assets or enterprise is not legally bound to absorb in its employ the
employers of the seller of such assets or enterprise, the parties are liable to the employees if the transaction
between the parties is colored or clothed with bad faith. 8
In the case at bar, contrary to the claim of the public respondent that the transaction between petitioner and
Mabuhay was attended with bad faith, the court finds no cogent basis for such contention. Thus, the absorption
of the employees of Mabuhay may not be imposed on petitioner.
It is undisputed that when Mabuhay surrendered the leased premises to Syjuco and asked Syjuco to offer same
to other lessees it was Syjuco who found petitioner and persuaded petitioner to lease said premises. Mabuhay
had nothing to do with the negotiation and consummation of the lease contract between petitioner and Syjuco.
It was only when Mabuhay offered to sell its assets and personal properties in the premises to petitioner that
they came to deal with each other. It appears that petitioner agreed to purchase said assets of respondent
Mabuhay to enable Mabuhay to pay its obligations to its striking employees and to Syjuco. Indeed, in the deed
of assignment that was executed by Mabuhay in favor of petitioner on April 14, 1 987 for and in consideration
of P2,500,000.00, it is specifically provided therein that the same is "purely for and in consideration of the
sale/transfer and assignment of the personal properties and assets of Hotel Mabuhay, Inc. listed . . . " and "in no
way involves any assumption or undertaking on the part of Second Party (petitioner) of any debts or liabilities
whatsoever of Hotel Mabuhay, Inc." 9 The liabilities alluded to in this agreement should be interpreted to mean
not only any monetary liability of Mabuhay but any other liability or obligation arising from the operation of its
business including its liability to its employees.
Moreover, in the tripartite agreement that was entered into by petitioner with respondents NUWHRAIN and
Mabuhay, it is clearly stipulated as follows:
8. That, immediately after the execution of this Agreement, the FIRST PARTY shall give
a list of its members to the THIRD PARTY that it desires to recommend for employment
so that the latter can consider them for employment, with no commitment whatsoever on
the part of the THIRD PARTY to hire them in the business that it will operate in the
premises formerly occupied by the Hotel Mabuhay; 10
From the foregoing, it is clear that petitioner has no liability whatsoever to the employees of Mabuhay And its
responsibility if at all, is only to consider them for re-employment in the operation of the business in the same
premises. There can be no implied acceptance of the employees of Mabuhay by petitioner and acceptance of
statutory wrong as it is expressly provided in the agreement that petitioner has no commitment or duty to absorb
them.
Moreover, the court does not subscribe to the theory of public respondent that petitioner should have informed
NUWHRAIN of its lease of the premises and its purchase of the assets and personal properties of Mabuhay
therein so that said employees could have taken steps to protect their interest. The court finds no such duty on
the part of petitioner and its failure to notify said employees cannot be an indicium of bad faith.
Much less is there any evidence that petitioner and respondent Mabuhay are joint tortfeasors as found by public
respondent. While it is true that petitioner is using the leased property for the same type of business as that of
respondent Mabuhay, there can be no continuity of the business operations of the predecessor employer by the
successor employer as respondent Mabuhay had not retained control of the business. Petitioner is a corporation
entirely different from Mabuhay. It has no controlling interest whatever in respondent Mabuhay. Petitioner and
Mabuhay have no privity and are strangers to each other.
What is obvious is that the petitioner, by purchasing the assets of respondent Mabuhay in the hotel premises,
enabled Mabuhay to pay its obligations to its employees. There being no employer-employee relationship
between the petitioner and the Mabuhay employees, the petition must fail. Petitioner can not be compelled to
absorb the employees of Mabuhay and to pay them backwages.
WHEREFORE, the petition is GRANTED and the questioned orders of public respondent Secretary of Labor
and Employment dated January 20, 1988 and March 8, 1988 are reversed and set aside. The restraining order
that this Court issued on March 20,1988 is hereby made permanent. No pronouncement as to costs.
SO ORDERED.
G.R. No. 224099, June 21, 2017
ROMMEL M. ZAMBRANO, ROMEO O. CALIPAY, JESUS L. CHIN, LYNDON B. APOSAGA,
BONIFACIO A. CASTAÑEDA, ROSEMARIE P. FALCUNIT, ROMEO A. FINALLA, LUISITO G.
GELLIDO, JOSE ALLI L. MABUHAY, VICENTE A. MORALES, RAUL L. REANZARES, DIODITO
I. TACUD, ERNAN D. TERCERO, LARRY V. MUTIA, ROMEO A. GURON, DIOSDADO S.
AZUSANO, BENEDICTO D. GIDAYAWAN, LOWIS M. LANDRITO, NARCISO R. ASI, TEODULO
BORAC, SANTOS J. CRUZADO, JR., ROLANDO DELA CRUZ, RAYMUNDO, MILA Y. ABLAY,
ERMITY F. GABUCAY, PABLITO M. LACANARIA, MELCHOR PEÑAFLOR, ARSENIO B.
PICART III, ROMEO M. SISON, JOSE VELASCO JR., ERWIN M. VICTORIA, PRISCO J. ABILO,
WILFREDO D. ARANDIA, ALEXANDER Y. HILADO, JAIME M. CORALES, GERALDINE C.
MAUHAY, MAURO P. MARQUEZ, JONATHAN T. BARQUIN, RICARDO M. CALDERON JR.,
RENATOR. RAMIREZ, VIVIAN P. VIRTUDES, DOMINGO P. COSTANTINO JR., RENATO A.
MANAIG, RAFAEL D. CARILLO, Petitioners, v. PHILIPPINE CARPET MANUFACTURING
CORPORATION/PACIFIC CARPET MANUFACTURING CORPORATION, DAVID E. T. LIM, AND
EVELYN LIM FORBES, Respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to reverse and set aside
the January 8, 2016 Decision1 and April 11, 2016 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No.
140663, which affirmed the February 27, 2015 Decision3 and March 31, 2015 Resolution4 of the National Labor
Relations Commission (NLRC) in NLRC NCR Case No. 01-00109-14; 01-00230-14; 01-00900-14; 01-01025-
14; and 01-01133-14, for five (5) consolidated complaints for illegal dismissal and unfair labor practice.
The Antecedents
The petitioners averred that they were employees of private respondent Philippine Carpet
Manufacturing Corporation (Phil Carpet). On January 3, 2011, they were notified of the termination of their
employment effective February 3, 2011 on the ground of cessation of operation due to serious business losses.
They were of the belief that their dismissal was without just cause and in violation of due process because the
closure of Phil Carpet was a mere pretense to transfer its operations to its wholly owned and controlled
corporation, Pacific Carpet Manufacturing Corporation (Pacific Carpet). They claimed that the job orders of
some regular clients of Phil Carpet were transferred to Pacific Carpet; and that from October to November
2011, several machines were moved from the premises of Phil Carpet to Pacific Carpet. They asserted that their
dismissal constituted unfair labor practice as it involved the mass dismissal of all union officers and members
of the Philippine Carpet Manufacturing Employees Association (PHILCEA).
In its defense, Phil Carpet countered that it permanently closed and totally ceased its operations
because there had been a steady decline in the demand for its products due to global recession, stiffer
competition, and the effects of a changing market. Based on the Audited Financial Statements5 conducted by
SGV & Co., it incurred losses of P4.1M in 2006; P12.8M in 2007; P53.28M in 2008; and P47.79M in 2009. As
of the end of October 2010, unaudited losses already amounted to P26.59M. Thus, in order to stem the
bleeding, the company implemented several cost-cutting measures, including voluntary redundancy and early
retirement programs. In 2007, the car carpet division was closed. Moreover, from a high production capacity of
about 6,000 square meters of carpet a month in 2002, its final production capacity steadily went down to an
average of 350 square meters per month for 2009 and 2010. Subsequently, the Board of Directors decided to
approve the recommendation of its management to cease manufacturing operations. The termination of the
petitioners' employment was effective as of the close of office hours on February 3, 2011. Phil Carpet likewise
faithfully complied with the requisites for closure or cessation of business under the Labor Code. The
petitioners and the Department of Labor and Employment (DOLE) were served written notices one (1) month
before the intended closure of the company. The petitioners were also paid their separation pay and they
voluntarily executed their respective Release and Quitclaim6 before the DOLE officials.
The LA Ruling
In the September 29, 2014 Decision,7 the Labor Arbiter (LA) dismissed the complaints for illegal
dismissal and unfair labor practice. It ruled that the termination of the petitioners' employment was due to total
cessation of manufacturing operations of Phil Carpet because it suffered continuous serious business losses
from 2007 to 2010. The LA added that the closure was truly dictated by economic necessity as evidenced by its
audited financial statements. It observed that written notices of termination were served on the DOLE and on
the petitioners at least one (1) month before the intended date of closure. The LA further found that the
petitioners voluntarily accepted their separation pay and other benefits and eventually executed their individual
release and quitclaim in favor of the company. Finally, it declared that there was no showing that the total
closure of operations was motivated by any specific and clearly determinable union activity of the employees.
The dispositive portion reads:
WHEREFORE, premises considered, judgment is hereby rendered DISMISSING the complaint of
Domingo P. Constantino, Jr. on ground of prescription of cause of action and the consolidated complaints of the
rest of complainants for lack of merit
SO ORDERED
Unconvinced, the petitioners elevated an appeal before the NLRC.
The NLRC Ruling
In its February 27, 2015 Decision, the NLRC affirmed the findings of the LA. It held that the
Audited Financial Statements show that Phil Carpet continuously incurred net losses starting 2007 leading to its
closure in the year 2010. The NLRC added that Phil Carpet complied with the procedural requirements of
effecting the closure of business pursuant to the Labor Code. The fallo reads:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, complainants' appeal from the Decision of the Labor Arbiter Marita V.
Padolina is hereby DISMISSED for lack of merit.
SO ORDERED.
Undeterred, the petitioners filed a motion for reconsideration thereof. In its resolution, dated March
31,2015, the NLRC denied the same.
Aggrieved, the petitioners filed a petition for certiorari with the CA.
The CA Ruling
In its assailed decision, dated January 8, 2016, the CA ruled that the total cessation of Phil Carpet's
manufacturing operations was not made in bad faith because the same was clearly due to economic necessity. It
determined that there was no convincing evidence to show that the regular clients of Phil Carpet secretly
transferred their job orders to Pacific Carpet; and that Phil Carpet's machines were not transferred to Pacific
Carpet but were actually sold to the latter after the closure of business as shown by the several sales invoices
and official receipts issued by Phil Carpet. The CA adjudged that the dismissal of the petitioners who were
union officers and members of PHILCEA did not constitute unfair labor practice because Phil Carpet was able
to show that the closure was due to serious business losses.
The CA opined that the petitioners' claim that their termination was a mere pretense because Phil
Carpet continued operation through Pacific Carpet was unfounded because mere ownership by a single
stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself
sufficient ground for disregarding the separate corporate personality. The CA disposed the petition in this
wise:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, the instant petition for certiorari is hereby DISMISSED.
SO ORDERED.10
The petitioners moved for reconsideration, but their motion was denied by the CA in its assailed resolution,
dated April 11, 2016.
Hence, this present petition.
ISSUES
WHETHER THE PETITIONERS WERE DISMISSED FROM EMPLOYMENT FOR A LAWFUL
CAUSE
WHETHER THE PETITIONERS' TERMINATION FROM EMPLOYMENT CONSTITUTES
UNFAIR LABOR PRACTICE
WHETHER PACIFIC CARPET MAY BE HELD LIABLE FOR PHIL CARPET'S OBLIGATIONS
WHETHER THE QUITCLAIMS SIGNED BY THE PETITIONERS ARE VALID AND BINDING
The petitioners argue that Phil Carpet did not totally cease its operations; that most of the job orders
of Phil Carpet were transferred to its wholly owned subsidiary, Pacific Carpet; and that the signing of
quitclaims did not bar them from pursuing their case because they were made to believe that the closure was
legal.
In its Comment,11 dated August 26, 2016, Phil Carpet averred that the termination of the petitioners'
employment as a consequence of its total closure and cessation of operations was in accordance with law and
supported by substantial evidence; that the petitioners could only offer bare and self-serving claims and sham
evidence such as financial statements that did not pertain to Phil Carpet; and that under the Labor Code, any
compromise settlement voluntarily agreed upon by the parties with the assistance of the regional office of the
DOLE was final and binding upon the parties.
In their Reply,12 dated November 8, 2016, the petitioners alleged that the losses of Phil Carpet were
almost proportionate to the net income of its subsidiary, Pacific Carpet; and that the alleged sale, which
transpired between Phil Carpet and Pacific Carpet, was simulated
The Court's Ruling
The petition is bereft of merit.
The petitioners were terminated from employment for an authorized cause
Under Article 298 (formerly Article 283) of the Labor Code, closure or cessation of operation of the
establishment is an authorized cause for terminating an employee, viz.:
 Article 298. Closure of establishment and reduction of personnel. - The employer may also terminate
the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operations of the establishment or undertaking unless the
closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the
workers and the Department of Labor and Employment at least one (1) month before the intended date thereof.
In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby
shall be entitled to a separation pay equivalent to at least one (1) month pay or to at least one (1) month pay for
every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closure or
cessation of operations of establishment or undertaking not due to serious business losses or financial
reverses, the separation pay shall be equivalent to at least one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be
considered as one (1) whole year. [Emphases supplied
Closure of business is the reversal of fortune of the employer whereby there is a complete cessation
of business operations and/or an actual locking-up of the doors of establishment, usually due to financial losses.
Closure of business, as an authorized cause for termination of employment, aims to prevent further financial
drain upon an employer who cannot pay anymore his employees since business has already stopped. In such a
case, the employer is generally required to give separation benefits to its employees, unless the closure is due to
serious business losses.13
Further, in Industrial Timber Corporation v. Ababon,14 the Court held
A reading of the foregoing law shows that a partial or total closure or cessation of operations of
establishment or undertaking may either be due to serious business losses or financial reverses or otherwise.
Under the first kind, the employer must sufficiently and convincingly prove its allegation of substantial losses,
while under the second kind, the employer can lawfully close shop anytime as long as cessation of or
withdrawal from business operations was bona fide in character and not impelled by a motive to defeat or
circumvent the tenurial rights of employees, and as long as he pays his employees their termination pay in the
amount corresponding to their length of service. Just as no law forces anyone to go into business, no law can
compel anybody to continue the same. It would be stretching the intent and spirit of the law if a court interferes
with management's prerogative to close or cease its business operations just because the business is not
suffering from any loss or because of the desire to provide the workers continued employment.
In sum, under Article 283 of the Labor Code, three requirements are necessary for a valid cessation
of business operations: (a) service of a written notice to the employees and to the DOLE at least one month
before the intended date thereof; (b) the cessation of business must be bona fide in character; and (c) payment
to the employees of termination pay amounting to one month pay or at least one-half month pay for every year
of service, whichever is higher.15 [citations omitted
In this case, the LA's findings that Phil Carpet suffered from serious business losses which resulted in
its closure were affirmed in toto by the NLRC, and subsequently by the CA. It is a rule that absent any showing
that the findings of fact of the labor tribunals and the appellate court are not supported by evidence on record or
the judgment is based on a misapprehension of facts, the Court shall not examine anew the evidence submitted
by the parties.16 In Alfaro v. Court of Appeals,17 the Court explained the reasons therefor, to wit:
The Supreme Court is not a trier of facts, and this doctrine applies with greater force in labor cases.
Factual questions are for the labor tribunals to resolve. In this case, the factual issues have already been
determined by the labor arbiter and the National Labor Relations Commission. Their findings were affirmed by
the CA. Judicial review by this Court does not extend to a reevaluation of the sufficiency of the evidence upon
which the proper labor tribunal has based its determination.
Indeed, factual findings of labor officials who are deemed to have acquired expertise in matters
within their respective jurisdictions are generally accorded not only respect, but even finality, and are binding
on the Supreme Court. Verily, their conclusions are accorded great weight upon appeal, especially when
supported by substantial evidence. Consequently, the Supreme Court is not duty-bound to delve into the
accuracy of their factual findings, in the absence of a clear showing that the same were arbitrary and bereft of
any rational basis.1
Even after perusal of the records, the Court finds no reason to take exception from the foregoing rule.
Phil Carpet continuously incurred losses starting 2007, as shown by the Audited Financial Statements19 which
were offered in evidence by the petitioners themselves. The petitioners, in claiming that Phil Carpet continued
to earn profit in 2011 and 2012, disregarded the reason for such income, which was Phil Carpet's act of selling
its remaining inventories. Notwithstanding such income, Phil Carpet continued to incur total comprehensive
losses in the amounts of 9,559,716 and 12,768,277 for the years 2011 and 2012, respectively.20
Further, even if the petitioners refuse to consider these losses as serious enough to warrant Phil
Carpet's total and permanent closure, it was a business judgment on the part of the company's owners and
stockholders to cease operations, a judgment which the Court has no business interfering with. The only
limitation provided by law is that the closure must be "bona fide in character and not impelled by a motive to
defeat or circumvent the tenurial rights of employees."21 Thus, when an employer complies with the foregoing
conditions, the Court cannot prohibit closure "just because the business is not suffering from any loss or
because of the desire to provide the workers continued employment."22
Finally, Phil Carpet notified DOLE23 and the petitioners24 of its decision to cease manufacturing
operations on January 3, 2011, or at least one (1) month prior to the intended date of closure on February 3,
2011. The petitioners were also given separation pay equivalent to 100% of their monthly basic salary for every
year of service.
The dismissal of the petitioners did not amount to unfair labor practice
Article 259 (formerly Article 248) of the Labor Code enumerates the unfair labor practices of
employers, to wit:
Art. 259. Unfair Labor Practices of Employers. - It shall be unlawful for an employer to commit any
of the following unfair labor practices:
(a) To interfere with, restrain or coerce employees in the exercise of their right to self-organization;
(b) To require a:s a condition of employment that a person or an employee shall not join a labor
organization or shall withdraw from one to which he belongs;
(c) To contract out services or functions being performed by union members when such will interfere
with, restrain or coerce employees in the exercise of their right to self-organization;
(d) To initiate, dominate, assist or otherwise interfere with the formation or administration of any
labor organization, including the giving of financial or other support to it or its organizers or supporters;
(e) To discriminate in regard to wages, hours of work and other terms and conditions of employment
in order to encourage or discourage membership in any labor organization. Nothing in this Code or in any other
law shall stop the parties from requiring membership in a recognized collective bargaining agent as a condition
for employment, except those employees who are already members of another union at the time of the signing
of the collective bargaining agreement. Employees of an appropriate bargaining unit who are not members of
the recognized collective bargaining agent may be assessed a reasonable fee equivalent to the dues and other
fees paid by members of the recognized collective bargaining agent, if such non-union members accept the
benefits under the collective bargaining agreement: Provided, That the individual authorization required under
Article 242, paragraph (o) of this Code shall not apply to the non-members of the recognized collective
bargaining agent;
 (f) To dismiss, discharge or otherwise prejudice or discriminate against an employee for having
given or being about to give testimony under this Code;
(g) To violate the duty to bargain collectively as prescribed by this Code;
(h) To pay negotiation or attorney's fees to the union or its officers or agents as part of the settlement
of any issue in collective bargaining or any other dispute; or
(i) To violate a collective bargaining agreement.
The provisions of the preceding paragraph notwithstanding, only the officers and agents of
corporations, associations or partnerships who have actually participated in, authorized or ratified unfair labor
practices shall be held criminally liable
Unfair labor practice refers to acts that violate the workers' right to organize.25 There should be no
dispute that all the prohibited acts constituting unfair labor practice in essence relate to the workers' right to
self-organization.26 Thus, an employer may only be held liable for unfair labor practice if it can be shown that
his acts affect in whatever manner the right of his employees to self-organize.27
The general principle is that one who makes an allegation has the burden of proving it. Although
there are exceptions to this general rule, in the case of unfair labor practice, the alleging party has the burden of
proving it.28 In the case of Standard Chartered Bank Employees Union (NUBE) v. Confesor,29 this Court
elaborated
In order to show that the employer committed ULP under the Labor Code, substantial
evidence is required to support the claim. Substantial evidence has been defined as such relevant evidence as
a reasonable mind might accept as adequate to support a conclusion.30 [Emphasis supplies
Moreover, good faith is presumed and he who alleges bad faith has the duty to prove the same.31
The petitioners miserably failed to discharge the duty imposed upon them. They did not identify the
acts of Phil Carpet which, they claimed, constituted unfair labor practice. They did not even point out the
specific provisions which Phil Carpet violated. Thus, they would have the Court pronounce that Phil Carpet
committed unfair labor practice on the ground that they were dismissed from employment simply because they
were union officers and members. The constitutional commitment to the policy of social justice, however,
cannot be understood to mean that every labor dispute shall automatically be decided in favor of labor.32
In this case, as far as the pieces of evidence offered by the petitioners are concerned, there is no
showing that the closure of the company was an attempt at union-busting. Hence, the charge that Phil Carpet is
guilty of unfair labor practice must fail for lack of merit.
Pacific Carpet has a personality separate and distinct from Phil Carpet
The petitioners, in asking the Court to disregard the separate corporate personality of Pacific Carpet
and to make it liable for the obligations of Phil Carpet, rely heavily on the former being a subsidiary of the
latter.
A corporation is an artificial being created by operation of law. It possesses the right of succession
and such powers, attributes, and properties expressly authorized by law or incident to its existence. It has a
personality separate and distinct from the persons composing it, as well as from any other legal entity to which
it may be related.33
Equally well-settled is the principle that the corporate mask may be removed or the corporate veil
pierced when the corporation is just an alter ego of a person or of another corporation. For reasons of public
policy and in the interest of justice, the corporate veil will justifiably be impaled only when it becomes a shield
for fraud, illegality or inequity committed against third persons.34
Hence, any application of the doctrine of piercing the corporate veil should be done with caution. A
court should be mindful of the milieu where it is to be applied. It must be certain that the corporate fiction was
misused to such an extent that injustice, fraud, or crime was committed against another, in disregard of rights.
The wrongdoing must be clearly and convincingly established; it cannot be presumed. Otherwise, an injustice
that was never unintended may result from an erroneous application.35
Further, the Court's ruling in Philippine National Bank v. Hydro Resources Contractors
Corporation36 is enlightening, viz.:
The doctrine of piercing the corporate veil applies only in three (3) basic areas, namely: 1) defeat of
public convenience as when the corporate fiction is used as a vehicle for the evasion of an existing obligation;
2) fraud cases or when the corporate entity is used to justify a wrong, protect fraud, or defend a crime; or 3)
alter ego cases, where a corporation is merely a farce since it is a mere alter ego or business conduit of a person,
or where the corporation is so organized and controlled and its affairs are so conducted as to make it merely an
instrumentality, agency, conduit or adjunct of another corporation
xxxx
In this connection, case law lays down a three-pronged test to determine the application of the alter
ego theory, which is also known as the instrumentality theory, namely:
(1) Control, not mere majority or complete stock control, but complete domination, not only of
finances but of policy and business practice in respect to the transaction attacked so that the corporate entity as
to this transaction had at the time no separate mind, will or existence of its own;
(2) Such control must have been used by the defendant to commit fraud or wrong, to perpetuate the
violation of a statutory or other positive legal duty, or dishonest and unjust act in contravention of plaintiff's
legal right; and
(3) The aforesaid control and breach of duty must have proximately caused the injury or unjust loss
complained of.
The first prong is the "instrumentality" or "control" test. This test requires that the subsidiary be completely
under the control and domination of the parent. It examines the parent corporation's relationship with the
subsidiary. It inquires whether a subsidiary corporation is so organized and controlled and its affairs are so
conducted as to make it a mere instrumentality or agent of the parent corporation such that its separate existence
as a distinct corporate entity will be ignored. It seeks to establish whether the subsidiary corporation has no
autonomy and the parent corporation, though acting through the subsidiary in form and appearance, "is
operating the business directly for itself."
The second prong is the "fraud" test. This test requires that the parent corporation's conduct in using
the subsidiary corporation be unjust, fraudulent or wrongful. It examines the relationship of the plaintiff to the
corporation. It recognizes that piercing is appropriate only if the parent corporation uses the subsidiary in a way
that harms the plaintiff creditor. As such, it requires a showing of "an element of injustice or fundamental
unfairness."
The third prong is the "harm" test. This test requires the plaintiff to show that the defendant's control,
exerted in a fraudulent, illegal or otherwise unfair manner toward it, caused the harm suffered. A causal
connection between the fraudulent conduct committed through the instrumentality of the subsidiary and the
injury suffered or the damage incurred by the plaintiff should be established. The plaintiff must prove that,
unless the corporate veil is pierced, it will have been treated unjustly by the defendant's exercise of control and
improper use of the corporate form and, thereby, suffer damages.
To summarize, piercing the corporate veil based on the alter ego theory requires the concurrence of
three elements: control of the corporation by the stockholder or parent corporation, fraud or fundamental
unfairness imposed on the plaintiff, and harm or damage caused to the plaintiff by the fraudulent or unfair act of
the corporation. The absence of any of these elements prevents piercing the corporate veil.37 [Citations omitted
The Court finds that none of the tests has been satisfactorily met in this case.
Although ownership by one corporation of all or a great majority of stocks of another corporation
and their interlocking directorates may serve as indicia of control, by themselves and without more, these
circumstances are insufficient to establish an alter ego relationship or connection between Phil Carpet on the
one hand and Pacific Carpet on the other hand, that will justify the puncturing of the latter's corporate cover.38
This Court has declared that "mere ownership by a single stockholder or by another corporation of all
or nearly all of the capital stock of a corporation is not of itself sufficient ground for disregarding the separate
corporate personality."39 It has likewise ruled that the "existence of interlocking directors, corporate officers and
shareholders is not enough justification to pierce the veil of corporate fiction in the absence of fraud or other
public policy considerations."40
It must be noted that Pacific Carpet was registered with the Securities and Exchange Commission on
January 29, 1999,41 such that it could not be said that Pacific Carpet was set up to evade Phil Carpet's liabilities.
As to the transfer of Phil Carpet's machines to Pacific Carpet, settled is the rule that "where one corporation
sells or otherwise transfers all its assets to another corporation for value, the latter is not, by that fact alone,
liable for the debts and liabilities of the transferor."42
All told, the petitioners failed to present substantial evidence to prove their allegation that Pacific
Carpet is a mere alter ego of Phil Carpet.
The quitclaims were valid and binding upon the petitioners
Where the person making the waiver has done so voluntarily, with a full understanding thereof, and
the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as being a
valid and binding undertaking.43 Not all quitclaims are per se invalid or against policy, except (1) where there is
clear proof that the waiver was wangled from an unsuspecting or gullible person, or (2) where the terms of
settlement are unconscionable on their face; in these cases, the law will step in to annul the questionable
transactions.44
In this case, the petitioners question the validity of the quitclaims they signed on the ground that Phil
Carpet's closure was a mere pretense. As the closure of Phil Carpet, however, was supported by substantial
evidence, the petitioners' reason for seeking the invalidation of the quitclaims must necessarily fail. Further, as
aptly observed by the CA, the contents of the quitclaims, which were in Filipino, were clear and simple, such
that it was unlikely that the petitioners did not understand what they were signing.45 Finally, the amount they
received was reasonable as the same complied with the requirements of the Labor Code.
WHEREFORE, the petition is DENIED. The January 8, 2016 Decision and April 11, 2016 Resolution of the
Court of Appeals in CA-G.R. SP No. 140663, are AFFIRMED in toto.
SO ORDERED.
G.R. No. 121314. February 12, 1998
EDGE APPAREL, INC., Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION, Fourth
Division, Cebu City; Regional Arbitration Branch No. 7, Cebu City; and JOSEPHINE ANTIPUESTO,
NORINA ANDO, JULIET BAGUIO, APOLINARIA VELONTA, CORAZON PINO, and JOSEPHINE
CAETE, Respondents.
VITUG, J.:
Pursuing its retrenchment program, petitioner Edge Apparel, Inc., dismissed private respondents Josephine
Antipuesto, Norina Ando, Juliet Baguio, Apolinaria Velonta, Corazon Pino and Josephine Caete from
employment effective 03 September 1992. Feeling aggrieved, Antipuesto, et al., consulted with the Regional
Director of the Department of Labor and Employment ("DOLE") who opined that it would be best for them to
receive the separation pay being offered by the corporation. His advice was heeded. The subsequent receipt of
their separation pay benefits, nevertheless, did not deter Antipuesto, et al., from later going through with their
complaint for illegal dismissal against the corporation. The charge averred that the retrenchment program was a
mere subterfuge used by Edge Apparel to give a semblance of regularity and validity to the dismissal of the
complainants.
Edge Apparel countered that its financial obligations, amounting to about P8 Million, had begun to eat up most
of its capital outlay and resulted in unabated losses of P681,280.00 in 1989, P262,741.00 in 1990, P162,170.00
in 1991 and P749,294.00 in 1992, constraining the company to adopt and implement a retrenchment program.
Satisfied with the legality of the retrenchment program, Labor Arbiter Nicasio C. Anion, on 20 June 1994,
dismissed the complaint of Antipuesto, et al., against Edge Apparel.
Antipuesto, et al., appealed the decision of the Labor Arbiter to the National Labor Relations Commission
("NLRC"). In their appeal, Antipuesto, et al., claimed that the documents submitted by Edge Apparel to
demonstrate its alleged losses had been "bloated" so as to reflect financial losses.
In its decision, promulgated on 26 April 1995, the NLRC held:
"There is therefore basis in the retrenchment of these 27 workers.
"We note however that these 27 workers were assigned to row #8 of the sewing line for simple
garments which was phased out due in fact to the dropping of this particular line of business.
"`Termination of an employee's services because of a reduction of work force due
to a decrease in the scope or volume of work of the employer is synonymous to,
or a shade of termination because of redundancy under Article 283 (formerly 284)
of the Labor Code. Redundancy exist where the services of an employee are in
excess of what is reasonably demanded by the actual requirements of the
enterprise. A position is redundant where it is superfluous, and superfluity of a
position or positions may be the outcome of a number of factors, such as
overhiring of workers, decreased volume of business, or dropping of a particular
product line or service activity previously manufactured or undertaken by the
enterprise. (Tierra International Construction Corporation vs. NLRC, 77 SCRA
Vol. 211)'
 "In case of termination due to the installation of labor saving devices or redundancy, the worker
affected thereby shall be entitled to at least one (1) month pay or to at least one month pay for
every year of service, which ever is higher. (Art. 283, Labor Code).
"Under the circumstances obtaining in this case, the termination of the 27 retrenched employees
is considered a redundancy. Hence, the complainants, who were already paid the separation pay
equivalent to 1/2 month pay per year of service, are entitled to be paid the additional separation
pay equivalent to 1/2 month pay for every year of service.
"WHEREFORE, the respondents are ordered to pay the complainants an additional separation
pay equivalent to 1/2 month pay for every year of service. The Decision of the Labor Arbiter is
AFFIRMED in all other respects.
Edge Apparel filed a motion for a partial reconsideration of the above decision insofar as it awarded
"an additional separation pay equivalent to 1/2 month pay for every year of service" to the
complainants. In a resolution, dated 21 June 1995, the NLRC denied the motion; thus:
"From the foregoing, it can clearly be gleaned that row #8 in which complainants were employed, was
phased out because respondent Company's `buyers had already ceased its orders for simple style
garments.' This is similar to `dropping of a particular product line' or a `decrease in the volume of
business,' two (2) of the reasons which justify the classification of positions as redundant, as ruled in
Tierra-International Construction Corporation vs. NLRC, 77 SCRA 211, cited in Our decision.
"Although the phasing out of row #8 was also caused by financial and business losses of respondent
company, the real and proximate cause thereof was the cessation of orders from respondent Company's
buyers.
"We, therefore, rule, as We did in Our Decision, that the cause of termination of the employment of the
complainants was redundancy.
"WHEREFORE, the Motion for Reconsideration of respondent is hereby DENIED, for lack of
merit."2cräläwvirtualibräry
In its instant petition for certiorari and prohibition, Edge Apparel argues that -
"RESPONDENT NLRC'S AWARD TO PRIVATE RESPONDENTS OF `ADDITIONAL
SEPARATION PAY' IS CONTRARY TO THE DOCTRINE LAID DOWN BY THIS
HONORABLE COURT IN THE FACTUALLY-SIMILAR CASE OF CAFFCO
INTERNATIONAL LIMITED VS. OFFICE OF THE MINISTER-MINISTRY OF LABOR
AND EMPLOYMENT."3cräläwvirtualibräry
The employer has a right to dismiss employees for valid causes after proper observance of due process.4 These
valid causes are categorized into two groups, i.e., "just" causes under Article 282 of the Labor Code and
"authorized" causes under Articles 283 and 284 of the same code
The just causes for termination of employment, enumerated in Article 282, include -
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative relative to his work;5cräläwvirtualibräry
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized
representative;6cräläwvirtualibräry
(d) Commission of a crime or offense by the employee against the person of his employer or any immediate
member of his family or his duly authorized representative;7 and
(e) Other causes analogous to the foregoing.
An employee who is terminated from employment for a just cause is not entitled to payment of separation
benefits.8 Section 7, Rule I, Book VI, of the Omnibus Rules Implementing the Labor Code provides, thus:
"Sec. 7. Termination of employment by employer. - The just causes for terminating the services
of an employee shall be those provided in Article 282 of the Code. The separation from work of
an employee for a just cause does not entitle him to the termination pay provided in Code,
without prejudice, however, to whatever rights, benefits and privileges he may have under the
applicable individual or collective bargaining agreement with the employer or voluntary
employer policy or practice."
Article 283, in turn, specifies the authorized causes for the termination of employment, viz:
(a) installation of labor-saving devices;
(b) redundancy;
(c) retrenchment to prevent losses; and
(d) closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of law.9cräläwvirtualibräry
In addition, Article 284 provides that an employer would be authorized to terminate the services of an employee
found to be suffering from any disease if the employee's continued employment is prohibited by law or is
prejudicial to his health or to the health of his fellow employees.
The installation of labor-saving devices contemplates the installation of machinery to effect economy and
efficiency in its method of production.10cräläwvirtualibräry
Redundancy exists where the services of an employee are in excess of what would reasonably be demanded by
the actual requirements of the enterprise.11 A position is redundant when it is superfluous, and superfluity of a
position or positions could be the result of a number of factors, such as the overhiring of workers, a decrease in
the volume of business or the dropping of a particular line or service previously manufactured or undertaken by
the enterprise.12 An employer has no legal obligation to keep on the payroll employees more than the number
needed for the operation of the business.13cräläwvirtualibräry
Retrenchment, in contrast to redundancy, is an economic ground to reduce the number of employees. In order to
be justified, the termination of employment by reason of retrenchment must be due to business losses or
reverses which are serious, actual and real.14 Not every loss incurred or expected to be incurred by the employer
will justify retrenchment,15 since, in the nature of things, the possibility of incurring losses is constantly present,
in greater or lesser degree, in carrying on the business operations.16 Retrenchment is normally resorted to by
management during periods of business reverses and economic difficulties occasioned by such events as
recession, industrial depression, or seasonal fluctuations.17 It is an act of the employer of reducing the work
force because of losses in the operation of the enterprise, lack of work, or considerable reduction on the volume
of business.18 Retrenchment is, in many ways, a measure of last resort when other less drastic means have been
tried and found to be inadequate.19 A lull caused by lack of orders or shortage of materials must be of such
nature as would severely affect the continued business operations of the employer to the detriment of all and
sundry if not properly addressed. The institution of "new methods or more efficient machinery, or of
automation" is technically a ground for termination of employment by reason of installation of labor-saving
devices but where the introduction of these methods is resorted to not merely to effect greater efficiency in the
operations of the business but principally because of serious business reverses and to avert further losses, the
device could then verily be considered one of retrenchment.
The payment of separation pay would be due when a dismissal is on account of an authorized cause. The
amount of separation pay depends on the ground for the termination of employment. A dismissal due to the
installation of labor saving devices, redundancy (Article 283) or disease (Article 284), entitles the worker to a
separation pay equivalent to "one (1) month pay or at least one (1) month pay for every year of service,
whichever is higher." When the termination of employment is due to retrenchment to prevent losses, or to
closure or cessation of operations of establishment or undertaking not due to serious business losses or financial
reverses, the separation pay is only an equivalent of "one (1) month pay or at least one-half (1/2) month pay for
every year of service, whichever is higher." In the above instances, a fraction of at least six (6) months is
considered as one (1) whole year.
In this case, the Labor Arbiter and the NLRC both concluded that there had been a valid ground for the
retrenchment of private respondents. The documents presented in evidence were found to "conclusively show
that (petitioner) suffered serious financial losses."20 The general standards or elements needed for the
retrenchment to be valid - i.e., that the losses expected are substantial and not merely de minimis in extent; that
the expected losses are reasonably imminent such as can be perceived objectively and in good faith by the
employer; that the retrenchment is reasonably necessary and likely to effectively prevent the expected losses;
and that the imminent losses sought to be forestalled are substantiated21 -were adequately shown in the present
case. The findings of the Labor Arbiter and the NLRC would negate any impression that petitioner was guilty
of bad faith or misdoing in its retrenchment policy; the NLRC stated:
"The complainants questioned the firm's financial statements which were made the bases to support the
validity of the retrenchment. The complainants pointed out in their appeal that while the gross profit on
sales increased by about 26% in 1989, expenses on representation and entertainment increased by
45.65% in 1989. These expenses were manipulated, according to the complainants, to justify the
retrenchment of these 27 employees.
"A perusal of the financial statements show that the company incurred recreation and entertainment
expenses as follows: 1988 - P385,711; 1989 - P561,816; 1990 - P261,120; 1991 - P327,081; and 1992 -
P374,290 for a total of P1,910,018 in five (5) years or at an average of P382,003.60 per year.
"These 27 retrenched employees received a daily wage of P105 in 1992. Multiplying this daily wage
by 314 days will result in a yearly income of P32,970 per retrenched worker. To retain the services of
these 27 workers would cost the company P964,372.50 per annum just to pay their basic wages & 13th
month pay.
"It is therefore very clear, that the deletion of this annual entertainment & representation expense
of P382,003.60 and reallocate it for the budget on salaries and wages would not be sufficient to pay the
salaries of the 27 retrenched workers amounting to P964,372.50 as of 1992."22cräläwvirtualibräry
Procedurally, in order to validly effect retrenchment, the employer must observe two other requirements, viz:
(a) service of a prior written notice of at least one month on the workers and the Department of Labor and
Employment, and (b) payment of the due separation pay.23 In the decision of Labor Arbiter Nicasio C. Anion,
affirmed by the NLRC, petitioner has been found to have complied with the above requirements of the law,
including the payment of separation pay equivalent to at least one month pay or to one-half (1/2) month pay for
every year of service, whichever is higher, with a fraction of at least six months being considered one whole
year.24cräläwvirtualibräry
The NLRC, unfortunately, went further by holding that the dismissal of private respondents could likewise be
considered to have been occasioned by redundancy since it was only private respondents' line of work which
was phased out by petitioner.
The Court agrees with the Solicitor General that here the NLRC has gravely abused its discretion. The law
acknowledges the right of every business entity to reduce its work force if such measure is made necessary or
compelled by economic factors that would otherwise endanger its stability or existence.25 In exercising its right
to retrench employees, the firm may choose to close all, or a part of, its business to avoid further losses or
mitigate expenses.26 In Caffco International Limited vs. Office of the Minister-Ministry of Labor and
Employment,27 the Court has aptly observed that –
"Business enterprises today are faced with the pressures of economic recession, stiff
competition, and labor unrest. Thus, businessmen are always pressured to adopt certain changes
and programs in order to enhance their profits and protect their investments. Such changes may
take various forms. Management may even choose to close a branch, a department, a plant, or a
shop (Phil. Engineering Corp. vs. CIR, 41 SCRA 89 [1971])."28cräläwvirtualibräry
Clearly, the fact alone that a mere portion of the business of an employer, not the whole of it, is shut down does
not necessarily remove that measure from the ambit of the term "retrenchment" within the meaning of Section
283(c) of the Labor Code.
The Court, accordingly, must sustain the position taken by the Labor Arbiter that private respondents should
only be entitled to severance compensation equivalent to one-half (1/2) month pay for every year of service.
WHEREFORE, the appealed decision, promulgated on 26 April 1995, is MODIFIED by deleting the
additional award of separation pay to private respondents decreed by the NLRC. No costs.
[G.R. NO. 167462 October 25, 2005]
MANLY EXPRESS INC. and SIU ENG T. CHING, Petitioners, v. ROMUALDO PAYONG,
JR., Respondent.
DECISION
YNARES-SANTIAGO, J.:
This Petition for Review on Certiorari under Rule 45 of the Rules of Court assails the November 22, 2004
Decision of the Court of Appeals1 in CA-G.R. SP No. 83800, as well as the February 28, 2005
Resolution2 denying the motion for partial reconsideration.
The facts as found by the Court of Appeals are as follows:
The simple relevant facts of the case show that petitioners Hercules Balena and Romualdo Payong, Jr. were
employed by Manly Express, Inc. and/or Siy Eng T. Ching on different dates, as tour coordinator (dispatcher)
and welder, respectively.
Balena alleged that during his employment, he demanded from his employer the payment of correct employee's
benefits. Nevertheless, every time he made the demand, he was told not to report for work anymore if he is not
contented with the wages he was receiving. Then, herein private respondents called Balena's attention on his
tardiness in work. As a result, on May 16, 2000, Balena commenced a case for constructive dismissal, payment
of salaries, overtime pay, holiday pay, back wages, leave pay, 13th month pay and attorney's fees.
Petitioner Romualdo Payong, Jr. has another story to tell. Sometime in December 1999, he was complaining of
eyesight problems. Brought to an eye specialist by private respondent Ching, he was diagnosed to be suffering
from eye cataract. Despite having the cataract removed in January of 2000, he was disallowed to return to his
work by Ching. Much later, on August 1, 2000, he was given a letter of termination of employment.3
The full text of the termination letter4 reads:
01 August 2000
Dear Mr. Romualdo Payong Jr.,
Our company has been severely affected by the prevailing poor business climate. There is a reduced demand for
our bus services - both for shuttle and city operations - and this has substantially reduced our income. At the
same time, our operating costs have increased, leaving us with a difficult cash position.
In order to survive, the company has decided to check on the performance of all its employees to determine P23,467.00
productivity. Unfortunately, it has been noticed that due to your partial blindness, you can no longer work in the
position that you are presently employed for. Flor Palisoc 20,115.00 13th month pay

In view of the above and the fact that despite the proper medical treatment for more than six months now, the The other findings stand affirmed.
company is constrained to terminate your employment effective immediately. In line with this, you are given a
grace period of 15 days to remove all your personal belongings from the company premises counted from this
date. SO ORDERED.6

In behalf of the company, I would like to express my gratitude for the services that you have rendered our With the denial of their motion for reconsideration,7 Balena and Payong elevated the case before the Court of
company. Kindly see the undersigned to coordinate the payment of your financial assistance and other benefits. Appeals, which rendered on November 22, 2004 a Decision, the dispositive portion of which reads:

Thank you. IN VIEW OF ALL THE FOREGOING, the instant petition is hereby DENIED, in so far as petitioner Hercules
Balena is concerned and the NLRC Decision, as to him, is AFFIRMED. However, as to petitioner Romualdo
Payong, Jr., We resolve to GRANT the petition and declare his dismissal from employment by the private
(Sgd.) respondents to be unlawful and should therefore be entitled to reinstatement and separation pay, if reinstatement
is no longer viable and backwages. No pronouncement as to costs.
Charles Malvin Ching
SO ORDERED.8
Operations Manager
The Court of Appeals found that Balena prematurely filed the complaint for illegal dismissal considering that at
Thus, a complaint for illegal dismissal with money claims was filed against Manly, which was consolidated the time of its filing, he was still gainfully employed by Manly. The appellate court noted that he failed to
with the complaint of two other employees, namely Francisca Adsuara and Flor Palisoc, also for illegal mention the details of the alleged dismissal or to prove the severance of his employment. It held that the
dismissal. management's statement that he quit his job if he is not contented with the salary he is receiving is not
equivalent to constructive dismissal.
On July 31, 2001, the Labor Arbiter rendered judgment the dispositive portion of which reads:
As regards Payong, the appellate court observed that considering that the termination was based on his alleged
WHEREFORE, in view of all the foregoing, the complaint of Hercules Balena is hereby DISMISSED for want partial blindness, Manly should have presented a certification by a competent public health authority that
of cause of action. Furthermore, respondent company is hereby ordered to pay complainants Payong, Adsuara Payong was suffering from such a disease and his continued employment is prejudicial to his health and that of
and Palisoc the total amount of SEVENTY-FIVE THOUSAND NINE HUNDRED PESOS (P75,900.00), as his co-employees. Without the certification, the dismissal was illegal.
discussed above.
Manly's motion for partial reconsideration was denied, hence, this petition.
SO ORDERED. 5

The petition lacks merit.

The National Labor Relations Commission (NLRC) modified the decision of the labor arbiter, thus:
WHEREFORE, premises considered, the Decision of July 31, 2001 is hereby MODIFIED. Respondents are
directed to pay the following:
Hercules Balena - P3,750.00 Service incentive leave pay
Article 284 of the Labor Code authorizes an employer to terminate an employee on the ground of disease, thus:
Art. 284. Disease as ground for termination. 'An employer may terminate the services of an employee who has
been found to be suffering from any disease and whose continued employment is prohibited by law or is
prejudicial to his health as well as to the health of his co-employees: '.

22, 500.00 13th month pay However, in order to validly terminate employment on this ground, Section 8, Rule I, Book VI of the Omnibus
Rules Implementing the Labor Code requires:

P26,250.00
Sec. 8. Disease as a ground for dismissal. - Where the employee suffers from a disease and his continued
employment is prohibited by law or prejudicial to his health or to the health of his co-employees, the employer
Romualdo Payong - P3,352.00 Service incentive leave pay shall not terminate his employment unless there is a certification by a competent public health authority that the
disease is of such nature or at such a stage that it cannot be cured within a period of six (6) months even with
20,115.00 13th month pay proper medical treatment. If the disease or ailment can be cured within the period, the employer shall not
terminate the employee but shall ask the employee to take a leave. The employer shall reinstate such employee
to his former position immediately upon the restoration of his normal health.
The rule is explicit. For a dismissal on the ground of disease to be considered valid, two requisites must concur:
(a) the employee suffers from a disease which cannot be cured within six months and his continued
employment is prohibited by law or prejudicial to his health or to the health of his co-employees, and (b) a
certification to that effect must be issued by a competent public health authority.
In the present case, there was no proof that Payong's continued employment was prohibited by law or
prejudicial to his health and that of his co-employees. No medical certificate by a competent public health
authority was submitted that Payong was suffering from a disease that cannot be cured within a period of six
months. In the absence of such certification, Payong's dismissal must necessarily be declared illegal.
Manly's contention that the requirement for a medical certification does not apply in the instant case since it
was Payong who refused to undergo medical treatment and his resignation from work was of his own free will,
is untenable. Manly has not established Payong's refusal to undergo a medical examination or that he resigned
from work on his own accord. On the contrary, the termination letter dated August 1, 2000 showed that it was
Manly who initiated the termination in view of the prevailing poor business climate and Payong's partial
blindness. Moreover, evidence shows that even before the termination letter was served on Payong, he was no
longer allowed to work which shows Manly's intent to dismiss him from work.
The burden of proving the validity of the dismissal rests on the employer. As such, the employer must prove
that the requisites for a valid dismissal due to a disease have been complied with. In the absence of the required
certification by a competent public health authority, this Court has ruled against the validity of the employee's
dismissal.9
In Triple Eight Integrated Services, Inc. v. NLRC,10 we held that:
The requirement for a medical certificate under Article 284 of the Labor Code cannot be dispensed with;
otherwise, it would sanction the unilateral and arbitrary determination by the employer of the gravity or extent
of the employee's illness and thus defeat the public policy on the protection of labor....
We also note that Manly failed to comply with the procedure for terminating an employee. In dismissing an
employee, the employer has the burden of proving that the employee has been served two notices: (1) one to
apprise him of the particular acts or omissions for which his dismissal is sought, and (2) the other to inform him
of his employer's decision to dismiss him. The first notice must state that dismissal is sought for the act or
omission charged against the employee, otherwise, the notice cannot be considered sufficient compliance with
the rules.11
All told, Payong's dismissal did not comply with both the substantive and procedural aspects of due process.
Clearly, his dismissal is tainted with invalidity.12
WHEREFORE, the petition is DENIED. The November 22, 2004 Decision of the Court of Appeals in CA-
G.R. SP No. 83800 and its February 28, 2005 Resolution, are AFFIRMED.
SO ORDERED.
G.R. No. 199338 : January 21, 2013
ELEAZAR S. PADILLO,** Petitioner, v. RURAL BANK OF NABUNTURAN, INC. and MARK S.
OROPEZA, Respondent.
\
PERLAS-BERNABE, J.:
Before the Court is a Petition for Review on Certiorari1 assailing the June 28, 2011 Decision2 and October 27,
2011 Resolution3 of the Cagayan de Oro City Court of Appeals (CA) in CA-G.R. SP No 03669-MIN which
revoked and set aside the National Labor Relations Commission's (NLRCs) Resolutions dated December 29,
20094 and March 31, 20105 and reinstated the Labor Arbiter's (LA's) Decision dated March 13, 20096 with
modification.
The Facts
On October 1, 1977, petitioner, the late Eleazar Padillo (Padillo), was employed by respondent Rural Bank of
Nabunturan, Inc. (Bank) as its SA Bookkeeper. Due to liquidity problems which arose sometime in 2003, the
Bank took out retirement/insurance plans with Philippine American Life and General Insurance Company
(Philam Life) for all its employees in anticipation of its possible closure and the concomitant severance of its
personnel. In this regard, the Bank procured Philam Plan Certificate of Full Payment No. 88204, Plan Type
02FP10SC, Agreement No. PP98013771 (Philam Life Plan) in favor of Padillo for a benefit amount
of P100,000.00 and which was set to mature on July 11, 2009.7?r?l1
On October 14, 2004, respondent Mark S. Oropeza (Oropeza), the President of the Bank, bought majority
shares of stock in the Bank and took over its management which brought about its gradual rehabilitation. The
Banks finances improved and eventually, its liquidity was regained.8?r?l1
During the latter part of 2007, Padillo suffered a mild stroke due to hypertension which consequently impaired
his ability to effectively pursue his work. In particular, he was diagnosed with Hypertension S/P CVA
(Cerebrovascular Accident) with short term memory loss, the nature of which had been classified as a total
disability.9 On September 10, 2007, he wrote a letter addressed to respondent Oropeza expressing his intention
to avail of an early retirement package. Despite several follow-ups, his request remained unheeded.
On October 3, 2007, Padillo was separated from employment due to his poor and failing health as reflected in a
Certification dated December 4, 2007 issued by the Bank. Not having received his claimed retirement benefits,
Padillo filed on September 23, 2008 with the NLRC Regional Arbitration Branch No. XI of Davao City a
complaint for the recovery of unpaid retirement benefits. He asserted, among others, that the Bank had adopted
a policy of granting its aging employees early retirement packages, pointing out that one of his co-employees,
Nenita Lusan (Lusan), was accorded retirement benefits in the amount of P348,672.7210 when she retired at the
age of only fifty-three (53). The Bank and Oropeza (respondents) countered that the claim of Padillo for
retirement benefits was not favorably acted upon for lack of any basis to grant the same.11?r?l1
The LA Ruling
On March 13, 2009, the LA issued a Decision12 dismissing Padillos complaint but directed the Bank to pay him
the amount of P100,000.00 as financial assistance, treated as an advance from the amounts receivable under the
Philam Life Plan.13 It found Padillo disqualified to receive any benefits under Article 300 (formerly, Article
287) of the Labor Code of the Philippines (Labor Code)14 as he was only fifty-five (55) years old when he
resigned, while the law specifically provides for an optional retirement age of sixty (60) and compulsory
retirement age of sixty-five (65). Dissatisfied with the LAs ruling, Padillo elevated the matter to the NLRC.
The NLRC Ruling
On December 29, 2009, the NLRCs Fifth Division reversed and set aside the LAs ruling and ordered
respondents to pay Padillo the amount of P164,903.70 as separation pay, on top of the P100,000.00 Philam Life
Plan benefit.15 Relying on the case of Abaquin Security and Detective Agency, Inc. v. Atienza (Abaquin),16 the
NLRC applied the Labor Code provision on termination on the ground of disease particularly, Article 297
thereof (formerly, Article 323) holding that while Padillo did resign, he did so only because of his poor health
condition.17 Respondents moved for reconsideration but the same was denied by the NLRC in its Resolution
dated March 31, 2010.18 Aggrieved, respondents filed a petition for certiorari with the CA.
The CA Ruling
On June 28, 2011, the CA granted respondents petition for certiorari and rendered a decision setting aside the
NLRCs December 29, 2009 and March 31, 2010 Resolutions, thereby reinstating the LAs March 13, 2009
Decision but with modification. It directed the respondents to pay Padillo the amount of P50,000.00 as financial
assistance exclusive of the P100,000.00 Philam Life Plan benefit which already matured on July 11, 2009.
The CA held that Padillo could not, absent any agreement with the Bank, receive any retirement benefits
pursuant to Article 300 of the Labor Code considering that he was only fifty-five (55) years old when he
retired.19 It likewise found the evidence insufficient to prove that the Bank has an existing company policy of
granting retirement benefits to its aging employees. Finally, citing the case of Villaruel v. Yeo Han Guan
(Villaruel),20 it pronounced that separation pay on the ground of disease under Article 297 of the Labor Code
should not be given to Padillo because he was the one who initiated the severance of his employment and that
even before September 10, 2007, he already stopped working due to his poor and failing health. 21?r?l1
Nonetheless, Padillo was still awarded the amount of P50,000.00 as financial assistance, in addition to the
benefits accruing under the Philam Life Plan, considering his twenty-nine (29) years of service with no
derogatory record and that he was severed not by reason of any infraction on his part but because of his failing
physical condition.22?r?l1
Displeased with the CAs ruling, Padillo (now substituted by his legal heirs due to his death on February 24,
2012) filed the instant petition contending that the CA erred when it: (a) deviated from the factual findings of
the NLRC; (b) misapplied the case of Villaruel vis-à-vis the factual antecedents of this case; (c) drastically
reduced the computation of financial assistance awarded by the NLRC; (d) failed to rule on the consequences of
respondents bad faith; and (e) reversed and set aside the NLRCs December 29, 2009 Resolution.23?r?l1
The Ruling of the Court
The petition is partly meritorious.
At the outset, it must be maintained that the Labor Code provision on termination on the ground of disease
under Article 29724 does not apply in this case, considering that it was the petitioner and not the Bank who
severed the employment relations. As borne from the records, the clear import of Padillos September 10, 2007
letter25 and the fact that he stopped working before the foregoing date and never reported for work even
thereafter show that it was Padillo who voluntarily retired and that he was not terminated by the Bank.
As held in Villaruel,26 a precedent which the CA correctly applied, Article 297 of the Labor Code contemplates
a situation where the employer, and not the employee, initiates the termination of employment on the ground of
the latters disease or sickness, viz:cralawlibrary
A plain reading of the [Article 297 of the Labor Code] clearly presupposes that it is the employer who
terminates the services of the employee found to be suffering from any disease and whose continued
employment is prohibited by law or is prejudicial to his health as well as to the health of his co-employees. It
does not contemplate a situation where it is the employee who severs his or her employment ties. This is
precisely the reason why Section 8, Rule 1, Book VI of the Omnibus Rules Implementing the Labor Code,
directs that an employer shall not terminate the services of the employee unless there is a certification by a
competent public health authority that the disease is of such nature or at such a stage that it cannot be cured
within a period of six (6) months even with proper medical treatment. (Emphasis, underscoring and words in
brackets supplied)
Thus, given the inapplicability of Article 297 of the Labor Code to the case at bar, it necessarily follows that
petitioners claim for separation pay anchored on such provision must be denied.
Further, it is noteworthy to point out that the NLRCs application of Abaquin27 was gravely misplaced
considering its dissimilar factual milieu with the present case.
To elucidate, a careful reading of Abaquin shows that the Court merely awarded termination pay on the ground
of disease in favor of security guard28 Antonio Jose because he belonged to a "special class of employees x x x
deprived of the right to ventilate demands collectively."29 Thus, notwithstanding the fact that it was Antonio
Jose who voluntarily resigned because of his sickness and it was not the security agency which terminated his
employment, the Court held that Jose "deserve[d] the full measure of the laws benevolence" and still granted
him separation pay because of his situation, particularly, the fact that he could not have organized with other
employees belonging to the same class for the purpose of bargaining with their employer for greater benefits on
account of the prohibition under the old law.
In this case, it cannot be said that Padillo belonged to the same class of employees prohibited to self-organize
which, at present, consist of: (1) managerial employees;30 and (2) confidential employees who assist persons
who formulate, determine, and effectuate management policies in the field of labor relations.31 Therefore, absent
this equitable peculiarity, termination pay on the ground of disease under Article 297 of the Labor Code and the
Courts ruling in Abaquin should not be applied.
What remains applicable, however, is the Labor Code provision on retirement. In particular, Article 300 of the
Labor Code as amended by Republic Act Nos. 764132 and 855833 partly provides:cralawlibrary
Art. 300. Retirement. Any employee may be retired upon reaching the retirement age established in the
collective bargaining agreement or other applicable employment contract.
In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have earned
under existing laws and any collective bargaining agreement and other agreements: Provided, however, That an
employee's retirement benefits under any collective bargaining and other agreements shall not be less than those
provided herein.
In the absence of a retirement plan or agreement providing for retirement benefits of employees in the
establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65)
years which is hereby declared the compulsory retirement age, who has served at least five (5) years in the said
establishment, may retire and shall be entitled to retirement pay equivalent to at least one-half (1/2) month
salary for every year of service, a fraction of at least six (6) months being considered as one whole year.
Unless the parties provide for broader inclusions, the term one half (1/2) month salary shall mean fifteen (15)
days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more than five (5) days of
service incentive leaves. (Emphasis and underscoring supplied)
Simply stated, in the absence of any applicable agreement, an employee must (1) retire when he is at least sixty
(60) years of age and (2) serve at least (5) years in the company to entitle him/her to a retirement benefit of at
least one-half (1/2) month salary for every year of service, with a fraction of at least six (6) months being
considered as one whole year.
Notably, these age and tenure requirements are cumulative and non-compliance with one negates the employees
entitlement to the retirement benefits under Article 300 of the Labor Code altogether.
In this case, it is undisputed that there exists no retirement plan, collective bargaining agreement or any other
equivalent contract between the parties which set out the terms and condition for the retirement of employees,
with the sole exception of the Philam Life Plan which premiums had already been paid by the Bank.
Neither was it proven that there exists an established company policy of giving early retirement packages to the
Banks aging employees. In the case of Metropolitan Bank and Trust Company v. National Labor Relations
Commission, it has been pronounced that to be considered a company practice, the giving of the benefits should
have been done over a long period of time, and must be shown to have been consistent and deliberate. 34 In this
relation, petitioners bare allegation of the solitary case of Lusan cannot assuming such fact to be true
sufficiently establish that the Banks grant of an early retirement package to her (Lusan) evolved into an
established company practice precisely because of the palpable lack of the element of consistency. As such,
petitioners reliance on the Lusan incident cannot bolster their claim.
All told, in the absence of any applicable contract or any evolved company policy, Padillo should have met the
age and tenure requirements set forth under Article 300 of the Labor Code to be entitled to the retirement
benefits provided therein. Unfortunately, while Padillo was able to comply with the five (5) year tenure
requirement as he served for twenty-nine (29) years he, however, fell short with respect to the sixty (60) year
age requirement given that he was only fifty-five (55) years old when he retired. Therefore, without prejudice to
the proceeds due under the Philam Life Plan, petitioners claim for retirement benefits must be denied.
Nevertheless, the Court concurs with the CA that financial assistance should be awarded but at an increased
amount. With a veritable understanding that the award of financial assistance is usually the final refuge of the
laborer, considering as well the supervening length of time which had sadly overtaken the point of Padillos
death an employee who had devoted twenty-nine (29) years of dedicated service to the Bank the Court, in light
of the dictates of social justice, holds that the CAs financial assistance award should be increased
from P50,000.00 to P75,000.00, still exclusive of the P100,000.00 benefit receivable by the petitioners under
the Philam Life Plan which remains undisputed.
Finally, the Court finds no bad faith in any of respondents actuations as they were within their right, absent any
proof of its abuse, to ignore Padillos misplaced claim for retirement benefits. Respondents obstinate refusal to
accede to Padillos request is precisely justified by the fact that there lies no basis under any applicable
agreement or law which accords the latter the right to demand any retirement benefits from the Bank. While the
Court mindfully notes that damages may be recoverable due to an abuse of right under Article 2135 in
conjunction with Article 19 of the Civil Code of the Philippines,36 the following elements must, however,
obtain: ( 1) there is a legal right or duty; (2) exercised in bad faith; and (3) for the sole intent of prejudicing or
injuring another.37 Records reveal that none of these elements exists in the case at bar and thus, no damages on
account of abuse of right may he recovered.
Neither can the grant of an early retirement package to Lusan show that Padillo was unfairly discriminated
upon. Records show that the same was merely an isolated incident and petitioners have failed to show that any
had faith or motive attended such disparate treatment between Lusan and Padillo. lrrefragably also, there is no
showing that other Bank employees were accorded the same benefits as that of Lusan which thereby dilutes the
soundness of petitioners' imputation of discrimination and bad faith. Verily, it is axiomatic that held f8ith can
never be presumed it must be proved by clear and convincing evidence.38 This petitioners were unable to prove
in the case at bar.
WHEREFORE, the petition is PARTLY GRANTED. Accordingly, the assailed Court of Appeals' Decision
dated June 28, 2011 Decision and October 27, 2011 Resolution in CA-G.R. SP No. 03669-MIN are hereby
MODIFIED, increasing the 8Ward of financial assist8nce of F50,000.00 to P75,000.00, exclusive of the P
100,000.00 benefit under the Phil am Life Plan.
SO ORDERED.
G.R. No. 80587 February 8, 1989
WENPHIL CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION AND ROBERTO MALLARE, respondents
GANCAYCO, J.:
Once again the dismissal of an employee without affording him due process is brought to the attention of this
Court by this petition.
Private respondent was hired by petitioner on January 18, 1984 as a crew member at its Cubao Branch. He
thereafter became the assistant head of the Backroom department of the same branch. At about 2:30 P.M. on
May 20, 1985 private respondent had an altercation with a co-employee, Job Barrameda, as a result of which he
and Barrameda were suspended on the following morning and in the afternoon of the same day a memorandum
was issued by the Operations Manager advising private respondent of his dismissal from the service in
accordance with their Personnel Manual. The notice of dismissal was served on private respondent on May 25,
1985.
Thus private respondent filed a complaint against petitioner for unfair labor practice, illegal suspension and
illegal dismissal. After submitting their respective position papers to the Labor Arbiter and as the hearing could
not be conducted due to repeated absence of counsel for respondent, the case was submitted for resolution.
Thereafter a decision was rendered by the Labor Arbiter on December 3, 1986 dismissing the complaint for
lack of merit.
Private respondent appealed to the National Labor Relations Commission (NLRC) wherein in due course a
decision was rendered on October 16, 1987 setting aside the appealed decision and ordering the reinstatement
of private respondent to his former position without loss of seniority and other related benefits and one (1) year
backwages without qualification and deduction.
Hence the herein petition for certiorari with preliminary injunction and/or restraining order wherein petitioner
alleges that the public respondent NLRC committed a grave abuse of discretion in rendering its decision
contrary to the evidence on record.
On December 2, 1987, the court issued a restraining order as prayed for in the petition enjoining the
enforcement of the decision dated October 16, 1987 of public respondent NLRC upon petitioner posting a bond
of P20,000.00.
The theory of the petitioner is that on the aforesaid date, May 20, 1985, when private respondent and
Barrameda had a misunderstanding about tending the Salad Bar, private respondent slapped Barrameda's cap,
stepped on his foot and picked up the ice scooper and brandished it against the latter. Marijo B. Kolimlim who
was a management trainee tried to pacify private respondent but he defied her so Kolimlim reported the
incident to the assistant manager, Delilah C. Hermosura, who immediately asked private respondent to see her.
Private respondent refused to see Hermosura and it took the security guard to bring him to her. Private
respondent then shouted and uttered profane words instead of making an explanation before her. He stated the
matter should be settled only by him and Barrameda. The following day Kolimlim and Hermosura submitted a
report on the incident and recommended the imposition of the appropriate penalties on both. It was the store
manager who issued a report meting out the penalty of suspension on the two until further notice in the
following morning. Later that day the Operations Manager issued a memorandum advising Barrameda of one
(1) week suspension and the dismissal of private respondent from the service.
The main thrust of the petition is that under the Personnel Manual of petitioner which had been read and
understood by private respondent, private respondent waived his right to the investigation. It is provided therein
that -
INVESTIGATION
If the offense is punishable with a penalty higher than suspension for fifteen (15)
days, upon the request of the erring employee, there shall be convened an investigation
board composed of the following
1. The Parlor Manager or Supervisor on duty when the incident occurred.
2. The General Manager or the Assistant Manager.
The investigation board shall discuss the merits of the case and shall issue a ruling, which
shall be final and conclusive. (p. 3, Personnel Manual: Emphasis supplied).
From the foregoing it appears that an investigation shall only be conducted if the offense committed by the
employee is punishable with the penalty higher than suspension of fifteen (15) days and the erring employee
requests for an investigation of the incident. Petitioner alleges that private respondent not having asked for an
investigation he is thus deemed to have waived his right to the same. Petitioner avers that immediately after the
incident when private respondent was asked to see Hermosura, he was defiant and showed that he was not
interested to avail of an investigation.
The contention of petitioner is untenable. The incident happened on May 20, 1985 and right then and there as
afore repeated on the following day private respondent was suspended in the morning and was dismissed from
the service in the afternoon. He received an official notice of his termination four (4) days later.
The defiant attitude of private respondent immediately after the incident amounted to insubordination.
Nevertheless his refusal to explain his side under the circumstances cannot be considered as a waiver of his
right to an investigation.
Although in the Personnel Manual of the petitioner, it states that an erring employee must request for an
investigation it does not thereby mean that petitioner is thereby relieved of the duty to conduct an investigation
before dismissing private respondent. Indeed said provision of the Personnel Manual of petitioner which may
effectively deprive its employees of the right to due process is clearly against the law and hence null and void.
The security of tenure of a laborer or employee is enshrined in the Constitution, the Labor Code and other
related laws. 1
Under Section 1, Rule XIV of the Implementing Regulations of the Labor Code, it is provided that "No worker
shall be dismissed except for just or authorized cause provided by law and after due process." Sections 2, 5, 6,
and 7 of the same rules require that before an employer may dismiss an employee the latter must be given a
written notice stating the particular act or omission constituting the grounds thereof; that the employee may
answer the allegations within a reasonable period; that the employer shall afford him ample opportunity to be
heard and to defend himself with the assistance of his representative, if he so desires; and that it is only then
that the employer may dismiss the employee by notifying him of the decision in writing stating clearly the
reasons therefor. Such dismissal is without prejudice to the right of the employee to contest its validity in the
Regional Branch of the NLRC.
Petitioner insists that private respondent was afforded due process but he refused to avail of his right to the
same; that when the matter was brought to the labor arbiter he was able to submit his position papers although
the hearing cannot proceed due to the non-appearance of his counsel; and that the private respondent is guilty of
serious misconduct in threatening or coercing a co-employee which is a ground for dismissal under Article 283
of the Labor Code.
The failure of petitioner to give private respondent the benefit of a hearing before he was dismissed constitutes
an infringement of his constitutional right to due process of law and equal protection of the laws. 2 The
standards of due process in judicial as well as administrative proceedings have long been established. In its bare
minimum due process of law simply means giving notice and opportunity to be heard before judgment is
rendered. 3
The claim of petitioner that a formal investigation was not necessary because the incident which gave rise to the
termination of private respondent was witnessed by his co- employees and supervisors is without merit. The
basic requirement of due process is that which hears before it condemns, which proceeds upon inquiry and
renders judgment only after trial. 4
However, it is a matter of fact that when the private respondent filed a complaint against petitioner he was
afforded the right to an investigation by the labor arbiter. He presented his position paper as did the petitioner.
If no hearing was had, it was the fault of private respondent as his counsel failed to appear at the scheduled
hearings. The labor arbiter concluded that the dismissal of private respondent was for just cause. He was found
guilty of grave misconduct and insubordination. This is borne by the sworn statements of witnesses. The Court
is bound by this finding of the labor arbiter.
By the same token, the conclusion of the public respondent NLRC on appeal that private respondent was not
afforded due process before he was dismissed is binding on this Court. Indeed, it is well taken and supported by
the records. However, it can not justify a ruling that private respondent should be reinstated with back wages as
the public respondent NLRC so decreed. Although belatedly, private respondent was afforded due process
before the labor arbiter wherein the just cause of his dismissal bad been established. With such finding, it would
be arbitrary and unfair to order his reinstatement with back wages.
The Court holds that the policy of ordering the reinstatement to the service of an employee without loss of
seniority and the payment of his wages during the period of his separation until his actual reinstatement but not
exceeding three (3) years without qualification or deduction, when it appears he was not afforded due process,
although his dismissal was found to be for just and authorized cause in an appropriate proceeding in the
Ministry of Labor and Employment, should be re-examined. It will be highly prejudicial to the interests of the
employer to impose on him the services of an employee who has been shown to be guilty of the charges that
warranted his dismissal from employment. Indeed, it will demoralize the rank and file if the undeserving, if not
undesirable, remains in the service.
Thus in the present case, where the private respondent, who appears to be of violent temper, caused trouble
during office hours and even defied his superiors as they tried to pacify him, should not be rewarded with re-
employment and back wages. It may encourage him to do even worse and will render a mockery of the rules of
discipline that employees are required to observe. Under the circumstances the dismissal of the private
respondent for just cause should be maintained. He has no right to return to his former employer.

However, the petitioner must nevertheless be held to account for failure to extend to private respondent his right
to an investigation before causing his dismissal. The rule is explicit as above discussed. The dismissal of an
employee must be for just or authorized cause and after due process. 5 Petitioner committed an infraction of the
second requirement. Thus, it must be imposed a sanction for its failure to give a formal notice and conduct an
investigation as required by law before dismissing petitioner from employment. Considering the circumstances
of this case petitioner must indemnify the private respondent the amount of P1,000.00. The measure of this
award depends on the facts of each case and the gravity of the omission committed by the employer.

WHEREFORE, the petition is GRANTED. The questioned decision of the public respondent NLRC dated
October 16, 1987 for the reinstatement with back wages of private respondent is REVERSED AND SET
ASIDE, and the decision of the labor arbiter dated December 3, 1986 dismissing the complaint is revived and [G.R. No. 117040. January 27, 2000.]
affirmed, but with the modification that petitioner is ordered to indemnify private respondent in the amount of RUBEN SERRANO, Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION and ISETANN
P1,000.00. The restraining order issued by this Court on December 2, 1987 is hereby made permanent and the DEPARTMENT STORE, Respondents.
bond posted by petitioner is cancelled. This decision is immediately executory. MENDOZA, J.:
This is a petition seeking review of the resolutions, dated March 30, 1994 and August 26, 1994, of
SO ORDERED. the National Labor Relations Commission (NLRC) which reversed the decision of the Labor Arbiter and
dismissed petitioner Ruben Serrano’s complaint for illegal dismissal and denied his motion for reconsideration.
The facts are as follows: \

Petitioner was hired by private respondent Isetann Department Store as a security checker to
apprehend shoplifters and prevent pilferage of merchandise. Initially hired on October 4, 1984 on contractual
basis, petitioner eventually became a regular employee on April 4, 1985. In 1988, he became head of the
Security Checkers Section of private Respondent.

Sometime in 1991, as a cost-cutting measure, private respondent decided to phase out its entire
security section and engage the services of an independent security agency. For this reason, it wrote petitioner
the following memorandum:

October 11, 1991

MR. RUBEN SERRANO
PRESENT
Dear Mr. Serrano,
In view of the retrenchment program of the company, we hereby reiterate our verbal notice to you of
your termination as Security Section Head effective October 11, 1991.
Please secure your clearance from this office.
Very truly yours,
[Sgd.] TERESITA A. VILLANUEVA
Human Resources Division Manager

The loss of his employment prompted petitioner to file a complaint on December 3, 1991 for illegal
dismissal, illegal layoff, unfair labor practice, underpayment of wages, and nonpayment of salary and overtime
pay.

The parties were required to submit their position papers, on the basis of which the Labor Arbiter
defined the issues as follows:

Whether or not there is a valid ground for the dismissal of the complainant.

Whether or not complainant is entitled to his monetary claims for underpayment of wages,
nonpayment of salaries, 13th month pay for 1991 and overtime pay.

Whether or not Respondent is guilty of unfair labor practice.
Thereafter, the case was heard. On April 30, 1993, the Labor Arbiter rendered a decision finding
petitioner to have been illegally dismissed. He ruled that private respondent failed to establish that it had
retrenched its security section to prevent or minimize losses to its business; that private respondent failed to
accord due process to petitioner; that private respondent failed to use reasonable standards in selecting
employees whose employment would be terminated; that private respondent had not shown that petitioner and
other employees in the security section were so inefficient so as to justify their replacement by a security
agency, or that "cost-saving devices [such as] secret video cameras (to monitor and prevent shoplifting) and
secret code tags on the merchandise” could not have been employed; instead, the day after petitioner’s
dismissal, private respondent employed a safety and security supervisor with duties and functions similar to
those of petitioner.chanrobles.com :
Accordingly, the Labor Arbiter ordered:
WHEREFORE, above premises considered, judgment is hereby decreed:
(a) Finding the dismissal of the complainant to be illegal and concomitantly, Respondent is ordered
to pay complainant full backwages without qualification or deduction in the amount of P74,740.00 from the
time of his dismissal until reinstatement (computed till promulgation only) based on his monthly salary of
P4,040.00/month at the time of his termination but limited to (3) three years;
(b) Ordering the Respondent to immediately reinstate the complainant to his former position as
security section head or to a reasonably equivalent supervisorial position in charges of security without loss of
seniority rights, privileges and benefits. This order is immediately executory even pending appeal;
(c) Ordering the Respondent to pay complainant unpaid wages in the amount of P2,020.73 and
proportionate 13th month pay in the amount of P3,198.30;
(d) Ordering the Respondent to pay complainant the amount of P7,995.91, representing 10%
attorney’s fees based on the total judgment award of P79,959.12.
All other claims of the complainant whether monetary or otherwise is hereby dismissed for lack of
merit.
SO ORDERED.
Private respondent appealed to the NLRC which, in its resolution of March 30, 1994, reversed the
decision of the Labor Arbiter and ordered petitioner to be given separation pay equivalent to one month pay for
every year of service, unpaid salary, and proportionate 13th month pay. Petitioner filed a motion for
reconsideration, but his motion was denied.
The NLRC held that the phase-out of private respondent’s security section and the hiring of an
independent security agency constituted an exercise by private respondent of" [a] legitimate business decision
whose wisdom we do not intend to inquire into and for which we cannot substitute our judgment" ; that the
distinction made by the Labor Arbiter between "retrenchment" and the employment of "cost-saving devices”
under Art. 283 of the Labor Code was insignificant because the company official who wrote the dismissal letter
apparently used the term "retrenchment” in its "plain and ordinary sense: to layoff or remove from one’s job,
regardless of the reason therefor”; that the rule of "reasonable criteria” in the selection of the employees to be
retrenched did not apply because all positions in the security section had been abolished; and that the
appointment of a safety and security supervisor referred to by petitioner to prove bad faith on private
respondent’s part was of no moment because the position had long been in existence and was separate from
petitioner’s position as head of the Security Checkers Section.
Hence this petition. Petitioner raises the following issue:
IS THE HIRING OF AN INDEPENDENT SECURITY AGENCY BY THE PRIVATE
RESPONDENT TO REPLACE ITS CURRENT SECURITY SECTION A VALID GROUND FOR THE
DISMISSAL OF THE EMPLOYEES CLASSED UNDER THE LATTER?
Petitioner contends that abolition of private respondent’s Security Checkers Section and the
employment of an independent security agency do not fall under any of the authorized causes for dismissal
under Art. 283 of the Labor Code.
Petitioner Laid Off for Cause
Petitioner’s contention has no merit. Art. 283 provides:
Closure of establishment and reduction of personnel. — The employer may also terminate the
employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operations of the establishment or undertaking unless the closing is
for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the
Department of Labor and Employment at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be
entitled to a separation pay equivalent to at least one (1) month pay or to at least one (1) month pay for every
year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closure or
cessation of operations of establishment or undertaking not due to serious business losses or financial reverses,
the separation pay shall be equivalent to at least one (1) month pay or at least one-half (1/2) month pay for
every year of service, whichever is higher. A fraction of at least six (6) months shall be considered as one (1)
whole year.
In De Ocampo v. National Labor Relations Commission, 8 this Court upheld the termination of
employment of three mechanics in a transportation company and their replacement by a company rendering
maintenance and repair services. It held:
In contracting the services of Gemac Machineries, as part of the company’s cost-saving program, the
services rendered by the mechanics became redundant and superfluous, and therefore properly terminable. The
company merely exercised its business judgment or management prerogative. And in the absence of any proof
that the management abused its discretion or acted in a malicious or arbitrary manner, the court will not
interfere with the exercise of such prerogative.
In Asian Alcohol Corporation v. National Labor Relations Commission, the Court likewise upheld
the termination of employment of water pump tenders and their replacement by independent contractors. It
ruled that an employer’s good faith in implementing a redundancy program is not necessarily put in doubt by
the availment of the services of an independent contractor to replace the services of the terminated employees to
promote economy and efficiency.
Indeed, as we pointed out in another case, the" [management of a company] cannot be denied the
faculty of promoting efficiency and attaining economy by a study of what units are essential for its operation.
To it belongs the ultimate determination of whether services should be performed by its personnel or contracted
to outside agencies . . . [While there] should be mutual consultation, eventually deference is to be paid to what
management decides." Consequently, absent proof that management acted in a malicious or arbitrary manner,
the Court will not interfere with the exercise of judgment by an employer.
In the case at bar, we have only the bare assertion of petitioner that, in abolishing the security
section, private respondent’s real purpose was to avoid payment to the security checkers of the wage increases
provided in the collective bargaining agreement approved in 1990. Such an assertion is not a sufficient basis for
concluding that the termination of petitioner’s employment was not a bona fide decision of management to
obtain reasonable return from its investment, which is a right guaranteed to employers under the Constitution.
Indeed, that the phase-out of the security section constituted a "legitimate business decision” is a factual finding
of an administrative agency which must be accorded respect and even finality by this Court since nothing can
be found in the record which fairly detracts from such finding.

Accordingly, we hold that the termination of petitioner’s services was for an authorized cause, i.e.,
redundancy. Hence, pursuant to Art. 283 of the Labor Code, petitioner should be given separation pay at the
rate of one month pay for every year of service.
Sanctions for Violations of the Notice Requirement
Art. 283 also provides that to terminate the employment of an employee for any of the authorized
causes the employer must serve "a written notice on the workers and the Department of Labor and Employment
at least one (1) month before the intended date thereof.” In the case at bar, petitioner was given a notice of
termination on October 11, 1991. On the same day, his services were terminated. He was thus denied his right
to be given written notice before the termination of his employment, and the question is the appropriate
sanction for the violation of petitioner’s right.
To be sure, this is not the first time this question has arisen. In Sebuguero v. NLRC, 16 workers in a
garment factory were temporarily laid off due to the cancellation of orders and a garment embargo. The Labor
Arbiter found that the workers had been illegally dismissed and ordered the company to pay separation pay and
backwages. The NLRC, on the other hand, found that this was a case of retrenchment due to business losses and
ordered the payment of separation pay without backwages. This Court sustained the NLRC’s finding. However,
as the company did not comply with the 30-day written notice in Art. 283 of the Labor Code, the Court ordered
the employer to pay the workers P2,000.00 each as indemnity.
The decision followed the ruling in several cases involving dismissals which, although based on any
of the just causes under Art. 282, were effected without notice and hearing to the employee as required by the
implementing rules. As this Court said: "It is now settled that where the dismissal of one employee is in fact for
a just and valid cause and is so proven to be but he is not accorded his right to due process, i.e., he was not
furnished the twin requirements of notice and opportunity to be heard, the dismissal shall be upheld but the
employer must be sanctioned for non-compliance with the requirements of, or for failure to observe, due
process."
The rule reversed a long standing policy theretofore followed that even though the dismissal is based
on a just cause or the termination of employment is for an authorized cause, the dismissal or termination is
illegal if effected without notice to the employee. The shift in doctrine took place in 1989 in Wenphil Corp. v.
NLRC. 20 In announcing the change, this Court said:
The Court holds that the policy of ordering the reinstatement to the service of an employee without
loss of seniority and the payment of his wages during the period of his separation until his actual reinstatement
but not exceeding three (3) years without qualification or deduction, when it appears he was not afforded due
process, although his dismissal was found to be for just and authorized cause in an appropriate proceeding in
the Ministry of Labor and Employment, should be re-examined. It will be highly prejudicial to the interests of
the employer to impose on him the services of an employee who has been shown to be guilty of the charges that
warranted his dismissal from employment. Indeed, it will demoralize the rank and file if the undeserving, if not
undesirable, remains in the service
x x x termination in advance, then the termination of his employment should be considered ineffectual and he should
However, the petitioner must nevertheless be held to account for failure to extend to private
respondent his right to an investigation before causing his dismissal. The rule is explicit as above discussed.
The dismissal of an employee must be for just or authorized cause and after due process. Petitioner committed
an infraction of the second requirement. Thus; it must be imposed a sanction for its failure to give a formal
notice and conduct an investigation as required by law before dismissing petitioner from employment.
Considering the circumstances of this case petitioner must indemnify the private respondent the amount of
P1,000.00. The measure of this award depends on the facts of each case and the gravity of the omission
committed by the employer.
The fines imposed for violations of the notice requirement have varied from P1,000.00 22 to
P2,000.00 23 to P5,000.00 24 to P10,000.00.25
Need for Reexamining the Wenphil Doctrine
Today, we once again consider the question of appropriate sanctions for violations of the notice
requirement in light of our experience during the last decade or so with the Wenphil doctrine. The number of
cases involving dismissals without the requisite notice to the employee, although effected for just or authorized
causes, suggests that the imposition of fine for violation of the notice requirement has not been effective in
deterring violations of the notice requirement. Justice Panganiban finds the monetary sanctions "too
insignificant, too niggardly, and sometimes even too late.” On the other hand, Justice Puno says there has in
effect been fostered a policy of "dismiss now, pay later” which moneyed employers find more convenient to
comply with than the requirement to serve a 30-day written notice (in the case of termination of employment
for an authorized cause under Arts. 283-284) or to give notice and hearing (in the case of dismissals for just
causes under Art. 282).
For this reason, they regard any dismissal or layoff without the requisite notice to be null and void
even though there are just or authorized causes for such dismissal or layoff. Consequently, in their view, the
employee concerned should be reinstated and paid backwages.
Validity of Petitioner’s Layoff Not
Affected by Lack of Notice
We agree with our esteemed colleagues, Justices Puno and Panganiban, that we should rethink the
sanction of fine for an employer’s disregard of the notice requirement. We do not agree, however, that disregard
of this requirement by an employer renders the dismissal or termination of employment null and void. Such a
stance is actually a reversion to the discredited pre-Wenphil rule of ordering an employee to be reinstated and
paid backwages when it is shown that he has not been given notice and hearing although his dismissal or layoff
is later found to be for a just or authorized cause. Such rule was abandoned in Wenphil because it is really
unjust to require an employer to keep in his service one who is guilty, for example, of an attempt on the life of
the employer or the latter’s family, or when the employer is precisely retrenching in order to prevent losses.
The need is for a rule which, while recognizing the employee’s right to notice before he is dismissed
or laid off, at the same time acknowledges the right of the employer to dismiss for any of the just causes
enumerated in Art. 282 or to terminate employment for any of the authorized causes mentioned in Arts. 283-
284. If the Wenphil rule imposing a fine on an employer who is found to have dismissed an employee for cause
without prior notice is deemed ineffective in deterring employer violations of the notice requirement, the
remedy is not to declare the dismissal void if there are just or valid grounds for such dismissal or if the
termination is for an authorized cause. That would be to uphold the right of the employee but deny the right of
the employer to dismiss for cause. Rather, the remedy is to order the payment to the employee of full
backwages from the time of his dismissal until the court finds that the dismissal was for a just cause. But,
otherwise, his dismissal must be upheld and he should not be reinstated. This is because his dismissal is
ineffectual.
For the same reason, if an employee is laid off for any of the causes in Arts. 283-284, i.e., installation
of a labor-saving device, but the employer did not give him and the DOLE a 30-day written notice of
be paid backwages. However, the termination of his employment should not be considered void but he should
simply be paid separation pay as provided in Art. 283 in addition to backwages.
Justice Puno argues that an employer’s failure to comply with the notice requirement constitutes a
denial of the employee’s right to due process. Prescinding from this premise, he quotes the statement of Chief
Justice Concepcion in Vda. de Cuaycong v. Vda. de Sengbengco 26 that "acts of Congress, as well as of the
Executive, can deny due process only under the pain of nullity, and judicial proceedings suffering from the
same flaw are subject to the same sanction, any statutory provision to the contrary notwithstanding.” Justice
Puno concludes that the dismissal of an employee without notice and hearing, even if for a just cause, as
provided in Art. 282, or for an authorized cause, as provided in Arts. 283-284, is a nullity. Hence, even if just or
authorized causes exist, the employee should be reinstated with full back pay. On the other hand, Justice
Panganiban quotes from the statement in People v. Bocar 27 that" [w]here the denial of the fundamental right of
due process is apparent, a decision rendered in disregard of that right is void for lack of jurisdiction."

Violation of Notice Requirement
Not a Denial of Due Process
The cases cited by both Justices Puno and Panganiban refer, however, to the denial of due process by
the State, which is not the case here. There are three reasons why, on the other hand, violation by the employer
of the notice requirement cannot be considered a denial of due process resulting in the nullity of the employee’s
dismissal or layoff.
The first is that the Due Process Clause of the Constitution is a limitation on governmental powers. It
does not apply to the exercise of private power, such as the termination of employment under the Labor Code.
This is plain from the text of Art. III, §1 of the Constitution, viz.: "No person shall be deprived of life, liberty,
or property without due process of law. . . .” The reason is simple: Only the State has authority to take the life,
liberty, or property of the individual. The purpose of the Due Process Clause is to ensure that the exercise of
this power is consistent with what are considered civilized methods.
The second reason is that notice and hearing are required under the Due Process Clause before the
power of organized society are brought to bear upon the individual. This is obviously not the case of
termination of employment under Art. 283. Here the employee is not faced with an aspect of the adversary
system. The purpose for requiring a 30-day written notice before an employee is laid off is not to afford him an
opportunity to be heard on any charge against him, for there is none.The purpose rather is to give him time to
prepare for the eventual loss of his job and the DOLE an opportunity to determine whether economic causes do
exist justifying the termination of his employment.
Even in cases of dismissal under Art. 282, the purpose for the requirement of notice and hearing is
not to comply with Due Process Clause of the Constitution. The time for notice and hearing is at the trial stage.
Then that is the time we speak of notice and hearing as the essence of procedural due process. Thus,
compliance by the employer with the notice requirement before he dismisses an employee does not foreclose
the right of the latter to question the legality of his dismissal. As Art. 277 (b) provides, "Any decision taken by
the employer shall be without prejudice to the right of the worker to contest the validity or legality of his
dismissal by filing a complaint with the regional branch of the National Labor Relations Commission."cralaw
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Indeed, to contend that the notice requirement in the Labor Code is an aspect of due process is to
overlook the fact that Art. 283 had its origin in Art. 302 of the Spanish Code of Commerce of 1882 which gave
either party to the employer-employee relationship the right to terminate their relationship by giving notice to
the other one month in advance. In lieu of notice, an employee could be laid off by paying him a mesada
equivalent to his salary for one month. This provision was repealed by Art. 2270 of the Civil Code, which took
effect on August 30, 1950. But on June 12, 1954, R.A. No. 1052, otherwise known as the Termination Pay
Law, was enacted reviving the mesada. On June 21, 1957, the law was amended by R.A. No. 1787 providing
for the giving of advance notice or the payment of compensation at the rate of one-half month for every year of
service.
The Termination Pay Law was held not to be a substantive law but a regulatory measure, the purpose
of which was to give the employer the opportunity to find a replacement or substitute, and the employee the
equal opportunity to look for another job or source of employment. Where the termination of employment was
for a just cause, no notice was required to be given to the employee. 30 It was only on September 4, 1981 that
notice was required to be given even where the dismissal or termination of an employee was for cause. This
was made in the rules issued by the then Minister of Labor and Employment to implement B.P. Blg. 130 which
amended the Labor Code. And it was still much later when the notice requirement was embodied in the law
with the amendment of Art. 277(b) by R.A. No. 6715 on March 2, 1989. It cannot be that the former regime
denied due process to the employee. Otherwise, there should now likewise be a rule that, in case an employee
leaves his job without cause and without prior notice to his employer, his act should be void instead of simply
making him liable for damages.
The third reason why the notice requirement under Art. 283 can not be considered a requirement of
the Due Process Clause is that the employer cannot really be expected to be entirely an impartial judge of his
own cause. This is also the case in termination of employment for a just cause under Art. 282 (i.e., serious
misconduct or willful disobedience by the employee of the lawful orders of the employer, gross and habitual
neglect of duties, fraud or willful breach of trust of the employer, commission of crime against the employer or
the latter’s immediate family or duly authorized representatives, or other analogous cases).
Justice Puno disputes this. He says that "statistics in the DOLE will prove that many cases have been
won by employees before the grievance committees manned by impartial judges of the company.” The
grievance machinery is, however, different because it is established by agreement of the employer and the
employees and composed of representatives from both sides. That is why, in Batangas Laguna Tayabas Bus Co.
v. Court of Appeals, which Justice Puno cites, it was held that "Since the right of [an employee] to his labor is
in itself a property and that the labor agreement between him and [his employer] is the law between the parties,
his summary and arbitrary dismissal amounted to deprivation of his property without due process of law.” But
here we are dealing with dismissals and layoffs by employers alone, without the intervention of any grievance
machinery. Accordingly in Montemayor v. Araneta University Foundation, although a professor was dismissed
without a hearing by his university, his dismissal for having made homosexual advances on a student was
sustained, it appearing that in the NLRC, the employee was fully heard in his defense.
Lack of Notice Only Makes
Termination Ineffectual
Not all notice requirements are requirements of due process. Some are simply part of a procedure to
be followed before a right granted to a party can be exercised. Others are simply an application of the Justinian
precept, embodied in the Civil Code, to act with justice, give everyone his due, and observe honesty and good
faith toward one’s fellowmen. Such is the notice requirement in Arts. 282-283. The consequence of the failure
either of the employer or the employee to live up to this precept is to make him liable in damages, not to render
his act (dismissal or resignation, as the case may be) void. The measure of damages is the amount of wages the
employee should have received were it not for the termination of his employment without prior notice. If
warranted, nominal and moral damages may also be awarded. ELC
We hold, therefore, that, with respect to Art. 283 of the Labor Code, the employer’s failure to comply
with the notice requirement does not constitute a denial of due process but a mere failure to observe a procedure
for the termination of employment which makes the termination of employment merely ineffectual. It is similar
to the failure to observe the provisions of Art. 1592, in relation to Art. 1191, of the Civil Code in rescinding a
contract for the sale of immovable property. Under these provisions, while the power of a party to rescind a
contract is implied in reciprocal obligations, nonetheless, in cases involving the sale of immovable property, the
vendor cannot exercise this power even though the vendee defaults in the payment of the price, except by
bringing an action in court or giving notice of rescission by means of a notarial demand. Consequently, a
notice of rescission given in the letter of an attorney has no legal effect, and the vendee can make payment even
after the due date since no valid notice of rescission has been given. 36
Indeed, under the Labor Code, only the absence of a just cause for the termination of employment
can make the dismissal of an employee illegal. This is clear from Art. 279 which provides:chanrob1es virtual
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Security of Tenure. — In cases of regular employment, the employer shall not terminate the services
of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed
from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full
backwages, 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.
Thus, only if the termination of employment is not for any of the causes provided by law is it illegal
and, therefore, the employee should be reinstated and paid backwages. To contend, as Justices Puno and
Panganiban do, that even if the termination is for a just or authorized cause the employee concerned should be
reinstated and paid backwages would be to amend Art. 279 by adding another ground for considering a
dismissal illegal. What is more, it would ignore the fact that under Art. 285, if it is the employee who fails to
give a written notice to the employer that he is leaving the service of the latter, at least one month in advance,
his failure to comply with the legal requirement does not result in making his resignation void but only in
making him liable for damages. 38 This disparity in legal treatment, which would result from the adoption of
the theory of the minority cannot simply be explained by invoking President Ramon Magsaysay’s motto that
"he who has less in life should have more in law." That would be a misapplication of this noble phrase
originally from Professor Thomas Reed Powell of the Harvard Law School.
Justice Panganiban cites Pepsi Cola Bottling Co. v. NLRC, 39 in support of his view that an illegal
dismissal results not only from want of legal cause but also from the failure to observe "due process." The
Pepsi-Cola case actually involved a dismissal for an alleged loss of trust and confidence which, as found by the
Court, was not proven. The dismissal was, therefore, illegal, not because there was a denial of due process, but
because the dismissal was without cause. The statement that the failure of management to comply with the
notice requirement "taints the dismissal with illegality” was merely a dictum thrown in as additional grounds
for holding the dismissal to be illegal.
article, he should not be reinstated. However, he must be paid backwages from the time his employment was
terminated until it is determined that the termination of employment is for a just cause because the failure to
hear him before he is dismissed renders the termination of his employment without legal effect.
WHEREFORE, the petition is GRANTED and the resolution of the National Labor Relations
Commission is MODIFIED by ordering private respondent Isetann Department Store, Inc. to pay petitioner
separation pay equivalent to one (1) month pay for every year of service, his unpaid salary, and his
proportionate 13th month pay and, in addition, full backwages from the time his employment was terminated on
October 11, 1991 up to the time the decision herein becomes final. For this purpose, this case is REMANDED
to the Labor Arbiter for computation of the separation pay, backwages, and other monetary awards to
petitioner.
SO ORDERED.

Given the nature of the violation, therefore, the appropriate sanction for the failure to give notice is
the payment of backwages for the period when the employee is considered not to have been effectively
dismissed or his employment terminated. The sanction is not the payment alone of nominal damages as Justice
Vitug contends.

Unjust Results of Considering Dismissals/

Layoffs Without Prior Notice As Illegal

The refusal to look beyond the validity of the initial action taken by the employer to terminate
employment either for an authorized or just cause can result in an injustice to the employer. For not giving
notice and hearing before dismissing an employee, who is otherwise guilty of, say, theft, or even of an attempt
against the life of the employer, an employer will be forced to keep in his employ such guilty employee. This is
unjust. G.R. No. 158693 November 17, 2004
JENNY M. AGABON and VIRGILIO C. AGABON, petitioners, vs. NATIONAL LABOR RELATIONS
It is true the Constitution regards labor as "a primary social economic force." But so does it declare COMMISSION (NLRC), RIVIERA HOME IMPROVEMENTS, INC. and VICENTE
that it "recognizes the indispensable role of the private sector, encourages private enterprise, and provides ANGELES, respondents.
incentives to needed investment." The Constitution bids the State to "afford full protection to labor." But it is YNARES-SANTIAGO, J.:
equally true that "the law, in protecting the rights of the laborer, authorizes neither oppression nor self-
destruction of the employer."And it is oppression to compel the employer to continue in employment one who This petition for review seeks to reverse the decision1 of the Court of Appeals dated January 23, 2003, in CA-
is guilty or to force the employer to remain in operation when it is not economically in his interest to do so. G.R. SP No. 63017, modifying the decision of National Labor Relations Commission (NLRC) in NLRC-NCR
Case No. 023442-00.
In sum, we hold that if in proceedings for reinstatement under Art. 283, it is shown that the
termination of employment was due to an authorized cause, then the employee concerned should not be ordered
Private respondent Riviera Home Improvements, Inc. is engaged in the business of selling and installing
reinstated even though there is failure to comply with the 30-day notice requirement. Instead, he must be
ornamental and construction materials. It employed petitioners Virgilio Agabon and Jenny Agabon as gypsum
granted separation pay in accordance with Art. 283, to wit:
board and cornice installers on January 2, 19922 until February 23, 1999 when they were dismissed for
abandonment of work.
In case of termination due to the installation of labor-saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least
one month for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases Petitioners then filed a complaint for illegal dismissal and payment of money claims3 and on December 28,
of closures or cessation of operations of establishment or undertaking not due to serious business losses or 1999, the Labor Arbiter rendered a decision declaring the dismissals illegal and ordered private respondent to
financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay the monetary claims. The dispositive portion of the decision states:
pay for every year of service, whichever is higher. A fraction of at least six months shall be considered one (1)
whole year. WHEREFORE, premises considered, We find the termination of the complainants illegal.
Accordingly, respondent is hereby ordered to pay them their backwages up to November 29, 1999 in
If the employee’s separation is without cause, instead of being given separation pay, he should be the sum of:
reinstated. In either case, whether he is reinstated or only granted separation pay, he should be paid full
backwages if he has been laid off without written notice at least 30 days in advance.
1. Jenny M. Agabon - P56, 231.93
On the other hand, with respect to dismissals for cause under Art. 282, if it is shown that the 2. Virgilio C. Agabon - 56, 231.93
employee was dismissed for any of the just causes mentioned in said Art 282, then, in accordance with that
 and, in lieu of reinstatement to pay them their separation pay of one (1) month for every year of
service from date of hiring up to November 29, 1999.
Respondent is further ordered to pay the complainants their holiday pay and service incentive leave
pay for the years 1996, 1997 and 1998 as well as their premium pay for holidays and rest days and
Virgilio Agabon's 13th month pay differential amounting to TWO THOUSAND ONE HUNDRED
FIFTY (P2,150.00) Pesos, or the aggregate amount of ONE HUNDRED TWENTY ONE
THOUSAND SIX HUNDRED SEVENTY EIGHT & 93/100 (P121,678.93) Pesos for Jenny
Agabon, and ONE HUNDRED TWENTY THREE THOUSAND EIGHT HUNDRED TWENTY
EIGHT & 93/100 (P123,828.93) Pesos for Virgilio Agabon, as per attached computation of Julieta C.
Nicolas, OIC, Research and Computation Unit, NCR.
On appeal, the NLRC reversed the Labor Arbiter because it found that the petitioners had abandoned their
work, and were not entitled to backwages and separation pay. The other money claims awarded by the Labor
Arbiter were also denied for lack of evidence.5
Upon denial of their motion for reconsideration, petitioners filed a petition for certiorari with the Court of
Appeals.
The Court of Appeals in turn ruled that the dismissal of the petitioners was not illegal because they had
abandoned their employment but ordered the payment of money claims. The dispositive portion of the decision
reads:
WHEREFORE, the decision of the National Labor Relations Commission is REVERSED only
insofar as it dismissed petitioner's money claims. Private respondents are ordered to pay petitioners
holiday pay for four (4) regular holidays in 1996, 1997, and 1998, as well as their service incentive
leave pay for said years, and to pay the balance of petitioner Virgilio Agabon's 13th month pay for
1998 in the amount of P2,150.00.
SO ORDERED.6
Hence, this petition for review on the sole issue of whether petitioners were illegally dismissed.7
Petitioners assert that they were dismissed because the private respondent refused to give them assignments
unless they agreed to work on a "pakyaw" basis when they reported for duty on February 23, 1999. They did
not agree on this arrangement because it would mean losing benefits as Social Security System (SSS) members.
Petitioners also claim that private respondent did not comply with the twin requirements of notice and hearing.8
Private respondent, on the other hand, maintained that petitioners were not dismissed but had abandoned their
work.9 In fact, private respondent sent two letters to the last known addresses of the petitioners advising them to
report for work. Private respondent's manager even talked to petitioner Virgilio Agabon by telephone sometime
in June 1999 to tell him about the new assignment at Pacific Plaza Towers involving 40,000 square meters of
cornice installation work. However, petitioners did not report for work because they had subcontracted to
perform installation work for another company. Petitioners also demanded for an increase in their wage to
P280.00 per day. When this was not granted, petitioners stopped reporting for work and filed the illegal
dismissal case.10
It is well-settled that findings of fact of quasi-judicial agencies like the NLRC are accorded not only respect but
even finality if the findings are supported by substantial evidence. This is especially so when such findings
were affirmed by the Court of Appeals.11 However, if the factual findings of the NLRC and the Labor Arbiter
are conflicting, as in this case, the reviewing court may delve into the records and examine for itself the
questioned findings.12
Accordingly, the Court of Appeals, after a careful review of the facts, ruled that petitioners' dismissal was for a
just cause. They had abandoned their employment and were already working for another employer.
To dismiss an employee, the law requires not only the existence of a just and valid cause but also enjoins the
employer to give the employee the opportunity to be heard and to defend himself.13 Article 282 of the Labor
Code enumerates the just causes for termination by the employer: (a) serious misconduct or willful
disobedience by the employee of the lawful orders of his employer or the latter's representative in connection
with the employee's work; (b) gross and habitual neglect by the employee of his duties; (c) fraud or willful
breach by the employee of the trust reposed in him by his employer or his duly authorized representative; (d)
commission of a crime or offense by the employee against the person of his employer or any immediate
member of his family or his duly authorized representative; and (e) other causes analogous to the foregoing.
Abandonment is the deliberate and unjustified refusal of an employee to resume his employment.14 It is a form
of neglect of duty, hence, a just cause for termination of employment by the employer.15 For a valid finding of
abandonment, these two factors should be present: (1) the failure to report for work or absence without valid or
justifiable reason; and (2) a clear intention to sever employer-employee relationship, with the second as the
more determinative factor which is manifested by overt acts from which it may be deduced that the employees
has no more intention to work. The intent to discontinue the employment must be shown by clear proof that it
was deliberate and unjustified.16
In February 1999, petitioners were frequently absent having subcontracted for an installation work for another
company. Subcontracting for another company clearly showed the intention to sever the employer-employee
relationship with private respondent. This was not the first time they did this. In January 1996, they did not
report for work because they were working for another company. Private respondent at that time warned
petitioners that they would be dismissed if this happened again. Petitioners disregarded the warning and
exhibited a clear intention to sever their employer-employee relationship. The record of an employee is a
relevant consideration in determining the penalty that should be meted out to him.17
In Sandoval Shipyard v. Clave,18 we held that an employee who deliberately absented from work without leave
or permission from his employer, for the purpose of looking for a job elsewhere, is considered to have
abandoned his job. We should apply that rule with more reason here where petitioners were absent because they
were already working in another company.
The law imposes many obligations on the employer such as providing just compensation to workers,
observance of the procedural requirements of notice and hearing in the termination of employment. On the
other hand, the law also recognizes the right of the employer to expect from its workers not only good
performance, adequate work and diligence, but also good conduct19 and loyalty. The employer may not be
compelled to continue to employ such persons whose continuance in the service will patently be inimical to his
interests.20
After establishing that the terminations were for a just and valid cause, we now determine if the procedures for
dismissal were observed.
The procedure for terminating an employee is found in Book VI, Rule I, Section 2(d) of the Omnibus Rules
Implementing the Labor Code:
Standards of due process: requirements of notice. – In all cases of termination of employment, the
following standards of due process shall be substantially observed:
 I. For termination of employment based on just causes as defined in Article 282 of the Code:
(a) A written notice served on the employee specifying the ground or grounds for termination, and
giving to said employee reasonable opportunity within which to explain his side;
(b) A hearing or conference during which the employee concerned, with the assistance of counsel if
the employee so desires, is given opportunity to respond to the charge, present his evidence or rebut
the evidence presented against him; and
(c) A written notice of termination served on the employee indicating that upon due consideration of
all the circumstances, grounds have been established to justify his termination.
In case of termination, the foregoing notices shall be served on the employee's last known address.
Dismissals based on just causes contemplate acts or omissions attributable to the employee while dismissals
based on authorized causes involve grounds under the Labor Code which allow the employer to terminate
employees. A termination for an authorized cause requires payment of separation pay. When the termination of
employment is declared illegal, reinstatement and full backwages are mandated under Article 279. If
reinstatement is no longer possible where the dismissal was unjust, separation pay may be granted.
Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must give the
employee two written notices and a hearing or opportunity to be heard if requested by the employee before
terminating the employment: a notice specifying the grounds for which dismissal is sought a hearing or an
opportunity to be heard and after hearing or opportunity to be heard, a notice of the decision to dismiss; and (2)
if the dismissal is based on authorized causes under Articles 283 and 284, the employer must give the employee
and the Department of Labor and Employment written notices 30 days prior to the effectivity of his separation.
From the foregoing rules four possible situations may be derived: (1) the dismissal is for a just cause under
Article 282 of the Labor Code, for an authorized cause under Article 283, or for health reasons under Article
284, and due process was observed; (2) the dismissal is without just or authorized cause but due process was
observed; (3) the dismissal is without just or authorized cause and there was no due process; and (4) the
dismissal is for just or authorized cause but due process was not observed.
In the first situation, the dismissal is undoubtedly valid and the employer will not suffer any liability.
In the second and third situations where the dismissals are illegal, Article 279 mandates that the employee is
entitled to reinstatement without loss of seniority rights and other privileges and full backwages, inclusive of
allowances, and other benefits or their monetary equivalent computed from the time the compensation was not
paid up to the time of actual reinstatement.
In the fourth situation, the dismissal should be upheld. While the procedural infirmity cannot be cured, it should
not invalidate the dismissal. However, the employer should be held liable for non-compliance with the
procedural requirements of due process.
The present case squarely falls under the fourth situation. The dismissal should be upheld because it was
established that the petitioners abandoned their jobs to work for another company. Private respondent, however,
did not follow the notice requirements and instead argued that sending notices to the last known addresses
would have been useless because they did not reside there anymore. Unfortunately for the private respondent,
this is not a valid excuse because the law mandates the twin notice requirements to the employee's last known
address.21 Thus, it should be held liable for non-compliance with the procedural requirements of due process.
A review and re-examination of the relevant legal principles is appropriate and timely to clarify the various
rulings on employment termination in the light of Serrano v. National Labor Relations Commission.22
Prior to 1989, the rule was that a dismissal or termination is illegal if the employee was not given any notice. In
the 1989 case of Wenphil Corp. v. National Labor Relations Commission,23 we reversed this long-standing rule
and held that the dismissed employee, although not given any notice and hearing, was not entitled to
reinstatement and backwages because the dismissal was for grave misconduct and insubordination, a just
ground for termination under Article 282. The employee had a violent temper and caused trouble during office
hours, defying superiors who tried to pacify him. We concluded that reinstating the employee and awarding
backwages "may encourage him to do even worse and will render a mockery of the rules of discipline that
employees are required to observe."24 We further held that:
Under the circumstances, the dismissal of the private respondent for just cause should be maintained.
He has no right to return to his former employment.
However, the petitioner must nevertheless be held to account for failure to extend to private
respondent his right to an investigation before causing his dismissal. The rule is explicit as above
discussed. The dismissal of an employee must be for just or authorized cause and after due process.
Petitioner committed an infraction of the second requirement. Thus, it must be imposed a sanction
for its failure to give a formal notice and conduct an investigation as required by law before
dismissing petitioner from employment. Considering the circumstances of this case petitioner must
indemnify the private respondent the amount of P1,000.00. The measure of this award depends on
the facts of each case and the gravity of the omission committed by the employer.25
The rule thus evolved: where the employer had a valid reason to dismiss an employee but did not follow the due
process requirement, the dismissal may be upheld but the employer will be penalized to pay an indemnity to the
employee. This became known as the Wenphil or Belated Due Process Rule.
On January 27, 2000, in Serrano, the rule on the extent of the sanction was changed. We held that the violation
by the employer of the notice requirement in termination for just or authorized causes was not a denial of due
process that will nullify the termination. However, the dismissal is ineffectual and the employer must pay full
backwages from the time of termination until it is judicially declared that the dismissal was for a just or
authorized cause.
The rationale for the re-examination of the Wenphil doctrine in Serrano was the significant number of cases
involving dismissals without requisite notices. We concluded that the imposition of penalty by way of damages
for violation of the notice requirement was not serving as a deterrent. Hence, we now required payment of full
backwages from the time of dismissal until the time the Court finds the dismissal was for a just or authorized
cause.
Serrano was confronting the practice of employers to "dismiss now and pay later" by imposing full backwages.
We believe, however, that the ruling in Serrano did not consider the full meaning of Article 279 of the Labor
Code which states:
ART. 279. Security of Tenure. – In cases of regular employment, the employer shall not terminate
the services of an employee except for a just cause or when authorized by this Title. An employee
who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights
and other privileges and to his full backwages, 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.
This means that the termination is illegal only if it is not for any of the justified or authorized causes provided
by law. Payment of backwages and other benefits, including reinstatement, is justified only if the employee was
unjustly dismissed.
The fact that the Serrano ruling can cause unfairness and injustice which elicited strong dissent has prompted
us to revisit the doctrine.
To be sure, the Due Process Clause in Article III, Section 1 of the Constitution embodies a system of rights
based on moral principles so deeply imbedded in the traditions and feelings of our people as to be deemed
fundamental to a civilized society as conceived by our entire history. Due process is that which comports with
the deepest notions of what is fair and right and just.26 It is a constitutional restraint on the legislative as well as
on the executive and judicial powers of the government provided by the Bill of Rights.
Due process under the Labor Code, like Constitutional due process, has two aspects: substantive, i.e., the valid
and authorized causes of employment termination under the Labor Code; and procedural, i.e., the manner of
dismissal. Procedural due process requirements for dismissal are found in the Implementing Rules of P.D. 442,
as amended, otherwise known as the Labor Code of the Philippines in Book VI, Rule I, Sec. 2, as amended by
Department Order Nos. 9 and 10.27 Breaches of these due process requirements violate the Labor Code.
Therefore statutory due process should be differentiated from failure to comply with constitutional due process.
Constitutional due process protects the individual from the government and assures him of his rights in
criminal, civil or administrative proceedings; while statutory due process found in the Labor Code and
Implementing Rules protects employees from being unjustly terminated without just cause after notice and
hearing.
In Sebuguero v. National Labor Relations Commission,28 the dismissal was for a just and valid cause but the
employee was not accorded due process. The dismissal was upheld by the Court but the employer was
sanctioned. The sanction should be in the nature of indemnification or penalty, and depends on the facts of each
case and the gravity of the omission committed by the employer.
In Nath v. National Labor Relations Commission,29 it was ruled that even if the employee was not given due
process, the failure did not operate to eradicate the just causes for dismissal. The dismissal being for just
cause, albeit without due process, did not entitle the employee to reinstatement, backwages, damages and
attorney's fees.
Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services, Inc. v. National Labor Relations
Commission,30 which opinion he reiterated in Serrano, stated:
C. Where there is just cause for dismissal but due process has not been properly observed by an
employer, it would not be right to order either the reinstatement of the dismissed employee or the
payment of backwages to him. In failing, however, to comply with the procedure prescribed by law
in terminating the services of the employee, the employer must be deemed to have opted or, in any
case, should be made liable, for the payment of separation pay. It might be pointed out that the notice
to be given and the hearing to be conducted generally constitute the two-part due process
requirement of law to be accorded to the employee by the employer. Nevertheless, peculiar
circumstances might obtain in certain situations where to undertake the above steps would be no
more than a useless formality and where, accordingly, it would not be imprudent to apply the res ipsa
loquitur rule and award, in lieu of separation pay, nominal damages to the employee. x x x.31
After carefully analyzing the consequences of the divergent doctrines in the law on employment termination,
we believe that in cases involving dismissals for cause but without observance of the twin requirements of
notice and hearing, the better rule is to abandon the Serrano doctrine and to follow Wenphil by holding that the
dismissal was for just cause but imposing sanctions on the employer. Such sanctions, however, must be stiffer
than that imposed in Wenphil. By doing so, this Court would be able to achieve a fair result by dispensing
justice not just to employees, but to employers as well.
The unfairness of declaring illegal or ineffectual dismissals for valid or authorized causes but not complying
with statutory due process may have far-reaching consequences.
This would encourage frivolous suits, where even the most notorious violators of company policy are rewarded
by invoking due process. This also creates absurd situations where there is a just or authorized cause for
dismissal but a procedural infirmity invalidates the termination. Let us take for example a case where the
employee is caught stealing or threatens the lives of his co-employees or has become a criminal, who has fled
and cannot be found, or where serious business losses demand that operations be ceased in less than a month.
Invalidating the dismissal would not serve public interest. It could also discourage investments that can
generate employment in the local economy.
The constitutional policy to provide full protection to labor is not meant to be a sword to oppress employers.
The commitment of this Court to the cause of labor does not prevent us from sustaining the employer when it is
in the right, as in this case.32 Certainly, an employer should not be compelled to pay employees for work not
actually performed and in fact abandoned.
The employer should not be compelled to continue employing a person who is admittedly guilty of misfeasance
or malfeasance and whose continued employment is patently inimical to the employer. The law protecting the
rights of the laborer authorizes neither oppression nor self-destruction of the employer.33
It must be stressed that in the present case, the petitioners committed a grave offense, i.e., abandonment, which,
if the requirements of due process were complied with, would undoubtedly result in a valid dismissal.
An employee who is clearly guilty of conduct violative of Article 282 should not be protected by the Social
Justice Clause of the Constitution. Social justice, as the term suggests, should be used only to correct an
injustice. As the eminent Justice Jose P. Laurel observed, social justice must be founded on the recognition of
the necessity of interdependence among diverse units of a society and of the protection that should be equally
and evenly extended to all groups as a combined force in our social and economic life, consistent with the
fundamental and paramount objective of the state of promoting the health, comfort, and quiet of all persons, and
of bringing about "the greatest good to the greatest number."34
This is not to say that the Court was wrong when it ruled the way it did in Wenphil, Serrano and related cases.
Social justice is not based on rigid formulas set in stone. It has to allow for changing times and circumstances.
Justice Isagani Cruz strongly asserts the need to apply a balanced approach to labor-management relations and
dispense justice with an even hand in every case:
We have repeatedly stressed that social justice – or any justice for that matter – is for the deserving,
whether he be a millionaire in his mansion or a pauper in his hovel. It is true that, in case of
reasonable doubt, we are to tilt the balance in favor of the poor to whom the Constitution fittingly
extends its sympathy and compassion. But never is it justified to give preference to the poor simply
because they are poor, or reject the rich simply because they are rich, for justice must always be
served for the poor and the rich alike, according to the mandate of the law.35
Justice in every case should only be for the deserving party. It should not be presumed that every case of illegal
dismissal would automatically be decided in favor of labor, as management has rights that should be fully
respected and enforced by this Court. As interdependent and indispensable partners in nation-building, labor
and management need each other to foster productivity and economic growth; hence, the need to weigh and
balance the rights and welfare of both the employee and employer.
Where the dismissal is for a just cause, as in the instant case, the lack of statutory due process should not nullify
the dismissal, or render it illegal, or ineffectual. However, the employer should indemnify the employee for the
violation of his statutory rights, as ruled in Reta v. National Labor Relations Commission.36 The indemnity to be
imposed should be stiffer to discourage the abhorrent practice of "dismiss now, pay later," which we sought to
deter in the Serrano ruling. The sanction should be in the nature of indemnification or penalty and should
depend on the facts of each case, taking into special consideration the gravity of the due process violation of the
employer.
Under the Civil Code, nominal damages is adjudicated in order that a right of the plaintiff, which has been
violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying
the plaintiff for any loss suffered by him.37
As enunciated by this Court in Viernes v. National Labor Relations Commissions,38 an employer is liable to pay
indemnity in the form of nominal damages to an employee who has been dismissed if, in effecting such
dismissal, the employer fails to comply with the requirements of due process. The Court, after considering the
circumstances therein, fixed the indemnity at P2,590.50, which was equivalent to the employee's one month
salary. This indemnity is intended not to penalize the employer but to vindicate or recognize the employee's
right to statutory due process which was violated by the employer.39
The violation of the petitioners' right to statutory due process by the private respondent warrants the payment of
indemnity in the form of nominal damages. The amount of such damages is addressed to the sound discretion of
the court, taking into account the relevant circumstances.40 Considering the prevailing circumstances in the case
at bar, we deem it proper to fix it at P30,000.00. We believe this form of damages would serve to deter
employers from future violations of the statutory due process rights of employees. At the very least, it provides
a vindication or recognition of this fundamental right granted to the latter under the Labor Code and its
Implementing Rules.
Private respondent claims that the Court of Appeals erred in holding that it failed to pay petitioners' holiday
pay, service incentive leave pay and 13th month pay.
We are not persuaded.
We affirm the ruling of the appellate court on petitioners' money claims. Private respondent is liable for
petitioners' holiday pay, service incentive leave pay and 13th month pay without deductions.
As a general rule, one who pleads payment has the burden of proving it. Even where the employee must allege
non-payment, the general rule is that the burden rests on the employer to prove payment, rather than on the
employee to prove non-payment. The reason for the rule is that the pertinent personnel files, payrolls, records,
remittances and other similar documents – which will show that overtime, differentials, service incentive leave
and other claims of workers have been paid – are not in the possession of the worker but in the custody and
absolute control of the employer.41
In the case at bar, if private respondent indeed paid petitioners' holiday pay and service incentive leave pay, it
could have easily presented documentary proofs of such monetary benefits to disprove the claims of the
petitioners. But it did not, except with respect to the 13th month pay wherein it presented cash vouchers
showing payments of the benefit in the years disputed.42 Allegations by private respondent that it does not
operate during holidays and that it allows its employees 10 days leave with pay, other than being self-serving,
do not constitute proof of payment. Consequently, it failed to discharge the onus probandi thereby making it
liable for such claims to the petitioners.
Anent the deduction of SSS loan and the value of the shoes from petitioner Virgilio Agabon's 13th month pay,
we find the same to be unauthorized. The evident intention of Presidential Decree No. 851 is to grant
an additional income in the form of the 13th month pay to employees not already receiving the same43 so as "to
further protect the level of real wages from the ravages of world-wide inflation."44 Clearly, as additional income,
the 13th month pay is included in the definition of wage under Article 97(f) of the Labor Code, to wit:
(f) "Wage" paid to any employee shall mean the remuneration or earnings, however designated,
capable of being expressed in terms of money whether fixed or ascertained on a time, task, piece , or
commission basis, or other method of calculating the same, which is payable by an employer to an
employee under a written or unwritten contract of employment for work done or to be done, or for
services rendered or to be rendered and includes the fair and reasonable value, as determined by the
Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the
employee…"
from which an employer is prohibited under Article 11345 of the same Code from making any deductions
without the employee's knowledge and consent. In the instant case, private respondent failed to show that the
deduction of the SSS loan and the value of the shoes from petitioner Virgilio Agabon's 13th month pay was
authorized by the latter. The lack of authority to deduct is further bolstered by the fact that petitioner Virgilio
Agabon included the same as one of his money claims against private respondent.
The Court of Appeals properly reinstated the monetary claims awarded by the Labor Arbiter ordering the
private respondent to pay each of the petitioners holiday pay for four regular holidays from 1996 to 1998, in the
amount of P6,520.00, service incentive leave pay for the same period in the amount of P3,255.00 and the
balance of Virgilio Agabon's thirteenth month pay for 1998 in the amount of P2,150.00.
WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the Court of Appeals dated
January 23, 2003, in CA-G.R. SP No. 63017, finding that petitioners' Jenny and Virgilio Agabon abandoned
their work, and ordering private respondent to pay each of the petitioners holiday pay for four regular holidays
from 1996 to 1998, in the amount of P6,520.00, service incentive leave pay for the same period in the amount
of P3,255.00 and the balance of Virgilio Agabon's thirteenth month pay for 1998 in the amount of P2,150.00
is AFFIRMED with the MODIFICATION that private respondent Riviera Home Improvements, Inc. is
further ORDERED to pay each of the petitioners the amount of P30,000.00 as nominal damages for non-
compliance with statutory due process.
No costs.
SO ORDERED
G.R. No. 151378. March 28, 2005
JAKA FOOD PROCESSING CORPORATION, Petitioners,
vs.
DARWIN PACOT, ROBERT PAROHINOG, DAVID BISNAR, MARLON DOMINGO, RHOEL
LESCANO and JONATHAN CAGABCAB, Respondents.
DECISION
GARCIA, J.:
Assailed and sought to be set aside in this appeal by way of a petition for review on certiorari under rule 45 of
the Rules of Court are the following issuances of the Court of Appeals in CA-G.R. SP. No. 59847, to wit:
1. Decision dated 16 November 2001,1 reversing and setting aside an earlier decision of the National Labor
Relations Commission (NLRC); and
2. Resolution dated 8 January 2002,2 denying petitioner’s motion for reconsideration.
The material facts may be briefly stated, as follows:
Respondents Darwin Pacot, Robert Parohinog, David Bisnar, Marlon Domingo, Rhoel Lescano and Jonathan
Cagabcab were earlier hired by petitioner JAKA Foods Processing Corporation (JAKA, for short) until the
latter terminated their employment on August 29, 1997 because the corporation was "in dire financial straits". It
is not disputed, however, that the termination was effected without JAKA complying with the requirement
under Article 283 of the Labor Code regarding the service of a written notice upon the employees and the
Department of Labor and Employment at least one (1) month before the intended date of termination.
In time, respondents separately filed with the regional Arbitration Branch of the National Labor Relations
Commission (NLRC) complaints for illegal dismissal, underpayment of wages and nonpayment of service
incentive leave and 13th month pay against JAKA and its HRD Manager, Rosana Castelo.
After due proceedings, the Labor Arbiter rendered a decision3 declaring the termination illegal and ordering
JAKA and its HRD Manager to reinstate respondents with full backwages, and separation pay if reinstatement
is not possible. More specifically the decision dispositively reads:
WHEREFORE, judgment is hereby rendered declaring as illegal the termination of complainants and ordering
respondents to reinstate them to their positions with full backwages which as of July 30, 1998 have already
amounted to P339,768.00. Respondents are also ordered to pay complainants the amount of P2,775.00
representing the unpaid service incentive leave pay of Parohinog, Lescano and Cagabcab an the amount of
P19,239.96 as payment for 1997 13th month pay as alluded in the above computation.
If complainants could not be reinstated, respondents are ordered to pay them separation pay equivalent to one
month salary for very (sic) year of service.
SO ORDERED.
Therefrom, JAKA went on appeal to the NLRC, which, in a decision dated August 30, 1999,4 affirmed in
toto that of the Labor Arbiter.
JAKA filed a motion for reconsideration. Acting thereon, the NLRC came out with another decision dated
January 28, 2000,5 this time modifying its earlier decision, thus:
WHEREFORE, premises considered, the instant motion for reconsideration is hereby GRANTED and the
challenged decision of this Commission [dated] 30 August 1999 and the decision of the Labor Arbiter xxx are
hereby modified by reversing an setting aside the awards of backwages, service incentive leave pay. Each of the
complainants-appellees shall be entitled to a separation pay equivalent to one month. In addition, respondents-
appellants is (sic) ordered to pay each of the complainants-appellees the sum of P2,000.00 as indemnification
for its failure to observe due process in effecting the retrenchment.
SO ORDERED.
Their motion for reconsideration having been denied by the NLRC in its resolution of April 28,
2000,6 respondents went to the Court of Appeals via a petition for certiorari, thereat docketed as CA-G.R. SP
No. 59847.
As stated at the outset hereof, the Court of Appeals, in a decision dated November 16, 2000, applying the
doctrine laid down by this Court in Serrano vs. NLRC,7 reversed and set aside the NLRC’s decision of January
28, 2000, thus:
WHEREFORE, the decision dated January 28, 2000 of the National Labor Relations Commission
is REVERSED and SET ASIDE and another one entered ordering respondent JAKA Foods Processing
Corporation to pay petitioners separation pay equivalent to one (1) month salary, the proportionate 13th month
pay and, in addition, full backwages from the time their employment was terminated on August 29, 1997 up to
the time the Decision herein becomes final.
SO ORDERED.
This time, JAKA moved for a reconsideration but its motion was denied by the appellate court in its resolution
of January 8, 2002.
Hence, JAKA’s present recourse, submitting, for our consideration, the following issues:
"I. WHETHER OR NOT THE COURT OF APPEALS CORRECTLY AWARDED ‘FULL BACKWAGES’
TO RESPONDENTS.
II. WHETHER OR NOT THE ASSAILED DECISION CORRECTLY AWARDED SEPARATION PAY TO
RESPONDENTS".
As we see it, there is only one question that requires resolution, i.e. what are the legal implications of a situation
where an employee is dismissed for cause but such dismissal was effected without the employer’s compliance
with the notice requirement under the Labor Code.
This, certainly, is not a case of first impression. In the very recent case of Agabon vs. NLRC,8 we had the
opportunity to resolve a similar question. Therein, we found that the employees committed a grave
offense, i.e., abandonment, which is a form of a neglect of duty which, in turn, is one of the just causes
enumerated under Article 282 of the Labor Code. In said case, we upheld the validity of the dismissal despite
non-compliance with the notice requirement of the Labor Code. However, we required the employer to pay the
dismissed employees the amount of P30,000.00, representing nominal damages for non-compliance with
statutory due process, thus:
"Where the dismissal is for a just cause, as in the instant case, the lack of statutory due process should not
nullify the dismissal, or render it illegal, or ineffectual. However, the employer should indemnify the employee
for the violation of his statutory rights, as ruled in Reta vs. National Labor Relations Commission. The
indemnity to be imposed should be stiffer to discourage the abhorrent practice of ‘dismiss now, pay later,’
which we sought to deter in the Serrano ruling. The sanction should be in the nature of indemnification or
penalty and should depend on the facts of each case, taking into special consideration the gravity of the due
process violation of the employer.
xxx xxx xxx
The violation of petitioners’ right to statutory due process by the private respondent warrants the payment of
indemnity in the form of nominal damages. The amount of such damages is addressed to the sound discretion of
the court, taking into account the relevant circumstances. Considering the prevailing circumstances in the
case at bar, we deem it proper to fix it at P30,000.00. We believe this form of damages would serve to deter
employers from future violations of the statutory due process rights of employees. At the very least, it provides
a vindication or recognition of this fundamental right granted to the latter under the Labor Code and its
Implementing Rules," (Emphasis supplied).
The difference between Agabon and the instant case is that in the former, the dismissal was based on a just
cause under Article 282 of the Labor Code while in the present case, respondents were dismissed due to
retrenchment, which is one of the authorized causes under Article 283 of the same Code.
At this point, we note that there are divergent implications of a dismissal for just cause under Article 282, on
one hand, and a dismissal for authorized cause under Article 283, on the other.
A dismissal for just cause under Article 282 implies that the employee concerned has committed, or is guilty
of, some violation against the employer, i.e. the employee has committed some serious misconduct, is guilty of
some fraud against the employer, or, as in Agabon, he has neglected his duties. Thus, it can be said that the
employee himself initiated the dismissal process.
On another breath, a dismissal for an authorized cause under Article 283 does not necessarily imply
delinquency or culpability on the part of the employee. Instead, the dismissal process is initiated by the
employer’s exercise of his management prerogative, i.e. when the employer opts to install labor saving devices,
when he decides to cease business operations or when, as in this case, he undertakes to implement a
retrenchment program.
The clear-cut distinction between a dismissal for just cause under Article 282 and a dismissal for authorized
cause under Article 283 is further reinforced by the fact that in the first, payment of separation pay, as a rule, is
not required, while in the second, the law requires payment of separation pay.9
For these reasons, there ought to be a difference in treatment when the ground for dismissal is one of the just
causes under Article 282, and when based on one of the authorized causes under Article 283.
Accordingly, it is wise to hold that: (1) if the dismissal is based on a just cause under Article 282 but the
employer failed to comply with the notice requirement, the sanction to be imposed upon him should
be tempered because the dismissal process was, in effect, initiated by an act imputable to the employee; and (2)
if the dismissal is based on an authorized cause under Article 283 but the employer failed to comply with the
notice requirement, the sanction should be stiffer because the dismissal process was initiated by the employer’s
exercise of his management prerogative.
The records before us reveal that, indeed, JAKA was suffering from serious business losses at the time it
terminated respondents’ employment. As aptly found by the NLRC:
"A careful study of the evidence presented by the respondent-appellant corporation shows that the audited
Financial Statement of the corporation for the periods 1996, 1997 and 1998 were submitted by the respondent-
appellant corporation, The Statement of Income and Deficit found in the Audited Financial Statement of the
respondent-appellant corporation clearly shows the following in 1996, the deficit of the respondent-appellant
corporation was P188,218,419.00 or 94.11% of the stockholder’s [sic] equity which amounts to
P200,000,000.00. In 1997 when the retrenchment program of respondent-appellant corporation was undertaken,
the deficit ballooned to P247,222,569.00 or 123.61% of the stockholders’ equity, thus a capital deficiency or
impairment of equity ensued. In 1998, the deficit grew to P355,794,897.00 or 177% of the stockholders’ equity.
From 1996 to 1997, the deficit grew by more that (sic) 31% while in 1998 the deficit grew by more than 47%.
The Statement of Income and Deficit of the respondent-appellant corporation to prove its alleged losses was
prepared by an independent auditor, SGV & Co. It convincingly showed that the respondent-appellant
corporation was in dire financial straits, which the complainants-appellees failed to dispute. The losses incurred
by the respondent-appellant corporation are clearly substantial and sufficiently proven with clear and
satisfactory evidence. Losses incurred were adequately shown with respondent-appellant’s audited financial
statement. Having established the loss incurred by the respondent-appellant corporation, it necessarily
necessarily (sic) follows that the ground in support of retrenchment existed at the time the complainants-
appellees were terminated. We cannot therefore sustain the findings of the Labor Arbiter that the alleged losses
of the respondent-appellant was [sic] not well substantiated by substantial proofs. It is therefore logical for the
corporation to implement a retrenchment program to prevent further losses."10
Noteworthy it is, moreover, to state that herein respondents did not assail the foregoing finding of the NLRC
which, incidentally, was also affirmed by the Court of Appeals.
It is, therefore, established that there was ground for respondents’ dismissal, i.e., retrenchment, which is one of
the authorized causes enumerated under Article 283 of the Labor Code. Likewise, it is established that JAKA
failed to comply with the notice requirement under the same Article. Considering the factual circumstances in
the instant case and the above ratiocination, we, therefore, deem it proper to fix the indemnity at P50,000.00.
We likewise find the Court of Appeals to have been in error when it ordered JAKA to pay respondents
separation pay equivalent to one (1) month salary for every year of service. This is because in Reahs
Corporation vs. NLRC,11 we made the following declaration:
"The rule, therefore, is that in all cases of business closure or cessation of operation or undertaking of the
employer, the affected employee is entitled to separation pay. This is consistent with the state policy of treating
labor as a primary social economic force, affording full protection to its rights as well as its welfare. The
exception is when the closure of business or cessation of operations is due to serious business losses or
financial reverses; duly proved, in which case, the right of affected employees to separation pay is lost for
obvious reasons. xxx". (Emphasis supplied)
WHEREFORE, the instant petition is GRANTED. Accordingly, the assailed decision and resolution of the
Court of Appeals respectively dated November 16, 2001 and January 8, 2002 are hereby SET ASIDE and a new
one entered upholding the legality of the dismissal but ordering petitioner to pay each of the respondents the
amount of P50,000.00, representing nominal damages for non-compliance with statutory due process.
SO ORDERED.
G.R. No. 192571 July 23, 2013
ABBOTT LABORATORIES, PHILIPPINES, CECILLE A. TERRIBLE, EDWIN D. FEIST, MARIA
OLIVIA T. YABUTMISA, TERESITA C. BERNARDO, AND ALLAN G. ALMAZAR, Petitioners,
vs.
PEARLIE ANN F. ALCARAZ, Respondent.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the Decision2 dated December 10,2009 and
Resolution3 dated June 9, 2010 of the Court of Appeals (CA) in CA-G.R. SP No. 101045 which pronounced
that the National Labor Relations Commission (NLRC) did not gravely abuse its discretion when it ruled that
respondent Pearlie Ann F. Alcaraz (Alcaraz) was illegally dismissed from her employment.
The Facts
On June 27, 2004, petitioner Abbott Laboratories, Philippines (Abbott) caused the publication in a major
broadsheet newspaper of its need for a Medical and Regulatory Affairs Manager (Regulatory Affairs Manager)
who would: (a) be responsible for drug safety surveillance operations, staffing, and budget; (b) lead the
development and implementation of standard operating procedures/policies for drug safety surveillance and
vigilance; and (c) act as the primary interface with internal and external customers regarding safety operations
and queries.4 Alcaraz - who was then a Regulatory Affairs and Information Manager at Aventis Pasteur
Philippines, Incorporated (another pharmaceutical company like Abbott) – showed interest and submitted her
application on October 4, 2004.5
On December 7, 2004, Abbott formally offered Alcaraz the abovementioned position which was an item under
the company’s Hospira Affiliate Local Surveillance Unit (ALSU) department.6 In Abbott’s offer sheet.7 it was
stated that Alcaraz was to be employed on a probationary basis.8 Later that day, she accepted the said offer and
received an electronic mail (e-mail) from Abbott’s Recruitment Officer, petitioner Teresita C. Bernardo
(Bernardo), confirming the same. Attached to Bernardo’s e-mail were Abbott’s organizational chart and a job
description of Alcaraz’s work.9
On February 12, 2005, Alcaraz signed an employment contract which stated, inter alia, that she was to be
placed on probation for a period of six (6) months beginning February 15, 2005 to August 14, 2005. The said
contract was also signed by Abbott’s General Manager, petitioner Edwin Feist (Feist):10
PROBATIONARY EMPLOYMENT
Dear Pearl,
After having successfully passed the pre-employment requirements, you are hereby appointed as follows:
Position Title : Regulatory Affairs Manager
Department : Hospira
The terms of your employment are:
Nature of Employment : Probationary
Effectivity : February 15, 2005 to August 14, 2005
Basic Salary : ₱110,000.00/ month
It is understood that you agree to abide by all existing policies, rules and regulations of the company, as well as
those, which may be hereinafter promulgated.
Unless renewed, probationary appointment expires on the date indicated subject to earlier termination by the
Company for any justifiable reason.
If you agree to the terms and conditions of your employment, please signify your conformity below and return a
copy to HRD.
Welcome to Abbott!
Very truly yours,
Sgd.
EDWIN D. FEIST
General Manager
CONFORME:
Sgd.
PEARLIE ANN FERRER-ALCARAZ
During Alcaraz’s pre-employment orientation, petitioner Allan G. Almazar (Almazar), Hospira’s Country
Transition Manager, briefed her on her duties and responsibilities as Regulatory Affairs Manager, stating that:
(a) she will handle the staff of Hospira ALSU and will directly report to Almazar on matters regarding Hopira’s
local operations, operational budget, and performance evaluation of the Hospira ALSU Staff who are on
probationary status; (b) she must implement Abbott’s Code of Good Corporate Conduct (Code of Conduct),
office policies on human resources and finance, and ensure that Abbott will hire people who are fit in the
organizational discipline; (c) petitioner Kelly Walsh (Walsh), Manager of the Literature Drug Surveillance
Drug Safety of Hospira, will be her immediate supervisor; (d) she should always coordinate with Abbott’s
human resource officers in the management and discipline of the staff; (e) Hospira ALSU will spin off from
Abbott in early 2006 and will be officially incorporated and known as Hospira, Philippines. In the interim,
Hospira ALSU operations will still be under Abbott’s management, excluding the technical aspects of the
operations which is under the control and supervision of Walsh; and (f) the processing of information and/or
raw material data subject of Hospira ALSU operations will be strictly confined and controlled under the
computer system and network being maintained and operated from the United States. For this purpose, all those
involved in Hospira ALSU are required to use two identification cards: one, to identify them as Abbott’s
employees and another, to identify them as Hospira employees.11
On March 3, 2005, petitioner Maria Olivia T. Yabut-Misa (Misa), Abbott’s Human Resources (HR) Director,
sent Alcaraz an e-mail which contained an explanation of the procedure for evaluating the performance of
probationary employees and further indicated that Abbott had only one evaluation system for all of its
employees. Alcaraz was also given copies of Abbott’s Code of Conduct and Probationary Performance
Standards and Evaluation (PPSE) and Performance Excellence Orientation Modules (Performance Modules)
which she had to apply in line with her task of evaluating the Hospira ALSU staff.12
Abbott’s PPSE procedure mandates that the job performance of a probationary employee should be formally
reviewed and discussed with the employee at least twice: first on the third month and second on the fifth month
from the date of employment. The necessary Performance Improvement Plan should also be made during the
third-month review in case of a gap between the employee’s performance and the standards set. These
performance standards should be discussed in detail with the employee within the first two (2) weeks on the
job. It was equally required that a signed copy of the PPSE form must be submitted to Abbott’s Human
Resources Department (HRD) and shall serve as documentation of the employee’s performance during his/her
probationary period. This shall form the basis for recommending the confirmation or termination of the
probationary employment.13
During the course of her employment, Alcaraz noticed that some of the staff had disciplinary problems. Thus,
she would reprimand them for their unprofessional behavior such as non-observance of the dress code,
moonlighting, and disrespect of Abbott officers. However, Alcaraz’s method of management was considered by
Walsh to be "too strict."14 Alcaraz approached Misa to discuss these concerns and was told to "lie low" and let
Walsh handle the matter. Misa even assured her that Abbott’s HRD would support her in all her management
decisions.15
On April 12, 2005, Alcaraz received an e-mail from Misa requesting immediate action on the staff’s
performance evaluation as their probationary periods were about to end. This Alcaraz eventually submitted.16
On April 20, 2005, Alcaraz had a meeting with petitioner Cecille Terrible (Terrible), Abbott’s former HR
Director, to discuss certain issues regarding staff performance standards. In the course thereof, Alcaraz
accidentally saw a printed copy of an e-mail sent by Walsh to some staff members which essentially contained
queries regarding the former’s job performance. Alcaraz asked if Walsh’s action was the normal process of
evaluation. Terrible said that it was not.17
On May 16, 2005, Alcaraz was called to a meeting with Walsh and Terrible where she was informed that she
failed to meet the regularization standards for the position of Regulatory Affairs Manager.18 Thereafter, Walsh
and Terrible requested Alcaraz to tender her resignation, else they be forced to terminate her services. She was
also told that, regardless of her choice, she should no longer report for work and was asked to surrender her
office identification cards. She requested to be given one week to decide on the same, but to no avail.19
On May 17, 2005, Alcaraz told her administrative assistant, Claude Gonzales (Gonzales), that she would be on
leave for that day. However, Gonzales told her that Walsh and Terrible already announced to the whole Hospira
ALSU staff that Alcaraz already resigned due to health reasons.20
On May 23, 2005, Walsh, Almazar, and Bernardo personally handed to Alcaraz a letter stating that her services
had been terminated effective May 19, 2005.21 The letter detailed the reasons for Alcaraz’s termination –
particularly, that Alcaraz: (a) did not manage her time effectively; (b) failed to gain the trust of her staff and to
build an effective rapport with them; (c) failed to train her staff effectively; and (d) was not able to obtain the
knowledge and ability to make sound judgments on case processing and article review which were necessary
for the proper performance of her duties.22 On May 27, 2005, Alcaraz received another copy of the said
termination letter via registered mail.23
Alcaraz felt that she was unjustly terminated from her employment and thus, filed a complaint for illegal
dismissal and damages against Abbott and its officers, namely, Misa, Bernardo, Almazar, Walsh, Terrible, and
Feist.24 She claimed that she should have already been considered as a regular and not a probationary employee
given Abbott’s failure to inform her of the reasonable standards for her regularization upon her engagement as
required under Article 29525 of the Labor Code. In this relation, she contended that while her employment
contract stated that she was to be engaged on a probationary status, the same did not indicate the standards on
which her regularization would be based.26 She further averred that the individual petitioners maliciously
connived to illegally dismiss her when: (a) they threatened her with termination; (b) she was ordered not to
enter company premises even if she was still an employee thereof; and (c) they publicly announced that she
already resigned in order to humiliate her.27
On the contrary, petitioners maintained that Alcaraz was validly terminated from her probationary employment
given her failure to satisfy the prescribed standards for her regularization which were made known to her at the
time of her engagement.28
The LA Ruling
In a Decision dated March 30, 2006,29 the LA dismissed Alcaraz’s complaint for lack of merit.
The LA rejected Alcaraz’s argument that she was not informed of the reasonable standards to qualify as a
regular employee considering her admissions that she was briefed by Almazar on her work during her pre-
employment orientation meeting30 and that she received copies of Abbott’s Code of Conduct and Performance
Modules which were used for evaluating all types of Abbott employees.31 As Alcaraz was unable to meet the
standards set by Abbott as per her performance evaluation, the LA ruled that the termination of her
probationary employment was justified.32 Lastly, the LA found that there was no evidence to conclude that
Abbott’s officers and employees acted in bad faith in terminating Alcaraz’s employment.33
Displeased with the LA’s ruling, Alcaraz filed an appeal with the National Labor Relations Commission
(NLRC).
The NLRC Ruling
On September 15, 2006, the NLRC rendered a Decision,34 annulling and setting aside the LA’s ruling, the
dispositive portion of which reads:
WHEREFORE, the Decision of the Labor Arbiter dated 31 March 2006 [sic] is hereby reversed, annulled and
set aside and judgment is hereby rendered:
1. Finding respondents Abbot [sic] and individual respondents to have committed illegal dismissal;
2. Respondents are ordered to immediately reinstate complainant to her former position without loss
of seniority rights immediately upon receipt hereof;
3. To jointly and severally pay complainant backwages computed from 16 May 2005 until finality of
this decision. As of the date hereof the backwages is computed at
a. Backwages for 15 months - PhP 1,650,000.00
b. 13th month pay - 110,000.00
TOTAL PhP 1,760,000.00
4. Respondents are ordered to pay complainant moral damages of ₱50,000.00 and exemplary
damages of ₱50,000.00.
5. Respondents are also ordered to pay attorney’s fees of 10% of the total award.
6. All other claims are dismissed for lack of merit.
SO ORDERED.35
The NLRC reversed the findings of the LA and ruled that there was no evidence showing that Alcaraz had been
apprised of her probationary status and the requirements which she should have complied with in order to be a
regular employee.36 It held that Alcaraz’s receipt of her job description and Abbott’s Code of Conduct and
Performance Modules was not equivalent to her being actually informed of the performance standards upon
which she should have been evaluated on.37 It further observed that Abbott did not comply with its own
standard operating procedure in evaluating probationary employees.38 The NLRC was also not convinced that
Alcaraz was terminated for a valid cause given that petitioners’ allegation of Alcaraz’s "poor performance"
remained unsubstantiated.39
Petitioners filed a motion for reconsideration which was denied by the NLRC in a Resolution dated July 31,
2007.40
Aggrieved, petitioners filed with the CA a Petition for Certiorari with Prayer for Issuance of a Temporary
Restraining Order and/or Writ of Preliminary Injunction, docketed as CA G.R. SP No. 101045 (First CA
Petition), alleging grave abuse of discretion on the part of NLRC when it ruled that Alcaraz was illegally
dismissed.41
Pending resolution of the First CA Petition, Alcaraz moved for the execution of the NLRC’s Decision before
the LA, which petitioners strongly opposed. The LA denied the said motion in an Order dated July 8, 2008
which was, however, eventually reversed on appeal by the NLRC.42 Due to the foregoing, petitioners filed
another Petition for Certiorari with the CA, docketed as CA G.R. SP No. 111318 (Second CA Petition),
assailing the propriety of the execution of the NLRC decision.43
The CA Ruling
With regard to the First CA Petition, the CA, in a Decision44 dated December 10, 2009, affirmed the ruling of
the NLRC and held that the latter did not commit any grave abuse of discretion in finding that Alcaraz was
illegally dismissed.
It observed that Alcaraz was not apprised at the start of her employment of the reasonable standards under
which she could qualify as a regular employee.45 This was based on its examination of the employment contract
which showed that the same did not contain any standard of performance or any stipulation that Alcaraz shall
undergo a performance evaluation before she could qualify as a regular employee.46 It also found that Abbott
was unable to prove that there was any reasonable ground to terminate Alcaraz’s employment.47 Abbott moved
for the reconsideration of the aforementioned ruling which was, however, denied by the CA in a
Resolution48 dated June 9, 2010.
The CA likewise denied the Second CA Petition in a Resolution dated May 18, 2010 (May 18, 2010
Resolution) and ruled that the NLRC was correct in upholding the execution of the NLRC Decision.49 Thus,
petitioners filed a motion for reconsideration.
While the petitioners’ motion for reconsideration of the CA’s May 18, 2010 Resolution was pending, Alcaraz
again moved for the issuance of a writ of execution before the LA. On June 7, 2010, petitioners received the
LA’s order granting Alcaraz’s motion for execution which they in turn appealed to the NLRC – through a
Memorandum of Appeal dated June 16, 2010 (June 16, 2010 Memorandum of Appeal ) – on the ground that the
implementation of the LA’s order would render its motion for reconsideration moot and academic.50
Meanwhile, petitioners’ motion for reconsideration of the CA’s May 18, 2010 Resolution in the Second CA
Petition was denied via a Resolution dated October 4, 2010.51 This attained finality on January 10, 2011 for
petitioners’ failure to timely appeal the same.52 Hence, as it stands, only the issues in the First CA petition are
left to be resolved.
Incidentally, in her Comment dated November 15, 2010, Alcaraz also alleges that petitioners were guilty of
forum shopping when they filed the Second CA Petition pending the resolution of their motion for
reconsideration of the CA’s December 10, 2009 Decision i.e., the decision in the First CA Petition.53 She also
contends that petitioners have not complied with the certification requirement under Section 5, Rule 7 of the
Rules of Court when they failed to disclose in the instant petition the filing of the June 16, 2010 Memorandum
of Appeal filed before the NLRC.54
The Issues Before the Court
The following issues have been raised for the Court’s resolution: (a) whether or not petitioners are guilty of
forum shopping and have violated the certification requirement under Section 5, Rule 7 of the Rules of Court;
(b) whether or not Alcaraz was sufficiently informed of the reasonable standards to qualify her as a regular
employee; (c) whether or not Alcaraz was validly terminated from her employment; and (d) whether or not the
individual petitioners herein are liable.
The Court’s Ruling
A. Forum Shopping and
Violation of Section 5, Rule 7
of the Rules of Court.
At the outset, it is noteworthy to mention that the prohibition against forum shopping is different from a
violation of the certification requirement under Section 5, Rule 7 of the Rules of Court. In Sps. Ong v. CA,55 the
Court explained that:
x x x The distinction between the prohibition against forum shopping and the certification requirement should
by now be too elementary to be misunderstood. To reiterate, compliance with the certification against forum
shopping is separate from and independent of the avoidance of the act of forum shopping itself. There is a
difference in the treatment between failure to comply with the certification requirement and violation of the
prohibition against forum shopping not only in terms of imposable sanctions but also in the manner of
enforcing them. The former constitutes sufficient cause for the dismissal without prejudice to the filing of the
complaint or initiatory pleading upon motion and after hearing, while the latter is a ground for summary
dismissal thereof and for direct contempt. x x x. 56
As to the first, forum shopping takes place when a litigant files multiple suits involving the same parties, either
simultaneously or successively, to secure a favorable judgment. It exists where the elements of litis pendentia
are present, namely: (a) identity of parties, or at least such parties who represent the same interests in both
actions; (b) identity of rights asserted and relief prayed for, the relief being founded on the same facts; and (c)
the identity with respect to the two preceding particulars in the two (2) cases is such that any judgment that may
be rendered in the pending case, regardless of which party is successful, would amount to res judicata in the
other case.57
In this case, records show that, except for the element of identity of parties, the elements of forum shopping do
not exist. Evidently, the First CA Petition was instituted to question the ruling of the NLRC that Alcaraz was
illegally dismissed. On the other hand, the Second CA Petition pertains to the propriety of the enforcement of
the judgment award pending the resolution of the First CA Petition and the finality of the decision in the labor
dispute between Alcaraz and the petitioners. Based on the foregoing, a judgment in the Second CA Petition will
not constitute res judicata insofar as the First CA Petition is concerned. Thus, considering that the two petitions
clearly cover different subject matters and causes of action, there exists no forum shopping.
As to the second, Alcaraz further imputes that the petitioners violated the certification requirement under
Section 5, Rule 7 of the Rules of Court58 by not disclosing the fact that it filed the June 16, 2010 Memorandum
of Appeal before the NLRC in the instant petition.
In this regard, Section 5(b), Rule 7 of the Rules of Court requires that a plaintiff who files a case should provide
a complete statement of the present status of any pending case if the latter involves the same issues as the one
that was filed. If there is no such similar pending case, Section 5(a) of the same rule provides that the plaintiff is
obliged to declare under oath that to the best of his knowledge, no such other action or claim is pending.
Records show that the issues raised in the instant petition and those in the June 16, 2010 Memorandum of
Appeal filed with the NLRC likewise cover different subject matters and causes of action. In this case, the
validity of Alcaraz’s dismissal is at issue whereas in the said Memorandum of Appeal, the propriety of the
issuance of a writ of execution was in question.
Thus, given the dissimilar issues, petitioners did not have to disclose in the present petition the filing of their
June 16, 2010 Memorandum of Appeal with the NLRC. In any event, considering that the issue on the propriety
of the issuance of a writ of execution had been resolved in the Second CA Petition – which in fact had already
attained finality – the matter of disclosing the June 16, 2010 Memorandum of Appeal is now moot and
academic.
Having settled the foregoing procedural matter, the Court now proceeds to resolve the substantive issues.
B. Probationary employment;
grounds for termination.
A probationary employee, like a regular employee, enjoys security of tenure. However, in cases of probationary
employment, aside from just or authorized causes of termination, an additional ground is provided under Article
295 of the Labor Code, i.e., the probationary employee may also be terminated for failure to qualify as a regular
employee in accordance with the reasonable standards made known by the employer to the employee at the
time of the engagement.59 Thus, the services of an employee who has been engaged on probationary basis may
be terminated for any of the following: (a) a just or (b) an authorized cause; and (c) when he fails to qualify as a
regular employee in accordance with reasonable standards prescribed by the employer.60
Corollary thereto, Section 6(d), Rule I, Book VI of the Implementing Rules of the Labor Code provides that if
the employer fails to inform the probationary employee of the reasonable standards upon which the
regularization would be based on at the time of the engagement, then the said employee shall be deemed a
regular employee, viz.:
(d) In all cases of probationary employment, the employer shall make known to the employee the standards
under which he will qualify as a regular employee at the time of his engagement. Where no standards are made
known to the employee at that time, he shall be deemed a regular employee.
In other words, the employer is made to comply with two (2) requirements when dealing with a probationary
employee: first, the employer must communicate the regularization standards to the probationary employee; and
second, the employer must make such communication at the time of the probationary employee’s engagement.
If the employer fails to comply with either, the employee is deemed as a regular and not a probationary
employee.
Keeping with these rules, an employer is deemed to have made known the standards that would qualify a
probationary employee to be a regular employee when it has exerted reasonable efforts to apprise the employee
of what he is expected to do or accomplish during the trial period of probation. This goes without saying that
the employee is sufficiently made aware of his probationary status as well as the length of time of the probation.
The exception to the foregoing is when the job is self-descriptive in nature, for instance, in the case of maids,
cooks, drivers, or messengers.61 Also, in Aberdeen Court, Inc. v. Agustin,62 it has been held that the rule on
notifying a probationary employee of the standards of regularization should not be used to exculpate an
employee who acts in a manner contrary to basic knowledge and common sense in regard to which there is no
need to spell out a policy or standard to be met. In the same light, an employee’s failure to perform the duties
and responsibilities which have been clearly made known to him constitutes a justifiable basis for a
probationary employee’s non-regularization.
In this case, petitioners contend that Alcaraz was terminated because she failed to qualify as a regular employee
according to Abbott’s standards which were made known to her at the time of her engagement. Contrarily,
Alcaraz claims that Abbott never apprised her of these standards and thus, maintains that she is a regular and
not a mere probationary employee.
The Court finds petitioners’ assertions to be well-taken.
A punctilious examination of the records reveals that Abbott had indeed complied with the above-stated
requirements. This conclusion is largely impelled by the fact that Abbott clearly conveyed to Alcaraz her duties
and responsibilities as Regulatory Affairs Manager prior to, during the time of her engagement, and the
incipient stages of her employment. On this score, the Court finds it apt to detail not only the incidents which
point out to the efforts made by Abbott but also those circumstances which would show that Alcaraz was well-
apprised of her employer’s expectations that would, in turn, determine her regularization:
(a) On June 27, 2004, Abbott caused the publication in a major broadsheet newspaper of its need for
a Regulatory Affairs Manager, indicating therein the job description for as well as the duties and
responsibilities attendant to the aforesaid position; this prompted Alcaraz to submit her application to
Abbott on October 4, 2004;
(b) In Abbott’s December 7, 2004 offer sheet, it was stated that Alcaraz was to be employed on a
probationary status;
(c) On February 12, 2005, Alcaraz signed an employment contract which specifically stated, inter
alia, that she was to be placed on probation for a period of six (6) months beginning February 15,
2005 to August 14, 2005;
(d) On the day Alcaraz accepted Abbott’s employment offer, Bernardo sent her copies of Abbott’s
organizational structure and her job description through e-mail;
(e) Alcaraz was made to undergo a pre-employment orientation where Almazar informed her that she
had to implement Abbott’s Code of Conduct and office policies on human resources and finance and
that she would be reporting directly to Walsh;
(f) Alcaraz was also required to undergo a training program as part of her orientation;
(g) Alcaraz received copies of Abbott’s Code of Conduct and Performance Modules from Misa who
explained to her the procedure for evaluating the performance of probationary employees; she was
further notified that Abbott had only one evaluation system for all of its employees; and
(h) Moreover, Alcaraz had previously worked for another pharmaceutical company and had admitted
to have an "extensive training and background" to acquire the necessary skills for her job.63
Considering the totality of the above-stated circumstances, it cannot, therefore, be doubted that Alcaraz was
well-aware that her regularization would depend on her ability and capacity to fulfill the requirements of her
position as Regulatory Affairs Manager and that her failure to perform such would give Abbott a valid cause to
terminate her probationary employment.
Verily, basic knowledge and common sense dictate that the adequate performance of one’s duties is, by and of
itself, an inherent and implied standard for a probationary employee to be regularized; such is a regularization
standard which need not be literally spelled out or mapped into technical indicators in every case. In this regard,
it must be observed that the assessment of adequate duty performance is in the nature of a management
prerogative which when reasonably exercised – as Abbott did in this case – should be respected. This is
especially true of a managerial employee like Alcaraz who was tasked with the vital responsibility of handling
the personnel and important matters of her department.
In fine, the Court rules that Alcaraz’s status as a probationary employee and her consequent dismissal must
stand. Consequently, in holding that Alcaraz was illegally dismissed due to her status as a regular and not a
probationary employee, the Court finds that the NLRC committed a grave abuse of discretion.
To elucidate, records show that the NLRC based its decision on the premise that Alcaraz’s receipt of her job
description and Abbott’s Code of Conduct and Performance Modules was not equivalent to being actually
informed of the performance standards upon which she should have been evaluated on.64 It, however,
overlooked the legal implication of the other attendant circumstances as detailed herein which should have
warranted a contrary finding that Alcaraz was indeed a probationary and not a regular employee – more
particularly the fact that she was well-aware of her duties and responsibilities and that her failure to adequately
perform the same would lead to her non-regularization and eventually, her termination.
Accordingly, by affirming the NLRC’s pronouncement which is tainted with grave abuse of discretion, the CA
committed a reversible error which, perforce, necessitates the reversal of its decision.
C. Probationary employment;
termination procedure.
A different procedure is applied when terminating a probationary employee; the usual two-notice rule does not
govern.65 Section 2, Rule I, Book VI of the Implementing Rules of the Labor Code states that "if the termination
is brought about by the x x x failure of an employee to meet the standards of the employer in case of
probationary employment, it shall be sufficient that a written notice is served the employee, within a reasonable
time from the effective date of termination."
As the records show, Alcaraz's dismissal was effected through a letter dated May 19, 2005 which she received
on May 23, 2005 and again on May 27, 2005. Stated therein were the reasons for her termination, i.e., that after
proper evaluation, Abbott determined that she failed to meet the reasonable standards for her regularization
considering her lack of time and people management and decision-making skills, which are necessary in the
performance of her functions as Regulatory Affairs Manager.66 Undeniably, this written notice sufficiently
meets the criteria set forth above, thereby legitimizing the cause and manner of Alcaraz’s dismissal as a
probationary employee under the parameters set by the Labor Code.67
D. Employer’s violation of
company policy and
procedure.
Nonetheless, despite the existence of a sufficient ground to terminate Alcaraz’s employment and Abbott’s
compliance with the Labor Code termination procedure, it is readily apparent that Abbott breached its
contractual obligation to Alcaraz when it failed to abide by its own procedure in evaluating the performance of
a probationary employee.
Veritably, a company policy partakes of the nature of an implied contract between the employer and employee.
In Parts Depot, Inc. v. Beiswenger,68 it has been held that:
Employer statements of policy . . . can give rise to contractual rights in employees without evidence that the
parties mutually agreed that the policy statements would create contractual rights in the employee, and, hence,
although the statement of policy is signed by neither party, can be unilaterally amended by the employer
without notice to the employee, and contains no reference to a specific employee, his job description or
compensation, and although no reference was made to the policy statement in pre-employment interviews and
the employee does not learn of its existence until after his hiring. Toussaint, 292 N.W .2d at 892. The principle
is akin to estoppel. Once an employer establishes an express personnel policy and the employee continues to
work while the policy remains in effect, the policy is deemed an implied contract for so long as it remains in
effect. If the employer unilaterally changes the policy, the terms of the implied contract are also thereby
changed.1âwphi1 (Emphasis and underscoring supplied.)
Hence, given such nature, company personnel policies create an obligation on the part of both the employee and
the employer to abide by the same.
Records show that Abbott’s PPSE procedure mandates, inter alia, that the job performance of a probationary
employee should be formally reviewed and discussed with the employee at least twice: first on the third month
and second on the fifth month from the date of employment. Abbott is also required to come up with a
Performance Improvement Plan during the third month review to bridge the gap between the employee’s
performance and the standards set, if any.69 In addition, a signed copy of the PPSE form should be submitted to
Abbott’s HRD as the same would serve as basis for recommending the confirmation or termination of the
probationary employment.70
In this case, it is apparent that Abbott failed to follow the above-stated procedure in evaluating Alcaraz. For
one, there lies a hiatus of evidence that a signed copy of Alcaraz’s PPSE form was submitted to the HRD. It
was not even shown that a PPSE form was completed to formally assess her performance. Neither was the
performance evaluation discussed with her during the third and fifth months of her employment. Nor did
Abbott come up with the necessary Performance Improvement Plan to properly gauge Alcaraz’s performance
with the set company standards.
While it is Abbott’s management prerogative to promulgate its own company rules and even subsequently
amend them, this right equally demands that when it does create its own policies and thereafter notify its
employee of the same, it accords upon itself the obligation to faithfully implement them. Indeed, a contrary
interpretation would entail a disharmonious relationship in the work place for the laborer should never be mired
by the uncertainty of flimsy rules in which the latter’s labor rights and duties would, to some extent, depend.
In this light, while there lies due cause to terminate Alcaraz’s probationary employment for her failure to meet
the standards required for her regularization, and while it must be further pointed out that Abbott had satisfied
its statutory duty to serve a written notice of termination, the fact that it violated its own company procedure
renders the termination of Alcaraz’s employment procedurally infirm, warranting the payment of nominal
damages. A further exposition is apropos.
Case law has settled that an employer who terminates an employee for a valid cause but does so through invalid
procedure is liable to pay the latter nominal damages.
In Agabon v. NLRC (Agabon),71 the Court pronounced that where the dismissal is for a just cause, the lack of
statutory due process should not nullify the dismissal, or render it illegal, or ineffectual. However, the employer
should indemnify the employee for the violation of his statutory rights.72 Thus, in Agabon, the employer was
ordered to pay the employee nominal damages in the amount of ₱30,000.00.73
Proceeding from the same ratio, the Court modified Agabon in the case of Jaka Food Processing Corporation v.
Pacot (Jaka)74 where it created a distinction between procedurally defective dismissals due to a just cause, on
one hand, and those due to an authorized cause, on the other.
It was explained that if the dismissal is based on a just cause under Article 282 of the Labor Code (now Article
296) but the employer failed to comply with the notice requirement, the sanction to be imposed upon him
should be tempered because the dismissal process was, in effect, initiated by an act imputable to the employee; WHEREFORE, the petition is GRANTED. The Decision dated December 10, 2009 and Resolution dated June
if the dismissal is based on an authorized cause under Article 283 (now Article 297) but the employer failed to 9, 2010 of the Court of Appeals in CA-G.R. SP No. 101045 are hereby REVERSED and SET ASIDE.
comply with the notice requirement, the sanction should be stiffer because the dismissal process was initiated Accordingly, the Decision dated March 30, 2006 of the Labor Arbiter is REINSTATED with the
by the employer’s exercise of his management prerogative.75 Hence, in Jaka, where the employee was dismissed MODIFICATION that petitioner Abbott Laboratories, Philippines be ORDERED to pay respondent Pearlie
for an authorized cause of retrenchment76 – as contradistinguished from the employee in Agabon who was Ann F. Alcaraz nominal damages in the amount of ₱30,000.00 on account of its breach of its own company
dismissed for a just cause of neglect of duty77 – the Court ordered the employer to pay the employee nominal procedure.
damages at the higher amount of ₱50,000.00.
SO ORDERED.
Evidently, the sanctions imposed in both Agabon and Jaka proceed from the necessity to deter employers from
future violations of the statutory due process rights of employees.78 In similar regard, the Court deems it proper
to apply the same principle to the case at bar for the reason that an employer’s contractual breach of its own
company procedure – albeit not statutory in source – has the parallel effect of violating the laborer’s rights.
Suffice it to state, the contract is the law between the parties and thus, breaches of the same impel recompense
to vindicate a right that has been violated. Consequently, while the Court is wont to uphold the dismissal of
Alcaraz because a valid cause exists, the payment of nominal damages on account of Abbott’s contractual
breach is warranted in accordance with Article 2221 of the Civil Code.79

Anent the proper amount of damages to be awarded, the Court observes that Alcaraz’s dismissal proceeded
from her failure to comply with the standards required for her regularization. As such, it is undeniable that the
dismissal process was, in effect, initiated by an act imputable to the employee, akin to dismissals due to just
causes under Article 296 of the Labor Code. Therefore, the Court deems it appropriate to fix the amount of
nominal damages at the amount of ₱30,000.00, consistent with its rulings in both Agabon and Jaka.

E. Liability of individual
petitioners as corporate
officers.

It is hornbook principle that personal liability of corporate directors, trustees or officers attaches only when: (a)
they assent to a patently unlawful act of the corporation, or when they are guilty of bad faith or gross
negligence in directing its affairs, or when there is a conflict of interest resulting in damages to the corporation,
its stockholders or other persons; (b) they consent to the issuance of watered down stocks or when, having
knowledge of such issuance, do not forthwith file with the corporate secretary their written objection; (c) they
agree to hold themselves personally and solidarily liable with the corporation; or (d) they are made by specific
provision of law personally answerable for their corporate action.80

In this case, Alcaraz alleges that the individual petitioners acted in bad faith with regard to the supposed crude
manner by which her probationary employment was terminated and thus, should be held liable together with
Abbott. In the same vein, she further attributes the loss of some of her remaining belongings to them.81

Alcaraz’s contention fails to persuade.

A judicious perusal of the records show that other than her unfounded assertions on the matter, there is no
evidence to support the fact that the individual petitioners herein, in their capacity as Abbott’s officers and
employees, acted in bad faith or were motivated by ill will in terminating

Alcaraz’s services. The fact that Alcaraz was made to resign and not allowed to enter the workplace does not
necessarily indicate bad faith on Abbott’s part since a sufficient ground existed for the latter to actually proceed
with her termination. On the alleged loss of her personal belongings, records are bereft of any showing that the
same could be attributed to Abbott or any of its officers. It is a well-settled rule that bad faith cannot be
presumed and he who alleges bad faith has the onus of proving it. All told, since Alcaraz failed to prove any
malicious act on the part of Abbott or any of its officers, the Court finds the award of moral or exemplary G.R. No. 201701 June 3, 2013
damages unwarranted. UNILEVER PHILIPPINES, INC., Petitioner, vs. MARIA RUBY M. RIVERA, Respondent.
MENDOZA, J.:
Subject of this disposition is the petition for review on certiorari1 under Rule 45 of the Rules of Court filed by
petitioner Unilever Philippines, Inc. (Unilever) questioning the June 22, 2011 Decision2 and the April 25, 2012
Resolution3 of the Court of Appeals (CA)-Cagayan de Oro City, in CA G.R. SP No. 02963-MIN, an Illegal
Dismissal case filed by respondent Maria Ruby M. Rivera (Rivera). The CA affirmed with modification the
March 31, 2009 Resolution of the National Labor Relations Commission (NLRC) finding Rivera's dismissal
from work to be valid as it was for a just cause and declaring that she was not entitled to any retirement benefit.
The CA, however, awarded separation pay in her favor as a measure of social justice.
The Facts
Unilever is a company engaged in the production, manufacture, sale, and distribution of various food, home and
personal care products, while Rivera was employed as its Area Activation Executive for Area 9 South in the
cities of Cotabato and Davao. She was primarily tasked with managing the sales, distribution and promotional
activities in her area and supervising Ventureslink International, Inc. (Ventureslink), a third party service
provider for the company’s activation projects. Unilever enforces a strict policy that every trade activity must
be accompanied by a Trade Development Program (TDP) and that the allocated budget for a specific activity
must be used for such activity only.4
Sometime in 2007, Unilever’s internal auditor conducted a random audit and found out that there were fictitious
billings and fabricated receipts supposedly from Ventureslink amounting to ₱11,200,000.00. It was also
discovered that some funds were diverted from the original intended projects. Upon further verification,
Ventureslink reported that the fund deviations were upon the instruction of Rivera.
On July 16, 2007, Unilever issued a show-cause notice to Rivera asking her to explain the following charges, to
wit: a) Conversion and Misappropriation of Resources; b) Breach of Fiduciary Trust; c) Policy Breaches; and d)
Integrity Issues.
Responding through an email, dated July 16, 2007, Rivera admitted the fund diversions, but explained that such
actions were mere resourceful utilization of budget because of the difficulty of procuring funds from the head
office.5 She insisted that the diverted funds were all utilized in the company’s promotional ventures in her area
of coverage.
Through a letter, dated August 23, 2007, Unilever found Rivera guilty of serious breach of the company’s Code
of Business Principles compelling it to sever their professional relations. In a letter, dated September 20, 2007,
Rivera asked for reconsideration and requested Unilever to allow her to receive retirement benefits having
served the company for fourteen (14) years already. Unilever denied her request, reasoning that the forfeiture of
retirement benefits was a legal consequence of her dismissal from work.
On October 19, 2007, Rivera filed a complaint for Illegal Dismissal and other monetary claims against
Unilever.
On April 28, 2008, the Labor Arbiter (LA) dismissed her complaint for lack of merit and denied her claim for
retirement benefits, but ordered Unilever to pay a proportionate 13th month pay and the corresponding cash
equivalent of her unused leave credits. The decretal portion of the LA decision reads:
WHEREFORE, premises considered, judgment is hereby rendered dismissing for lack of merit the illegal
dismissal complaint. However, UNILEVER PHILIPPINES, INC. is hereby ordered to pay complainant the total
amount of PESOS: FIFTY SEVEN THOUSAND EIGHTY TWO & 90/100 ONLY (₱57,082.90) representing
proportionate 13th month pay and unused leave credits.
The complaint against individual respondents Recto Sampang and Alejandro Concha are likewise dismissed for
it was not shown that they acted in bad faith in the dismissal of complainant. Moreover, their legal personality
is separate and distinct from that of the corporation.
All other money claims are dismissed for lack of basis.6
On appeal, the NLRC partially granted Rivera’s prayer. In its Resolution, dated November 28, 2008, the NLRC
held that although she was legally dismissed from the service for a just cause, Unilever was guilty of violating
the twin notice requirement in labor cases. Thus, Unilever was ordered to pay her ₱30,000.00 as nominal
damages, retirement benefits and separation pay. The dispositive portion reads:
WHEREFORE, foregoing premises considered, the appeal is PARTIALLY GRANTED. The assailed Decision
dated 28 April 2008 is hereby MODIFIED in the sense that respondent UNILEVER PHILIPPINES, INC. is
hereby ordered to pay the following sums:
1. The amount of ₱30,000.00 representing nominal damages for violation of complainant’s right to
procedural due process;
2. Retirement benefits under the company’s applicable retirement policy or written agreement, and in
the absence of which, to pay complainant her retirement pay equivalent to at least one-half (1/2)
month salary for every year of service, a fraction of at least six (6) months being considered as one
whole year;
3. Separation pay under the company’s applicable policy or written agreement, and in the absence of
which, to pay separation pay equivalent to at least one-half (1/2) month salary for every year of
service, a fraction of at least six (6) months being considered as one whole year.
The rest of the Decision is hereby AFFIRMED.
SO ORDERED.7
Unilever asked for a reconsideration of the NLRC decision. In its Resolution, dated March 31, 2009, the NLRC
modified its earlier ruling by deleting the award of separation pay and reducing the nominal damages from
₱30,000.00 to ₱20,000.00, but affirmed the award of retirement benefits to Rivera. The fallo reads:
WHEREFORE, foregoing premises considered, the instant Motion for Partial Reconsideration is PARTLY
GRANTED. The Resolution dated 28 November 2008 of the Commission is hereby
RECONSIDERED as follows:
(1)The award of separation pay is hereby deleted for lack of factual and legal basis; and
(2)The award of nominal damages is hereby tempered and reduced to the amount of ₱20,000.00.
The rest of the award for retirement benefits is affirmed in toto.
SO ORDERED.8
Unsatisfied with the ruling, Unilever elevated the case to CA-Cagayan de Oro City via a petition for certiorari
under Rule 65 of the Rules of Court.
On June 22, 2011, the CA affirmed with modification the NLRC resolution. Justifying the deletion of the award
of retirement benefits, the CA explained that, indeed, under Unilever’s Retirement Plan, a validly dismissed
employee cannot claim any retirement benefit regardless of the length of service. Thus, Rivera is not entitled to
any retirement benefit. It stated, however, that there was no proof that she personally gained any pecuniary
benefit from her infractions, as her instructions were aimed at increasing the sales efficiency of the company
and competing in the local market. For said reason, the CA awarded separation pay in her favor as a measure of
social justice.9 The decretal portion of the CA decision reads:
WHEREFORE, the assailed Resolution dated March 31, 2009 of the NLRC (Branch 5), Cagayan De Oro City
is hereby AFFIRMED with MODIFICATION. Consequently, UNILEVER is directed to pay MARIA RUBY
M. RIVERA the following:
a) Separation pay, to be computed based on the company’s applicable policy or written agreement, or
in the absence thereof, the equivalent of at least one-half (1/2) month salary for every year of service,
a fraction of at least six (6) months being considered as one whole year;
b) ₱20,000.00 as nominal damages; and
c) Proportionate 13th month pay and unused leave credits, to be computed based on her salary during
the period relevant to the case.
The award of retirement benefits is hereby DELETED.
SO ORDERED.10
Unilever filed a motion for partial reconsideration,11 but it was denied in a Resolution, dated April 25, 2012.
Hence, this petition.12
In support of its position, Unilever submits for consideration the following
GROUNDS
I.
THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION IN
GRANTING AFFIRMATIVE RELIEFS IN FAVOR OF RIVERA EVEN IF SHE DID NOT FILE ANY
PETITION FOR CERTIORARI TO CHALLENGE THE NLRC RESOLUTIONS.
II.
THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION IN
AWARDING SEPARATION PAY IN FAVOR OF RIVERA CONSIDERING THAT THE LATTER WAS
VALIDLY DISMISSED FROM EMPLOYMENT BASED ON JUST CAUSES UNDER THE LAW.
III.
THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION IN
RULING THAT THE COMPANY VIOLATED RIVERA’S RIGHT TO PROCEDURAL DUE PROCESS
BEFORE TERMINATING HER EMPLOYMENT, AND CONSEQUENTLY, IN AWARDING NOMINAL
DAMAGES.
Unilever argues that Rivera did not file any separate petition for certiorari before the CA. Neither did she file
any comment on its petition. Hence, it was erroneous for the CA to grant an affirmative relief because it was
inconsistent with the doctrine that a party who has not appealed cannot obtain from the appellate court any
affirmative relief other than the ones granted in the appealed decision. The petitioner stresses that Rivera
misappropriated company funds amounting to millions of pesos and that granting her separation pay
undermines the serious misdeeds she committed against the company. Moreover, the length of her service with
Unilever does not mitigate her offense, but even aggravates the depravity of her acts.14
The petition is partly meritorious.
The pivotal issue in the case at bench is whether or not a validly dismissed employee, like Rivera, is entitled to
an award of separation pay.
As a general rule, an employee who has been dismissed for any of the just causes enumerated under Article
28215of the Labor Code is not entitled to a separation pay.16 Section 7, Rule I, Book VI of the Omnibus Rules
Implementing the Labor Code provides:
Sec. 7. Termination of employment by employer. — The just causes for terminating the services of an
employee shall be those provided in Article 282 of the Code. The separation from work of an employee for a
just cause does not entitle him to the termination pay provided in the Code, without prejudice, however, to
whatever rights, benefits and privileges he may have under the applicable individual or collective agreement
with the employer or voluntary employer policy or practice.
In exceptional cases, however, the Court has granted separation pay to a legally dismissed employee as an act
of "social justice" or on "equitable grounds." In both instances, it is required that the dismissal (1) was not for
serious misconduct; and (2) did not reflect on the moral character of the employee.17 The leading case of
Philippine Long Distance Telephone Co. vs. NLRC18 is instructive on this point:
We hold that henceforth separation pay shall be allowed as a measure of social justice only in those instances
where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his
moral character. Where the reason for the valid dismissal is, for example, habitual intoxication or an offense
involving moral turpitude, like theft or illicit sexual relations with a fellow worker, the employer may not be
required to give the dismissed employee separation pay, or financial assistance, or whatever other name it is
called, on the ground of social justice.
A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather than punishing the
erring employee for his offense. And we do not agree that the punishment is his dismissal only and the
separation pay has nothing to do with the wrong he has committed. Of course it has. Indeed, if the employee
who steals from the company is granted separation pay even as he is validly dismissed, it is not unlikely that he
will commit a similar offense in his next employment because he thinks he can expect a like leniency if he is
again found out.1âwphi1 This kind of misplaced compassion is not going to do labor in general any good as it
will encourage the infiltration of its ranks by those who do not deserve the protection and concern of the
Constitution.
The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the
underprivileged. At best, it may mitigate the penalty but it certainly will not condone the offense. Compassion
for the poor is an imperative of every humane society but only when the recipient is not a rascal claiming an
undeserved privilege. Social justice cannot be permitted to be refuge of scoundrels any more than can equity be
an impediment to the punishment of the guilty. Those who invoke social justice may do so only if their hands
are clean and their motives blameless and not simply because they happen to be poor. This great policy of our
Constitution is not meant for the protection of those who have proved they are not worthy of it, like the workers
who have tainted the cause of labor with the blemishes of their own character.19
In the subsequent case of Toyota Motor Philippines Corporation Workers Association (TMPCWA) v. National
Labor Relations Commission,20 it was further elucidated that "in addition to serious misconduct, in dismissals
based on other grounds under Art. 282 like willful disobedience, gross and habitual neglect of duty, fraud or
willful breach of trust, and commission of a crime against the employer or his family, separation pay should not
be conceded to the dismissed employee."21 In Reno Foods, Inc, v. Nagkakaisang Lakas ng Manggagawa
(NLM)-Katipunan,22 the Court wrote that "separation pay is only warranted when the cause for termination is
not attributable to the employee’s fault, such as those provided in Articles 283 and 284 of the Labor Code, as
well as in cases of illegal dismissal in which reinstatement is no longer feasible. It is not allowed when an
employee is dismissed for just cause."23
In this case, Rivera was dismissed from work because she intentionally circumvented a strict company policy,
manipulated another entity to carry out her instructions without the company’s knowledge and approval, and
directed the diversion of funds, which she even admitted doing under the guise of shortening the laborious
process of securing funds for promotional activities from the head office. These transgressions were serious
offenses that warranted her dismissal from employment and proved that her termination from work was for a
just cause. Hence, she is not entitled to a separation pay.
More importantly, Rivera did not appeal the March 31, 2009 ruling of the NLRC disallowing the award of
separation pay to her. It was Unilever who elevated the case to the CA. It is axiomatic that a party who does not
appeal, or file a petition for certiorari, is not entitled to any affirmative relief.24 Due process prevents the grant
of additional awards to parties who did not appeal.25 An appellee who is not an appellant may assign errors in
his brief where his purpose is to maintain the judgment, but he cannot seek modification or reversal of the
judgment or claim affirmative relief unless he has also appealed.26 It was, therefore, erroneous for the CA to
grant an affirmative relief to Rivera who did not ask for it.
Lastly, Unilever questions the grant of nominal damages in favor of Rivera for its alleged non-observance of
the requirements of procedural due process. It insists that she was given ample opportunity "to explain her side,
interpose an intelligent defense and adduce evidence on her behalf." 27
The Court is not persuaded. Section 2, Rule XXIII, Book V of the Rules Implementing the Labor Code
expressly states:
Section 2. Standard of due process: requirements of notice.
— In all cases of termination of employment, the following standards of due process shall be substantially
observed.
I. For termination of employment based on just causes as defined in Article 282 of the Code:
(a) A written notice served on the employee specifying the ground or grounds for termination, and
giving to said employee reasonable opportunity within which to explain his side;
(b) A hearing or conference during which the employee concerned, with the assistance of counsel if
the employee so desires, is given opportunity to respond to the charge, present his evidence or rebut
the evidence presented against him; and
(c) A written notice of termination served on the employee indicating that upon due consideration of
all the circumstance, grounds have been established to justify his termination.
In case of termination, the foregoing notices shall be served on the employee’s last known address.
King of Kings Transport, Inc. v. Mamac28 detailed the steps on how procedural due process can be satisfactorily
complied with. Thus:
To clarify, the following should be considered in terminating the services of employees:
(1) The first written notice to be served on the employees should contain the specific causes or
grounds for termination against them, and a directive that the employees are given the opportunity to
submit their written explanation within a reasonable period. "Reasonable opportunity" under the
Omnibus Rules means every kind of assistance that management must accord to the employees to
enable them to prepare adequately for their defense. This should be construed as a period of at least
five (5) calendar days from receipt of the notice to give the employees an opportunity to study the
accusation against them, consult a union official or lawyer, gather data and evidence, and decide on
the defenses they will raise against the complaint. Moreover, in order to enable the employees to
intelligently prepare their explanation and defenses, the notice should contain a detailed narration of
the facts and circumstances that will serve as basis for the charge against the employees. A general
description of the charge will not suffice. Lastly, the notice should specifically mention which
company rules, if any, are violated and/or which among the grounds under Art. 282 is being charged
against the employees.
(2) After serving the first notice, the employers should schedule and conduct a hearing or conference
wherein the employees will be given the opportunity to: (1) explain and clarify their defenses to the
charge against them; (2) present evidence in support of their defenses; and (3) rebut the evidence
presented against them by the management. During the hearing or conference, the employees are
given the chance to defend themselves personally, with the assistance of a representative or counsel
of their choice. Moreover, this conference or hearing could be used by the parties as an opportunity
to come to an amicable settlement.
(3) After determining that termination of employment is justified, the employers shall serve the
employees a written notice of termination indicating that: (1) all circumstances involving the charge
against the employees have been considered; and (2) grounds have been established to justify the
severance of their employment.29
In this case, Unilever was not direct and specific in its first notice to Rivera. The words it used were couched in
general terms and were in no way informative of the charges against her that may result in her dismissal from
employment. Evidently, there was a violation of her right to statutory due process warranting the payment of
indemnity in the form of nominal damages. Hence, the Court finds no compelling reason to reverse the award
of nominal damages in her favor. The Court, however, deems it proper to increase the award of nominal
damages from ₱20,000.00 to ₱30,000.00, as initially awarded by the NLRC, in accordance with existing
jurisprudence.30
WHEREFORE, the petition is hereby PARTIALLY GRANTED.1âwphi1 The June 22, 2011 Decision and the
April 25, 2012 Resolution of the Court of Appeals (CA)-Cagayan de Oro City in CA-G.R. SP No. 02963-MIN
are AFFIRMED with MODIFICATION. The dispositive portion should read as follows:
WHEREFORE, the March 31, 2009 Resolution of the NLRC (Branch 5), Cagayan de Oro City, is hereby
AFFIRMED with MODIFICATION. UNILEVER PHILIPPINES, INC., is hereby directed to pay MARIA
RUBY M. RIVERA the following:
a) ₱30,000.00 as nominal damages; and
 b) Proportionate 13th month pay and unused leave credits, to be computed based on her salary during
the period relevant to the case.
The award of retirement benefit is DELETED.
SO ORDERED.
JOSE CATRAL ME
G.R. No. 197402, June 30, 2021
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, Petitioner, v. CECILIO Z. DOMINGO,
Respondent.
DECISION
GAERLAN, J.:
Before this Court is a Petition for Review on Certiorari1 dated August 12, 2011 filed by petitioner Philippine
Long Distance Telephone Company (PLDT) praying for the reversal of the Decision2 dated January 31, 2011
and the Resolution3 dated June 22, 2011 of the Court of Appeals (CA) in the case entitled, "Cecilio Z. Domingo
v. National Labor Relations Commission," docketed as CA-G.R. SP No. 107672.
The Factual Antecedents
Respondent Cecilio Z. Domingo (Domingo) has been employed by PLDT as an Installer/Repairman since
October 14, 1980.4 In May 2001, Domingo was assigned as a temporary Storekeeper in one of PLDT's Data
Services Installation Maintenance Divisions (DSIM), located in Tambo, Pasay City (DSIM Tambo Warehouse).
Thereafter, he was appointed as permanent Storekeeper of the DSIM Tambo Warehouse in June 2001.5
As Storekeeper, Domingo's responsibilities included ensuring an adequate inventory of supplies in the DSIM
Tambo Warehouse. Thus, whenever the inventory went below a certain level, Domingo, as Storekeeper, was
tasked to requisition replenishment stock from PLDT's warehouses. For this purpose, Storekeepers accomplish
specific requisition forms where the materials to be requested are listed, and such forms are brought to PLDT's
warehouses so that such materials can be withdrawn and brought to the different DSIM warehouses.6
Particularly, Storekeepers are required to accomplish requisition form PLD 140, whenever their base stock
modems, required for the installation and maintenance of PLDT's data services, went below a certain limit.
Accomplished PLD 140 forms must be approved by the authorized representative and then brought to the
DSIM warehouse where the materials needed may be withdrawn. Meanwhile, to order materials such as parallel
wires, connectors, clamps, and electrical tapes, DSIM personnel called Combination Men must accomplish
requisition form PLD 158, where they must list the particular materials and the number of units required. The
Combination Men must likewise specify the name of the project for which such materials will be used. Upon
accomplishing the PLD 158 forms, the Combination Men must have the same approved by their
Supervisor/Team Leader, and thereafter, the Combination Men must submit the accomplished PLD 158 forms
to the Storekeeper. The Storekeeper will then bring the PLD 158 forms to regular PLDT warehouses and
withdraw the materials for use by the Combination Men.7
In 2001, the first year Domingo was assigned to the DSIM Tambo Warehouse, the DSMI Tambo Warehouse
transacted only a total of three PLD 140 forms. In 2002, however, the DSIM Tambo Warehouse showed a
drastic increase in DSIM requisitions, from merely three PLD 140 form transactions to a total of 102 PLD
140 form transactions. On the other hand, for PLD 158 form transactions, the DSIM Tambo Warehouse had
a total of 277 transactions for 2001 which likewise drastically increased to 1,336 PLD 158 form
transactions in 2002. Relevantly, the materials requisitioned using the PLD 158 forms in 2002, which were
withdrawn from the DSIM Sucat and Reposo Satellite Warehouses, amounted to P17,081,843.31, which is
significantly greater than the P1,069,285.36 spent for materials requisitioned under PLD 1588 forms in 2001.8
Because of the drastic increase in materials requisitioned, PLDT conducted a materials inventory in December
2002. Upon audit, PLDT discovered that there was a huge discrepancy between the total volume of materials
requisitioned, and those materials actually used in PLDT's projects and the remaining inventory in the DSIM
Tambo Warehouse. Because of such anomaly, PLDT decided to conduct an investigation.9
During the investigation, PLDT was able to retrieve 88 out of the 102 original warehouse copies of the 2002
PLD 140 forms, and 1,121 out of the 1,336 original warehouse copies of the 2002 PLD 158 forms. Notably, a
simple examination of these PLD forms reveals that the signatures of the supposed "authorized by" and
"received by" personnel were forged and glaringly different from the specimen signatures of the same
employees on file. Thus, PLDT invited these employees for investigation where they disclaimed that those
signatures were theirs. Particularly, the Team Leaders who supposedly signed the "authorized by" portion of the
forged PLD forms, namely, Vicente Ramos, Ernesto Alejandro, Ramir Espeno, and Alfred May (DSIM Team
Leaders), all submitted sworn affidavits strongly denying that they have authorized or signed the PLD forms.
These DSIM Team Leaders further contended that the quantity of materials listed under the PLD forms were
abnormally large, and that it was impractical for them to requisition materials from warehouses located in
Metro Manila when there are PLDT warehouses which are nearer to their respective areas in Davao,
Zamboanga, Butuan City, Panay, and Negros.10
Further, PLDT likewise invited eight of its employees whose signatures appeared in the "received by" portion
of the forged PLD forms, namely, Agripino Rivera, Wilfredo Salvador, Antonio Aquino, Fracel Gammad,
Bernardo Neria, Renato Romero, Romeo Cayabyab, and Luciano Cambronero. Similarly, they all stated that the
signatures appearing in the PLD forms are not theirs.11
During the investigation, PLDT likewise interviewed Nimrod Paradero (Paradero), the Storekeeper of the
DSIM Reposo Satellite Warehouse, to determine who received the requisitioned materials listed in the PLD
forms. Relevantly, in his sworn affidavit, Paradero positively identified Domingo as the person who presented
the forged PLD forms, and received the materials listed herein.12 Paradero's statements were likewise validated
by the DSIM Reposo Satellite Warehouse Vehicle Security Registry, which showed that on the dates mentioned
by Paradero, Domingo indeed went to the DSIM Reposo Satellite Warehouse using a PLDT service vehicle,
with Fleet No. 96-450. Likewise, the DSIM Sucat Satellite Warehouse Vehicle Security Registry showed that
Domingo went to the DSIM Sucat Satellite Warehouse on at least 65 separate occasions when the forged PLD
forms were presented.13
Moreover, clerks of PLDT submitted sworn statements that Domingo asked them to prepare the forged PLD
forms. Particularly, Maritess Mendoza (Mendoza) stated that Domingo, on several occasions, handed her pieces
of papers with handwritten notes of the materials needed and their corresponding quantities. Thereafter,
Domingo instructed her to type the same on the PLD forms. Notably, Mendoza's statements were corroborated
by Sheryl Marie Magahis (Magahis) in her affidavit, where she testified that she once helped Mendoza type and
prepare the PLD 158 forms upon the instruction of Domingo.14
Because of the claims of Domingo's involvement in the above-stated anomalies, PLDT issued a Memorandum
dated May 14, 2004 (First Invitation) inviting Domingo to appear at a formal inquiry scheduled on May 19,
2004.15 The First Invitation reads:
You are hereby requested to personally appear together with a Union Council Representative or a Counsel of
your preference at Field Operations Division office located at 4th Floor, PLDT Garnet Building, Emerald
Avenue corner Garnet Street, Ortigas Center, Pasig City on May 19, 2004 (Wednesday) or three (3) working
days upon receipt of this invitation at about 9:00 o'clock in the morning.
This is in connection with the formal inquiry in your issuance of outside plant materials to personnel of
Data Services Installation and Maintenance (DSIM) Division covering January to October 2002 in line
with your special function as internal custodian of DSIM Satellite Warehouse at Tambo, Pasay Exchange
during the period January to October 2002.
Specific inquiries shall be based on materials requisitions that were allegedly transacted to you by your
colleagues or personnel at DSIM using accomplished and signed PLD 158 (Requisitions for Materials and
Supplies), PLD 22 (Requisitions for Reserved materials) and PLD 140 (Requisitions for Department
Accountabilities) covering the year 2002.
This invitation is issued for your compliance.16 (Emphasis supplied)
Notably, Domingo refused to receive the First Invitation, and failed to attend the scheduled formal
inquiry.17 Nevertheless, in PLDT's hopes of acquiring the cooperation of Domingo in determining the truth of
the anomalous transactions involving the forged PLD forms, PLDT again issued another Memorandum dated
May 25, 2004 (Second Invitation), inviting Domingo to attend another formal inquiry scheduled on May 28,
2004, which reads:
This is in relation to our memo with Ref No. 045-02-FOD with subject INVITATION TO APPEAR dated May
14, 2004, wherein you chose not to acknowledge receipt during the formal issuance to you by our Mr. Maliksi
last May 18, 2004 and again by your immediate supervisor in Mr. Espeno last May 24, 2004.
We are inviting you for the 2nd time to personally appear together with a Union Council Representative or a
Counsel of your preference at Field Operations Division office located at 4th Floor, PLDT Garnet Building,
Emerald Avenue corner Garnet Street, Ortigas Center, Pasig City on May 28, 2004 (Friday) or three (3)
working days upon receipt of this invitation at about 9:00 o'clock in the morning.
This is in connection with the formal inquiry in your issuance of outside plant materials to personnel of
Data Services Installation and Maintenance (DSIM) Division covering January to October 2002 in line
with your special function as internal custodian of DSIM Satellite Warehouse at Tambo, Pasay Exchange
during the period January to October 2002.
Specific inquiries shall be based on materials requisitions that were allegedly transacted to you by your
colleagues or personnel at DSIM using accomplished and signed PLD 158 (Requisitions for Materials and
Supplies, PLD 22 (Requisitions for Reserved materials) and PLD 140 (Requisitions for Department
Accountabilities) covering the year 2002.
This invitation is issued for your compliance. (Emphasis supplied)
18
Again, Domingo did not acknowledge receipt of the Second Invitation. Domingo likewise did not attend the
scheduled formal inquiry on May 28, 2004. Thus, PLDT was constrained to issue a third Memorandum dated
June 7, 2004 (Third Invitation), which provides:
Regarding your election not to receive and acknowledge our 1st and 2nd INVITATION TO APPEAR memos
with Ref Nos. 045-02-FOD dated May 14, 2004 and 051-02-FOD dated May 25, 2004 which, were
correspondingly and formally issued to you by our Mr. Maliksi and Mr. Espeno, your immediate supervisor.
We are requesting you for the 3rd and final time to personally appear most preferably with a Union Council
Representative or a Counsel of your preference at Field Operations Division office located at 4th Floor, PLDT
Garnet Building, Emerald Avenue corner Garnet Street Ortigas Center Pasig City on June 10, 2004 (Thursday)
or three (3) working days upon receipt of this invitation at about 9:00 o'clock in the morning.
This is in connection with the formal inquiry in your issuance of outside plant materials to personnel of
Data Services Installation and Maintenance (DSIM) Division covering January to October 2002 in line
with your special function as internal custodian of DSIM Satellite Warehouse at Tambo, Pasay Exchange
during the period January to October 2002.
Specific inquiries shall be based on materials requisitions that were allegedly transacted to you by your
colleagues or personnel at DSIM using accomplished and signed PLD 158 (Requisitions for Materials and
Supplies, PLD 22 (Requisitions for Reserved materials) and PLD 140 (Requisitions for Department
Accountabilities) covering the year 2002.
Failure to attend to our 3rd and final Invitation to Appear shall compel us to prepare investigation report
based on evidence at hand without you being heard.
This invitation is issued for your compliance.19
For a third time, Domingo failed to appear at the formal inquiry scheduled on June 10, 2004. As such, PLDT
proceeded with the investigation without the cooperation of Domingo. However, due to the invariably
voluminous documents required to be reviewed, and the number of personnel interviewed, PLDT was only able
to conclude its investigation after three years in its Investigation Report20 dated January 19, 2005 (Investigation
Report). The Investigation Report ultimately recommended that an administrative action for serious misconduct
be instituted against Domingo as he used his knowledge, skills, and authority as Storekeeper in making various
fraudulent requisitions of outside plant materials which were verified to be unaccounted for, based on the
following:
First, all DSIM Team Leaders, submitted sworn testimonies stating that their signatures appearing in the
"authorized by" portion of the forged PLD forms were falsified. In fact, the DSIM Team Leaders, who are all
assigned in areas outside of Metro Manila, stated that it is impractical and even ridiculous for provincial
employees to requisition materials from warehouses in Manila since there are several PLDT warehouses located
near their areas. Even more, the DSIM Team Leaders contended that requisitioning materials from Metro
Manila is violative of PLDT's warehousing procedure, which requires that provincial employees must
requisition materials and supplies only at warehouses serving their areas.21
Second, the DSIM Team Leaders testified that the materials requisitioned under the forged PLD forms were in
excess of the typical requirements needed for PLDT's private line's installation and maintenance. 22
Third, based on audit and inventory conducted at the DSIM Tambo Warehouse, it was discovered that the
materials requisitioned under the forged PLD forms were unaccounted for.23
Fourth, the sworn testimonies of Mendoza and Magahis confirm that Domingo was the one who instructed
them to type and prepare the forged PLD forms.24
Fifth, the Vehicle Security Registry reports for both the DSIM Sucat and Reposo Satellite Warehouses show
that Domingo personally went to these locations on the dates when the materials under the forged PLD
forms were requisitioned.25Sixth, Paradero, the Storekeeper of the DSIM Reposo Satellite
Warehouse, positively identified Domingo as the person to whom he issued the materials listed under the
forged PLD forms.26
Because of the findings in the Investigation Report, PLDT issued a Request for Explanation27 dated February
21, 2005 requiring Domingo to explain in writing why he should not be dismissed from service. The Request
for Explanation reads:
Investigative findings show that as the designated internal storekeeper of DSIM during the period of January to
November 2002, you made voluminous requisition of outside plant materials, which, when verified in the
DSIM internal warehouse, were unaccounted for. These unaccounted materials would cost the Company
17,115,796.34 in material losses. Moreover, the investigation findings also show that you withdrew and
received outside plant materials from the 3 Company warehouses when the employee requisitioning (as
evidenced by the attached requisitioning forms) is either on vacation leave or assigned in the regional offices,
and that the authorized signatories were forged.
The acts described above constitute Serious Misconduct, the penalty of which is dismissal from the service.
In view of the above, you are required to explain in writing why you should not be dismissed from the service
on the above-mentioned acts. Submit your explanation within seventy-two (72) hours upon receipt of this
communication. You may elect to be heard if you so desire.
Your failure to reply to this letter within the time required shall be considered as a waiver of your right
to be heard on this matter. Accordingly, the Company shall proceed with the evaluation of the case on
the basis of the evidence on hand.28 (Emphasis in the original)
On February 24, 2005, Domingo, with the assistance of counsel, submitted a three-page letter,29 whereby he
denied the allegations made against him. In his letter, Domingo questioned why he is being made to explain
alleged wrongdoings which were committed three years earlier. He likewise stated that he was never informed
that an investigation was being conducted, and that he was never furnished with copies of the documents and
records which form part of the evidence against him.
After review and perusal of all the available evidence, including Domingo's response, PLDT found that
Domingo is guilty of serious misconduct and issued a Notice of Termination30 dated May 18, 2005, which
provides:
This has reference to your administrative case that as the designated internal storekeeper of DSIM during the
period of January to November 2002, you made voluminous requisition of outside plant materials, which, when
verified in the DSIM internal warehouse, were unaccounted for. These unaccounted materials amounted to
P17,115,796.34 in losses for the Company. Moreover, it was shown that during the above-mentioned period ,
you withdrew and received outside plant materials from 3 Company warehouses when the employee
requisitioning is either on vacation leave or assigned in the regional offices, and that the signatures of
authorized personnel in the requisitioning forms were forged. Said acts constitute Serious Misconduct.
After careful evaluation of your case including your written explanation, we find you liable as charged.
In view of the above, Management has decided to dismiss you from the service for Serious
Misconduct [effective at] the close of business hours of May 18, 2005.
This is without prejudice to such other action as this Company may take including court action to recover
whatever amount is due from under your accountabilities.31
Proceedings before the Labor Tribunals
Aggrieved of the decision of PLDT to terminate his employment based on serious misconduct, Domingo filed a
Complaint for Illegal Dismissal before the Labor Arbiter (LA), with prayer for reinstatement and the payment
of full backwages.32
On July 25, 2006, the LA rendered his Decision33 which dismissed Domingo's Complaint for lack of merit. The
LA's Decision found that PLDT was able to establish, by substantial evidence, that Domingo was indeed
involved in the anomalous and fraudulent transactions concerning the forged PLD forms, and that the same
constitutes serious misconduct, which is a just and valid ground for termination of employment.
Unsatisfied with the LA's Decision, Domingo appealed the same before the National Labor Relations
Commission (NLRC).34 However, in its Resolution35 dated June 27, 2007, the NLRC denied Domingo's appeal:
WHEREFORE, premises considered, Complainant-Appellant's Appeal is DISMISSED for lack of merit.
Accordingly, the Decision appealed from is SUSTAINED in toto.
SO ORDERED.36
Petition before the Court of Appeals
Because of the adverse rulings of the LA and the NLRC, Domingo assailed the NLRC's Resolution before the
CA via Petition for Certiorari37 dated March 5, 2009 under Rule 65 of the Rules of Court.
In Domingo's Petition for Certiorari dated March 5, 2009, he alleged that the NLRC committed grave abuse of
discretion in finding that he was validly dismissed from employment, and that he was not denied due process of
law.38 Particularly, Domingo argued the following:
First, the NLRC committed grave abuse of discretion when it found that the charges against Domingo have not
yet been condoned, considering that the Collective Bargaining Agreement (CBA) between PLDT and its
employees provides that offenses are deemed condoned if no show cause memorandum is issued within two
years from discovery of the offense:
An offense shall be deemed condoned if no "show-cause" memorandum is issued by the COMPANY to the
concerned employee with in two (2) years from date of discovery of the offense if punishable by termination; or
within one (1) year from date of discovery of the offense, for all offenses not punishable by termination.39
Considering that the Request for Explanation was issued in 2005, or three years since the discovery of the
supposed anomalies, such offense has already been condoned by virtue of the above-cited provision.40
Second, the NLRC erred when it considered the First, Second, and Third Invitations as the "show cause"
notices contemplated in the above-cited provision because the Labor Code itself provides that such notices must
contain the statement of the causes for termination.41
Third, even assuming that the First, Second, and Third Invitations can be considered as the "show cause"
notices, the NLRC still committed grave abuse of discretion when it held that Domingo was validly dismissed,
considering that PLDT presented no proof that Domingo was properly furnished with copies of the same.42
Fourth, the NLRC committed grave abuse of discretion in finding that PLDT was able to demonstrate by
substantial evidence Domingo's participation in the falsification of the forged PLD forms since the sworn
statements relied on by PLDT failed to attach original copies of the forged PLD forms, and the mere
testimonies of PLDT's personnel must not be readily believed.43
Fifth, the NLRC committed a grave error when it found that procedural due process was observed, considering
that no hearing or conference was conducted, and Domingo was not furnished with copies of the investigative
findings, nor was he confronted with all of the evidence against him.44
On January 31, 2011, the CA rendered its Decision, the dispositive portion of which reads as follows:
WHEREFORE, in the light of the foregoing, the instant Petition is hereby GRANTED. The assailed
Resolutions of public respondent NLRC dated June 27, 2007 and November 28, 2008 are hereby SET ASIDE.
Petitioner is hereby declared illegally dismissed. Consequently, private respondent PLDT is hereby ordered to
reinstate petitioner to his former position without loss of seniority or diminution of benefits with full backwages
from the time of his dismissal up to the time of his reinstatement. Likewise, PLDT is directed to pay attorney's
fees equivalent to 10% of the monetary award.
SO ORDERED.45
In reversing the Resolution of the NLRC, the CA found that PLDT failed to overcome the quantum of
substantial evidence needed to establish that Domingo was guilty of serious misconduct.46
In this regard, the CA was unconvinced with the testimonies presented by PLDT. Likewise, the CA found that
there was no malicious intent on the part of Domingo in using the forged PLD forms, and as such, his dismissal
is illegal.47 Furthermore, the CA found that no proof was submitted to show that the First, Second and Third
Invitations were presented and actually rejected by Domingo. Finally, the CA stated that there was no clear
showing that Domingo was furnished with a copy of the Investigation Report.48
Aggrieved, PLDT filed its Motion for Reconsideration which was denied by the CA in the Resolution dated
June 22, 2011.49
The Instant Petition
In view of the adverse rulings of the CA, PLDT came before this Court by way of a Petition for Review
on Certiorari under Rule 45 of the Rules of Court, where PLDT raised the following issue:
WHETHER OR NOT THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN GIVING
DUE COURSE TO DOMINGO'S PETITION FOR CERTIORARI, NOTWITHSTANDING THE FACT
THAT HE WAS NOT ABLE TO ESTABLISH GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OR EXCESS OF JURISDICTION THAT WOULD JUSTIFY THE NULLIFICATION OF THE
DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION.50
In fine, in the instant Petition, PLDT principally argued the following:
First, the CA committed a grave error when it annulled the Resolution of the NLRC considering that Domingo
failed to demonstrate that the NLRC committed grave abuse of discretion in issuing the said Resolution.51
Second, the findings of the NLRC are supported by testimonial and documentary evidence which is sufficient to
overcome the quantum of substantial evidence required in illegal dismissal cases.52
Third, the NLRC was correct when it found that Domingo was not denied due process because Domingo was
given an ample opportunity to be heard.53
Fourth, considering that Domingo was validly dismissed, the CA erred when it ordered PLDT to reinstate
Domingo, and to pay him backwages and attorney's fees.54
Our Ruling
We find the Petition meritorious.
The Court Of Appeals Can Reverse And Modify The Findings Of Fact Of The NLRC Only If Grave
Abuse Of Discretion Exists.
Preliminarily, it must be stressed that findings of fact of quasi-judicial agencies such as those of the NLRC
must be accorded great respect and even finality when supported by substantial evidence.55 Still, the CA is
granted limited jurisdiction under Rule 65 to review, reverse, and modify the factual findings of the labor
tribunals when grave abuse of discretion exists:
We have ruled in a litany of cases that resort to judicial review of the decisions of the NLRC under Rule 65 of
the Rules of Court is confined only to issues of want or excess of jurisdiction and grave abuse of discretion on
the part of the tribunal rendering them. It does not include an inquiry on the correctness of the evaluation of
evidence, which served as basis for the labor official in determining his conclusion. Findings of fact of
administrative officers are generally given finality. x x x.56
Grave abuse of discretion has been defined as "a capricious and whimsical exercise of judgment as is equivalent
to lack of jurisdiction. Mere abuse of discretion is not enough, it must be so grave as when the power is
exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and must be so patent
and so gross as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined or
to act at all in contemplation of law."57
Notably, this Court has had numerous occasions when it found that the NLRC had committed grave abuse of
discretion and allowed the modification and reversed of its factual findings, such as when there is an arbitrary
disregard of the evidence on record, or when the labor tribunals have misappreciated the evidence to such an
extent as to compel a contrary conclusion if such evidence had been properly appreciated.58
Clearly, therefore, before the CA may reverse and modify the factual findings of the labor tribunals, there must
be a clear showing of grave abuse of discretion on the part of the NLRC. Otherwise stated, the CA's inquiry in
petitions for certiorari under Rule 65 must be limited to whether the NLRC committed grave abuse of
discretion in arriving at its factual findings.59
Applying the foregoing in the present case, We fail to see any grave abuse of discretion on the part of the
NLRC to justify the CA's modification and reversal of the NLRC's factual findings, considering that the NLRC
judiciously reviewed the records of the case and based its ruling on the substantial evidence presented by both
parties.
The Quantum of Proof Required In Illegal Dismissal Cases Is Merely Substantial Evidence.
As correctly pointed out by PLDT, the quantum of proof required in illegal dismissal cases is substantial
evidence.60 This Court has already clarified that substantial evidence is only such evidence as a reasonable mind
might accept as adequate to support a conclusion:
In this regard, it is a well-established rule that the party-litigant who alleges the existence of a fact or thing
necessary to establish his/her claim has the burden of proving the same by the amount of evidence required by
law, which, in labor proceedings, is substantial evidence, or "such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion." To be clear, in the hierarchy of evidentiary values, "proof
beyond reasonable doubt is placed at the highest level , followed by clear and convincing evidence,
preponderance of evidence, and substantial evidence, in that order." Thus, in the hierarchy of evidence, it is
the least demanding. "Corollarily, the ground for the dismissal of an employee does not require proof beyond
reasonable doubt." The quantum of proof required is merely substantial evidence — which only entails
evidence to support a conclusion, "even if other minds, equally reasonable, might conceivably opine
otherwise."61 (Emphasis supplied, citations omitted)
Thus, in illegal dismissal cases, the employer need only present evidence which is adequate to support a
conclusion, and not evidence which will establish moral certainty of guilt on the part of the employee.
In the present case, the cause of Domingo's dismissal is serious misconduct. Relevantly, in Maula v. Ximex
Delivery Express, Inc.,62 this Court has explained what the Labor Code contemplates as serious misconduct:
Misconduct is improper or wrong conduct; it is the transgression of some established and definite rule of action,
a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error in
judgment. The misconduct, to be serious within the meaning of the Labor Code must be of such a grave and
aggravated character and not merely trivial or unimportant. Thus, for misconduct or improper behavior to
be a just cause for dismissal, (a) it must be serious; (b) it must relate to the performance of the employee's
duties; and (c) it must show that the employee has become unfit to continue working for the
employer.63 (Emphasis supplied, citations omitted)
This means that in justifying Domingo's dismissal, PLDT had the burden to prove, with substantial evidence,
that the acts of Domingo: (1) were of a serious nature; (2) related to his duties as a Storekeeper of the DSIM
Tambo Warehouse; and (3) has made him unfit to continue working for PLDT.
In this regard, both the LA and the NLRC found that PLDT was able to overcome the burden of proving, with
substantial evidence, that Domingo committed serious misconduct, and as such, the dismissal of Domingo was
justified.
To recall, PLDT presented numerous witnesses, documentary evidence, and a complete Investigation Report
which concluded that Domingo was indeed involved in a fraudulent scheme in using forged PLD forms to
requisition outside plant materials, which, when audited, were found to be unaccounted for. The records
likewise bear that Domingo undisputedly used and presented the forged PLD forms. Such possession and use of
the said forged PLD forms already gives rise to the presumption that Domingo was involved in the fraudulent
scheme against PLDT. As succinctly ruled by the NLRC:
We hold that since Complainant-Appellant was found in possession of forged PLD 158s which he used, as
substantially evidenced by the foregoing pieces of evidence, and since he failed to make a satisfactory
explanation of his involvement in the anomalous requisitions, he is guilty of falsification.
As aptly held on the matter by the Supreme Court, in the case of Alarcon vs. Court of Appeals, No. L-21846,
March 31, 1967 "(I)n the absence of satisfactory explanation, a person who is found in possession of a forged
document and who used the same, is the forger thereof, or the one who caused the forgery, and therefore, he is
guilty of falsification."64
In stark contrast to the overwhelming evidence presented by PLDT, Domingo merely presented bare denials.
He mentioned that he was merely following instructions, and that he could not have known about the proper
procurement procedures because Domingo supposedly never received formal training for his position as a
Storekeeper.
We are unconvinced with Domingo's bare denials and self-serving evidence. While it may be true that he did
not receive any training for his position as Storekeeper, it must be recalled that he was assigned to that position
as early as May 2001, and any and all anomalies only commenced in 2002. This means that for at least six
months, he learned and properly followed PLDT's procurement procedure. Furthermore, as the Storekeeper
beginning May 2001, he was personally aware that the DSIM Tambo Warehouse only had a total of three PLD
140 form transactions and 277 PLD 158 form transactions in 2001. Clearly, it is incredulous to claim that he
was unaware of any anomaly since the amount of transactions involving both PLD 140 and PLD 158 forms had
an unusual, drastic, and sharp increase in 2002. Thus, he cannot feign ignorance and pretend to have only been
following instructions when, as Storekeeper, he was personally involved in all of the said transactions.
Given the foregoing, this Court finds that PLDT was able to prove, with substantial evidence, that Domingo's
termination based on serious misconduct is valid, considering that:
First, the act of knowingly using the forged PLD forms to requisition materials is of a serious matter that cost
PLDT P17,115,796.34 in material losses.
Second, the offense committed by Domingo relates to his functions as the Storekeeper of the DSIM Tambo
Warehouse. As Storekeeper, his functions required the full trust and confidence of PLDT since he was in
charge with the custody of materials and equipment. Evidently, as a Storekeeper, Domingo was able to utilize
his knowledge and access to PLDT's materials when he engaged in the fraudulent transactions.
Third, because of Domingo's acts, he is no longer fit to continue his employment with PLDT, considering the
latter's loss of trust and confidence in Domingo, and the monetary losses PLDT endured because of the
fraudulent scheme.
In sum, We find that the CA erred when it disturbed the factual findings of the NLRC as PLDT sufficiently
established with substantial evidence Domingo's valid cause for termination.
Domingo Was Not Denied Due Process Of Law.
Contrary to the ruling of the CA, We find that Domingo was not denied due process of law.
In a plethora of cases, this Court has already elucidated the requirements to observe procedural due process in
termination cases. In Distribution & Control Products, Inc./Tiamsic v. Santos,65 it has been explained that two
written notices are required to be furnished to the employee before his or her termination of employment. In the
same case, it has likewise been ruled that a formal hearing is not necessary so long as the employee was granted
an opportunity to be heard:
[T]he settled rule is that in termination proceedings of employees, procedural due process consists of the twin
requirements of notice and hearing. The employer must furnish the employee with two written notices before
the termination of employment can be effected: (1) the first apprises the employee of the particular acts or
omissions for which his dismissal is sought; and (2) the second informs the employee of the employer's
decision to dismiss him. The requirement of a hearing is complied with as long as there was an opportunity to
be heard, and not necessarily that an actual hearing was conducted.66 (Emphasis supplied, citations omitted)
Here, Domingo was furnished two written notices before his employment was terminated: (1) the Request
for Explanation; and (2) the Notice of Termination.
As recited above, in the Request for Explanation, PLDT outlined the particular acts which were the subject of
the serious misconduct charge against Domingo. The Request for Explanation likewise asked Domingo to
respond and explain his side within 72 hours from his receipt of the same. Finally, the Request for Explanation
informed Domingo that a hearing may be had if he so desires.
Domingo did respond to the Request for Explanation by submitting a three-page letter where he unsatisfactorily
explained his defense. Notably, nowhere in his response did he request that a formal hearing be
conducted.
Upon review of all the evidence on record, as well as Domingo's response, PLDT issued the Notice of
Termination where Domingo was informed that he was being dismissed from service.
With the foregoing, it is clear that all the requisites of procedural due process were complied with.
Nevertheless, while this Court is satisfied that procedural due process was observed in the present case, We
deem it best to resolve the other arguments that Domingo raised to supposedly show that he was deprived of his
right to due process.
The Offense Committed Has Not Yet Been Condoned.
In his submissions, Domingo insists that his offense has supposedly already been condoned pursuant to the
provision in the CBA, considering that the Notice to Explain was only issued to him three years after the
supposed discovery of the offense. On this note, we cannot fault PLDT for the delay in the issuance of the
Request for Explanation precisely because Domingo was also at fault when he intentionally failed to cooperate
in the investigation being conducted by PLDT.
As discussed above, PLDT issued three invitations – the First, Second, and Third Invitations – asking Domingo
to appear in a formal inquiry. During the scheduled formal inquiries, Domingo could have already explained his
side and presented his defense, which would have enabled PLDT to unravel the truth and conclude its
investigation with more haste. However, and as seen in the annotations written in the First, Second, and Third
Invitations, Domingo refused to acknowledge receipt of the same, which resulted in further delays in the
investigation. It must be stressed that We cannot subscribe to Domingo's view that no proof was presented with
regard to his receipt of these invitations. Such view is not only self-serving, but likewise appears to be
ridiculous when juxtaposed to the fact that PLDT attempted to serve a copy of the invitation to appear three
times, on three separate occasions. Thusly, PLDT's narrative that Domingo refused to receive the same holds
more water.
We likewise echo the view of the NLRC that these invitations were already akin to the "show cause"
memorandum required under the CBA, considering that the same already informed Domingo that a formal
inquiry will be conducted whereby he will be asked about his involvement in the fraudulent use of the forged
PLD forms. Prescinding from this discussion, it is clear that the offense committed by Domingo cannot be
considered to have been already condoned.
A Formal Hearing Is Not Required In Illegal Dismissal Cases.
In Domingo's submissions, he also argues that a formal hearing is required to ensure that procedural due
process is observed. He likewise contends that since a formal hearing was not conducted, he was deprived of
the opportunity to cross-examine PLDT's witnesses, and make an intelligent defense.
These arguments are devoid of merit.
As stated above, jurisprudence is clear that a formal hearing is not necessary as long as the employee is given
an ample opportunity to be heard. Our ruling in Perez v. Philippine Telegraph and Telephone Company,67 is
instructive:
Article 277(b) of the Labor Code provides that, in cases of termination for a just cause, an employee must be
given "ample opportunity to be heard and to defend himself." Thus, the opportunity to be heard afforded by law
to the employee is qualified by the word "ample" which ordinarily means "considerably more than adequate or
sufficient." In this regard, the phrase "ample opportunity to be heard" can be reasonably interpreted as extensive
enough to cover actual hearing or conference. To this extent, Section 2(d), Rule I of the Implementing Rules of
Book VI of the Labor Code is in conformity with Article 277(b).
Nonetheless, Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor Code should not be
taken to mean that holding an actual hearing or conference is a condition sine qua non for compliance
with the due process requirement in termination of employment. The test for the fair procedure guaranteed
under Article 277(b) cannot be whether there has been a formal pretermination confrontation between the
employer and the employee. The "ample opportunity to be heard" standard is neither synonymous nor
similar to a formal hearing. To confine the employee's right to be heard to a solitary form narrows down that
right. It deprives him of other equally effective forms of adducing evidence in his defense. Certainly, such an
exclusivist and absolutist interpretation is overly restrictive. The "very nature of due process negates any
concept of inflexible procedures universally applicable to every imaginable situation."
xxxx
Significantly, Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor Code itself provides that
the so-called standards of due process outlined therein shall be observed "substantially", not strictly. This is a
recognition that while a formal hearing or conference is ideal, it is not an absolute, mandatory or exclusive
avenue of due process.68 (Emphasis supplied, citations omitted)
In the present case, Domingo cannot validly aver that his right to due process was violated because a hearing
was not conducted considering that the conduct of a formal hearing is not even essential in the first place. Even
more, PLDT, in the Request for Explanation, expressly gave Domingo the opportunity to request for a formal
hearing, which Domingo failed to do. Hence, Domingo cannot be allowed to blame PLDT when he himself is at
fault.
The Right To Cross-Examine Is Not Indispensable Since The Technical Rules Of Evidence Need Not Be
 Strictly Applied In Labor Cases.
Notably, in his submissions before this Court, Domingo likewise argued that he was denied due process
because he was unable to cross-examine PLDT's witnesses. In support of his argument, Domingo cited the case
of Caltex (Phils.), Inc. v. Agad,69 where this Court considered as hearsay evidence the testimonies of the
witnesses therein since no cross-examination was held.
To clarify, in Caltex (Phils.), Inc. v. Agad, We did not categorically declare that the right to cross-examine
witnesses in illegal dismissal cases is indispensabie in order to satisfy the requirements of due process. At best,
such statement was mere obiter dictum since it did not pertain to the key issue in the said case. In this regard,
the settled doctrine that the technical rules of evidence are not strictly applied in labor cases70 still stands.
x x x. The argument that the affidavit is hearsay because the affiants were not presented for cross-examination
is not persuasive because the rules of evidence are not strictly observed in proceedings before administrative
bodies like the NLRC where decisions may be reached on the basis of position papers only. x x x.
Clearly, the alleged denial of Solidum's request to cross-examine the witnesses of Smart does not render their
affidavits hearsay. Thus, these pieces of evidence were properly considered by the labor tribunal.73 (Emphasis in
the original, citations omitted)
Given the foregoing, it is apparent that Domingo's argument is devoid of merit, considering that he was granted
an ample opportunity to be heard, even though he was unable to cross-examine PLDT's witnesses.

In fact, this Court has already had the occasion of applying this well-settled doctrine vis-a-vis the right to cross-
examine witnesses in labor cases:
[J]urisprudence is replete with rulings that administrative bodies are not bound by the technical niceties of
law and procedure and the rules obtaining in the courts of law. Hence, whatever merit C.F. Sharp’s
argument might have in the context of ordinary civil actions, where the rules of evidence apply with greater
rigidity, disappears when adduced in connection with labor cases.
On another note, the rule that the technical rules of evidence may be relaxed in labor cases is similarly
applicable in resolving Domingo's claim that the evidence attached to PLDT's affidavits are mere photocopies,
and thus, should not be given credence.
Considering that rules of evidence need not be strictly applied in labor cases, We hold that the NLRC did not
err when it gave evidentiary weight to the affidavits presented by PLDT, notwithstanding the fact that the
attachments therein are mere photocopies.

The claim of denial of due process on the part of C.F. Sharp must also be rejected. The essence of due process
lies in the reasonable opportunity afforded a party to be heard and to submit any evidence in support of its
defense. What is vital is not the opportunity to cross-examine an adverse witness, but an opportunity to
be heard.71 (Emphasis supplied, citations omitted)
Further, in the recent case of Smart Communications, Inc. v. Solidum,72 this Court explicitly stated that cross-
examination is not necessary in labor cases:
It is not necessary that witnesses be cross-examined by counsel of the adverse party in proceedings before
the labor arbiter
Solidum further alleges that he was denied the right to cross-examine the witnesses who submitted affidavits in
favor of Smart; thus, the affidavits must be considered hearsay and inadmissible. In support of such contention,
Solidum cites Naguit v. National Labor Relations Commission.
All said, this Court grants the instant Petition. We find that the NLRC did not commit grave abuse of discretion
when it affirmed the factual findings of the LA that Domingo's dismissal is valid. The termination not being
illegal, We likewise overturn the CA's grant of reinstatement, backwages, and attorney's fees.
WHEREFORE, premises considered, the instant Petition for Review on Certiorari dated August 12, 2011
filed by Philippine Long Distance Telephone Company is GRANTED. The Decision dated January 31, 2011
and the Resolution dated June 22, 2011 of the Court of Appeals in CA-G.R. SP No. 107672 are
hereby REVERSED and SET ASIDE, and the Resolution dated June 27, 2007 of the National Labor Relations
Commission is REINSTATED.
SO ORDERED.

Such contention is misplaced.

The controlling jurisprudence on the matter is the ruling in the more recent Philippine Long Distance Telephone
Company v. Honrado, where the Court ruled:

It is hornbook in employee dismissal cases that "[t]he essence of due process is an opportunity to be heard, or as
applied to administrative proceedings, an opportunity to explain one's side x x x. A formal or trial type hearing
is not at all times and in all instances essential to due process, the requirements of which are satisfied where the
parties are afforded fair and reasonable opportunity to explain their side of the controversy." Neither is it
necessary that the witnesses be cross-examined by counsel for the adverse party.

The Court explained the reason why cross-examination is not required in the proceedings before the labor
arbiter in Reyno v. Manila Electric Company, citing Rabago v. National Labor Relations Commission where the
Court ruled:
 he was not their employee, but that of Contact Tours.14 In fact, based on their agreement with Contact Tours, it
was supposedly the latter that had the obligation to inform respondent of the contents of the reports and to
decide on the appropriate sanctions.15 Petitioners further explained that due to the issuance of the three
irregularity reports against Rodriguez, they wrote to Contact Tours and recommended the termination of
respondent’s assignment to them.16

During the pendency of the illegal dismissal case before the labor arbiter, ALPS Transportation charged
Rodriguez with theft before the Office of the Provincial Prosecutor of Tanauan, Batangas.17 However,
petitioners eventually filed an Affidavit of Desistance and withdrew the criminal charges against respondent.18

On 12 January 2006, the labor arbiter dismissed the illegal dismissal complaint for lack of merit.19 He explained
that no evidence had been adduced to support the contention of Rodriguez that the latter had been terminated on
27 January 2005.20 Moreover, during the mandatory conference, the representative of Contact Tours manifested
that the company had not dismissed Rodriguez, and that it was in fact willing to reinstate him to his former
position.21 Thus, the labor arbiter concluded that Rodriguez had not been illegally dismissed, and was actually
an employee of Contact Tours, and not of ALPS Transportation.22

Rodriguez appealed the dismissal to the National Labor Relations Commission (NLRC). On 28 February 2007,
the NLRC set aside the decision of the labor arbiter and entered a new one, the dispositive portion of which
reads:cralavvonlinelawlibrary
WHEREFORE, the assailed Decision dated January 12, 2006 is hereby SET ASIDE and a new one is being
entered, directing the respondents to reinstate the complainant to his former position without loss of seniority
G. R. No. 186732, June 13, 2013
rights and privileges but without backwages.

ALPS TRANSPORTATION AND/OR ALFREDO E. PEREZ, Petitioners, v. ELPIDIO M. SO ORDERED.23

RODRIGUEZ, Respondent.
In so concluding, the NLRC ruled that Contact Tours was a labor-only contractor. 24 Thus, Rodriguez should be
DECISION considered as a regular employee of ALPS Transportation.25

As regards the claim of illegal dismissal, the NLRC found that Rodriguez failed to prove that his services were
SERENO, C.J.: illegally terminated by petitioners, and that he was prevented from returning to work.26 However, the bus
company likewise failed to prove that he had abandoned his work.27 Thus, citing previous rulings of this Court,
Before this Court is a Rule 45 Petition for Review1 assailing the Decision2 and Resolution3 of the Court of the NLRC held that in case the parties fail to prove either abandonment or termination, the employer should
Appeals (CA) in CA-G.R. SP No. 100163. order the employee to report back for work, accept the latter, and reinstate the employee to the latter’s former
position. However, an award for backwages is not warranted, as the parties must bear the burden of their own
loss.28
THE FACTS
Dissatisfied with the ruling of the NLRC, Rodriguez filed a Rule 65 Petition for Certiorari with the CA.
Respondent Elpidio Rodriguez (Rodriguez) was previously employed as a bus conductor.4 He entered into an
employment contract with Contact Tours Manpower5 (Contact Tours) and was assigned to work with petitioner
After a review of the records, the CA concluded that the NLRC acted with grave abuse of discretion in
bus company, ALPS Transportation.6
rendering the assailed decision. The appellate court ruled that, in termination cases, it is the employer who bears
the burden of proving that the employee was not illegally dismissed.29 Here, the CA found that ALPS
During the course of his employment, Rodriguez was found to have committed irregularities on 26 April
Transportation failed to present convincing evidence that Rodriguez had indeed collected bus fares without
2003,7 12 October 2003,8 and 26 January 2005.9 The latest irregularity report dated 26 January 2005 stated that
issuing corresponding tickets to passengers. The appellate court held that the irregularity reports were mere
he had collected bus fares without issuing corresponding tickets to passengers. The report was annotated with
allegations, the truth of which had not been established by evidence.30
the word “Terminate.”10
Moreover, the CA gave no credence to ALPS Transportation’s argument that Rodriguez had not yet been
Rodriguez alleged that he was dismissed from his employment on 27 January 2005, or the day after the
terminated when he filed the illegal dismissal complaint, as he had not yet received any notice of
issuance of the last irregularity report. However, he did not receive any written notice of termination.11 He went
termination.31 The appellate court explained that, before the illegal dismissal complaint was filed, more than six
back to the bus company a number of times, but it refused to readmit him.12
months had lapsed since respondent was last given a bus assignment by ALPS Transportation.32 Thus, the CA
concluded that the argument of the bus company was only an excuse to cover up the latter’s mistake in
On 11 August 2005, Rodriguez filed before the labor arbiter a complaint for illegal dismissal, nonpayment of
terminating him without due process of law.33
13th month pay, and damages against ALPS Transportation and Alfredo Perez, the proprietor of petitioner bus
company.13
The CA then ordered ALPS Transportation to reinstate Rodriguez and to pay him full backwages,
viz:cralavvonlinelawlibrary
In response to the complaint, petitioners stated that they did not have any prerogative to dismiss Rodriguez, as
WHEREFORE, the petition is GRANTED. Alfredo Perez is declared guilty of having committed illegal
dismissal. Accordingly, only the portions of the assailed dispositions ordering the reinstatement of Elpidio
Rodriguez to his former position without loss of seniority rights is AFFIRMED and the phrase, “but without
backwages” is ANNULLED and SET ASIDE. In lieu thereof, Alfredo Perez is ORDERED to pay Elpidio
Rodriguez backwages computed from the time he was illegally dismissed until his actual reinstatement. No
costs.
SO ORDERED.34
Aggrieved by the appellate court’s decision, petitioners filed the instant Rule 45 Petition before this Court.
THE ISSUES
As culled from the records and the submissions of the parties, the issues in this case are as
follows:cralavvonlinelawlibrary
1. Whether respondent Rodriguez was validly dismissed; and
2. Assuming that respondent was illegally dismissed, whether ALPS Transportation and/or Alfredo E.
Perez is liable for the dismissal.
THE COURT’S RULING
We uphold the assailed Decision and Resolution and rule that respondent Rodriguez has been illegally
dismissed.
For a dismissal to be valid, the rule is that the employer must comply with both substantive and procedural due
process requirements.35 Substantive due process requires that the dismissal must be pursuant to either a just or
an authorized cause under Articles 282, 283 or 284 of the Labor Code.36 Procedural due process, on the other
hand, mandates that the employer must observe the twin requirements of notice and hearing before a dismissal
can be effected.37
Thus, to determine the validity of Rodriguez’s dismissal, we first discuss whether his employment was
terminated for a just cause.
Petitioners argue that the dismissal of Rodriguez was brought about by his act of collecting fare from a
passenger without issuing the corresponding ticket.38 This was not the first irregularity report issued against
respondent, as similar reports had been issued against him on 26 April 200339 and 12 October 2003.40 Thus, the
company had lost trust and confidence in him, as he had committed serious misconduct by stealing company
revenue.41 Petitioners therefore submit that the dismissal was valid under Article 282 of the Labor Code.42
For his part, Rodriguez denies the contents of the irregularity report.43 He states that the report consists of a
mere charge, but is bereft of the necessary proof.44 Moreover, he submits that while the bus company filed a
criminal complaint against him for the same act, the complaint was dismissed pursuant to an Affidavit of
Desistance, in which the bus company stated that “the incident arose out of [a] misunderstanding between
them.”45 Finally, he contends that the company’s invocation of the 2003 irregularity reports to support his
dismissal effected in 2005 was a mere afterthought.46 In any event, he maintains that even those alleged
infractions were not duly supported by evidence.47
We find for respondent and rule that the employer failed to prove that the dismissal was due to a just cause.
The Labor Code provides that the burden of proving that the termination of an employee was for a just or
authorized cause lies with the employer.48 If the employer fails to meet this burden, the conclusion would be
that the dismissal was unjustified and, therefore, illegal.49
Here, we agree with Rodriguez’s position that the 26 January 2005 irregularity report, which served as the basis
of his dismissal, may only be considered as an uncorroborated allegation if unsupported by substantial
evidence. On this matter, we quote with favor the ruling of the appellate court:cralavvonlinelawlibrary
[T]he nature of work of a bus conductor involves inherent or normal occupational risks of incurring money
shortages and uncollected fares. A conductor’s job is to collect exact fares from the passengers and remit his
collections to the company. Evidence must, therefore, be substantial and not based on mere surmises or
conjectures for to allow an employer to terminate the employment of a worker based on mere allegations places
the latter in an uncertain situation and at the sole mercy of the employer. An accusation that is not substantiated
will not ripen into a holding that there is just cause for dismissal. A mere accusation of wrongdoing or a mere
pronouncement of lack of confidence is not sufficient cause for a valid dismissal of an employee. Thus, the
failure of the [petitioners] to convincingly show that the [respondent] misappropriated the bus fares renders the
dismissal to be without a valid cause. To add, jurisprudence dictates that [if] doubt exists between the evidence
presented by the employer and the employee, the scales of justice must be tilted in favor of the
latter.50 (Citations omitted)
Thus, we rule that petitioners have failed to prove that the termination of Rodriguez’s employment was due to a
just cause.
Turning to the issue of procedural due process, both parties are in agreement that Rodriguez was not given a
written notice specifying the grounds for his termination and giving him a reasonable opportunity to explain his
side; a hearing which would have given him the opportunity to respond to the charge and present evidence in
his favor; and a written notice of termination indicating that after considering all the circumstances,
management has concluded that his dismissal is warranted. Clearly, therefore, the inescapable conclusion is that
procedural due process is wanting in the case at bar.
Having found that Rodriguez was illegally dismissed, we now rule on petitioners’ liabilities and respondent’s
entitlements under the law.
An illegally dismissed employee is entitled to the twin remedies of reinstatement and payment of full
backwages. In Santos v. National Labor Relations Commission,51 we explained:cralavvonlinelawlibrary
The normal consequences of a finding that an employee has been illegally dismissed are, firstly, that the
employee becomes entitled to reinstatement to his former position without loss of seniority rights and,
secondly, the payment of backwages corresponding to the period from his illegal dismissal up to actual
reinstatement. The statutory intent on this matter is clearly discernible. Reinstatement restores the employee
who was unjustly dismissed to the position from which he was removed, that is, to his status quo ante dismissal,
while the grant of backwages allows the same employee to recover from the employer that which he had lost by
way of wages as a result of his dismissal. These twin remedies — reinstatement and payment of backwages —
make the dismissed employee whole who can then look forward to continued employment. Thus, do these two
remedies give meaning and substance to the constitutional right of labor to security of tenure. (Citations
omitted)
Thus, the CA committed no reversible error in upholding the NLRC’s order to reinstate Rodriguez and in
directing the payment of his full backwages, from the time he was illegally dismissed until his actual
reinstatement.
As to who should bear the burden of satisfying respondent’s lawful claims, petitioners submit that since
Rodriguez was an employee of Contact Tours, the latter is liable for the settlement of his claims.
We do not agree.
“The presumption is that a contractor is a labor-only contractor unless he overcomes the burden of proving that
it has substantial capital, investment, tools, and the like.”52 While ALPS Transportation is not the contractor
itself, since it is invoking Contact Tours’ status as a legitimate job contractor in order to avoid liability, it bears
the burden of proving that Contact Tours is an independent contractor.53
It is thus incumbent upon ALPS Transportation to present sufficient proof that Contact Tours has substantial
capital, investment and tools in order to successfully impute liability to the latter. However, aside from making
bare assertions and offering the Kasunduan between Rodriguez and Contact Tours in evidence,54 ALPS
Transportation has failed to present any proof to substantiate the former’s status as a legitimate job contractor.
Hence, the legal presumption that Contact Tours is a labor-only contractor has not been overcome.
As a labor-only contractor, therefore, Contact Tours is deemed to be an agent of ALPS Transportation. 55 Thus,
the latter is responsible to Contact Tours’ employees in the same manner and to the same extent as if they were
directly employed by the bus company.56
Finally, the CA correctly ruled that since ALPS Transportation is a sole proprietorship owned by petitioner
Alfredo Perez, it is he who must be held liable for the payment of backwages to Rodriguez.57 A sole
proprietorship does not possess a juridical personality separate and distinct from that of the owner of the
enterprise.58 Thus, the owner has unlimited personal liability for all the debts and obligations of the business,
and it is against him that a decision for illegal dismissal is to be enforced.59
WHEREFORE, the instant Rule 45 Petition for Review is DENIED. The assailed Decision and Resolution of
the Court of Appeals in CA-G.R. SP No. 100163 are hereby AFFIRMED.
SO ORDERED.
G.R. No. 198967, March 07, 2016
JOSE EMMANUEL P. GUILLERMO, Petitioner, v. CRISANTO P. USON, Respondent.
PERALTA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul and
set aside the Court of Appeals Decision1 dated June 8, 2011 and Resolution2 dated October 7, 2011 in CA G.R.
SP No. 115485, which affirmed in toto the decision of the National Labor Relations Commission (NLRC).
The facts of the case follow.
On March 11, 1996, respondent Crisanto P. Uson (Uson) began his employment with Royal Class Venture
Phils., Inc. (Royal Class Venture) as an accounting clerk.3 Eventually, he was promoted to the position of
accounting supervisor, with a salary of Php13,000.00 a month, until he was allegedly dismissed from
employment on December 20, 2000.4
On March 2, 2001, Uson filed with the Sub-Regional Arbitration . Branch No. 1, Dagupan City, of the NLRC a
Complaint for Illegal Dismissal, with prayers for backwages, reinstatement, salaries and 13th month pay, moral
and exemplary damages and attorney's fees against Royal Class Venture.5
Royal Class Venture did not make an appearance in the case despite its receipt of summons.6
On May 15, 2001, Uson filed his Position Paper7 as complainant.
On October 22, 2001, Labor Arbiter Jose G. De Vera rendered a Decision8 in favor of the complainant Uson
and ordering therein respondent Royal Class Venture to reinstate him to his former position and pay his
backwages, 13th month pay as well as moral and exemplary damages and attorney's fees.
Royal Class Venture, as the losing party, did not file an appeal of the decision.9 Consequently, upon Uson's
motion, a Writ of Execution10 dated February 15, 2002 was issued to implement the Labor Arbiter's decision.
On May 17, 2002, an Alias Writ of Execution11 was issued. But with the judgment still unsatisfied, a Second
Alias Writ of Execution12 was issued on September 11, 2002.
Again, it was reported in the Sheriff's Return that the Second Alias Writ of Execution dated September 11, 2002
remained "unsatisfied." Thus, on November 14, 2002, Uson filed a Motion for Alias Writ of Execution and to
Hold Directors and Officers of Respondent Liable for Satisfaction of the Decision.13 The motion quoted from a
portion of the Sheriffs Return, which states:
chanRoblesvirtualLawlibrary
On September 12, 2002, the undersigned proceeded at the stated present business office address of the
respondent which is at Minien East, Sta. Barbara, Pangasinan to serve the writ of execution. Upon arrival, I
found out that the establishment erected thereat is not [in] the respondent's name but JOEL and SONS
CORPORATION, a family corporation owned by the Guillermos of which, Jose Emmanuel F. Guillermo the
General Manager of the respondent, is one of the stockholders who received the writ using his nickname
"Joey," [and who] concealed his real identity and pretended that he [was] the brother of Jose, which [was]
contrary to the statement of the guard-on-duty that Jose and Joey [were] one and the same person. The former
also informed the undersigned that the respondent's (sic) corporation has been dissolved.
On the succeeding day, as per [advice] by the [complainant's] counsel that the respondent has an account at the
Bank of Philippine Islands Magsaysay Branch, A.B. Fernandez Ave., Dagupan City, the undersigned
immediately served a notice of garnishment, thus, the bank replied on the same day stating that the respondent
[does] not have an account with the branch.14ChanRoblesVirtualawlibrary
On December 26, 2002, Labor Arbiter Irenarco R. Rimando issued an Order15 granting the motion filed by
Uson. The order held that officers of a corporation are jointly and severally liable for the obligations of the
corporation to the employees and there is no denial of due process in holding them so even if the said officers
were not parties to the case when the judgment in favor of the employees was rendered.16 Thus, the Labor
Arbiter pierced the veil of corporate fiction of Royal Class Venture and held herein petitioner Jose Emmanuel
Guillermo (Guillermo), in his personal capacity, jointly and severally liable with the corporation for the
enforcement of the claims of Uson.17
Guillermo filed, by way of special appearance, a Motion for Reconsideration/To Set Aside the Order of
December 26, 2002.18 The same, however, was not granted as, this time, in an Order dated November 24, 2003,
Labor Arbiter Niña Fe S. Lazaga-Rafols sustained the findings of the labor arbiters before her and even
castigated Guillenno for his unexplained absence in the prior proceedings despite notice, effectively putting
responsibility on Guillermo for the case's outcome against him.19
On January 5, 2004, Guillermo filed a Motion for Reconsideration of the above Order,20 but the same was
promptly denied by the Labor Arbiter in an Order dated January 7, 2004.21
On January 26, 2004, Uson filed a Motion for Alias Writ of Execution,22 to which Guillermo filed a Comment
and Opposition on April 2, 2004.23
On May 18, 2004, the Labor Arbiter issued an Order24 granting Uson's Motion for the Issuance of an Alias Writ
of Execution and rejecting Guillermo's arguments posed in his Comment and Opposition.
Guillermo elevated the matter to the NLRC by filing a Memorandum of Appeal with Prayer for a (Writ of)
Preliminary Injunction dated June 10, 2004.25cralawred
In a Decision26 dated May 11, 2010, the NLRC dismissed Guillermo's appeal and denied his prayers for
injunction.
On August 20, 2010, Guillermo filed a Petition for Certiorari27 before the Court of Appeals, assailing the
NLRC decision.
On June 8, 2011, the Court of Appeals rendered its assailed Decision28 which denied Guillermo's petition and
upheld all the findings of the NLRC.
The appellate court found that summons was in fact served on Guillermo as President and General Manager of
Royal Class Venture, which was how the Labor Arbiter acquired jurisdiction over the company.29 But
Guillermo subsequently refused to receive all notices of hearings and conferences as well as the order to file
Royal Class Venture's position paper.30 Then, it was learned during execution that Royal Class Venture had
been dissolved.31 However, the Court of Appeals held that although the judgment had become final and
executory, it may be modified or altered "as when its execution becomes impossible or unjust."32 It also noted
that the motion to hold officers and directors like Guillermo personally liable, as well as the notices to hear the
same, was sent to them by registered mail, but no pleadings were submitted and no appearances were made by
anyone of them during the said motion's pendency.33 Thus, the court held Guillermo liable, citing jurisprudence
that hold the president of the corporation liable for the latter's obligation to illegally dismissed
employees.34 Finally, the court dismissed Guillermo's allegation that the case is an intra-corporate controversy,
stating that jurisdiction is determined by the allegations in the complaint and the character of the relief sought.35
From the above decision of the appellate court, Guillermo filed a Motion for Reconsideration36 but the same
was again denied by the said court in the assailed Resolution37 dated October 7, 2011.
Hence, the instant petition.
Guillermo asserts that he was impleaded in the case only more than a year after its Decision had become final
and executory, an act which he claims to be unsupported in law and jurisprudence.38 He contends that the
decision had become final, immutable and unalterable and that any amendment thereto is null and
void.39 Guillermo assails the so-called "piercing the veil" of corporate fiction which allegedly discriminated
against him when he alone was belatedly impleaded despite the existence of other directors and officers in
Royal Class Venture.40 He also claims that the Labor Arbiter has no jurisdiction because the case is one of an
intra-corporate controversy, with the complainant Uson also claiming to be a stockholder and director of Royal
Class Venture.41
In his Comment,42 Uson did not introduce any new arguments but merely cited verbatim the disquisitions of the
Court of Appeals to counter Guillermo's assertions in his petition.
To resolve the case, the Court must confront the issue of whether an officer of a corporation may be included as
judgment obligor in a labor case for the first time only after the decision of the Labor Arbiter had become final
and executory, and whether the twin doctrines of "piercing the veil of corporate fiction" and personal liability of
company officers in labor cases apply.
The petition is denied.
In the earlier labor cases of Claparols v. Court of Industrial Relations43 and A.C. Ransom Labor Union-CCLU
v. NLRC,44 persons who were not originally impleaded in the case were, even during execution, held to be
solidarity liable with the employer corporation for the latter's unpaid obligations to complainant-employees.
These included a newly-formed corporation which was considered a mere conduit or alter ego of the originally
impleaded corporation, and/or the officers or stockholders of the latter corporation.45 Liability attached,
especially to the responsible officers, even after final judgment and during execution, when there was a failure
to collect from the employer corporation the judgment debt awarded to its workers.46 In Naguiat v. NLRC,47 the
president of the corporation was found, for the first time on appeal, to be solidarily liable to the dismissed
employees. Then, in Reynoso v. Court of Appeals,48 the veil of corporate fiction was pierced at the stage of
execution, against a corporation not previously impleaded, when it was established that such corporation had
dominant control of the original party corporation, which was a smaller company, in such a manner that the
latter's closure was done by the former in order to defraud its creditors, including a former worker.
The rulings of this Court in A.C. Ransom, Naguiat, and Reynoso, however, have since been tempered, at least in
the aspects of the lifting of the corporate veil and the assignment of personal liability to directors, trustees and
officers in labor cases. The subsequent cases of McLeod v. NLRC,49Spouses Santos v. NLRC50 and Carag v.
NLRC,51 have all established, save for certain exceptions, the primacy of Section 3152 of the Corporation Code in
the matter of assigning such liability for a corporation's debts, including judgment obligations in labor cases.
According to these cases, a corporation is still an artificial being invested by law with a personality separate and
distinct from that of its stockholders and from that of other corporations to which it may be connected.53 It is not
in every instance of inability to collect from a corporation that the veil of corporate fiction is pierced, and the
responsible officials are made liable. Personal liability attaches only when, as enumerated by the said Section
31 of the Corporation Code, there is a wilfull and knowing assent to patently unlawful acts of the corporation,
there is gross negligence or bad faith in directing the affairs of the corporation, or there is a conflict of interest
resulting in damages to the corporation.54 Further, in another labor case, Pantranco Employees Association
(PEA-PTGWO), et al. v. NLRC, et al.,55 the doctrine of piercing the corporate veil is held to apply only in three
(3) basic areas, namely: ( 1) defeat of public convenience as when the corporate fiction is used as a vehicle for
the evasion of an existing obligation; (2) fraud cases or when the corporate entity is used to justify a wrong,
protect fraud, or defend a crime; or (3) alter ego cases, where a corporation is merely a farce since it is a mere
alter ego or business conduit of a person, or where the corporation is so organized and controlled and its affairs
are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation. In
the absence of malice, bad faith, or a specific provision of law making a corporate officer liable, such corporate
officer cannot be made personally liable for corporate liabilities.56 Indeed, in Reahs Corporation v. NLRC,57 the
conferment of liability on officers for a corporation's obligations to labor is held to be an exception to the
general doctrine of separate personality of a corporation.
It also bears emphasis that in cases where personal liability attaches, not even all officers are made accountable.
Rather, only the "responsible officer," i.e., the person directly responsible for and who "acted in bad faith" in
committing the illegal dismissal or any act violative of the Labor Code, is held solidarily liable, in cases
wherein the corporate veil is pierced.58 In other instances, such as cases of so-called corporate tort of a close
corporation, it is the person "actively engaged" in the management of the corporation who is held liable.59 In the
absence of a clearly identifiable officer(s) directly responsible for the legal infraction, the Court considers the
president of the corporation as such officer.60
The common thread running among the aforementioned cases, however, is that the veil of corporate fiction can
be pierced, and responsible corporate directors and officers or even a separate but related corporation, may be
impleaded and held answerable solidarily in a labor case, even after final judgment and on execution, so long as
it is established that such persons have deliberately used the corporate vehicle to unjustly evade the judgment
obligation, or have resorted to fraud, bad faith or malice in doing so. When the shield of a separate corporate
identity is used to commit wrongdoing and opprobriously elude responsibility, the courts and the legal
authorities in a labor case have not hesitated to step in and shatter the said shield and deny the usual protections
to the offending party, even after final judgment. The key element is the presence of fraud, malice or bad faith.
Bad faith, in this instance, does not connote bad judgment or negligence but imports a dishonest purpose or
some moral obliquity and conscious doing of wrong; it means breach of a known duty through some motive or
interest or ill will; it partakes of the nature of fraud.61
As the foregoing implies, there is no hard and fast rule on when corporate fiction may be disregarded; instead,
each case must be evaluated according to its peculiar circumstances.62 For the case at bar, applying the above
criteria, a finding of personal and solidary liability against a corporate officer like Guillermo must be rooted on
a satisfactory showing of fraud, bad
faith or malice, or the presence of any of the justifications for disregarding the corporate fiction. As stated
in McLeod,63 bad faith is a question of fact and is evidentiary, so that the records must first bear evidence of
malice before a finding of such may be made.
It is our finding that such evidence exists in the record. Like the A. C. Ransom, and Naguiat cases, the case at
bar involves an apparent family corporation. As in those two cases, the records of the present case bear
allegations and evidence that Guillermo, the officer being held liable, is the person responsible in the actual
running of the company and for the malicious and illegal dismissal of the complainant; he, likewise, was shown
to have a role in dissolving the original obligor company in an obvious "scheme to avoid liability" which regarding the regulation of the corporation. As correctly found by the appellate court, Uson's complaint and
jurisprudence has always looked upon with a suspicious eye in order to protect the rights of labor.64 redress sought were centered alone on his dismissal as an employee, and not upon any other relationship he had
with the company or with Guillermo. Thus, the matter is clearly a labor dispute cognizable by the labor
Part of the evidence on record is the second page of the verified Position Paper of complainant (herein tribunals.chanrobleslaw
respondent) Crisanto P. Uson, where it was clearly alleged that Uson was "illegally dismissed by the
President/General Manager of respondent corporation (herein petitioner) Jose Emmanuel P. Guillermo when WHEREFORE, the petition is DENIED. The Court of Appeals Decision dated June 8, 2011 and Resolution
Uson exposed the practice of the said President/General Manager of dictating and undervaluing the shares of dated October 7, 2011 in CA G.R. SP No. 115485 are AFFIRMED.
stock of the corporation."65 The statement is proof that Guillermo was the responsible officer in charge of
running the company as well as the one who dismissed Uson from employment. As this sworn allegation is SO ORDERED.cralawlawlibrary
uncontroverted - as neither the company nor Guillermo appeared before the Labor Arbiter despite the service of
summons and notices - such stands as a fact of the case, and now functions as clear evidence of Guillermo's bad
faith in his dismissal of Uson from employment, with the motive apparently being anger at the latter's reporting
of unlawful activities.

Then, it is also clearly reflected in the records that it was Guillermo himself, as President and General Manager
of the company, who received the summons to the case, and who also subsequently and without justifiable
cause refused to receive all notices and orders of the Labor Arbiter that followed.66 This makes Guillermo
responsible for his and his company's failure to participate in the entire proceedings before the said office. The
fact is clearly narrated in the Decision and Orders of the Labor Arbiter, Uson's Motions for the Issuance of
Alias Writs of Execution, as well as in the Decision of the NLRC and the assailed Decision of the Court of
Appeals,67 which Guillermo did not dispute in any of his belated motions or pleadings, including in his petition
for certiorari before the Court of Appeals and even in the petition currently before this Court.68 Thus, again, the
same now stands as a finding of fact of the said lower tribunals which binds this Court and which it has no
power to alter or revisit.69 Guillermo's knowledge of the case's filing and existence and his unexplained refusal
to participate in it as the responsible official of his company, again is an indicia of his bad faith and malicious
intent to evade the judgment of the labor tribunals.

Finally, the records likewise bear that Guillermo dissolved Royal Class Venture and helped incorporate a new
firm, located in the same address as the former, wherein he is again a stockl1older. This is borne by the
Sherif11s Return which reported: that at Royal Class Venture's business address at Minien East, Sta. Barbara,
Pangasinan, there is a new establishment named "Joel and Sons Corporation," a family corporation owned by
the Guillermos in which Jose Emmanuel F. Guillermo is again one of the stockholders; that Guillermo received
the writ of execution but used the nickname "Joey" and denied being Jose Emmanuel F. Guillermo and, instead,
pretended to be Jose's brother; that the guard on duty confirmed that Jose and Joey are one and the same person;
and that the respondent corporation Royal Class Venture had been dissolved.70 Again, the facts contained in the
Sheriffs Return were not disputed nor controverted by Guillermo, either in the hearings of Uson's Motions for
Issuance of Alias Writs of Execution, in subsequent motions or pleadings, or even in the petition before this
Court. Essentially, then, the facts form part of the records and now stand as further proof of Guillermo's bad
faith and malicious intent to evade the judgment obligation.

The foregoing clearly indicate a pattern or scheme to avoid the obligations to Uson and frustrate the execution
of the judgment award, which this Court, in the interest of justice, will not countenance.

As for Guillermo's assertion that the case is an intra-corporate controversy, the Court sustains the finding of the
appellate court that the nature of an action and the jurisdiction of a tribunal are determined by the allegations of
the complaint at the time of its filing, irrespective of whether or not the plaintiff is entitled to recover upon all
or some of the claims asserted therein.71 Although Uson is also a stockholder and director of Royal Class
Venture, it is settled in jurisprudence that not all conflicts between a stockholder and the corporation are intra-
corporate; an examination of the complaint must be made on whether the complainant is involved in his
capacity as a stockholder or director, or as an employee.72 If the latter is found and the dispute does not meet the
test of what qualities as an intra-corporate controversy, then the case is a labor case cognizable by the NLRC
and is not within the jurisdiction of any other tribunal.73 In the case at bar, Uson's allegation was that he was
maliciously and illegally dismissed as an Accounting Supervisor by Guillermo, the Company President and
General Manager, an allegation that was not even disputed by the latter nor by Royal Class Venture. It raised no
intra-corporate relationship issues between him and the corporation or Guillermo; neither did it raise any issue
 to 6:00 p.m. Six months after her employment, specifically on 27 December 2013, she was informed of her
dismissal and was advised to no longer report for work. According to petitioner, upon inquiring the reason for
her dismissal, respondent coldly ignored her query and thereafter, no longer contacted her. She contended that
respondent failed to provide any notice or justifiable cause as to why her employment was being severed.
Because of respondent's failure to comply with both substantive and procedural due process requirements, as
mandated by law, petitioner alleged that she was illegally dismissed.4

In its defense, respondent denied the illegal dismissal allegation of petitioner. Respondent acknowledged,
however, that petitioner was hired by it as a probationary employee, particularly as a Leasing Assistant.
Petitioner's probationary employment with respondent was for a period of six months, as indicated by the
former's Employment Agreement with the latter. Petitioner was assigned by respondent to Solemare Parksuites,
a condominium building in Bradco Avenue, Parañaque City, to render clerical and secretarial services
necessary in the leasing operations of the building. As a Leasing Assistant, petitioner was required to report
primarily at the project site in Parañaque City, under the supervision of the Leasing Manager, Elizabeth Tungol
(Tungol).5

According to respondent, in line with the provisions of their Employment Agreement, petitioner was subjected
to the respondent's evaluation procedure on the fifth month of her employment. Hence, sometime in November
2013, petitioner's over-all performance and capacity to meet the demands of her work were assessed by her
immediate superiors.6

On 29 November 2013, petitioner was likewise asked to report to respondent's head office in Makati City to
take the Verbal, Non-Verbal, and Numerical Examinations which were administered by the Human Resources
(HR) Department. Petitioner garnered below average (BA) scores in the aforesaid tests, rendering her
qualifications for regularization doubtful under HR Standards. In addition, petitioner's over-all performance and
capacity to meet the demands of her work were assessed by her immediate superior, Tungol. Based on
respondent's set criteria for quantitative and qualitative performance and developmental assessment, Tungol's
G.R. No. 226240, March 06, 2019 findings indicated that petitioner failed to satisfactorily meet the level of performance expected from her
position.7
MYRA M. MORAL, PETITIONER, v. MOMENTUM PROPERTIES MANAGEMENT
CORPORATION, RESPONDENT. According to respondent, petitioner's over-all rating indicated a BA score, which made her unqualified for
regularization purposes. Hence, in accordance with standard procedure, the HR and Administration Manager,
Annie Ocampo (Ocampo), directed Tungol to advise petitioner to report to the head office, for the purpose of
DECISION
discussing her poor evaluation scores. Unfortunately, petitioner disregarded the aforesaid request.8 Thereafter,
Tungol was instructed to talk to petitioner about possibly extending her employment contract and improving
CARPIO, J.: her performance, during such an extension period. Unexpectedly, however, petitioner no longer reported for
work as of 27 December 2013. In line with standard procedure, on 7 January 2014, Ocampo prepared a Notice
The Case of Absence without Official Leave (NAWOL) requiring petitioner to submit a written explanation as to why her
employment should not be considered terminated due to her absence within five days from receipt thereof.
Petitioner was likewise invited to the head office for a meeting with Ocampo.9
For resolution is a petition for review on certiorari dated 23 September 2016 filed by Myra M. Moral
(petitioner) assailing the Decision1 dated 22 March 2016 and the Resolution2 dated 19 July 2016 of the Court of
Appeals in CA-G.R. SP No. 138704. Respondent averred that, on 13 January 2014, as it awaited petitioner's response to various invitations for her to
report to the head office, petitioner filed a Request for Assistance (RFA) before the NCR Arbitration Branch of
the NLRC.10 After conciliation and mediation efforts between petitioner and respondent failed, they submitted
The Facts their respective Position Papers, Replies, and Rejoinders. Thereafter, the case was submitted for resolution.11

On 5 March 2014, petitioner filed a Complaint3 for illegal dismissal against her employer, Momentum The Ruling of the Labor Arbiter
Properties Management Corporation (respondent) and/or its Chief Executive Officer, Steve Li (Li), before the
National Capital Region (NCR) Arbitration Branch of the National Labor Relations Commission (NLRC).
On 31 July 2014, the Labor Arbiter rendered a Decision12 in favor of petitioner. The dispositive portion of the
Decision of the Labor Arbiter dated 31 July 2014 provides:
In her Position Paper, petitioner alleged that, on 26 June 2013, respondent hired her as a probationary
employee, with her designation being that of a Leasing Assistant. She worked eight hours a day from 9:00 a.m.
WHEREFORE, judgment is hereby rendered declaring that the Complainant was illegally dismissed. Total P154,308.00
Consequently, Respondent MOMENTUM PROPERTIES MANAGEMENT CORP. is hereby ordered to pay
the Complainant the following:
The other findings are affirmed.
1. P124,280[.00] as her backwages;
2. P16,000.00 as her separation pay; SO ORDERED.18
3. P20,000.00 as moral damages;
4. P20,000.00 as exemplary damages; and
5. Ten percent of the total monetary award or the amount of P18,028.00 as attorney's fees. The NLRC upheld the view of the Labor Arbiter that respondent failed to defend its argument that it did not
dismiss petitioner. It held that the payroll issued by respondent did not establish petitioner's employment
beyond 27 December 2013, because the document merely covered the periods of 11 and 12 December 2013. On
All other claims are dismissed for lack of merit. the other hand, petitioner presented the text messages she received from Tungol, informing her that she should
no longer report for work and instructing her to report to the HR Department to process her clearance and
SO ORDERED.13 backpay.19

The Labor Arbiter found the allegation of respondent that petitioner was guilty of abandonment untenable. It
emphasized that, in order for there to be abandonment, which is a just ground for dismissal, there must be a
deliberate and unjustified refusal on the part of the employee to resume employment. It held that mere absence
or failure to report for work, after a notice of return is given to such employee, is not enough to amount to
abandonment. Hence, it held that petitioner was illegally dismissed by respondent.14
The NLRC deleted the award of moral and exemplary damages granted by the Labor Arbiter, on the ground
that petitioner failed to prove through clear and convincing evidence that her termination was "carried out in an
arbitrary, capricious and malicious manner, with evident personal ill-will."20 It ruled that "the award of moral
and exemplary damages cannot be justified solely upon the premise that the employer dismissed his employee
without just cause or due process."21

The Labor Arbiter noted that, because petitioner was illegally dismissed, it naturally follows that she would be
entitled to reinstatement with the payment of backwages. However, because her relationship with respondent
had already become strained, the Labor Arbiter ruled that separation pay of one month for every year of service,
in lieu of reinstatement, was more proper. Hence, petitioner was awarded separation pay in addition to the
payment of backwages. Petitioner was further awarded moral and exemplary damages and attorney's fees. With
respect to the grant of moral and exemplary damages, the Labor Arbiter ruled that there was bad faith on the
part of respondent when it dismissed petitioner, because it was carried out whimsically and capriciously.15
The Labor Arbiter held that Li could not be held solidarity liable with respondent, because no evidence was
submitted to prove that the former was guilty of bad faith.16
Respondent moved for reconsideration, which was denied by the NLRC in a Resolution22 dated 18 November
2014. Thereafter, it sought to reverse the Decision and Resolution of the NLRC dated 30 September 2014 and
18 November 2014, respectively, by filing a petition for certiorari with the Court of Appeals.23
The Ruling of the Court of Appeals
In its Decision dated 22 March 2016, the Court of Appeals granted the petition and annulled and set aside the
Decision and Resolution of the NLRC dated 30 September 2014 and 18 November 2014, respectively. The
dispositive portion of the Decision of the Court of Appeals dated 22 March 2016 provides:

WHEREFORE, premises considered, the instant petition is hereby GRANTED. The assailed Decision and
Aggrieved, respondent filed an appeal with the NLRC. Resolution of the Third Division of the National Labor Relations Commission dated September 30, 2014 and
November 18, 2014, respectively, are ANNULLED and SET ASIDE. However, for failure to observe
The Ruling of the NLRC procedural due process, the petitioner is hereby directed to pay nominal damages to private respondent in the
amount of Php30,000.00.
On 30 September 2014, the NLRC rendered a Decision17 modifying the Decision of the Labor Arbiter dated 31
July 2014 removing the award of moral and exemplary damages from the judgment and reducing the entire SO ORDERED.24
amount to P154,308.00, viz:
Respondent argued that petitioner failed to show through substantial evidence that she was dismissed from
WHEREFORE, the decision is hereby MODIFIED. Respondent Momentum Properties Management Corp. is work. It contended that the text messages purportedly from Tungol were not verified or authenticated in
ordered to pay complainant the following: accordance with the Rules on Electronic Evidence. It averred that, while technical rules of procedure are not
strictly observed by the NLRC, the latter remains to have a duty to comply with certain procedures, in order to
determine the admissibility and probative value of the evidence sought to be presented. It further alleged that,
Backwages P124,280.00 assuming arguendo, that such text messages were from Tungol, the same cannot be regarded as a formal notice
of petitioner's termination, because the authority to do so fully resides with the HR Department.25
Separation Pay 16,000.00
Respondent likewise argued that it was improper for the NLRC to consider the payroll for December 2013 as
140,280.00
basis for petitioner's dismissal. It averred that such document was merely meant to negate her claim for
payment of salary and was not to be used as evidence to show that she remained under its employ beyond the
Ten Percent (10%) Attorney's Fees 14,028.00
covered date.26
The Court of Appeals held that the status of petitioner as a probationary employee was established and not
contested. Hence, her employment was under respondent's observation for a period of six months. It ruled that
respondent had the option of hiring petitioner or terminating her services, because she failed to qualify as a
regular employee in accordance with the reasonable standards made known to her at the time of her
engagement.27
The Court of Appeals ruled that, based on the evidence, petitioner's performance evaluation was not up to par.
It was established that petitioner received abysmal scores in a series of aptitude tests that she took before her six
months of probationary employment were done.28 In the same manner, petitioner's Performance Appraisal
Report (PAR) indicated that she did not meet respondent's expectations when it came to her performance at
work. In most of the components of the subject PAR, petitioner received BA scores.29 Furthermore, the Court of
Appeals noted that petitioner's tests were given "appropriately, fairly and with proper notice before they were
taken."30
Given the abovementioned circumstances and the fact that petitioner was duly apprised of her probationary
status at the time of her hiring and was made aware of the evaluation that she had to undergo in order for her to
become a regular employee of respondent, the Court of Appeals held that respondent had every right to refuse
petitioner's regularization. However, it ruled that, while respondent had the right to terminate petitioner's
employment, such termination was carried out in a manner not in accordance with the standards set forth under
the law. Instead of dismissing petitioner through a formal written notice within a reasonable time, petitioner
was informed of her dismissal by respondent via a series of text messages.31 Due to the aforementioned
procedural infirmity, the Court of Appeals ruled that petitioner was entitled to nominal damages.32
Petitioner moved for reconsideration, which the Court of Appeals denied in its Resolution dated 19 July 2016.
Hence, the instant petition before this Court.
The Issue
The issue in this case is whether or not petitioner was illegally dismissed by respondent.
The Court's Ruling
The Court finds the instant petition bereft of merit.
It is a well-established rule that the Court is not a trier of facts. The function of the Court in a petition for
review on certiorari under Rule 45 of the Rules of Court is limited to questions of law. However, this rule
admits of exceptions, to wit: (1) the conclusion is grounded on speculations, surmises or conjectures; (2) the
inference is manifestly mistaken, absurd or impossible; (3) there is grave abuse of discretion; (4) the judgment
is based on misapprehension of facts; (5) the findings of fact are conflicting; (6) there is no citation of specific
evidence on which the factual findings are based; (7) the findings of absence of facts are contradicted by the
presence of evidence on record; (8) the findings of the Court of Appeals are contrary to those of the trial court;
(9) the Court of Appeals manifestly overlooked certain relevant and undisputed facts that, if properly
considered, would justify a different conclusion; (10) the findings of the Court of Appeals are beyond the issues
of the case; and (11) such findings are contrary to the admissions of both parties.33
The present case qualifies as an exception to the aforementioned rule. In the instant case, the Labor Arbiter and
the NLRC, on one hand, and the Court of Appeals, on the other hand, arrived at divergent factual findings, with
respect to petitioner's termination. Hence, the Court deems it necessary to re-examine such findings and
determine whether or not the Court of Appeals had sufficient basis to annul and set aside the Decision and
Resolution of the NLRC dated 30 September 2014 and 18 November 2014, respectively, declaring that
petitioner was illegally dismissed from work.
Petitioner maintains that she was constructively dismissed, because the reason for her termination from
employment was not due to poor performance or her failure to meet the regularization standards set by
respondent at the time of her engagement. In the instant petition, petitioner alleges that "she was not dismissed
by the respondent on the ground of poor performance but for reasons only known to the respondent, which do
not constitute as just or authorized cause of termination."34
On the other hand, respondent insists that it was within its power to refuse petitioner's regularization.
Respondent avers that petitioner was hired as a probationary employee and was made aware of the evaluation
that she had to undergo to attain regularization. According to respondent, petitioner failed to comply with the
regularization standards made known to her at the time of her employment, as indicated by her poor ratings in
both her performance evaluation and PAR. Hence, it had every right to dismiss petitioner.35
A probationary employee is one who is placed on trial by an employer, during which the latter determines
whether or not the former is qualified for permanent employment.36 By virtue of a probationary employment, an
employer is given an opportunity to observe the fitness and competency of a probationary employee while at
work. During the probationary period of employment, an employer has the right or is at liberty to decide who
will be hired and who will be denied employment.37
The essence of a probationary period of employment lies primordially in the purpose or objective of both the
employer and the employee during such period. While the employer observes the fitness, propriety, and
efficiency of a probationary employee, in order to ascertain whether or not such person is qualified for
regularization, the latter seeks to prove to the former that he or she has the qualifications and proficiency to
meet the reasonable standards for permanent employment.38
As a general rule, probationary employment cannot exceed six months. Otherwise, the employee concerned
shall be regarded as a regular employee. Moreover, it is indispensable in probationary employment that the
employer informs the employee of the reasonable standards that will be used as basis for his or her
regularization at the time of his or her engagement. In the event that the employer fails to comply with the
aforementioned, then the employee is considered a regular employee.39
A probationary employee enjoys security of tenure, although it is not on the same plane as that of a permanent
employee. Other than being terminated for a just or authorized cause, a probationary employee may also be
dismissed due to his or her failure to qualify in accordance with the standards of the employer made known to
him or her at the time of his or her engagement.40 Hence, the services of a probationary employee may be
terminated for any of the following: (1) a just cause; (2) an authorized cause; and (3) when he or she fails to
qualify as a regular employee in accordance with the reasonable standards prescribed by the employer.41
In connection with the abovementioned, Section 6(d), Rule I, Book VI, as amended by Department Order No.
147-15, of the Omnibus Rules Implementing the Labor Code of the Philippines (Labor Code) provides the
following:
xxxx
(d) In all cases of probationary employment, the employer shall make known to the employee the standards
under which he will qualify as a regular employee at the time of his engagement. Where no standards are made
known to the employee at that time, he shall be deemed a regular employee.
In other words, the employer is mandated to comply with two requirements when dealing with a probationary
employee, viz: (1) the employer must communicate the regularization standards to the probationary employee;
and (2) the employer must make such communication at the time of the probationary employee's engagement. If
the employer fails to abide by any of the aforementioned obligations, the employee is deemed as a regular, and
not a probationary employee. An employer is deemed to have made known the regularization standards when it thereafter may be promulgated by the
has exerted reasonable efforts to apprise the employee of what he or she is expected to do or accomplish during company.
the trial period of probation. The exception to the foregoing is when the job is self-descriptive in nature, such as
in the case of maids, cooks, drivers, and messengers.42

2. Terms of
In the instant case, the evidence is clear that petitioner is a probationary employee of respondent. Evidently, an Employment
examination of the Employment Agreement dated 28 June 2013 executed by petitioner and respondent
positively indicates the hiring of the former by the latter as a probationary employee, to wit:

EMPLOYMENT AGREEMENT The term of

employment
governing the
xxxx EMPLOYEE shall
be the following:
EMPLOYER shall employ the EMPLOYEE based on the following terms and conditions:

1. Employment & 2.1 Probationary status - for six (6) months

Duties commencing on June 26,
2013 until December 26, 2013.

a) Momentum Properties Management

Corp./EMPLOYER hereby employs the During the probationary status, the
services of the EMPLOYEE as Leasing EMPLOYEE shall be appraised on the
Assistant to perform the function of his/her following schedule:
position and such other duties at such times
and in such manner as the company and/or
its officers may direct him/her from time to
time; a) 3rd month of employment - to
determine EMPLOYEE'S ability
to carry the tasks assigned to
him/her, assess culture fit and
b) EMPLOYEE agrees to perform duties consideration to other growth
assigned to him/her as stated in his/her job areas of the EMPLOYEE that is
description, to the best of his/her ability, to necessary for continued progress
maintain an account of his/her work, to
devote hi[s]/her full and undivided time to
the transaction of company's business;
b) 5th month of employment - prior
to regularization to fully
determine EMPLOYEE'S over-all
c) EMPLOYEE expressly understood that performance and output including
he/she must refrain and should not engage in but not limited to the
any other business during the tenure of improvement on the growth areas
his/her employment with the company that of the EMPLOYEE during the
may jeopardize his/her performance and first evaluation schedule
create a conflict with the interest of the
company;
2.2 EMPLOYEE shall be given a notice of
employment status before the 6th month of
d) EMPLOYEE agrees to comply with all employment.
stated standards of performance, policies,
rules and regulations that is set and/or
 2.3 EMPLOYEE expressly agree[d] and With respect to the termination of a probationary employee, a different procedure is applied – the usual two-
understood that his/her employment with the notice rule does not govern.51 The aforesaid two-notice rule is that which is found under Article 292(b) of the
company may be terminated at any given Labor Code, as amended by Section 33 of Republic Act No. 10151, viz:
time for a cause.
Article 292. Miscellaneous Provisions. —
x x x x43 (Boldfacing and underscoring in the original)

xxxx
Petitioner was well-aware that her regularization would depend on her ability and capacity to fulfill the
requirements of her position as a Leasing Assistant and that her failure to perform such would give respondent a
valid cause to terminate her probationary employment. (b) Subject to the constitutional right of workers to security of tenure and their right to be protected against
dismissal except for a just and authorized cause and without prejudice to the requirement of notice under
Article 283 (now, Article 298) of this Code, the employer shall furnish the worker whose employment is sought
A thorough examination of the records of the instant case reveals that petitioner failed to comply with the
to be terminated a written notice containing a statement of the cause for termination and shall afford the latter
regularization standards of respondent made known to her at the time of her engagement. Petitioner's
ample opportunity to be heard and to defend himself with the assistance of his representative if he so desires in
performance evaluation was substandard, as evinced by her dismal scores in a series of aptitude tests she took
accordance with company rules and regulations promulgated pursuant to guidelines set by the Department of
before the end of her six-month probationary period. In her PTI-Numerical Examination, which consisted of 30
Labor and Employment. x x x.
items, petitioner only garnered a raw score of six. Noticeably, petitioner left 10 items blank in her PTI-
Numerical Examination.44 With respect to her PTI-Verbal Examination, which consisted of 50 items, petitioner
only received a raw score of 19.45 The aforementioned procedure is also found in Section 2, Rule I, Book VI, as amended by Department Order
No. 147-15, of the Omnibus Rules Implementing the Labor Code which states:
With the objective of testing her language skills, petitioner was asked to write about herself and where she saw
herself in the future. She was likewise asked to discuss other matters which she believed would help strengthen Section 2. Security of Tenure. —
her application for regular employment. Strikingly, her answers to the aforesaid were marked as questionable
by the HR Department.46 In addition, petitioner was asked to draft a memorandum for a given situation. Her xxxx
written memorandum was peppered with grammatical errors and erasures and was likewise marked as
questionable by the HR Department.47
In all cases of termination of employment, the following standards of due process shall be substantially
observed:
In her PAR, petitioner received the following ratings in the key results areas portion, which measured her
quantitative performance: (1) Contract Management – BA; (2) Lease Administrative Functions – average (A);
(3) Basic Financial/Accounting Functions - BA; (4) General Administration – A; and (5) Customer For termination of employment based on just causes as defined in Article 288 (now, Article 297) of the Labor
Service/Communication Skills – BA. In the same PAR, petitioner received the following marks in the Code:
behavioral factors portion, which measured her qualitative performance: (1) Job Knowledge and Quality of
Work – A; (2) Service Orientation – BA; (3) Communication – BA; (4) Judgment – BA; (5) Attendance and
Punctuality – A; (6) Risk Control - BA; (7) Use of Technology – A; (8) Process Improvement – BA; (9) (i) A written notice served on the employee specifying the ground or grounds for termination, and giving
Planning and Organization – A; and (10) Training – BA. In the Employee's Performance Summary part of her said employee reasonable opportunity within which to explain his side.
PAR, petitioner's scores for her quantitative and qualitative performance and results under the developmental
assessment portion were analyzed. For her overall grade, petitioner received a 1.43 score, which fell under the
rating norm for BA.48
(ii) A hearing or conference during which the employee concerned, with the assistance of counsel if he so
desires, is given opportunity to respond to the charge, present his evidence, or rebut the evidence
Based on the abovementioned test results, respondent was only exercising its statutory hiring prerogative when presented against him.
it refused to hire petitioner on a permanent basis, upon the expiration of her six-month probationary period. It is
a well-established principle that an employer has the right or is at liberty to choose who will be hired and who
will be denied employment. Accordingly, it is within the exercise of the right to select one's employees that an
employer may set or fix a probationary period within which the latter may test and observe the conduct of the (iii) A written notice of termination served on the employee, indicating that upon due consideration of all
former before the former is hired on a permanent basis.49 As long as the employer has made known to the the circumstances, grounds have been established to justify his termination.
employee the regularization standards at the time of the employee's engagement, the refusal of the former to
regularize the latter, by reason of the latter's failure to comply with the regularization standards, is within the
ambit of the law.50 xxxx

All the same, while respondent had the right to terminate petitioner's employment, and not to accord her the Section 2, Rule I, Book VI, as amended by Department Order No. 147-15, of the Omnibus Rules Implementing
status of a regular employee, the manner by which petitioner's dismissal was carried out was not in accordance the Labor Code governs the procedure for the termination of a probationary employee, to wit:
with the standards set forth under the law.
Section 2. Security of Tenure. —
xxxx
If the termination is brought about by the x x x failure of an employee to meet the standards of the employer in
case of probationary employment, it shall be sufficient that a written notice is served the employee within a
reasonable time from the effective date of termination.
A perusal of the records reveals that petitioner's dismissal was effected through a series of text messages from
Tungol, instead of the abovementioned mandated procedure. As correctly pointed out by the Court of Appeals,
the NAWOL issued by Ocampo was nothing more than an afterthought, considering it was furnished to
petitioner on 7 January 2014 or five days after she was informed of her dismissal.52 Hence, in view of the
procedural infirmity attending the termination of petitioner, respondent is liable to pay nominal damages.
In the case of Agabon v. National Labor Relations Commission,53 the Court pronounced that, where the
dismissal is for a just cause, the lack of statutory due process should not nullify the dismissal, or render it illegal
or ineffectual. Nevertheless, the employer should indemnify the employee for the violation of his statutory
rights. The violation of the employee's right to statutory due process by the employer warrants the payment of
indemnity in the form of nominal damages. The amount of such damages is addressed to the sound discretion of
the court, taking into account the relevant circumstances. The payment of nominal damages would serve to
deter employers from future violations of the statutory due process rights of employees. It likewise provides a
vindication or recognition of the fundamental right to due process accorded to employees under the Labor Code
and its Omnibus Implementing Rules.54
With respect to the proper amount of damages to be awarded in the instant case, the Court notes that petitioner's
dismissal proceeded from her failure to comply with the standards required for her regularization. Hence, it is
indisputable that the dismissal process was, in effect, initiated by an act imputable to the employee, akin to
dismissals due to just causes under Article 297 of the Labor Code. Therefore, the Court deems it appropriate to
fix the amount of nominal damages in the sum of P30,000.00, consistent with its ruling in Agabon v. National
Labor Relations Commission.55
WHEREFORE, the petition is DENIED. The Decision dated 22 March 2016 and the Resolution dated 19 July
2016 of the Court of Appeals in CA-G.R. SP No. 138704 are AFFIRMED.
SO ORDERED.
[G.R. NO. 159293 December 16, 2005]
VETERANS SECURITY AGENCY, INC. and JESUS R. VARGAS, Petitioners, v. FELIPE
GONZALVO, JR., Respondent.
CHICO-NAZARIO, J.:
In this Petition for Review , petitioner VETERANS SECURITY AGENCY, INC. (VSAI), represented by its
Executive Vice-President and General Manager, JESUS R. VARGAS, challenges the Decision1 dated 27
January 2003 of the Court of Appeals in CA-G.R. SP No. 67043, affirming the Decision of the National Labor
Relations Commission (NLRC). The NLRC reversed the Decision of the Labor Arbiter and declared respondent
to have been illegally dismissed. VSAI likewise implores this Court to take a look at the Resolution2 dated 19
June 2003 of the Court of Appeals denying their motion for reconsideration.
The evidence shows that VSAI hired respondent as a security guard, with initial assignment at Overseas
Workers Welfare Administration (OWWA) collection unit at the Philippines Overseas Employment Agency
building in Ortigas, Pasig City from July 1991 to October 1992. His next tour of duty was at the Citytrust Bank
from 20 November 1992 to 31 December 1992. He was then detailed at the National Power Corporation in
Plaridel, Bulacan from January 1993 to January 1994. In February 1994 to April 1995, he was deployed at the
University of Santo Tomas.
Meanwhile, on 24 April 1995, respondent brought his complaint against VSAI before the Social Security
System (SSS) for non-remittance of SSS contributions. As a result, petitioners formally remitted his
contributions to the SSS.
In May 1995, respondent was transferred to the OWWA's main office in Pasig City.
On 26 August 1998, VSAI again failed to remit to the SSS his contributions and loan payments prompting
respondent to file another complaint against VSAI before the SSS for non-remittance of contributions and loan
payments. As a result, the OWWA Detachment Commander intimated to respondent that VSAI was annoyed
by the fact that he had commenced the said action against it.
Thereafter, VSAI hired three (3) additional guards for the OWWA parking lot located at San Luis Street, Pasay
City. In a meeting sometime in December 1998, OWWA's Chief of Services and Property Division announced
that the lease contract for said parking lot was to expire on 07 January 1999 and the three newly-hired guards
posted there would have to report to VSAI's office.
On 30 December 1998, respondent, who was then manning the OWWA main office, was made to swap
postings with one of these three guards manning the OWWA parking lot. This came as a surprise to respondent
because such swapping would be to his disadvantage as he would have to give up his post at the OWWA main
office where he was serving for almost three (3) years to give way to one of the newly-hired security guards
who would soon be displaced from the OWWA parking lot as a result of the expiration of the lease contract for
said property. Resultantly, on 7 January 1999, upon the expiration of the lease contract on the parking lot, the
services of the guards temporarily assigned there were withdrawn, including that of respondent.
The next day, when respondent reported for work at the OWWA Detachment Commander, he was told that he
would have to be assigned somewhere else because his spouse was also assigned as a lady guard at the OWWA.
This came as an utter surprise to the respondent who was single at that time.
VSAI informed respondent that his redeployment would be at the Department of Labor and Employment
(DOLE). When respondent reported to the DOLE Detachment Commander, he was required to renew his
Barangay, police and National Bureau of Investigation (NBI) clearances and to undergo neurological
examination. Respondent requested petitioners to assign him at either the OWWA Office in Intramuros, Manila
or at the OWWA Collection Unit located in Pasig City, so he need not reapply and renew his employment
requirements, but was denied. From then on, respondent was placed on a "floating status" sans pay.
Consequently, on 14 April 1999, respondent filed a complaint against petitioner VSAI and its President,
Alfredo Vargas, Jr., for overtime pay, premium for holiday and rest day, holiday pay, service incentive leave
pay, thirteenth (13th) month pay and non-remittance of SSS contribution starting January 1999.3 Respondent
alleged, in his Position Paper, that he was terminated by VSAI to hit back at him for his filing of two (2)
complaints against the company for non-remittances of his contributions and loan payments with the SSS.4
On 29 September 1999, respondent filed an additional complaint for illegal dismissal with claims for separation
pay and attorney's fees.5
In its Position Paper, VSAI retorted that on 07 January 1999, it received a memorandum from Rafael C. Velez,
Officer-in-Charge of the Administrative Department of OWWA, stating that OWWA's lease contract covering
the parking area had expired for which reason the services of the three (3) guards, including respondent, had to
be withdrawn. On 8 January 1999, respondent was given a posting assignment at the DOLE in lieu of his
OWWA assignment, but was required to undergo an interview as well as neurological examination before final
posting. Respondent did not report to work thereafter, although VSAI sent no less than three (3) memoranda for
him to report for work. In its Position Paper, VSAI averred that it would submit copies of the payrolls for the
pertinent periods to the Labor Arbiter to show that respondent had been paid in accordance with existing labor
laws. However, these were never submitted.
On 08 February 2000, the Labor Arbiter dismissed the complaint for lack of merit. The NLRC reversed the
decision of the Labor Arbiter in a Decision dated 24 April 2001, with the following fallo:
WHEREFORE, the assailed decision is hereby REVERSED and SET ASIDE and a new one entered declaring
complainant-appellant's dismissal as illegal and ordering respondent-appellee to pay him his separation pays
equivalent to one-month salary per year of service and his money claims of night shift differential pay, service
incentive leave, legal holiday pay, overtime pay, computed three years backward, as follows:
1.) Separation
P198 x 26 days x 7 yrs. P36,036.00
2.) Salary differential from Jan. 8, 1996 to Jan. 8, 1999 = 3 yrs.
- From Jan. 8, 1996 to Feb.1, 1996 = 76 mos.
P8,335.05 - 4,350 (P145.00 x 30 days) = P3,985.05 x .70 mos. P 3,028.64
-From Feb.2, 1996 to Apr. 30, 1996 = 3 mos.
P9,254.76 - 4,830 (161.00 x 30 days) = P4,424.76 x 3 mos. 13,274.28
-May 1, 1996 to Feb. 5, 1997 = 9.2 mos
P9,484.71 - 4,950 (165.00 x 30 days) = P4,946.95 x 2.8 mos. 41,719.33
-Feb.6, 1997 to April 30, 1997 = 2.8 mos
P10,346.95 - 5,400 (180.00 x 30 days) = P4,946.95 x 2.8 mos. 13,851.46
-May 1, 1997 to Feb. 5, 1998 = 9.2 mos
P10,634.37 5,550 (180.00 x 30 days)= P4,946.95 x 2.8 mos. 46,776.20
-Feb. 6, 1998 to Jan. 8,1999 = 11.06 mos
P11,381.65 5,940 (P198.00 x 30 days)= P5,441.65 x 11.06 mos. 60,184.65
Total P178,834.56.
GRAND TOTAL P214,870.566
On 27 January 2003, the Court of Appeals affirmed the ruling of the NLRC. VSAI's motion for reconsideration
was denied by the Court of Appeals in the Resolution7 of 19 June 2003.
Hard done by the said ruling, petitioner now comes to this Court as a final recourse via the instant appeal
assailing the Decision and Resolution of the Court of Appeals on the following assignment of errors:
I. the HONORABLE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR WHEN
IT HELD THAT THE RESPONDENT WAS ILLEGALLY DISMISSED DESPITE A JUDICIAL
ADMISSION BY RESPONDENT THAT HE WAS OFFERED SENTINEL DUTY IMMEDIATELY AFTER
HIS RECALL FROM HIS POSTING ASSIGNMENT AT THE PREMISES OF OVERSEAS WORKERS
WELFARE ADMINISTRATION, (OWWA).
II. the honorable court of appeals committed serious and reversible error when it sustained the award by the
national labor relations commission (NLRC), OF OVERTIME PAY TO THE RESPONDENT DESPITE A
FINDING BY THE NLRC THAT THERE WAS NO IOTA OF EVIDENCE TO SATISFY THE BURDEN OF
PROOF REQUIRED TO SUPPORT THE MONEY CLAIM.8
The issue of whether or not respondent was constructively dismissed is the bedrock of the petition. Related to
this is the issue of whether or not respondent had abandoned his job.
VSAI ardently claims that there was no dismissal, constructive or otherwise. VSAI claims that respondent
abandoned his post and went on Absence Without Leave. The evidence, however, points to a different
direction.
Constructive dismissal exist when an act of clear discrimination, insensibility or disdain on the part of the
employer has become so unbearable as to leave an employee with no choice but to forego continued
employment.9 On the other hand, abandonment, as a just and valid cause for termination, requires a deliberate
and unjustified refusal of an employee to resume his work, coupled with a clear absence of any intention of
returning to his or her work. Abandonment is incompatible with constructive dismissal.10
We find the absence of abandonment, in this case, as there was no deliberate intent on the part of the respondent
to abandon his employment with VSAI. A strong indication of the intention of respondent to resume work is
that on several dates, after his last assignment on January 1999, he reported to the VSAI's office regularly for
reassignment, but was not given any. He then lost no time in filing the illegal dismissal case. An employee who
forthwith takes steps to protest his layoff cannot by any stretch of imagination be said to have abandoned his
work and the filing of the complaint is proof enough og his desire to return to work, thus negating any
suggestion of abandonment.11 Significantly, respondent, in his position paper,12 prayed for a regular assignment
or in the alternative VSAI should be ordered to pay salaries until the time he is gainfully employed.
Respondent's entreaty to be given a regular posting is antithetical to a charge of abandonment.
Moreover, the burden of proving that respondent has abandoned his job rests with VSAI. However, VSAI failed
miserably to discharge the burden. VSAI adduced in evidence three memos allegedly sent via registered mail to
respondent, but as the NLRC and the Court of Appeals ruled, the evidentiary value of these documents is of
dubious authenticity as the memos had not been properly identified and were only attached belatedly to the
petition.13 Moreover, we note that there was no registry return card for these memos so there is no way of telling
who received these memos, if they were received at all by respondent. What is more, the three memos appear to
be exact copies of each other except for the signatories and the dates and the way the addressees were written.
The three memos commonly stated, viz:
Re: Directive To Report to VSAI
Operations Center For
Re-Assignment
Pursuant to the Standing Policy of our Agency to give priority assignment to security guards who have been
relieved from their post of assignment and who are on a floating status, you are hereby directed to report
soonest to the VSAI Personnel Office at the above address for re-assignment.
Failure to comply will be tantamount to your non-interest for re-assignment and will constitute a waiver on
your part of your rights under the circumstances.
Please acknowledge receipt hereof by affixing your signature over your printed name on the space provided
hereunder.14 (Emphasis supplied.)
This similarity in form and substance of the memos engenders the impression that they were just pro-forma
letters aimed at making it appear that VSAI have not dismissed respondent and that on three occasions it had
asked respondent to report for work, but which notices the latter refused to heed. Further, it baffles the Court
that the second memorandum did not mention about the previous memorandum sent to respondent. Neither did
the third memorandum mention anything about the two previous memos.
We find it equally implausible that none of the 3 memos touched on respondent's alleged refusal to accept the
posts assigned to him and the abandonment of his posts considering that such acts constitute willful
disobedience and gross neglect of duty which are valid grounds for dismissal.15
VSAI capitalized on the fact that on 7 January 1999, it received a memorandum from the Officer-in-Charge of
the Administrative Department of OWWA, informing that OWWA's lease contract covering the parking area
had expired for which reason the services of the three (3) guards, including respondent, had to be withdrawn.
The uncontroverted fact, however, is that respondent was already previously regularly detailed at the OWWA
main office, but he was uprooted from this assignment and was tossed at the OWWA parking lot in Pasay City
with the knowledge that the security services in that area would soon expire, as a consequence of which he
would have to be reassigned somewhere else. As the facts stand, reassignment to a new client, in this case,
necessitates a renewal of Barangay clearance, training certificate, neurological test, and ultimately passing the
interview by the client. In effect, he would reapply with the next client of VSAI, which is the DOLE, and in the
process of application, be on "floating status" without pay, with no assurance of acceptance despite securing the
said documents as he would still have to undergo the rigors of an interview. Indeed, respondent was then left
uncertain as to when and where his next assignment would be.
There is likewise something devious with the fact that a new recruit replaced respondent from his previous
posting at OWWA main office relegating respondent to a short-lived posting at the OWWA Pasay City parking
lot that would soon fold-up.
VSAI further contends that respondent was only provisionally relieved from his last post and not dismissed
from employment. Hence, the filing of the illegal dismissal case in April 1999 was premature. If at all, it is
argued that respondent should be considered on temporary "off-detail" status.
In Superstar Security Agency, Inc. v. NLRC,16 we held that placing an employee on temporary "off-detail" is not
equivalent to dismissal provided that such temporary inactivity should continue only for a period of six (6)
months. Otherwise, the security agency concerned could be held liable for constructive dismissal under Article
286 of the Labor Code which reads:
Art. 286. When employment not deemed terminated. 'The bona fide suspension of the operation of a business or
undertaking for a period not exceeding six (6) months, or the fulfillment by the employee of a military or civic
duty shall not terminate employment. In all such cases, the employer shall reinstate the employee to his former
position without loss of seniority rights if he indicates his desire to resume his work not later than one (1)
month from the resumption of operations of his employer or from his relief from the military or civic duty.
(Emphasis supplied.)
Article 286 applies only when there is a bona fide suspension of the employer's operation of a business or
undertaking for a period not exceeding six (6) months. In security agency parlance, being placed "off detail" or
on "floating" status means "waiting to be posted."17 Here, prior to his tour of duty in Pasay City, respondent had
a regular posting, but he was dislodged by a newly-hired security guard and respondent had to be assigned to a
client whose service contract was to end. Thus, there was no suspension of operation, business or
undertaking, bona fide or not, that would have justified placing the respondent off-detail and making him wait
for a period of more than six months.18 In the same vein, the records are shorn of any indication that respondent
had to be placed on temporary "off-detail" for lack of available post. VSAI just stopped giving respondent his
assignment after his duty at the OWWA Parking Lot in Pasay City.
True, it is the inherent prerogative of an employer to transfer and reassign its employees to meet the
requirements of its business. Be that as it may, the prerogative of the management to transfer its employees
must be exercised without grave abuse of discretion. The exercise of the prerogative should not defeat an
employee's right to security of tenure. The employer's privilege to transfer its employees to different
workstations cannot be used as a subterfuge to rid itself of an undesirable worker.19
Here, riled by respondent's consecutive filing of complaint against it for nonpayment of SSS contributions,
VSAI had been tossing respondent to different stations thereafter. From his assignment at University of Santo
Tomas for almost a year, he was assigned at the OWWA main Office in Pasig where he served for more than
three years. After three years at the OWWA main office, he was transferred to the OWWA Pasay City parking
lot knowing that the security services will end forthwith. VSAI even concocted the reason that he had to be
assigned somewhere because his spouse was already a lady guard assigned at the OWWA main office.
Inasmuch as respondent was single at that time, this was obviously a mere façade to rid of respondent who
was no longer in VSAI's good graces.
The only logical conclusion from the foregoing discussion is that the VSAI constructively dismissed the
respondent. This ruling is in rhyme with the findings of the Court of Appeals and the NLRC. Dismissal is the
ultimate penalty that can be meted to an employee. Inasmuch as petitioners failed to adduce clear and
convincing evidence to support the legality of respondent's dismissal, the latter is entitled to reinstatement and
back wages as a necessary consequence. However, reinstatement is no longer feasible in this case because of
the palpable strained relations, thus, separation pay is awarded in lieu of reinstatement.20
Anent monetary claims, VSAI ardently argues that such demands must be denied for failure of respondent to
adduce evidence thereon. Such logic could not withstand judicial muster.
On this, the Court could not be any clearer in Mayon Hotel & Restaurant v. Rolando Adana, et al,21 when we
held that inasmuch as respondents therein have set out with particularity in their complaint, position paper,
affidavits and other documents the labor standard benefits they are entitled to, and which they alleged that
petitioners therein have failed to pay them, it became incumbent upon the employers to prove that they have
paid these money claims. This is in tune with the general precept that: "one who pleads payment has the burden
of proving it, and even where the employees must allege nonpayment, the general rule is that the burden rests
on the defendant to prove nonpayment, rather than on the plaintiff to prove non payment."22 The reason for the
rule is that the pertinent personnel files, payrolls, records, remittances and other similar documents - which will
show that overtime, differentials, service incentive leave and other claims of workers have been paid - are not in
the possession of the worker but in the custody and absolute control of the employer.23
In the case at bar, VSAI failed to discharge the burden of proof by choosing not to fully and completely
disclose information and present the necessary documents to prove payment of labor standard benefits due to
respondent. Despite repeated promises, i.e., in its five-paged Position Paper24 or in its two-paged Reply,25 that it
will proffer in evidence the payrolls which it admitted are the best evidence to resolve the monetary claims of
respondent, VSAI failed to submit the pertinent employee files, which would show that respondent rendered
work entitling him to payment for overtime work, night shift differential, service incentive leave, and premium
pay for work on holidays and rest day. Indeed, VSAI's failure to submit the necessary documents - documents
which are not in respondent's possession but in the custody and absolute control of VSAI - in spite of its
previous undertaking to do so, gives rise to the presumption that their presentation is prejudicial to its
cause.26 Consequently, it failed to discharge the onus prabandi thereby making it liable for such claims to
respondent.27
In sum, respondent having been illegally dismissed, he is entitled to separation pay and salary differentials as
awarded by the NLRC whose computations the Court defers to, it being a matter failing within its expertise.28
One final note. The cavalier fashion by which the Labor Arbiter dealt with this case must not go unnoticed. The
Decision, in its totality, was merely two pages and the rationale for the denial of respondent's claims was
sketchily couched in this lone paragraph, to wit:
This Office is inclined to uphold the position of the respondents. Indeed, payrolls of service contractors which
are performing specific work for a government office are being scrutinized by the auditors of the Commission
on Audit. These auditors will not allow the payment of the billings of the service contractors unless there is
sufficient showing that the employees of the service contractors are paid in accordance with laws.29
There is absolutely no evidence on record to support the above-quoted pronouncement of the Labor Arbiter. In
the ordinary course of things, it is far-fetched that COA auditors would investigate if the employees of the
service contractors of government offices are properly paid. The vinculum that binds the government offices to
the contractors is the contract of service. Thus, the COA auditors are normally limited to ascertaining if the
payments made by the government agencies are in accordance with the service contracts and if they are
properly documented with billings and receipts of payments. Ceteris paribus, other things considered equal,
COA auditors are not tasked to look into the payrolls of the service contractors to make sure that their
employees are properly compensated in allowing or disallowing the payment of service contractors.
It was, therefore, sheer whim on the part of the Labor Arbiter to dismiss the claims of respondent on the basis
of a mere presumption without stating its legal basis.
With unfading fervor, the Court again strikes a chord among the quasi-judicial agencies to shun from treating
labor cases flippantly. In the avuncular case of San Jose v. NLRC,30 the Court smote hard blows on the Labor
Arbiter therein for his slapdash manner of deciding a case, viz:
Labor Arbiters should exert all efforts to cite statutory provisions and/or judicial decision to buttress their
dispositions. An Arbiter cannot rely on simplistic statements, generalizations, and assumptions. These are not
substitutes for reasoned judgment. Had the Labor Arbiter exerted more research efforts, support for the
Decision could have been found in pertinent provisions of the Labor Code, its Implementing Rules, and
germane decisions of the Supreme Court.31
Indeed, not only do the claims of employees boil down to the lucre of wages, separation pay, etc., although
these are the lifeblood of a minimum wage earner such as the respondent herein. Perhaps more importantly, at
stake is a workingman's years of sweat and toil. Here, respondent had rendered nine (9) years of unsullied hard
work, but his reward came in a long-drawn-out floating status without pay to chastise him for lodging a
legitimate grievance against VSAI for non-remittance of SSS payments.
Indeed, the Court ought to deny this petition lest the wheels of justice for aggrieved workingmen grind to a halt.
We ought to abate the culture of employers bestowing security of tenure to employees, not on the basis of the
latter's performance on the job, but on their ability to toe the line set by their employer and endure in silence the
flagrant incursion of their rights, zealously protected by our labor laws and by the Constitution, no less.
WHEREFORE, the present petition is hereby DENIED. Accordingly, the Decision and the Resolution dated
27 January 2003 and 19 June 2003, of the Court of Appeals in CA-G.R. SP No. 67043, are hereby AFFIRMED.
Costs against petitioners.SO ORDERED
[G.R. No. 189947 : January 25, 2012]
MANILA PAVILION HOTEL, OWNED AND OPERATED BY ACESITE (PHILS.) HOTEL
CORPORATION, PETITIONER, VS. HENRY DELADA, RESPONDENT.
SERENO, J.:
Before the Court is a Petition for Review on Certiorari filed under Rule 45 of the Revised Rules of Court,
assailing the 27 July 2009 Decision and 12 October 2009 Resolution of the Court of Appeals (CA).[1]
Facts
The present Petition stems from a grievance filed by respondent Henry Delada against petitioner Manila
Pavilion Hotel (MPH). Delada was the Union President of the Manila Pavilion Supervisors Association at
MPH. He was originally assigned as Head Waiter of Rotisserie, a fine-dining restaurant operated by petitioner.
Pursuant to a supervisory personnel reorganization program, MPH reassigned him as Head Waiter of Seasons
Coffee Shop, another restaurant operated by petitioner at the same hotel. Respondent declined the inter-outlet
transfer and instead asked for a grievance meeting on the matter, pursuant to their Collective Bargaining
Agreement (CBA). He also requested his retention as Head Waiter of Rotisserie while the grievance procedure
was ongoing.
MPH replied and told respondent to report to his new assignment for the time being, without prejudice to the
resolution of the grievance involving the transfer. He adamantly refused to assume his new post at the Seasons
Coffee Shop and instead continued to report to his previous assignment at Rotisserie. Thus, MPH sent him
several memoranda on various dates, requiring him to explain in writing why he should not be penalized for the
following offenses: serious misconduct; willful disobedience of the lawful orders of the employer; gross
insubordination; gross and habitual neglect of duties; and willful breach of trust.
Despite the notices from MPH, Delada persistently rebuffed orders for him to report to his new assignment.
According to him, since the grievance machinery under their CBA had already been initiated, his transfer must
be held in abeyance. Thus, on 9 May 2007, MPH initiated administrative proceedings against him. He attended
the hearings together with union representatives.
Meanwhile, the parties failed to reach a settlement during the grievance meeting concerning the validity of
MPH's transfer order. Respondent then elevated his grievance to the Peers Resources Development Director.
Still, no settlement between the parties was reached. Respondent appealed the matter to the Grievance
Committee level. The committee recommended that he proceed to the next level of the grievance procedure, as
it was unable to reach a decision on the matter. Consequently, on 20 April 2007, Delada lodged a Complaint
before the National Conciliation and Mediation Board. On 25 May 2007, the parties agreed to submit the
following issues for voluntary arbitration:
I. WHETHER OR NOT THE TRANSFER OF THE UNION PRESIDENT FROM HEAD
WAITER AT ROTISSERIE TO HEAD WAITER AT SEASONS RESTAURANT IS
VALID AND JUSTIFIED;
II. WHETHER OR NOT THE PREVENTIVE SUSPENSION OF THE COMPLAINANT IS
VALID AND JUSTIFIED;
III. WHETHER OR NOT THE PREVENTIVE SUSPENSION OF THE COMPLAINANT IS
A VALID GROUND TO STRIKE;
IV. WHETHER OR NOT THE RESPONDENT MAY BE HELD LIABLE FOR MORAL
AND EXEMPLARY DAMAGES AND ATTORNEY'S FEES; AND
V. WHETHER OR NOT THE COMPLAINANT MAY BE HELD LIABLE FOR MORAL
AND EXEMPLARY DAMAGES AND ATTORNEY'S FEES. [2]
While respondent's Complaint concerning the validity of his transfer was pending before the Panel of
Voluntary Arbitrators (PVA), MPH continued with the disciplinary action against him for his refusal to report
to his new post at Seasons Coffee Shop. Citing security and safety reasons, petitioner also placed respondent on
a 30-day preventive suspension. On 8 June 2007, MPH issued a Decision, which found him guilty of
insubordination based on his repeated and willful disobedience of the transfer order. The Decision imposed on
Delada the penalty of 90-day suspension. He opposed the Decision, arguing that MPH had lost its authority to
proceed with the disciplinary action against him, since the matter had already been included in the voluntary
arbitration.
 On 14 December 2007, the PVA issued a Decision and ruled that the transfer of Delada was a valid
exercise of management prerogative. According to the panel, the transfer order was done in the interest of the
efficient and economic operations of MPH, and that there was no malice, bad faith, or improper motive
attendant upon the transfer of Delada to Seasons Coffee Shop. They found that the mere fact that he was the
Union President did not "put color or ill motive and purpose" to his transfer. On the contrary, the PVA found
that the real reason why he refused to obey the transfer order was that he asked for additional monetary benefits
as a condition for his transfer. Furthermore, the panel ruled that his transfer from Rotisserie to Seasons Coffee
Shop did not prejudice or inconvenience him. Neither did it result in diminution of salaries or demotion in rank.
The PVA thus pronounced that Delada had no valid and justifiable reason to refuse or even to delay compliance
with the management's directive.
The PVA also ruled that there was no legal and factual basis to support petitioner's imposition of
preventive suspension on Delada. According to the panel, the mere assertion of MPH that "it is not far-fetched
for Henry Delada to sabotage the food to be prepared and served to the respondent's dining guest and
employees because of the hostile relationship then existing" was more imagined than real. It also found that
MPH went beyond the 30-day period of preventive suspension prescribed by the Implementing Rules of the
Labor Code when petitioner proceeded to impose a separate penalty of 90-day suspension on him. Furthermore,
the PVA ruled that MPH lost its authority to continue with the administrative proceedings for insubordination
and willful disobedience of the transfer order and to impose the penalty of 90-day suspension on respondent.
According to the panel, it acquired exclusive jurisdiction over the issue when the parties submitted the
aforementioned issues before it. The panel reasoned that the joint submission to it of the issue on the validity of
the transfer order encompassed, by necessary implication, the issue of respondent's insubordination and willful
disobedience of the transfer order. Thus, MPH effectively relinquished its power to impose disciplinary action
on Delada.[3]
As to the other issues, the panel found that there was no valid justification to conduct any strike or
concerted action as a result of Delada's preventive suspension. It also ruled that since the 30-day preventive
suspension and the penalty of 90-day suspension was invalid, then MPH was liable to pay back wages and other
benefits.
The CA affirmed the Decision of the PVA and denied petitioner's Motion for Reconsideration.
Consequently, MPH filed the instant Petition.
Issue
Despite the various issues surrounding the case, MPH limited its appeal to the following:
I. Whether MPH retained the authority to continue with the administrative case against
Delada for insubordination and willful disobedience of the transfer order.
II. Whether MPH is liable to pay back wages.
Discussion
Petitioner argues that it did not lose its authority to discipline Delada notwithstanding the joint
submission to the PVA of the issue of the validity of the transfer order. According to petitioner, the specific
issue of whether respondent could be held liable for his refusal to assume the new assignment was not raised
before the PVA, and that the panel's ruling was limited to the validity of the transfer order. Thus, petitioner
maintains that it cannot be deemed to have surrendered its authority to impose the penalty of suspension.
In Sime Darby Pilipinas, Inc. v. Deputy Administrator Magsalin,[4] we ruled that the voluntary
arbitrator had plenary jurisdiction and authority to interpret the agreement to arbitrate and to determine the
scope of his own authority - subject only, in a proper case, to the certiorari jurisdiction of this Court. In that
case, the specific issue presented was "the issue of performance bonus." We then held that the arbitrator had the
authority to determine not only the issue of whether or not a performance bonus was to be granted, but also the
related question of the amount of bonus, were it to be granted. We then said that there was no indication at all
that the parties to the arbitration agreement had regarded "the issue of performance bonus" as a two-tiered issue,
only one aspect of which was being submitted to arbitration; thus, we held that the failure of the parties to
specifically limit the issues to that which was stated allowed the arbitrator to assume jurisdiction over the
related issue.
A more recent case is Ludo & Luym Corporation v. Saornido.[5] In that case, we recognized that
voluntary arbitrators are generally expected to decide only those questions expressly delineated by the
submission agreement; that, nevertheless, they can assume that they have the necessary power to make a final
settlement on the related issues, since arbitration is the final resort for the adjudication of disputes. Thus, we
ruled that even if the specific issue brought before the arbitrators merely mentioned the question of "whether an
employee was discharged for just cause," they could reasonably assume that their powers extended beyond the
determination thereof to include the power to reinstate the employee or to grant back wages. In the same vein, if
the specific issue brought before the arbitrators referred to the date of regularization of the employee, law and
jurisprudence gave them enough leeway as well as adequate prerogative to determine the entitlement of the
employees to higher benefits in accordance with the finding of regularization. Indeed, to require the parties to
file another action for payment of those benefits would certainly undermine labor proceedings and contravene
the constitutional mandate providing full protection to labor and speedy labor justice.
Consequently, could the PVA herein view that the issue presented before it - the question of the
validity of the transfer order - necessarily included the question of respondent Delada's insubordination and
willful disobedience of the transfer order?
Pursuant to the doctrines in Sime Darby Pilipinas and Ludo & Luym Corporation, the PVA was
authorized to assume jurisdiction over the related issue of insubordination and willful disobedience of the
transfer order. Nevertheless, the doctrine in the aforementioned cases is inapplicable to the present Petition. In
those cases, the voluntary arbitrators did in fact assume jurisdiction over the related issues and made rulings on
the matter. In the present case, however, the PVA did not make a ruling on the specific issue of insubordination
and willful disobedience of the transfer order. The PVA merely said that its disagreement with the 90-
day penalty of suspension stemmed from the fact that the penalty went beyond the 30-day limit
for preventive suspension:
But to us, what militates against the validity of Delada's preventive suspension is the fact that it went beyond
the 30-day period prescribed by the Implementing Rules of the Labor Code (Section 4, Rules XIV, Book V).
The preventive suspension of Delada is supposed to expire on 09 June 2007, but without notifying Delada, the
MPH proceeded to impose a separate penalty of 90-days suspension to him which took effect only on 18 June
2007, or way beyond the 30-day rule mandated by the Rules. While the intention of the MPH is to impose the
90-day suspension as a separate penalty against Delada, the former is already proscribed from doing so because
as of 05 June 2007, the dispute at hand is now under the exclusive jurisdiction of the panel of arbitrators. In
fact, by its own admission, the MPH categorically stated in its Position Paper that as of 25 May 2007, or before
the suspension order was issued, MPH and Delada had already formulated and submitted the issues for
arbitration. For all legal intents and purposes, therefore, the MPH has now relinquished its authority to suspend
Delada because the issue at this juncture is now within the Panel's ambit of jurisdiction. MPH's authority to
impose disciplinary action to Delada must now give way to the jurisdiction of this panel of arbitrators to rule on
the issues at hand. By necessary implication, this Panel is thus constrained to declare both the preventive
suspension and the separate suspension of 90-days meted to Delada to be not valid and justified.[6
First, it must be pointed out that the basis of the 30-day preventive suspension imposed on Delada
was different from that of the 90-day penalty of suspension. The 30-day preventive suspension was imposed by
MPH on the assertion that Delada might sabotage hotel operations if preventive suspension would not be
imposed on him. On the other hand, the penalty of 90-day suspension was imposed on respondent as a form of
disciplinary action. It was the outcome of the administrative proceedings conducted against
him. Preventive suspension is a disciplinary measure resorted to by the employer pending investigation of an
alleged malfeasance or misfeasance committed by an employee.[7] The employer temporarily bars the employee
from working if his continued employment poses a serious and imminent threat to the life or property of the
employer or of his co-workers.[8] On the other hand, the penalty of suspension refers to the disciplinary action
imposed on the employee after an official investigation or administrative hearing is conducted.[9] The employer
exercises its right to discipline erring employees pursuant to company rules and regulations.[10] Thus, a finding
of validity of the penalty of 90-day suspension will not embrace the issue of the validity of the 30-
day preventive suspension. In any event, petitioner no longer assails the ruling of the CA on the illegality of the
30-day preventive suspension.
It can be seen that, unlike in Sime Darby Pilipinas and Ludo & Luym Corporation, the PVA herein
did not make a definitive ruling on the merits of the validity of the 90-day suspension. The panel only held that
MPH lost its jurisdiction to impose disciplinary action on respondent. Accordingly, we rule in this case that
MPH did not lose its authority to discipline respondent for his continued refusal to report to his new
assignment. In relation to this point, we recall our Decision in Allied Banking Corporation v. Court of Appeals
In Allied Banking Corporation,[13] employer Allied Bank reassigned respondent Galanida from its
Cebu City branch to its Bacolod and Tagbilaran branches. He refused to follow the transfer order and instead
filed a Complaint before the Labor Arbiter for constructive dismissal. While the case was pending, Allied Bank
insisted that he report to his new assignment. When he continued to refuse, it directed him to explain in writing
why no disciplinary action should be meted out to him. Due to his continued refusal to report to his new
assignment, Allied Bank eventually terminated his services. When the issue of whether he could validly refuse
to obey the transfer orders was brought before this Court, we ruled thus
The refusal to obey a valid transfer order constitutes willful disobedience of a lawful order of an
employer. Employees may object to, negotiate and seek redress against employers for rules or orders that
they regard as unjust or illegal. However, until and unless these rules or orders are declared illegal or
improper by competent authority, the employees ignore or disobey them at their peril. For Galanida's
continued refusal to obey Allied Bank's transfer orders, we hold that the bank dismissed Galanida for just cause
in accordance with Article 282(a) of the Labor Code. Galanida is thus not entitled to reinstatement or to
separation pay. (Emphasis supplied, citations omitted)
It is important to note what the PVA said on Delada's defiance of the transfer order
In fact, Delada cannot hide under the legal cloak of the grievance machinery of the CBA or the
voluntary arbitration proceedings to disobey a valid order of transfer from the management of the hotel. While
it is true that Delada's transfer to Seasons is the subject of the grievance machinery in accordance with the
provisions of their CBA, Delada is expected to comply first with the said lawful directive while awaiting the
results of the decision in the grievance proceedings. This issue falls squarely in the case of Allied Banking
Corporation vs. Court of Appeals x x x.
Pursuant to Allied Banking, unless the order of MPH is rendered invalid, there is a presumption of
the validity of that order. Since the PVA eventually ruled that the transfer order was a valid exercise of
management prerogative, we hereby reverse the Decision and the Resolution of the CA affirming the Decision
of the PVA in this respect. MPH had the authority to continue with the administrative proceedings for
insubordination and willful disobedience against Delada and to impose on him the penalty of suspension. As a
consequence, petitioner is not liable to pay back wages and other benefits for the period corresponding to the
penalty of 90-day suspension.
WHEREFORE, the Petition is GRANTED. The Decision and the Resolution of the Court of
Appeals are hereby MODIFIED. We rule that petitioner Manila Pavilion Hotel had the authority to continue
with the administrative proceedings for insubordination and willful disobedience against Delada and to impose
on him the penalty of suspension. Consequently, petitioner is not liable to pay back wages and other benefits for
the period corresponding to the penalty of 90-day suspension.
SO ORDERED
G.R. No. 158922 May 28, 2004
FERNANDO GO, petitioner,
vs.
COURT OF APPEALS and MOLDEX PRODUCTS, INC., respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review under Rule 45 of the Rules of Court seeking the reversal of the decision1 of the
Court of Appeals dated June 30, 2003, in CA-G.R. SP No. 73349, which set aside the twin resolutions2 of the
National Labor Relations Commission (NLRC).
The antecedent facts are as follows:
On April 26, 1986, petitioner Moldex Products, Inc. hired private respondent, Fernando Go as a salesman with
a monthly salary of One Thousand Six Hundred Ninety One Pesos (P1,691.00) and an allowance of Five
Hundred Ten Pesos (P510.00).3 Over the years, private respondent worked himself within petitioner's corporate
structure until he eventually attained the rank of Senior Sales Manager with a monthly compensation of Fifty
Thousand Pesos (P50,000.00) and an average sales commission of Fifteen Thousand Pesos (P15,000.00) per
month.4
As the Senior Sales Manager of private respondent, petitioner was responsible for overseeing and managing the
sales force of the company such as dealing with clients, getting orders, entering into agreement with clients,
subject to the approval of higher management.5
Sometime in the middle of 1998, petitioner's attention was called by Antonio Roman, the Executive Vice-
President and Chief Operating Officer of respondent corporation, regarding the discovery of alleged anomalies
purportedly committed by the sales people under the Commercial and Industrial Division of the respondent's
Marketing Department. The anomalies stemmed from the disbursement of funds by the respondent to
government officials for the purpose of getting big supply contracts from the government.6
It appears that sometime in 1998, the accounts handled by the petitioner and his staff experienced collection
problems. This difficulty in collection necessitated the conduct of an investigation by the respondent,7 which led
to the discovery of anomalies. Among the sales personnel investigated was a member of petitioner's division.
Consequently, respondent corporation dismissed a number of its personnel.8
For its part, respondent claimed that it also questioned petitioner and that "obviously feeling guilty for not
exercising effective supervision over his subordinates, (petitioner) submitted a letter of resignation9 dated
October 12, 1998 but effective on November 16, 1998."10 Respondent added that petitioner went on leave from
October 12, 1998 to November 16, 1998. While on leave, petitioner worked for the release of his clearance and
the payment of 13th month pay and leave pay benefits.
On the other hand, petitioner averred that he was not investigated. During his talk with the higher management
of the respondent corporation, petitioner contended that the sales people who were found to be involved in the
anomalies were directly getting instructions, relative to the disbursement of funds to government officials, from
respondent's personnel who were occupying management positions higher than that of the petitioner.11
Petitioner further alleged that after the investigation, he was surprised to receive an advice from the respondent
that his services were being terminated by the latter on account of command responsibility. But since the
petitioner was not involved in the anomalies, he was promised payment of separation pay, commission and
other benefits due him on account of his long and dedicated employment with the respondent. In addition, the
respondent also granted to petitioner a distributorship agreement for the right to be a distributor of its products.
In exchange, petitioner was asked to submit a courtesy resignation to the respondent.12 Thereafter, petitioner's
responsibility as the senior sales manager of the respondent was eventually stripped from him.
On March 21, 2000, petitioner filed with the NLRC a complaint13 for constructive dismissal, separation pay,
service incentive leave including damages and attorney's fees against the respondent.14 The case was docketed
as NLRC NCR Case No. 00-03-01684-2000 and it was raffled to the office of Labor Arbiter Ermita T.
Abrasaldo-Cuyuca.
On April 30, 2001, Labor Arbiter Abrasaldo-Cuyuca rendered a Decision15 the dispositive portion of which
states:
WHEREFORE, judgment is hereby rendered in favor of the complainant and against the respondent.
1. Declaring the dismissal of complainant to be illegal;
2. Ordering respondent to pay complainant his backwages in the amount of P1,597,916.67;
3. To pay complainant his separation pay in the amount of P375,000.00
Ten Percent of the total award as attorney's fees.
Respondent appealed16 the aforesaid decision to the NLRC. On May 31, 2002, the Third Division of the NLRC
promulgated a Resolution17 which affirmed with modification the Labor Arbiter's decision. As modified, the
NLRC deleted the award of attorney's fees for lack of factual basis but it affirmed the rest of the Labor Arbiter's
award in favor of herein petitioner. The dispositive portion of the decision reads:
WHEREFORE, the appealed decision is hereby AFFIRMED, with modification deleting the award of attorney's
fees.
SO ORDERED.
Respondent sought a reconsideration of the NLRC decision which was denied in a Resolution dated July 31,
18
2002. Respondent filed a petition for certiorari with the Court of Appeals.19
As stated earlier, the Court of Appeals annulled and set aside the twin resolutions of the NLRC. In arriving at
its decision, the Court of Appeals relied heavily on the annexes20 attached to the affidavit21 of Antonio Roman,
the Senior Executive Vice and Chief Operating Officer of the respondent. The said annexes purportedly showed
that, contrary to the allegations of the petitioner that he was stripped of his responsibility as a sales manager, he
was actively performing his normal duties and functions between the periods of July and September 1998, the
months immediately prior to his resignation on October 12, 1998.
Hence, this petition for review, raising the following arguments:
The Court of Appeals committed reversible error considering that:
1. It weighed at face value the sworn statement of Antonio Roman and its annexes, which were both
presented for the first time on appeal;
2. It ruled that herein petitioner was not constructively dismissed rather he voluntarily resigned from
the respondent;
3. It held that the petitioner's witnesses are biased and therefore tainted with prejudice against the
private respondent;
4. It ruled that the resignation of the petitioner was not a result of the manipulation and deception of
the private respondent, and;
5. It held that the NLRC committed grave abuse of discretion when it misappreciated the facts and
rendered judgment contrary to established evidence.22
The petition lacks merit.
It is a well-established rule that the jurisdiction of the Supreme Court in cases brought before it from the Court
of Appeals via Rule 45 of the 1997 Rules of Civil Procedure, as amended, is limited to reviewing errors of
law.23 This Court is not a trier of facts. In the exercise of its power of review, the findings of fact of the Court of
Appeals are conclusive and binding and consequently, it is not our function to analyze or weigh evidence all
over again.24
The above rule, however, is not iron-clad. In Siguan v. Lim25 we enumerated the instances when the factual
findings of the Court of Appeals are not deemed conclusive, to wit: (1) when the conclusion is a finding
grounded entirely on speculations, surmises or conjectures; (2) when the inference made is manifestly mistaken,
absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of facts are conflicting; (6) when the Court of Appeals, in
making its findings went beyond the issues of the case and the same is contrary to the admission of both the
appellant and the appellee; (7) when the findings are contrary to those of the trial court; (8) when the findings
are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the
petition as well as in the petitioner's main and reply brief are not disputed by the respondent; and when (10) the
findings of fact are premised on the supposed evidence and contradicted by the evidence on record.
In the instant case, the issue is shrouded by a conflict of factual perception. We are constrained to review the
factual findings of the Court of Appeals, because the conflict falls within the ambit of one of the recognized
exceptions to the conclusiveness of its findings, i.e., when its findings of facts contradict those of the lower
court, in this case that of the Labor Arbiter and the agency which exercised adjudicative functions over him, the
NLRC.
The principal issue to be resolved in this case is whether or not the petitioner was constructively dismissed.
Petitioner claims that his separation from employment with the respondent was a case of constructive dismissal,
an allegation which the respondent refutes with its own set of evidence pointing to the petitioner's voluntary
resignation.
After a careful review of the records of this case, we find sufficient reasons to uphold respondent's contention.
Constructive dismissal exists where there is a cessation of work because continued employment is rendered
impossible, unreasonable or unlikely.26 It is present when an employee's functions, which were originally
supervisory in nature, were reduced, and such reduction is not grounded on valid grounds such as genuine
business necessity.27
Petitioner contends that he felt compelled to tender his resignation on October 12, 1998 because after the
discovery of anomalies perpetrated by sales people under him, he started getting shabby treatment from the
company, and that slowly, he was divested of his duties and responsibilities as the Senior Sales and Marketing
Manager of the respondent. He, however, maintains that his resignation was involuntary.
In support of his contention, the petitioner submitted the respective affidavits of Mario Carangan III28 and
Floriza Tuazon,29 his former co-employees, who both alleged that petitioner was one of the officers of
respondent who was stripped of responsibilities and duties while the investigation of the anomalies was going
on.
By way of rebuttal, the respondent challenged the contents of the sworn statements for being purely hearsay.
With respect to the sworn statement of Ms. Floriza G. Tuazon, respondent argues that Ms. Tuazon resigned
even before the petitioner. Thus, she could not be privy to the events involving petitioner which transpired after
her resignation. More specifically, the cause of petitioner's resignation on October 12, 1998 was no longer
within the competence of Ms. Tuazon.30 The sworn statement of Mr. Mario Carangan III also suffers from the
same infirmity.
As correctly observed by the Court of Appeals:
It should be remembered that the petitioner has submitted a letter of resignation. It is thus incumbent upon him
to substantiate his claim that his resignation was not voluntary but in truth was actually a constructive
dismissal.31
The failure of the petitioner to fully substantiate his claim that the respondent stripped him of his duties and
functions is fatal to his present petition. Except for the sworn statements previously discussed, which we have
found to be lacking in probative value, petitioner did not present any other proof of the alleged stripping of his
functions by the respondent. Petitioner's bare allegations of constructive dismissal, when uncorroborated by the
evidence on record, cannot be given credence.
Further, respondent presented copies of its confidential sales evaluation form which prove that, contrary to the
32
allegations of the petitioner, he was still performing his duties and responsibilities one month prior to his
resignation. This clearly negates his allegations that he was stripped of his duties.
Apparently, petitioner fully exercised the prerogatives and the responsibilities of his office as the Senior Sales
Manager of the respondent during the time that the said functions were supposedly removed from him.
Therefore, there can be no constructive dismissal to speak of. He who asserts must prove.33
Moreover, after petitioner resigned, he went on leave from October 12, 1998 to November 16, 1998, the date of
the effectivity of his resignation. While on leave, he worked for the release of his clearance and the payment of
his 13th month pay and leave pay benefits. In doing so, he in fact performed all that an employee normally does
after he resigns. Petitioner has taken his theory of coerced or manipulated resignation out of the equation. If
indeed the petitioner was forced into resigning from the respondent, he would not have sought to be cleared by
the respondent and to be paid the monies due him. Resignation is the formal pronouncement or relinquishment
of an office.34 The voluntary nature of petitioner's acts has manifested itself clearly and belie his claim of
constructive dismissal.
The totality of the evidence indubitably shows that petitioner resigned from employment without any coercion
or compulsion from respondent. His resignation was voluntary. As such, he shall only be entitled to his 13th
month pay and leave pay benefits. These, however, have already been paid to him by respondent.35
WHEREFORE, the petition is DENIED and the decision of the Court Appeal dated June 30, 2003 is
AFFIRMED. The complaint for constructive dismissal filed by respondent Fernando Go against petitioner is
ordered DISMISSED.SO ORDERED
G.R. No. 232527, July 07, 2021
YOUNGBROS PARTS CENTRE INC. AND LAURENCE LLAVE, Petitioners, v. ULDARICO I.
TADURAN, Respondent.
DECISION
LOPEZ, J.:
We pass upon the petition for review on certiorari1 under Rule 45 of the Revised Rules of Court filed by
Youngbros Parts Centre, Inc. and Laurence Llave (petitioners). They assail the Decision2 dated December 9,
2016 of the Court of Appeals (CA), in CA-G.R. SP No. 136991, which set aside the Decision3 dated May 29,
2014 of the National Labor Relations (NLRC) Commission in NLRC LAC Case No. 11-003299-13 and NLRC
NCR Case No. 07-10950-13, dismissing Uldarico Taduran's (respondent) complaint for illegal dismissal, and
the CA Resolution4 dated June 27, 2017, which denied petitioners Motion for Partial Reconsideration.
The Antecedents
Respondent began working for the petitioner in February 1972 as storekeeper. He was promoted to Manager in
1990 and has kept his post since.5
On September 14, 2011, petitioner Laurence Llave, Manager of Youngbros Parts Centre, Inc., offered him a
retirement package as management appreciation for his 39 years of continuous service. However, the offer
required his answer within 48 hours from notice.6
With the dearth of details of the coverage of the retirement package, respondent inquired. In their reply,
petitioners informed respondent that he was entitled to receive P511,875.99 as retirement pay. Considering,
however, that respondent had cash advances totaling to P883,395.00 representing his unremitted accumulated
sales, he still owed the company the amount of P371,520.00. Nonetheless, petitioners waived the right to collect
his cash balances. Instead, it offered respondent the amount of P316,605.00 as financial assistance.7
In a Memorandum dated October 7, 2011, petitioner informed respondent the should he decline the retirement
package offered, he shall be subjected to the company policies applicable to all employees.8
On November 9, 2011, respondent sent a letter to petitioner informing the latter of his decision to avail of the
retirement package, subject to proper computation. Respondent claimed that his monthly compensation
amounted to P48,000.00, which when computed as basis for retirement pay, would sum up to P1,345,499.00.
He added that his alleged cash advances were actually payment for his commission, 13th month pay, and service
incentive leave, all recognized by the previous company owner.9
In a letter dated November 23, 2011, the company denied respondent's counter-offer. It also informed
respondent that his cash advances already totaled to P907,745.00. Even then, the company had increased the
retirement package offer to P1,200,000.00 so that after deducting respondent's cash advances, the latter would
still receive the amount of P292,255.00 as retirement pay.10
On December 1, 2011, respondent filed a complaint for non-payment of salary, overtime pay, holiday pay,
holiday premium, service incentive leave, 13th month pay, meal and transportation allowance, commission,
retirement benefits, emergency cost of living allowance (ECOLA), moral and exemplary damages, and
attorney's fees. The case was docketed as NLRC NCR Case No. 12-17894-11.11
In a Decision dated September 6, 2012, Labor Arbiter Madjayran Ajan ruled in favor of respondent,
thus:chanroblesvirtualawlibrary
WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent company to pay
complainant's monthly compensation of P35,000.00 to be computed from September 2011 up to the last date of
his employment, 13th month pay and retirement benefits to be computed from the start of his employment in
February 1972 up to December 1, 2011, plus attorney's fees equivalent to ten percent (10%) of herein total
award for having compelled to litigate in this case.
All other claims are hereby dismissed for lack of sufficient factual and legal basis.
xxx
SO ORDERED. 12
Undaunted, petitioners appealed to the NLRC. On June 28, 2013, the NLRC rendered its Decision, modifying
the assailed ruling:chanroblesvirtualawlibrary
WHEREFORE, premises considered, the appeal is PARTLY GRANTED and the September 6, 2012 Decision
is hereby MODIFIED in that the award of salary for September 2011 up to the last date of employment and
13th month pay for 2011 are deleted, there being no evidence that the same were [not] duly paid. Complainant's
retirement pay is ordered computed based on his established monthly salary of P17,200.00 reckoned from
February 1972 up to December 2011, plus 10% of the total award as attorney's fees. The computation of the
total award is attached herewith and forms part of this Decision.
All other claims are dismissed for lack of merit.
SO ORDERED.13
Both parties moved for reconsideration, but their motions were denied in the NLRC Resolution dated July 31,
2013.14
On similar date, respondent filed an illegal dismissal case against petitioners. In his complaint, respondent
averred that he was allowed to continue his employment until July 19, 2013 when the guard on duty had barred
him from further reporting to work because he was already retired. Respondent believed that he was yet to
exercise his option to retire because: 1) he was only 62 years old; 2) he had not yet received any retirement pay;
and 3) the NLRC Decision awarding retirement benefits had still to attain finality. The case was, subsequently,
docketed as NLRC-NCR Case No. 0710950-13. Petitioners filed a Motion to Dismiss the complaint on the
ground of forum shopping. In opposition, respondent countered that the illegal dismissal case had a different
issue from the previously instituted action.15
On October 21, 2013, Labor Arbiter Lilia S. Savari issued an Order,16 dismissing the case for lack of
jurisdiction. Subsequently, respondent appealed to the NLRC.17
Meanwhile, the June 28, 2013 NLRC Decision became final. Thus, respondent filed a motion to enforce the
execution of the monetary awards pursuant to the Entry of Judgment issued in NLRC NCR Case No. 1217894-
11. A pre-execution proceeding was conducted, where petitioners voluntarily settled the monetary award. Such
payment was evidenced by an acknowledgment receipt dated December 23, 2013 in the amount of
P550,000.00.18
By way of Comment, respondent argued that the payment of retirement benefits did not sever the employer-
employee relationship between him and petitioners as he did not voluntarily retire. In Reply thereto, petitioners
claimed that there was already an agreement to retire although the payment of the retirement benefit was
deferred.19
On May 29, 2014, the NLRC issued a Decision, dismissing the appeal as follows:chanroblesvirtualawlibrary
WHEREFORE, premises considered, the appeal is denied. The Order dated October [21], 2013 is AFFIRMED,
subject to the modification that the complaint is deemed to have opted to retire under the third paragraph of
Article 287 of the Labor Code as amended by [Republic Act] No. 7641.
SO ORDERED.20
Unwilling to concede, respondent filed a Motion for Reconsideration, but the same was denied for lack of
merit. That prompted him to elevate the case to the CA by way of a certiorari petition.21
Taking on another stance, the CA granted the petition in its Decision dated December 9, 2016 and ruled that
respondent was illegally dismissed. The CA said that respondent's acceptance of his retirement benefits,
pursuant to the NLRC Decision, which has become final and executory, did not put him in estoppel in pursuing
his illegal dismissal case. According to the CA, respondent's cause of action in the illegal dismissal case
accrued on July 19, 2013 when his employment was terminated. At such time, there was still an existing
employer-employee relationship between the parties as there was yet no final and consummated agreement as
to respondent's retirement benefit. Since the cause of action in the illegal dismissal case accrued prior to the
settlement of retirement benefits on December 23, 2013, respondent's acceptance of the judgment award did not
render moot the illegal dismissal case.
In the end, the CA adjudged:chanroblesvirtualawlibrary
WHEREFORE, the instant Petition for Certiorari is GRANTED. The assailed May 29, 2014 Decision and June
30, 2014 Resolution issued by the public respondent National Labor Relations Commission, in NLRC LAC
Case No. 11-003299-13, NLRC NCR Case 07-10950-13 are hereby REVERSED and SET ASIDE. Private
respondents are ORDERED to pay petitioner ULDARICO I. TADURAN (a) separation pay in the amount
equivalent to one (1) month pay for every year of service; and (b) backwages, computed from the time
compensation of petitioner Taduran was withheld from him when he was unjustly terminated on July 19, 2013,
up to the time of the finality of his retirement on November 6, 2013. For this purpose, let the records of this
case be REMANDED to the labor Arbiter for the proper computation of said awards based on the foregoing
discussion.
SO ORDERED.22
Hence, this petition.
The Issues
I. WHETHER THE INSTANT PETITION FOR CERTIORARI SUFFERS FROM A FORMAL DEFECT,
SPECIFICALLY, RESPONDENT'S COPY OF THE PETITION WAS NOT ACCOMPANIED BY PLAIN
COPIES OF ALL DOCUMENTS ATTACHED TO THE ORIGINAL, PURSUANT TO SECTION 3, RULE
46 OF THE RULES OF COURT;
II. WHETHER THE NLRC DID NOT GRAVELY ABUSE ITS DISCRETION IN ISSUING ITS
RESOLUTION DATED JUNE 30, 2014 AND DECISION DATED MAY 29, 2014 BOTH HEREIN
ASSAILED;
III. WHETHER VOLUNTARINESS IN THE SEVERANCE OF EMPLOYER-EMPLOYEE RELATIONSHIP
WAS PRESENT WHEN RESPONDENT RECEIVED HIS RETIREMENT BENEFITS ON DECEMBER 23,
2013.
Our Ruling
We shall first dispose the procedural matter raised by the petitioners. They argue that the CA gravely erred
when it dismissed outright its certiorari petition for failure to comply with Section 3, Rule 46 of the Rules of
Court, which requires submission of all pleadings relevant or pertinent thereto.
We have explained in Duremdes v. Jorilla23 that "while rules of procedure are essential to the proper, efficient,
and orderly dispensation of justice, such rules are to be applied in a manner that will help secure and not defeat
justice. Thus, the Court has ruled against the dismissal of appeals based solely on technicalities, especially so
when the appellant has substantially complied with the formal requirements." In the same case, We have
reiterated the guideposts to be followed in determining the necessity for copies of pleadings and other
documents that needed to be attached in the petition:chanroblesvirtualawlibrary
First, not all pleadings and parts of case records are required to be attached to the petition. Only those which are
relevant and pertinent must accompany it. The test of relevancy is whether the document in question will
support the material allegations in the petition, whether said document will make out a prima faci case of grave
abuse of discretion as to convince the court to give due course to the petition.
Second, even if the document is relevant and pertinent to the petition, it need not be appended if it is shown that
the contents thereof can also be found in another document already attached to the petition. Thus, if the material
allegations in a position paper are summarized in a questioned judgment, it will suffice that only a certified true
copy of the judgment is attached.
Third, a petition lacking an essential pleading or part of the case record may still be given due course or
reinstated (if earlier dismissed) upon showing that petitioner later submitted the documents required, or that it
will serve the higher interest of justice that the case be decided on the merits.24 (Citation omitted)
It is necessary then to remind the CA of the principle that rules of procedure are employed only to help secure
and not override substantial justice. If a stringent application of the rules would hinder rather than serve the
demands of substantial justice, the former must yield to the latter.
Having settled the procedural matter, we shall discuss the merits of the case.
Based on the submissions of both parties, the main issue presented for resolution to this Court is whether
respondent, after receiving the adjudged retirement pay from petitioner, is estopped to pursue an action for
separation pay arising from his claim for illegal termination of his employment.
Retirement is "the result of a bilateral act of the parties, a voluntary agreement between the employer and the
employee whereby the latter, after reaching a certain age, agrees to sever their employment with the
former."25 As explained in Laya v. Philippine Veteran's Bank, et al.,26 the retirement of employees in the private
sector is governed by Article 287 of the Labor Code, viz.:chanroblesvirtualawlibrary
Article 287. Retirement. Any employee may be retired upon reaching the retirement age established in the
collective bargaining agreement or other applicable employment contract.
Here, there are telling details indicative of respondent's assent to the company's retirement offer. First, it was
respondent who pursued payment of his retirement benefits by filing a claim before the Labor Arbiter. Second,
after the NLRC has settled the amount of retirement benefits which respondent is entitled to receive, the latter
never contested the adjudged amount. Third, upon finality of the NLRC's ruling, it was respondent who moved
for the execution of the monetary judgment. Finally, respondent received, without condition, the adjudged
retirement pay as evidenced by the acknowledgment receipt dated December 23, 2013.
Indeed, by actively filing a retirement claim before the labor tribunal, even doggedly pursuing its re-
computation to the NLRC, and finally receiving the adjudged retirement benefits as soon as the judgment has
attained finality, respondent has evinced his desire to relinquish his employment with the petitioners. His
positive acts eloquently portrayed his clear intention to concede his tenure. In fact, both the Labor Arbiter and
the NLRC have recognized such intent to retire when they computed respondent's benefits from his date of
hiring up to the day that he filed his retirement claim on December 1, 2011. In short, respondent is deemed to
have acceded to his retirement effective on the day that he had filed his claim for retirement benefits against
petitioners, and his acceptance of the benefits, as he himself admitted, marked the consummation of their
agreement for him to retire. To allow respondent, at this point, to pursue an action for illegal dismissal filed
way after he had opted to retire would be tantamount to an injustice on the part of petitioners, which this Court
cannot countenance. Thus, We have stated that:chanroblesvirtualawlibrary
xxx more often than not, been inclined [toward] the plight of the workers and has upheld their cause in their
conflicts with the employers, such inclination has not blinded it to the rule that justice is in every case for the
deserving, to be dispensed in the light of the established facts and applicable law and doctrine.29
WHEREFORE, premises considered, the Petition is GRANTED. The Decision dated December 9, 2016 of
the Court of Appeals, in CA-G.R. SP No. 136991 is REVERSED and SET ASIDE. The Decision dated May
29, 2014 of the National Labor Relations Commission in NLRC LAC Case No. 11-003299-13 and NLRC NCR
Case No. 07-10950-13 is REINSTATED. Uldarico I. Taduran was not illegally dismissed from service as he is
deemed to have opted to retire under the third paragraph of Article 287 of the Labor Code as amended by R.A.
No. 7641.chanroblesvirtualawlibrary
SO ORDERED.

In the absence of a retirement plan or agreement providing for retirement benefits of employees in the
establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65)
years which is hereby declared the compulsory retirement age, who has served at least five (5) years in the said
establishment, may retire and shall be entitled to retirement pay [equivalent to at least one-half (½) month
salary for every year of service, a fraction of at least six (6) months being considered as one whole year].
The article provides for two types of retirement, namely: (a) compulsory and (b) optional. The first takes place
when the employee reaches the age of 65, while the second is primarily determined by the collective bargaining
agreement or other employment contract or employers' retirement plan. In the absence of any provision on
optional retirement in a collective bargaining agreement, other employment contract, or employer's retirement
plan, an employee may optionally retire upon reaching the age of 60 years or more, but not beyond 65 years,
provided they have served at least five years in the establishment concerned. That prerogative is exclusively
lodged in the employee.27

In Pulong v. Super Manufacturing, Inc.,28 the Court iterated that the "[a]cceptance by the employees of an early
retirement age option must be explicit, voluntary, free, and uncompelled." But while the law demands more
than a passive acquiescence on the part of the employee to avail of the retirement package proposed by the
employer, intent to retire may also be inferred from the overt act/s manifested by the employee.