Labor Digests Complete

SAN BEDA UNIVERSITY COLLEGE OF LAW
Labor Law 1 & Agrarian Law and Social Legislation

Atty. Mercader
Atty. Mercader
Atty. Mercader
Case Name GR. No. Contributor/s Page

Constitutional Law Principles in Relation to Labor Law
Manila Electric Co. v. Quisumbing 127598 Alteza & Aurelio 10
Agabon v. NLRC 158693 Karisha Orcullo 13
Jaka Food v. Pacot 151378 Jaime Pagao 15
Abbot Laboratories v. Alcaraz 192571 Camille Teves 17
Duncan Assoc. v. Glaxo Wellcome 162994 Feliciano & Madarang 22
Yrasuegui v. Philippine Airlines 168081 Romero & Tolentino 24
Manuel v. N.C. Construction Supply 127553 Janine Marasigan 27
Punzal v. ETSI Technologies Inc. 170384 Pierre Kalaw 29
Lopez v. Alturas Group of Companies 191008 Agatha Edillor 30
Pascual v. Board of Med. Examiners L-25018 Bea Medrano 33
Social Justice Society v. DDB & PDEA 157870 Joelle Garcia 35
Employer-Employee Relationship
LVN Pictures v. Phil. Musicians Guild L-12582 Nehvin Siasoco 38
Paguio Transport Corp. v. NLRC 119500 Jame Bacolod 40
Teng v. Pahagac 169704 Joseph Montemar 41
Dy Keh Beng v. International Labor L-32245 Ronalyn Pordan 43
Insular Life Assurance Co. v. NLRC 84484 James Anas 45
Tongko v. Manufacturer’s Life 167622 Marianne Suzuki 47
AFP Mutual Benefit Assoc. v. NLRC 102199 Raj Biasca 49
Corporal v. NLRC 129315 Paula Torres 50
Maraguinot v. NLRC 120969 Chantal Castaneda 52
Sonza v. ABS-CBN Broadcasting 138051 Paolo Pascual 54
ABS-CBN v. Marlyn Nazareno 164156 Joseph De Guzman 57
Fulache v. ABS-CBN 183810 Charlotte Lomibao 60
Begino v. ABS-CBN 199166 Judee Hamor 62
Orozco v. Court of Appeals 155207 Gregorio Maligaya 65
WPP Marketing v. Galera 169207 Nichole Pedrina 67
TAPE v. Servaña 167648 Joelle Garcia 70
Calamba Medical Center v. NLRC 176484 Joelle Garcia 72
Jardin v. NLRC 119268 Nikolai Paggao 74
Francisco v. NLRC 170087 Karisha Orcullo 75
Tabang v. NLRC 121143 Camille Teves 77
Matling Industrial v. Coros 157802 Knicole Feliciano 78
Malcaba v. Prohealth Pharma Phil. 209085 Aaron Madarang 80
Republic v. Asiapro Cooperative 172101 River Romero 82
Classes of Employees
De Leon v. NLRC 70705 Eryn Alteza 85
Magsalin v. National Organization 148492 James Anas 87
Canadian Opportunities v. Dalangin 172223 Aaron Aurelio 90
Aliling v. Feliciano 185829 Jamie Bacolod 93
Philippine Daily Inquirer v. Magtibay 164532 Raj Biasca 94
Abbot Laboratories v. Alcaraz 192571 Camille Teves 95
Enchanted Kingdom v. Verzo 209559 Chantal Castaneda 99
ICMC v. NLRC 72222 Joeseph De Guzman 101
Magis Learning Center v. Manalo 178835 Agatha Edillor 103
Atty. Mercader
Mercado v. AMA Computer College 183572 Judee Hamor 106

Colegio del Santisimo Rosario v. Rojo 170388 Pierre Kalaw 108
Buiser v. Hon. Leogardo L-63316 Charlotte Lomibao 110
Mariwasa Manufacturing v. Leogardo 74246 Kristine Magbojos 112
ALU-TCP v. NLRC 109902 Kristine Magbojos 114
Leyte Geothermal v. PNOC-EDC 170351 Gregorio Maligaya 115
Malicdem v. Marulas Industrial Corp. 204406 Janine Marasigan 119
Maraguinot v. NLRC 120969 Chantal Castaneda 121
Liganza v. RBL Shipyard Corporation 159862 Kimmy Medina 123
Hanjin Heavy Industries v. Ibanez 170181 Kimmy Medina 126
PNOC-Energy Devt. Corp. v. NLRC 169353 Bea Medrano 130
Filsystems v. Cruz 153832 Joseph Montemar 132
E. Ganzon, Inc. v. Ando 214183 Paolo Pascual 134
Mercado v. NLRC 79869 Patrick Patricio 136
Cocomangas Hotel v. Visca 167045 Patrick Patricio 137
Gadia v. Sykes Asia 209499 Nichole Pedrina 139
Hacienda v. National Federation 149440 Camille Teves 142
Gapayao v. Fulo 193493 Nehvin Siasoco 144
URC v. Acibo 186439 Divina Tolentino 146
Paz v. Northern Tobacco Redrying Co 199554 Marianne Suzuki 148
Kimberly Independent v. Drilon 77629 Eryn Alteza 152
Philippine Geothermal v. NLRC 82643 James Anas 155
Brent School v. Zamora 48494 Aaron Aurelio 157
Pakistan International Airlines v. Ople 61594 Jamie Bacolod 159
Philips Semiconductors v. Fadriquela Raj Biasca 161
Fuji Network Television v. Espiritu 204944 Chantal Castaneda 162
Samonte v. La Salle Greenhills 199683 Joespeh De Guzman 164
Poseidon Fishing v. NLRC 168052 Agatha Edillor 167
Fabella v. San Miguel Corporation 150658 Knicole Feliciano 169
GMA Network v. Pabriga Judee Hamor 171
Job Contracting and Labor-only Contracting
Coca-Cola Bottlers v. Dela Cruz 184977 Pierre Kalaw 175
Temic Automotive v. Temic Employee 186965 Charlotte Lomibao 177
Alviado v. Procter & Gamble 160506 Aaron Madarang 179
Neri v. NLRC 97008 Kristine Magbojos 181
Vinoya v. NLRC 126586 Gregorio Maligaya 182
San Miguel Corporation v. Semillano 164257 Janine Marasigan 185
Baguio v. NLRC 79004 Kimmy Medina 187
San Miguel v. Semillano 164257 Bea Medrano 190
Consolidated Building v. Asprec 217301 Joseph Montemar 192
Mago v. Sun Power Manufacturing 210961 Karisha Orcullo 196
Jaguar Security v. Sales 162420 Jaime Pagao 199
Vinoya v. NLRC 126586 Gregorio Maligaya 200
Coca-Cola Bottlers v. Agito 179546 Paolo Pascual 204
Garden of Memories Park v. NLRC 160278 Patrick Patricio 206
Aliviado v. Procter & Gamble 160506 Nichole Pedrina 208
Manila Memorial Park v. Lluz 208451 River Romero 211
W.M. Manufacturing v. Dalag 209418 Nehvin Siasoco 213
Diamond Farms, v. Southern Phil. 173254 Mariane Suzuki 215
Atty. Mercader
Recruitment of Local and Migrant Workers

People v. Panis L-58674 Divina Tolentino 218
People v. Gallo 187730 Eryn Alteza 219
People Dela Piedra 121777 James Anas 222
People v. Chua 184058 Aaron Aurelio 223
David v. Marquez 209859 Jamie Bacolod 225
Republic v. Principalia Management 167639 Raj Biasca 228
Trans Action Overseas v. DOLE Sec. 109583 Chantal Evangelista 229
Stolt-Nielsen v. Medequillo 177498 Joseph De Guzman 231
Estate of Nelson Dulay v. Aboitiz 172642 Agatha Edillor 234
Santiago v. CF Sharp Crew 162419 Knicole Feliciano 235
Industrial Personnel v. De Vera 205703 Judee Hamor 237
Datuman v. First Cosmopolitan 156029 Pierre Kalaw 241
Gagui v. Dejero 196036 Charlote Lomibao 243
Sealanes Marine v. Dela Torre 214132 Aaron Madarang 245
Gargallo v. DOHLE Seafront Crewing 215551 Kristine Magbojos 257
Princess Talent Center v. Masagca 191310 Gregorio Maligaya 248
Powerhouse Staffbuilders v. Rey 190203 Janine Marasigan 250
Sunace International v. NLRC 161757 Kimmy Medina 253
Yap v. Thenamaris Ship Management 179532 Bea Medrano 255
Sameer Overseas v. Cabiles 170139 Joseph Montemar 257
Maersk-Filipinas Crewing v. Avestruz 207010 Karisha Orcullo 260
Hours of Work
Rada v. NLRC 96078 Jaime Pagao 263
University of Pangasinan Faculty v. UP L-63122 Paolo Pascual 266
San Juan de Dios Hospital v. NLRC 126383 Patrick Patricio 267
Philippine Graphic Arts v. NLRC L-80737 Nichole Pedrina 270
Unicorn Safety Glass v. Basarte 154689 River Romero 271
Linton Commercial v. Hellera 163147 Nehvin Siasoco 273
Bisig Manggagawa sa Tryco v. NLRC 151309 Mariane Suzuki 275
Durabilt Recapping Plant v. NLRC 76746 Camille Teves 277
Pan Am v. Pan American Employees L-16275 Divina Tolentino 280
Sime Darby Pilipinas v. NLRC 119205 Eryn Alteza 282
Philippine Airlines v. NLRC 132805 James Anas 284
Arica v. NLRC 78210 Aaron Aurelio 287
Salazar v. NLRC 109210 Jamie Bacolod 290
San Miguel v. Democratic Labor Union L-18353 Raj Biasca 292
PAL Employees Savings v. NLRC 105963 Chantal Castaneda 293
PNB v. PNB Employees Association L-30279 Joseph De Guzman 294
R.B. Michael Press v. Galit 153510 Agatha Edillor 297
Union of Filipro Employees v. Vivar 79256 Knicole Feliciano 300
Jose Rizal College v. NLRC L-65482 Joelle Garcia 302
Grand Asian Shipping Lines v. Galvez 178184 Judee Hamor 305
San Miguel v. Court of Appeals 146775 Pierre Kalaw 308
Chartered Bank Employees v. Ople L-44717 Charlotte Lomibao 309
Wellington Investment v. Trajano 114698 Aaron Madarang 311
Producers Bank v. NLRC 100701 Kristine Magbojos 313
Odango v. NLRC 147420 Gregorio Maligaya 315
Atty. Mercader
Lim v. HMR Philippines 201483 Janine Marasigan 317

Asian Transmission v. CA 144664 Kimmy Medina 319
Fernandez v. NLRC 105892 Bea Medrano 322
Auto Bus Transport v. Bautista 156367 Joseph Montemar 324
JPL Marketing v. Court of Appeals 151966 Karisha Orcullo 326
David v. Macasio 195466 Jaime Pagao 328
Paloma v. Philippine Airlines 148415 Paolo Pascual 329
Sugue v. Triumph International 164804 Patrick Patricio 330
Soriano v. PNCC Skyway Corporation 171231 Nichole Pedrina 333
Wages
Aklan Electric Cooperative v. NLRC 121439 River Romero 336
Philex Gold v. Philex Bulawan 149758 Nehvin Siasoco 337
International School v. Quisumbing 128845 Mariane Suzuki 338
C Planas Commercial v. NLRC 144619 Camille Teves 340
Rosario Gaa v. Court of Appeals L-44169 Divina Tolentino 342
Honda Philippines v. Samahan 145561 Eryn Alteza 344
Millares v. NLRC James Anas 348
Mayon Hotel and Restaurant v. Adana 157634 Aaron Aurelio 350
SLL International v. NLRC 172161 Jamie Bacolod 352
Our Haus Realty Devt. v. Parian 204651 Raj Biasca 354
Phil. Duplicators, Inc. v. NLRC (1993) 110068 Chantal Castaneda 356
Phil. Duplicators, Inc. v. NLRC (1995) 110068 Joseph De Guzman 358
Boie-Takeda Chemicals v. De la Serna 92174 Agatha Edillor 360
Iran v. NLRC 121927 Knicole Feliciano 362
Reyes v. NLRC 160233 Joelle Garcia 363
Philippine Spring Water v. CA 205278 Judee Hamor 364
Central Azucarera v. Central Union 188949 Pierre Kalaw 368
Honda Philippines v. Samahan 145561 Charlotte Lomibao 370
Boie-Takeda Chemicals v. De la Serna 92174 Aaron Madarang 371
Philippine Duplicators, Inc. v. NLRC 110068 Kristine Magbojos 373
King of Kings Transport v. Mamac 166208 Gregorio Maligaya 374
Vergara v. Coca Cola Bottlers 176985 Janine Marasigan 377
Arco Metal v. SAMARM-NAFLU 170734 Kimmy Medina 379
Metropolitan Bank v. NLRC 152928 Bea Medrano 381
UE v. UE Employees Association 179593 Joseph Montemar 382
Wesleyan Univ. v. Wesleyan Assoc 181806 Karisha Orcullo 384
Am Wire v. American Wire and Cable 155059 Jaime Pagao 387
Protacio v. Laya Mananghaya 168654 Paolo Pascual 389
Lepanto v. Lepanto Employees Assoc. 180866 Patrick Patricio 391
Mega Magazine v. Defensor 162021 Nichole Pedrina 393
TSPIC Corp v. TSPIC Employees Union 163419 River Romero 395
Eastern Telecom v. Eastern Union 185665 Nehvin Siasoco 397
Rosario Gaa v. Court of Appeals L-44169 Mariane Suzuki 399
Five J Taxi v. NLRC 111474 Camille Teves 400
Niña Jewelry v. Montecillo 188169 Divina Tolentino 402
Special Steel Products v. Villareal 143304 Eryn Alteza 404
Milan v. NLRC 202961 James Anas 406
Norkis v. Norkis Trading 157098 Aaron Aurelio 409
Prubankers Assoc. v. Prudential Bank 131247 Jamie Bacolod 411
Atty. Mercader
Employer’s Confederation v. NWPC 96169 Raj Biasca 413

Metrobank Employees Union v. NLRC 102636 Chantal Castaneda 414
Metro Transit Organization v. NLRC 116008 Joseph De Guzman 416
Bankard Employees Union v. NLRC 140689 Agatha Edillor 418
Philippine Geothermal v. Chevron 207252 Knicole Feliciano 419
Filipinas Golf and Country v. NLRC 62918 Joelle Garcia 422
Philippine Telegraph v. NLRC 99858 Judee Hamor 425
DBP v. NLRC 82763 Pierre Kalaw 428
DBP v. NLRC 86227 Charlotte Lomibao 430
Special Group of Workers
Philippine Telegraph v. NLRC 118978 Aaron Madarang 432
Lakpue Drug v. Belga 166379 Kristine Magbojos 434
Del Monte v. Velasco 153477 Gregorio Maligaya 435
Star Paper v. Simbol 164774 Janine Marasigan 437
Capin-Cadiz v. Brent Hospital 187417 Kimmy Medina 440
Inocente v. St. Vincent Foundation 202621 Bea Medrano 442
Union School International v. Dagdag 234186 Joseph Montemar 444
Libres v. NLRC 123737 Karisha Orcullo 446
Domingo v. Rayala 155831 Jaime Pagao 448
Apex Mining v. NLRC 94951 Paolo Pascual 452
Barcenas v. NLRC 87210 Nichole Pedrina 453
Bernardo v. NLRC 122917 River Romero 455
Nitto Enterprises v. NLRC 114337 Nehvin Siasoco 457
Century Canning v. Court of Appeals Divina Tolentino 458
Social Legislation
Social Security Commission v. Azote 209471 Eryn Alteza 461
Social Security Commission v. Favila 170195 James Anas 464
Social Security System v. Jarque 165545 Aaron Aurelio 466
Signey v. Social Security System 173582 Jamie Bacolod 467
Mendoza v. People 183891 Raj Biasca 468
Navarra v. People 224943 Chantal Castaneda 469
GSIS v. De Leon 186560 Joseph De Guzman 471
GSIS v. Alcaraz 187474 Agatha Edillor 473
Agrarian Reform
Secretary of DAR v. Dumagpi 195412 Knicole Feliciano 476
Landbank v. Alsua 211351 Joelle Garcia 478
Hacienda Luisita v. PARC 171101 Judee Hamor 480
Lebrudo v. Loyola 181370 Pierre Kalaw 483
Bumagat v. Arribay 194818 Charlotte Lomibao 485
DAR v. Carriedo (2016) 176549 Aaron Madarang 486
DAR v. Carriedo (2018) 176549 Gregorio Maligaya 488
Mateo v. DAR 186339 Janine Marasigan 490
Land Bank v. Heirs of Tañada 170506 Kimmy Medina 493
Robustum Agricultural v. DAR 221484 Bea Medrano 495
Atty. Mercader
Atty. Mercader
Meralco v Quisimbing
Ynares-Santiago, C.J.
GR No. 127598 – 22 February 2000
Facts: MEWA is the duly recognized labor organization of the rank-and-file employees of MERALCO.
On September 7, 1995, MEWA informed MERALCO of its intention to re-negotiate the terms and conditions
of their existing 1992-1997 Collective Bargaining Agreement (CBA). MERALCO signified its willingness to
re-negotiate through its letter dated October 17, 1995. Thereafter, collective bargaining negotiations
proceeded. However, despite the series of meetings between the negotiating panels of MERALCO and
MEWA, the parties failed to arrive at terms and conditions acceptable to both of them.
On April 23, 1996, MEWA filed a Notice of Strike with the National Capital Region Branch of the
National Conciliation and Mediation Board (NCMB) of the Department of Labor and Employment (DOLE on
the grounds of bargaining deadlock and unfair labor practices. The NCMB then conducted a series of
conciliation meetings but the parties failed to reach an amicable settlement. Faced with the imminence of
a strike, MERALCO on May 2, 1996, filed an Urgent Petition with the Department of Labor and Employment
which was docketed as OS-AJ No. 050396 praying that the Secretary assume jurisdiction over the labor
dispute and to enjoin the striking employees to go back to work.
The Labor Secretary granted the petition.
The union contends that any judicial review is limited to an examination of the Secretarys decision-
making/discretion - exercising process to determine if this process was attended by some capricious or
whimsical act that constitutes grave abuse; in the absence of such abuse, his findings - considering that he
has both jurisdiction and expertise to make them - are valid. First, no reviewable abuse of discretion could
have attended the Secretarys arbitral award because the Secretary complied with constitutional norms in
rendering the dispute award. The union posits that the yardstick for comparison and for the determination
of the validity of the Secretarys actions should be the specific standards laid down by the Constitution itself.
Issue/s:
1) W/N the decision of the Sec of Labor is subject to judicial review
2) W/N he commited grave abuse of discretion
Held: Yes. Judicial power includes the duty of the courts of justice to settle actual controversies involving
rights which are legally demandable and enforceable, and to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the government.
Under this constitutional mandate, every legal power of the Secretary of Labor under the Labor Code,
or, for that matter, any act of the Executive, that is attended by grave abuse of discretion is subject to review
by this Court in an appropriate proceeding. To be sure, the existence of an executive power alone - whether
granted by statute or by the Constitution - cannot exempt the executive action from judicial oversight,
interference or reversal when grave abuse of discretion is, or is alleged to be, present. This is particularly
true when constitutional norms are cited as the applicable yardsticks since this Court is the final interpreter
of the meaning and intent of the Constitution.
The extent of judicial review over the Secretary of Labors arbitral award is not limited to a determination
of grave abuse in the manner of the secretary’s exercise of his statutory powers. This Court is entitled to,
and must - in the exercise of its judicial power - review the substance of the Secretary’s award when grave
abuse of discretion is alleged to exist in the award, i.e., in the appreciation of and the conclusions the
Secretary drew from the evidence presented.
The natural and ever present limitation on the Secretary’s acts is, of course, the Constitution. And we
recognize that indeed the constitutional provisions the union cited are State policies on labor and social
justice that can serve as standards in assessing the validity of a Secretary of Labors actions. However, we
note that these provisions do not provide clear, precise and objective standards of conduct that lend
themselves to easy application. We likewise recognize that the Constitution is not a lopsided document that
only recognizes the interests of the working man; it too protects the interests of the property owner and
employer as well.
For these reasons - and more importantly because a ruling on the breadth and scope of the suggested
constitutional yardsticks is not absolutely necessary in the disposition of this case - we shall not use these
Atty. Mercader
yardsticks in accordance with the time-honored practice of avoiding constitutional interpretations when a
decision can be reached using non-constitutional standards. We have repeatedly held that one of the
essential requisites for a successful judicial inquiry into constitutional questions is that the resolution of the
constitutional question must be necessary in deciding the case.
In this case we believe that the more appropriate and available standard - and one does not require
a constitutional interpretation - is simply the standard of reasonableness. In layman’s terms,
reasonableness implies the absence of arbitrariness; in legal parlance, this translates into the
exercise of proper discretion and to the observance of due process. Thus, the question we have to
answer in deciding this case is whether the Secretary’s actions have been reasonable in light of the parties
positions and the evidence they presented.
YES. We find, based on our consideration of the parties positions and the evidence on record, that the
Secretary of Labor disregarded and misappreciated evidence, particularly with respect to the wage
award.The Secretary of Labor apparently also acted arbitrarily and even whimsically in considering a
number of legal points; even the Solicitor General himself considered that the Secretary gravely abused his
discretion on at least three major points: (a) on the signing bonus issue; (b) on the inclusion of confidential
employees in the rank and file bargaining unit, and (c) in mandating a union security closed-shop regime in
the bargaining unit.
While the Secretary is not expected to accept the company-offered figures wholesale in determining a wage
award, we find it a grave abuse of discretion to completely disregard data that is based on actual and
undisputed record of financial performance in favor of the third-hand and unfounded claims the Secretary
eventually relied upon. At the very least, the Secretary should have properly justified his disregard of the
company figures. The Secretary should have also reasonably insured that the figure that served as the
starting point for his computation had some substantial basis.
Atty. Mercader
Atty. Mercader
Agabon v. NLRC
Ynares-Santiago, J.
GR No. 158693 – 17 November 2004
This petition for review seeks to reverse the decision of the Court of Appeals dated January 23,
2003, in CA-G.R. SP No. 63017, modifying the decision of National Labor Relations Commission (NLRC)
in NLRC-NCR Case No. 023442-00.
FACTS:
Private respondent Riviera Home Improvements, Inc. is engaged in the business of selling and
installing ornamental and construction materials. It employed petitioners Virgilio Agabon and Jenny Agabon
as gypsum board and cornice installers on January 2, 19922 until February 23, 1999 when they were
dismissed for abandonment of work.
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.
Private respondent, on the other hand, maintained that petitioners were not dismissed but had
abandoned their work. 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.
Petitioners then filed a complaint for illegal dismissal and payment of money claims.
LA: The dismissals were illegal and ordered private respondent to pay the monetary claims.
NLRC: Reversed the Labor Arbiter decision 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.
CA: The dismissal of the petitioners was not illegal because they had abandoned their employment but
ordered the payment of money claims.
ISSUE/S:
W/N petitioners were illegally dismissed
HELD: PETITION DENIED.
As to Substantive Due Process:
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. 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. It
is a form of neglect of duty, hence, a just cause for termination of employment by the employer. 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
Atty. Mercader
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.
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.
As to Procedural Due Process:
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.
In the case at bar, 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.
Thus, it should be held liable for non-compliance with the procedural requirements of due process.
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 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. 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.
As to Money Claims:
The Supreme Court affirms 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. 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. 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.
Atty. Mercader
Jaka Food Processing Corporation v. Pacot, et al.

GARCIA, J.
G.R. No. 151378 - March 28, 2005
An employer is liable for nominal damages even if the termination were upheld due to just causes. In noting
the different implications between a dismissal for just cause under Article 282 and one for authorized causes
under Article 283, the SC ruled that the termination was based on authorized cause (retrenchment), but
since Jaka did not comply with the notice requirement; they have to pay 50k as nominal damages for non-
compliance with statutory due process. Jaka, however should not pay separation pay because while it is
true that the rule is to grant separation pay to employees terminated due to authorized causes, the
EXCEPTION is where the closure of business or cessation of operations is due to serious business losses
or financial reverses, duly proved, as in this case.
NATURE:
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.
FACTS: Petitioner Jaka Foods Processing Corporation hired Respondents Pacot et al. Petitioner
terminated Respondents employment because the corporation was in “dire financial straits.” However, they
were terminated without Jaka FPC complying with the requirement under Article 283 of the Labor Code
regarding the service of a written notice upon the employees and the DOLE at least 1 month before the
intended date of termination. Respondents separately filed complaints for illegal dismissal, underpayment
of wages and nonpayment of 13th month pay and SIL against Jaka and its Human Resources Manager
with the regional Arbitration Branch of the NLRC.
ISSUE:
Whether the dismissal is invalid, because of non-compliance with the notice requirement.
HELD:
The dismissal is legal, but employer should pay nominal damages for non-compliance with the
notice requirement. This, certainly, is not a case of first impression. In the very recent case of Agabon v.
NLRC, 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 v. 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.”
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.
Atty. Mercader
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.
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 reveal that Jaka was suffering from serious business losses at the time it terminated
respondents’ employment. 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.
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 v. NLRC, 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.”
DISPOSITIVE:
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.
Atty. Mercader
Abbot Laboratories v. Alcaraz

Perlas - Bernabe, J.
G.R. No. 192571-23 July 2013
Assailed in this petition for review on certiorari are the Decision dated December 10,2009 and
Resolution 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.
FACTS:
 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).
 October 4, 2004: 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
 December 7, 2004: Abbott formally offered Alcaraz the position which was an item under the
company’s Hospira Affiliate Local Surveillance Unit (ALSU) department. In Abbott’s offer sheet, it
was stated that Alcaraz was to be employed on a probationary basis. 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.
 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.
 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.
 Abbott’s Probationary Performance Standards and Evaluation (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.
 April 20, 2005: 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 Abbot’s former HR Director, Terrible if Walsh’s action was the normal
process of evaluation. Terrible said that it was not.
 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.Thereafter, Walsh and Terrible requested Alcaraz to tender her resignation, else they be
forced to terminate her services.
 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.
Atty. Mercader
 May 23, 2005: Walsh, Almazar, and Bernardo personally handed to Alcaraz a letter stating that her
services had been terminated effective May 19, 2005.
 Respondent felt that she was unjustly termindated and thus filed a complaint for illegal dismissal
and damages. She contended that:
o 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 295 of the Labor Code.
o 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.
o individual petitioners maliciously connived to illegally dismiss her.
 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.
 Labor Arbiter dismissed Alcaraz’ complaint. 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.
 NLRC reversed the ruling of the LA
o 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.
o 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.
o Abbott did not comply with its own standard operating procedure in evaluating probationary
employees.
 Court of Appeals affirmed the decision of the NLRC
 Hence, this petition.
ISSUE/S:
1. Whether or not Alcaraz was sufficiently informed of the reasonable standards to qualify her as a
regular employee.
2. Whether or not Alcaraz was validly terminated from her employment.
3. Whether or not Abbott breached its contractual obligation to Alcaraz when it failed to abide by its
own procedure in evaluating the performance of a probationary employee.
4. Whether or not the individual petitioners herein are liable.
HELD: PETITION GRANTED.

1) Yes. Alcaraz was sufficiently informed of the reasonable standards to qualify her as a
regular employee.
a. 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.
b. 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.
c. 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
Atty. Mercader
regularized; such is a regularization standard which need not be literally spelled out or
mapped into technical indicators in every case.
d. 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.
2) Yes. Alcaraz was validly terminated from her employment.

a. A different procedure is applied when terminating a probationary employee; the usual two-
notice rule does not govern.
b. 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."
c. 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.
3) Yes. Abbott breached its contractual obligation to Alcaraz when it failed to abide by its own
procedure in evaluating the performance of a probationary employee.
a. 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. The principle is akin to estoppel. 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.
b. In this case, it is apparent that Abbott failed to follow the procedure in evaluating Alcaraz.
i. There lies a hiatus of evidence that a signed copy of Alcaraz’s PPSE form was
submitted to the HRD;
ii. It was not even shown that a PPSE form was completed to formally assess her
performance;
iii. Neither was the performance evaluation discussed with her during the third and
fifth months of her employment;
iv. Nor did Abbott come up with the necessary Performance Improvement Plan to
properly gauge Alcaraz’s performance with the set company standards.
c. 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.
d. 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.
Atty. Mercader
4) No. The individual petitioners as corporate officers herein are not liable.
a. It is hornbook principle that personal liability of corporate directors, trustees or officers
attaches only when:
i. (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;
ii. (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;
iii. (c) they agree to hold themselves personally and solidarily liable with the
corporation; or
iv. (d) they are made by specific provision of law personally answerable for their
corporate action.
b. 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.
c. 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.
Atty. Mercader
Atty. Mercader
Duncan Association Of Detailman-Ptgwo And Pedro A. Tecson, Petitioners, Vs. Glaxo Wellcome
Philippines, Inc. Respondent.
Tinga, J.
G.R. No. 162994. September 17, 2004
Confronting the Court in this petition is a novel question, with constitutional overtones, involving the validity
of the policy of a pharmaceutical company prohibiting its employees from marrying employees of any
competitor company.
Section 1, Article III of the 1987 Constitution provides: “No person shall be deprived of life, liberty, or
property without due process of law, nor shall any person be denied the equal protection of the laws.”
FACTS:
Petitioner Pedro A. Tecson (Tecson) was hired by respondent Glaxo Wellcome Philippines, Inc. (Glaxo) as
medical representative on October 24, 1995, after Tecson had undergone training and orientation.
Tecson signed a contract of employment which stipulates, that he agrees to study and abide by existing
company rules; to disclose to management any existing or future relationship by consanguinity or affinity
with co-employees or employees of competing drug companies and should management find that such
relationship poses a possible conflict of interest, to resign from the company. The Employee Code of
Conduct of Glaxo likewise provides the same policy.
Tecson was initially assigned to market Glaxo’s products in the Camarines Sur-Camarines Norte sales
area. Subsequently, Tecson entered into a romantic relationship with Bettsy, an employee of Astra
Pharmaceuticals (Astra), a competitor of Glaxo. Bettsy was Astra’s Branch Coordinator in Albay. She
supervised the district managers and medical representatives of her company and prepared marketing
strategies for Astra in that area.
Even before they got married, Tecson received several reminders from his District Manager regarding the
conflict of interest which his relationship with Bettsy might engender. Still, love prevailed, and Tecson
married Bettsy in September 1998. In January 1999, Tecsons superiors informed him that his marriage to
Bettsy gave rise to a conflict of interest. Tecson’s superiors reminded him that he and Bettsy should decide
which one of them would resign from their jobs, although they told him that they wanted to retain him as
much as possible because he was performing his job well.
Tecson requested for time to comply with the company policy against entering into a relationship with an
employee of a competitor company. He explained that Astra, Bettsy’s employer, was planning to merge
with Zeneca, another drug company; and Bettsy was planning to avail of the redundancy package to be
offered by Astra. With Bettsys separation from her company, the potential conflict of interest would be
eliminated. At the same time, they would be able to avail of the attractive redundancy package from Astra.
In August 1999, Tecson again requested for more time resolve the problem. In September 1999, Tecson
applied for a transfer in Glaxo’s milk division, thinking that since Astra did not have a milk division, the
potential conflict of interest would be eliminated. His application was denied in view of Glaxos least-
movement-possible policy.
Because the parties failed to resolve the issue at the grievance machinery level, they submitted the matter
for voluntary arbitration. Glaxo offered Tecson a separation pay of one-half (1/2) month pay for every year
of service, or a total of P50,000.00 but he declined the offer. On November 15, 2000, the National
Conciliation and Mediation Board (NCMB) rendered its Decision declaring as valid Glaxo’s policy on
relationships between its employees and persons employed with competitor companies, and affirming
Glaxo’s right to transfer Tecson to another sales territory.
Petitioners contend that Glaxo’s policy against employees marrying employees of competitor companies
violates the equal protection clause of the Constitution because it creates invalid distinctions among
employees on account only of marriage. They claim that the policy restricts the employees right to marry.
ISSUE/S:
1. Whether or not Glaxo’s policy is violative of the equal protection clause of the 1987 Constitution.
2. Whether or not Tecson was constructively dismissed.
HELD: PETITION DISMISSED.

Atty. Mercader
1. NO. The challenged company policy does not violate the equal protection clause of the Constitution
as petitioners erroneously suggest. It is a settled principle that the commands of the equal
protection clause are addressed only to the state or those acting under color of its authority.
Corollarily, it has been held in a long array of U.S. Supreme Court decisions that the equal
protection clause erects no shield against merely private conduct, however, discriminatory or
wrongful.
In any event, from the wordings of the contractual provision and the policy in its employee handbook, it is
clear that Glaxo does not impose an absolute prohibition against relationships between its employees and
those of competitor companies. Its employees are free to cultivate relationships with and marry persons of
their own choosing. What the company merely seeks to avoid is a conflict of interest between the employee
and the company that may arise out of such relationships.
2. NO. The Court finds no merit in petitioners contention that Tecson was constructively dismissed
when he was transferred from the Camarines Norte-Camarines Sur sales area to the Butuan City-Surigao
City-Agusan del Sur sales area, and when he was excluded from attending the companys seminar on new
products which were directly competing with similar products manufactured by Astra. Constructive dismissal
is defined as a quitting, an involuntary resignation resorted to when continued employment becomes
impossible, unreasonable, or unlikely; when there is a demotion in rank or diminution in pay; or when a
clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee.
None of these conditions are present in the instant case. The record does not show that Tecson was
demoted or unduly discriminated upon by reason of such transfer. In this case, petitioners transfer to
another place of assignment was merely in keeping with the policy of the company in avoidance of conflict
of interest, and thus valid.
Atty. Mercader
Yrasuegi v. Philippine Airlines, Inc.

Reyes, R.T. , J.
GR No. 168081 – 17 October 2008
FACTS:
Armando Yrasuegi was a former international flight steward for the Philippine Airlines. As mandated by
the Cabin and Crew Administration Manual of PAL, the proper weight for a man of his height and body
structure is from 147 to 166 pounds, the ideal weight being 166 pounds.
In 1984, his weight problem started, which prompted PAL to give him an extended vacation until to give
him time to comply to the weight requirement. On November 1985, he was allowed to return to work as
he lost all the excess weight. However, the problem recurred and PAL allowed him to go on leave without
pay from October 17, 1988 to February 1989. Despite the lapse of a ninety-day period given by PAL to
reach his ideal weight, he failed to meet the weight requirement. On January 3, 1990, he was informed of
the PAL decision for him to remain grounded until such time that he satisfactorily complies with the weight
standards. He was directed to report every two weeks for weight checks, which he failed to comply with.
On April 17, 1990, petitioner was formally warned that a repeated refusal to report for weight check would
be dealt with accordingly. He was given another set of weight check dates, which he did not report to. On
November 13, 1992, PAL served petitioner a Notice of Administrative Charge for violation of company
standards on weight requirements. Petitioner insists that he is being discriminated as those similarly
situated were not treated the same as some were even granted promotions.
On June 15, 1993, petitioner was formally informed by PAL that due to his inability to attain his ideal
weight, “and considering the utmost leniency” extended to him “which spanned a period covering a total
of almost five (5) years,” his services were considered terminated “effective immediately.”
The Labor Arbiter held that the weight standards of PAL are reasonable in view of the nature of the job of
petitioner. However, the weight standards need not be complied with under pain of dismissal since his
weight did not hamper the performance of his duties. Such decision was affirmed by the National Labor
Relation Commission. The case was raised to the Court of Appeals ruled that the weight standards of
PAL are reasonable. Thus, petitioner was legally dismissed because he repeatedly failed to meet the
prescribed weight standards. It is obvious that the issue of discrimination was only invoked by petitioner
for purposes of escaping the result of his dismissal for being overweight. Hence, petitioner appealed to
this Court via a petition for review on certiorari claiming that he was illegally dismissed.
ISSUE/S:
1. W/N the CA erred in holding that petitioner’s obesity can be a ground for dismissal under
paragraph (e) of Article 282 (renumbered Art 297) of the Labor Code of the Philippines
2. W/N the CA erred in holding that petitioner’s dismissal for obesity can be predicated on the Bona
fide occupational qualification (BFOQ) defense
3. W/N the CA erred in holding that petitioner was not unduly discriminated against when he was
dismissed while other overweight cabin attendants were either given flying duties or promoted
4. W/N the CA erred when it rushed aside petitioner’s claim for reinstatement and wages allegedly
for being moot and academic
HELD: Appealed decision is affirmed but with modification

1) No. Petitioner’s obesity can be a ground for dismissal under paragraph (e)
The obesity of petitioner, when placed in the context of his work as flight attendant, becomes an
analogous cause under Article 282 (e) of the Labor Code that justifies his dismissal from the service. His
obesity may not be unintended, but is nonetheless voluntary. As the CA correctly puts it, "[v]oluntariness
basically means that the just cause is solely attributable to the employee without any external force
influencing or controlling his actions. This element runs through all just causes under Article 282 (art 297),
whether they be in the nature of a wrongful action or omission. Gross and habitual neglect, a recognized
just cause, is considered voluntary although it lacks the element of intent found in Article 282 (a), (c), and
(d)."
2) No. The dismissal of petitioner can be predicated on the BFOQ

Employment in particular jobs may not be limited to persons of a particular sex, religion, or national
origin unless the employer can show that sex, religion, or national origin is an actual qualification for
performing the job. The qualification is called a bona fide occupational qualification (BFOQ). The
Atty. Mercader
Constitution, the Labor Code, and RA No. 7277 or the Magna Cara for Disabled Persons contain provisions
similar to BFOQ.
In Star Paper Corporation v. Simbol, this Court held that in order to justify a BFOQ, the employer must
prove that (1) the employment qualification is reasonable related to the essential operation of the job
involved and (2) the there is factual basis for believing that all or substantially all persons meeting the
qualification would be unable to properly perform the duties of the job. There is a test of reasonableness of
the company policy is used because it is parallel to BFOQ. BFOQ is valid ‘provided it reflects an inherent
quality reasonably necessary for satisfactory job performance.”
A common carrier, from the nature of its business and for reasons of public policy, is bound to observe
extraordinary diligence for the safety of the passengers it transports. It is bound to carry its passengers
safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons,
with due regard for all the circumstances. The weigh standards of PAL show its effort to comply with the
exacting obligations imposed upon it by law by virtue of being a common carrier.
The primary objective of PAL in the imposition of the weight stands for cabin crew is flight safety. The
cabin attendants must have necessary strength to open emergency doors, the agility to attend to
passengers in cramped working conditions and the stamina to withstand grueling flight schedules. An
overweight cabin attendant occupies more space than a slim one, there is a possibility that they may impede
passengers from evacuating the aircraft, and being overweight impedes mobility.
Petitioner is also in estoppel as he has knowledge of the weight requirement prior to his employment
and never questioned PAL’s authority when he was asked to trim down his weight.
3) No. Petitioner failed to substantiate his claim that he was discriminated against by PAL.
Petitioner pointed out names of the supposed overweight cabin attendants but petitioner failed to
indicate their respective weights over their ideal weights, the periods they were allowed to fly despite being
underweight; the particular flights assigned to them; the discriminating treatment they got from PAL; and
other relevant data that would have adequately established a case of discriminatory treatment by PAL.
Petitioner invokes the equal protection clause guaranty of the Constitution. However, in the
absence of governmental interference, the liberties guaranteed by the Constitution cannot be invoked. Put
differently, the Bill of Rights is not meant to be invoked against acts of private individuals. Indeed, the United
States Supreme Court, in interpreting the Fourteenth Amendment, which is the source of our equal
protection guarantee, is consistent in saying that the equal protection erects no shield against private
conduct, however discriminatory or wrongful. Private actions, no matter how egregious, cannot violate the
equal protection guarantee.
4) No. The claims of petitioner for reinstatement and wages are moot.
Petitioner asserts that he is entitled full backwages ‘from the time he was illegally dismissed’ up to
the time that the NLRC was reversed by the CA. Basing from Article 223 (renumbered Article 229) of the
Labor code, we find that the law is clear. Although an award or order of reinstatement is self executory and
does not require a writ of execution, the option to exercise actual reinstatement or payroll reinstatement
belongs to the employer. It does not belong to the employee, to the labor tribunals, or even to the courts.
Legally dismissed employee is not entitled to separation pay. Exceptionally, separation pay is
granted to a legally dismissed employee as an act "social justice", or based on "equity". In both instances,
it is required that the dismissal (1) was not for serious misconduct; and (2) does not reflect on the moral
character of the employee. In case at bar, the court granted petitioner separation pay, as an act of social
justice based on equity equivalent to one-half month’s pay for every year of service as the Court recognizes
that he was not dismissed for any serious misconduct or to any act which would reflect on his moral
character and that he has been employed with PAL for more or less a decade.
Atty. Mercader
Atty. Mercader
Manuel v. N.C. Construction Supply

Puno, J.
GR No. 127553 – November 28, 1997
This special civil action for certiorari seeks to review the decision of the National Labor Relations
Commission (NLRC) dated June 27, 1996 entitled Eddie Manuel, Romeo Bana, Rogelio Patama, Jr. and
Joel Rea v. N.C. Construction Supply, Johnny Lim and Anita Sy finding the the dismissal of petitioners
legal and based on just case. It ruled that their admission to the involvement of the crime of theft may be
admitted in evidence because Section 12 Article III of the 1987 Constitution applies only to criminal
proceedings but not to administrative proceedings.
Section 12 (1) Article III of the 1987 Constitution:

Any person under investigation for the commission of an offense shall have the right to be informed of his
right to remain silent and to have competent and independent counsel preferably of his own choice. If the
person cannot afford the services of counsel, he must be provided with one. These rights cannot be
waived except in presence of counsel.
FACTS:
Petitioners were employed as drivers at N.C. Construction Supply owned by private respondents
Johnny Lim (a.k.a. Lao Ching Eng) and Anita Sy. On June 3, 1995, the security guards of respondent
company caught Aurelio Guevara, a company driver, and Jay Calso, his helper ("pahinante"), taking out
from the company premises two rolls of electrical wire worth P500.00 without authority. During the
investigation, Calso named seven other employees who were allegedly involved in a series of thefts at
respondent company. Petitioners received separate notices from respondent company informing them that
they were positively identified by their co-worker, Jay Calso, as perpetrators of the series of thefts committed
at respondent company. Petitioners initially denied the charge. However, after being positively identified by
Jay Calso, petitioners admitted their guilt and offered to resign in exchange for the withdrawal of any criminal
charge against them. Petitioners filed a complaint against private respondents for illegal dismissal.
Petitioners alleged that they were not informed of the charge against them nor were they given an
opportunity to dispute the same. They also alleged that their admission made at the Pasig police station
regarding their involvement in the theft as well as their resignation were not voluntary but were obtained by
private respondents' lawyer by means of threat and intimidation. Hence, Labor Arbiter Caday ordered
private respondents to reinstate petitioners to their former position without loss of seniority rights and to pay
them full backwages. He also ordered private respondents to pay petitioners their service incentive leave
benefits plus attorney's fees. On appeal, the NLRC reversed the decision of the Labor Arbiter. It ruled that
petitioners were dismissed for a just cause.
ISSUE/S:
(1) W/N the National Labor Relations Commission committed grave abuse of discretion in declaring the
dismissal legal and based on just cause.
(2) W/N there was a violation of petitioners’ right to due process.
(1) NO. An employer has a right to terminate the services of an employee subject to both
substantive and procedural limitations.
This means that (1) the dismissal must be for a just or authorized cause provided in the Labor Code, and
(2) the employee must be accorded due process before his employment is terminated. The validity of the
dismissal hinges on the employer's compliance with these two requirements. In the case at bar, petitioners
who were employed as drivers at respondent company were found guilty of stealing company property
consisting of electrical wire, welding rod, G.I. sheet, steel bar and plywood. Article 282 of the Labor Code
authorizes an employer to terminate the services of an employee for loss of trust and confidence, provided
Atty. Mercader
that the loss of confidence arises from particular proven facts. Petitioners' culpability in the instant case was
sufficiently proved by private respondents. We are not convinced by petitioners' allegation that such
admission was obtained by means of threat or intimidation as such allegation is couched in general terms
and is unsupported by evidence.
We also reject petitioners' argument that said admission is inadmissible as evidence against them
under Section 12 Article III of the 1987 Constitution. The right to counsel under Section 12 of the Bill of
Rights is meant to protect a suspect in a criminal case under custodial investigation. Custodial investigation
is the stage where the police investigation is no longer a general inquiry into an unsolved crime but has
begun to focus on a particular suspect who had been taken into custody by the police to carry out a process
of interrogation that lends itself to elicit incriminating statements. It is when questions are initiated by law
enforcement officers after a person has been taken into custody or otherwise deprived of his freedom of
action in any significant way. The right to counsel attaches only upon the start of such investigation.
Therefore, the exclusionary rule under paragraph (3) Section 12 of the Bill of Rights applies only to
admissions made in a criminal investigation but not to those made in an administrative investigation.
(2) YES. Private respondents failed to observe due process in terminating the employment of
petitioners.
Due process demands that the employer should furnish the worker whose employment is sought
to be terminated a written notice containing a statement of the cause(s) for termination and afford him ample
opportunity to be heard and to defend himself with the assistance of a representative if he so desires.
Specifically, the employer must furnish the worker with two written notices before termination of employment
can be legally effected: (1) notice which apprises the employee of the particular acts or omissions for which
his dismissal is sought, and (2) the subsequent notice which informs the employee of the employer's
decision to dismiss him.There is no showing in this case that private respondents furnished petitioners with
such notices. Private respondents, through their counsel, Atty. Reyes, immediately terminated petitioners'
services upon conclusion of the investigation. Private respondents must therefore indemnify petitioners for
failure to observe due process before dismissing them from work.
Atty. Mercader
Punzal V. ETSI Technologie

Carpio-Morales, J.:
G.R. Nos. 170384-85--March 9, 2007
Facts: Punzal, had been working for respondent, ETSI Technologies, Inc. (ETSI), for 12 years prior to the
termination of her services on November 26, 2001 on which date she was holding the position of
Department Secretary. On October 30, 2001, petitioner sent an electronic mail (e-mail) message to her
office-mates announcing the holding of a Halloween party that was to be held in the office the following day.
Such Halloween Party was not allowed by the SVP, so she sent another email announcing such news and
calling the SVP “unfair” in her email. The AVP for HR sent her an email, two weeks later, telling her the
SVP received a copy of her latter email, and is requesting her to explain in writing why she should not be
given disciplinary action for committing Article IV, No. 5 & 8: “Improper conduct or acts of discourtesy or
disrespect and Making malicious statements concerning Company Officer, whereby such offenses may be
subject to suspension to termination depending upon the gravity of the offense/s as specified in our ETSI’s
Code of Conduct and Discipline.” Punzal replied that she had no malicious intention in sending the second
e-mail message and that she "never expected such kind of words can be called as ‘acts of discourtesy or
disrespect.’ Geisert and Remudaro conferred with petitioner to give her a chance to explain her side. David
and Remudaro subsequently sent petitioner a letter on November 26, 2001, finding her explanation "not
acceptable" and terminating her services, effective immediately.
Punzal raised the issue of due process, alleging that her employer did not inform her of her right to be
assisted by counsel during the conference with respondents Geisert and Remudaro. While ETSI argues he
gravity of Punzal’s infraction is borne by the fact that her e-mail message to the workers of ETSI tended to
cast scorn and disrespect toward a senior vice president of the company. The message itself resounds of
subversion and undermines the authority and credibility of management.
Punzal filed before the National Labor Relations Commission (NLRC) a complaint for illegal dismissal
against ETSI, Geisert, and Remudaro.
Issue: a) W/N Petitioner Punzal was dismissed for just cause; b) W/N Punzal was accorded due process
Ruling: Petitioner, having been dismissed for just cause, is neither entitled to reinstatement nor to
backwages. The Court held that “the longer an employee stays in the service of the company, the greater
is his responsibility for knowledge and compliance with the norms of conduct and the code of discipline in
the company.”, despite the Punzal requesting her 12 years of serving with no offence be taken as a
mitigating circumstance.
Petitioner’s contention that she was denied due process is well-taken however, as the records do not show
that she was informed of her right to be represented by counsel during the conference with Geisert and
Remudaro. The protestations of ETSI, that the right to be informed of the right to counsel does not apply to
investigations before administrative bodies and that law and jurisprudence merely give the employee the
option to secure the services of counsel in a hearing or conference fall in light of the clear provision of
Article 277 (b) of the Labor Code that:
“the employer shall afford [the worker whose employment is sought to be terminated] ample opportunity to
be heard and to defend himself with the assistance of his representatives if he so desires in accordance
with company rules and regulations pursuant to guidelines set by the Department of Labor and
Employment”, and this Court’s explicit pronouncement that "ample opportunity connotes every kind of
assistance that management must accord the employee to enable him to prepare adequately for his
defense including legal representation."
Atty. Mercader
Lopez vs. Alturas Group of Companies and/or Uy

Carpio-Morales, J.
GR No. 191008 – 11 April 2011
Petitioner Lopez was hired by respondent as a truck driver. Ten years later, he was dismissed after
he was allegedly caught by respondent’s security guard in the act of attempting to smuggle out of the
company premises 60 kilos of scrap iron. When questioned, petitioner allegedly admitted to the security
guard that he was taking out the scrap iron consisting of lift springs out of which he would make axes.
FACTS:
 1997: Petitioner Lopez was hired by respondent Alturas as their truck driver.
 November 2007: Lopez was dismissed after allegedly being caught by the security guard in the
act of attempting to smuggle out 60 kilos of scrap iron aboard the company truck assigned to him.
When questioned, he allegedly admitted to the security guard that he was taking out the scrap iron
to make axes.
 December 2007: A show-cause notice was issued by Alturas’ HR Department to Lopez. The latter
denied the allegations by a handwritten explanation. Finding his explanation unsatisfactory, Alturas
terminated Lopez by Notice of Termination on the grounds of loss of trust and confidence, and of
violation of company rules and regulations.
 Upon investigation, Alturas found that Lopez had been smuggling out cartons which he had sold,
in conspiracy with Alaba. A criminal case for qualified theft was then filed against Lopez before the
RTC of Bohol. Earlier, another criminal case was filed for the theft of the scrap iron.
 Lopez filed a complaint against Alturas for illegal dismissal and underpayment of wages. he claimed
that the charges against him were fabricated to justify his illegal dismissal.
 June 2008: Labor Arbiter held that Lopez’ dismissal was justified, for he , a truck driver, held a
position of trust and confidence, and his act of stealing company property was a violation of the
trust reposed upon him. the LA also ruled that petitioner had been paid the correct wages and
benefits.
 December 2008: NLRC set aside LA’s decision. Alturas’ evidence was insufficient to warrant
Lopez’ dismissal, and that the latter’s alleged admission of taking the scrap iron was belied by his
denial. Citing Salaw vs. NLRC, the NLRC held that Lopez should have been afforded, or at
least advised of the right to counsel. Any evaluation which was based only on the
explanation to the show-cause letter and any so-called investigation but without
confrontation of the vital witnesses, do(es) not suffice.
 December 2009: CA reversed the NLRC ruling. It held that Alturas was justified in dismissing
Lopez on the ground of loss of trust and confidence. It further held that the evidence supporting the
criminal charge found after preliminary investigation are sufficient to show prima facie guilt.
 CA also held that due process was not observed when Alturas failed to give Lopez a chance
to defend his side in a proper hearing.
ISSUE/S:
1. WON Lopez’ dismissal was justified on the ground of loss of trust and confidence
2. WON due process was observed when Alturas failed to give Lopez a chance to defend his side
in a proper hearing

1. YES. DISMISSAL WAS VALID.
 Loss of trust and confidence as a ground for dismissal of employees covers employees occupying
a position of trust who are proven to have breached the trust and confidence reposed to them.
-Cruz vs. CA: Lost of trust and confidence must be based on wilful breach of the trust reposed in the
employee by his employer. Such breach is willful if it is done intentionally, knowingly, and purposely, without
justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently.
Moreover, it must be based on substantial evidence substantial evidence and not on the employer's whims
or caprices or suspicions, otherwise, the employee would eternally remain at the mercy of the employer.
Atty. Mercader
Loss of condence must not be indiscriminately used as a shield by the employer against a claim that the
dismissal of an employee was arbitrary. And, in order to constitute a just cause for dismissal, the act
complained of must be the work-related and shows that the employee concerned is unfit to continue working
for the employer. In addition, loss of confidence as a just cause for termination of employment is premised
on the fact that the employee concerned holds a position of responsibility, trust and confidence or that the
employee concerned is entrusted with confidence with respect to delicate matters, such as the handling or
care and protection of the property and assets of the employer. The betrayal of this trust is the essence of
the offense for which an employee is penalized.
 Lopez, as a driver assigned with a specific vehicle, was entrusted with the transportation of the
company’s goods and property, thus even if he did not occupy a managerial position, he can be
said to be holding a position of responsibility. Petitioner’s claim that he was framed up does not
inspire credence.
2. YES. PROCEDURAL DUE PROCESS WAS OBSERVED.

 Petitioner was given opportunity to explain his side when he was informed of the charge against
him and required to submit his written explanation with which he complied.
-Perez vs. Phil. Telegraph & Telephone Co.: After receiving the first notice apprising him of the charges
against him, the employee may submit a written explanation (which may be in the form of a letter,
memorandum, affidavit or position paper) and offer evidence in support thereof, like relevant company
records (such as his 201 file and daily time records) and the sworn statements of his witnesses. For this
purpose, he may prepare his explanation personally or with the assistance of a representative or counsel.
He may also ask the employer to provide him copy of records material to his defense. His written
explanation may also include a request that a formal hearing or conference be held. In such a case, the
conduct of a formal hearing or conference becomes mandatory, just as it is where there substantial
evidentiary disputes or where company rules or practice requires an actual hearing as part of employment
pre-termination procedure.
 The Supreme Court held that NLRC erred in holding that Lopez should have been afforded counsel
or advised of the right to counsel. The right to counsel and the assistance of one in
investigations involving termination cases is neither indispensable nor mandatory, except
when the employee himself requests for one or that he manifests that he wants a formal
hearing on the charges against him. In petitioner's case, there is no showing that he
requested for a formal hearing to be conducted or that he be assisted by counsel.
Atty. Mercader
Atty. Mercader
Pascual vs. Board of Medical Examiners

Fernando, J.
GR No. L-25018 – May 26, 1969
Article 1, Section 3, 1987 Constitution:

No person shall be compelled to be a witness against himself.
FACTS:
Petitioner Pascual filed a complaint against respondent Board of Medical Examiners. He alleged that
at the initial hearing of an administrative case for malpractice against him, counsel for complainants
announced that he would present as his first witness herein petitioner. Pascual then objected on this
and invoked his right against self-incrimination. He added that respondent is guilty of grave abuse of
discretion for failure to respect his rights against self-incrimination, the administrative proceeding
against him, which could result in forfeiture or loss of privilege being quasi-criminal in character.
Respondent Board stressed that the right against self-incrimination is available only when a question
calling for an incriminating answer is asked for a witness. It therefore denied that it acted with grave
abuse of discretion. Further, a motion for intervention was filed by the complainants in the malpractice
case against petitioner. The complainants stated that the right against self-incrimination cannot be
availed of in administrative hearing.
ISSUE:
Whether or not the right against self-incrimination can be invoked in an administrative proceeding.
HELD: YES
The Court ruled that in an administrative proceeding against a medical practitioner, the respondent
Board cannot compel the person proceeded against to take the witness stand without his consent. It is
a mistaken assumption by respondent that the constitutional guarantee against self-incrimination
should be limited to allowing a witness to object to questions the answers to which could lead to a penal
liability being subsequently incurred. The Court invoked the case of Cabal vs. Kapunan where the
complainant requested the investigating committee that petitioner be ordered to take the witness stand,
which was granted. Upon petitioner's refusal to be sworn as such witness, a charge for contempt was
filed against him in the sala of respondent Judge. He filed a motion to quash and upon its denial, he
initiated this proceeding. The Court ruled in for the petitioner in accordance with the well-settled
principle that "the accused in a criminal case may refuse, not only to answer incriminatory questions,
but, also, to take the witness stand." Further, an opinion which was penned by the Chief Justice stated
that while the matter referred to an administrative charge of unexplained wealth, with the Anti-Graft Act
authorizing the forfeiture of whatever property a public officer or employee may acquire, manifestly out
of proportion to his salary and his other lawful income, there is clearly the imposition of a penalty.
The proceeding for forfeiture while administrative in character thus possesses a criminal or
penal aspect.
The present case is not dissimilar for the petitioner would be similarly disadvantaged. Petitioner Pascual
could suffer not the forfeiture of property but the revocation of his license as medical practitioner,
for some an even greater deprivation, if he were to be compelled to be a witness against himself.
Atty. Mercader
Atty. Mercader
Social Justice Society v Dangerous Drugs Board

Velasco, Jr., J.:
GR No. 157870- November 3, 2008
FACTS:
1. Petitioners assail the constitutionality of Section 36 of RA 9165 (Comprehensive
Dangerous Drugs Act of 2002), insofar as it requires mandatory drug testing
a. According to section 36, of the assailed RA, the following will be subjected to undergo drug testing
i.Students of secondary and tertiary schools, (random drug testing)
ii.Officers and employees of public and private offices, whether domestic
or overseas (random drug testing)
iii.persons charged before the prosecutor’s office with a criminal offense
having an imposable penalty of imprisonment of not less than six (6)
years and one (1) day (mandatory drug testing)
iv.All candidates for public office whether appointed or elected both in the
national or local government (mandatory drug testing)
Petitioner’s arguments
a) Petitioner Aquilino Q. Pimentel, Jr., a senator of the Republic
Imposes additional qualifications, when Constitution only prescribes a maximum of five (5)
qualifications to become a senator
b) Social Justice Society (SJS), a registered political party
undue delegation of legislative power - unbridled discretion to schools and employers
Violates equal protection clause and protection against unreasonable searches
c) Petitioner Atty. Manuel J. Laserna, Jr., as citizen and taxpayer,
Right against self incrimination
ISSUES:
WN Sec. 36, RA 9165 is unconstitutional? Specifically, do these paragraphs violate the right to
privacy, the right against unreasonable searches and seizure, and the equal protection clause?
HELD:
Students of secondary and tertiary schools, (random drug testing) – NO, not unconstitutional
1. While mandatory, is still a random and suspicionless arrangement
2. objective is to stamp out illegal drug and safeguard in the process the well being of [the]
citizenry, particularly the youth, from the harmful effects of dangerous drugs.
a. May even be exempt from criminal liability (students not treated as criminals)
b. A doubtless and legitimate concern for the govt, that is put in motion by random drug testing
3. Waiver of their right to privacy, guided by the case of Vernonia v Acton,
(1) schools and their administrators stand in loco parentis with respect to their students;
(2) minor students have contextually fewer rights than an adult, and are subject to the custody
and supervision of their parents, guardians, and schools;
(3) schools, have a duty to safeguard the health and well-being of their students and may
adopt such measures as may reasonably be necessary to discharge duty
(4) schools have the right to impose conditions on applicants for admission that are fair,
just, and non-discriminatory.
Officers and employees of public and private offices (random drug testing) – NO, not
unconstitutional
1. Failure of SJS to show how random, mandatory, suspicionless drug testing violaties the constitution
– merely said that it is violative
2. Right to privacy, reduced in workplace – subject to discipline of employers
3. reasonableness of the drug test policy and requirement – has valid purpose and
measures providing the least intrusion
a. Privacy provides paramount rights to the public
Atty. Mercader
i.Privacy defined as “the right to privacy means the right to be free from unwarranted exploitation of
ones person or from intrusion into ones private activities in such a way as to cause humiliation to
a persons ordinary sensibilities.”
b. RA contains provisions specifically directed towards preventing a situation that would unduly
embarrass the employees or place them under a humiliating experience, also has a narrowing
ingredient as stated in Ople
c. testing shall be undertaken under conditions calculated to protect as much as possible the
employees privacy and dignity
.shall be conducted by trained professionals in access-controlled
laboratories monitored by the Department of Health (DOH)
i.Access to results, only in a need to know basis
ii.the intrusion into the employees privacy, under RA 9165, is accompanied
by proper safeguards, particularly against embarrassing leakages of test
results, and is relatively minimal.
Persons with a criminal offense having an imposable penalty of imprisonment of not less than
six (6) years and one (1) day (mandatory drug testing) – Yes, unconstitutional
1. They are not randomly picked; neither are they beyond suspicion.
2. Blatant attempt to harness a medical test as a tool for criminal prosecution, contrary to
the stated objectives of RA 9165.
All candidates for public office whether appointed or elected both in the national or local government
(mandatory drug testing) – Yes, unconstitutional
1. unconstitutionality of Sec. 36(g) of RA 9165 is rooted on its having infringed the
constitutional provision defining the qualification or eligibility requirements for one aspiring to
run for and serve as senator.
2. legislative power remains limited in the sense that it is subject to substantive and
constitutional limitations
Atty. Mercader
Atty. Mercader
LVN PICTURES, INC., vs. PHILIPPINE MUSICIANS Guild (FFW) and

COURT OF INDUSTRIAL RELATIONS,
CONCEPCION, J.:
G.R. No. L-12582 January 28, 1961
Petitioners herein, LVN Pictures, Inc. and Sampaguita Pictures, Inc. seek a review by certiorari of
an order of the Court of Industrial Relations in Case No. 306-MC thereof, certifying the Philippine
Musicians Guild (FFW), petitioner therein and respondent herein, as the sole and exclusive bargaining
agency of all musicians working with said companies, as well as with the Premiere Productions, Inc.,
which has not appealed. The appeal of LVN Pictures, Inc., has been docketed as G.R. No. L-12582,
whereas G.R. No. L-12598 is the appeal of Sampaguita Pictures, Inc. Involving as they do the same
order, the two cases have been jointly heard in this Court, and will similarly be disposed of.
'The right to control' test. Under this test an employer-employee relationship exist where the person for
whom the services are performed reserves the right to control not only the end to be achieved, but also
the manner and means to be used in reaching the end.
We are thus called upon to apply R.A. Act 875. which is substantially the same as and patterned after the
Wagner Act substantially the same as a Act and the Taft-Hartley Law of the United States. Hence,
reference to decisions of American Courts on these laws on the point-at-issue is called for.
FACTS:
In its petition in the lower court, the Philippine Musicians Guild (FFW), hereafter referred to
as the Guild, averred that it is a duly registered legitimate labor organization; that LVN Pictures,
Inc., Sampaguita Pictures, Inc., and Premiere Productions, Inc. are corporations, duly organized
under the Philippine laws, engaged in the making of motion pictures and in the processing and
distribution thereof; that said companies employ musicians for the purpose of making music
recordings for title music, background music, musical numbers, finale music and other incidental
music, without which a motion picture is incomplete; that ninety-five (95%) percent of all the
musicians playing for the musical recordings of said companies are members of the Guild; and that
the same has no knowledge of the existence of any other legitimate labor organization representing
musicians in said companies. Premised upon these allegations, the Guild prayed that it be certified
as the sole and exclusive bargaining agency for all musicians working in the aforementioned
companies. In their respective answers, the latter denied that they have any musicians as
employees, and alleged that the musical numbers in the filing of the companies are furnished by
independent contractors.
The work process for the guild is as follows:

When the music is ready for recording, the musicians are summoned through 'call slips' in
the name of the film company which show the name of the musician, his musical instrument, and
the date, time and place where he will be picked up by the truck of the film company. The film
company provides the studio for the use of the musicians for that particular recording. The
musicians are also provided transportation to and from the studio by the company. Similarly, the
company furnishes them meals at dinner time.
During the recording sessions, the motion picture director, who is an employee of the
company, supervises the recording of the musicians and tells what to do in every detail. He solely
directs the performance of the musicians before the camera as director, he supervises the
performance of all the action, including the musicians who appear in the scenes so that in the actual
performance to be shown on the screen, the musical director's intervention has stopped.
And even in the recording sessions and during the actual shooting of a scene, the
technicians, soundmen and other employees of the company assist in the operation. Hence, the
work of the musicians is an integral part of the entire motion picture since they not only furnish the
music but are also called upon to appear in the finished picture.
ISSUE/S:
1. Is there an employer-employee relationship?
2. Can the petition to be recognized as a bargaining unit be granted?
Atty. Mercader
HELD:
1. Yes. The National Labor Relations relies on 'the right to control' test. Under this test an
employer-employee relationship exist where the person for whom the services are performed
reserves the right to control not only the end to be achieved, but also the manner and means
to be used in reaching the end.
The right of control of the film company over the musicians is shown (1) by calling the musicians
through 'call slips' in 'the name of the company; (2) by arranging schedules in its studio
for recording sessions; (3) by furnishing transportation and meals to musicians; and
(4) by supervising and directing in detail, through the motion picture director, the
performance of the musicians before the camera, in order to suit the music they are
playing to the picture which is being flashed on the screen.
2. Yes.So long as, after due hearing, the parties are found to bear said relationship, as in the case at
bar, it is proper to pass upon the merits of the petition for certification.
NOTES:
It is the purpose of the policy of Republic Act 875; (a) To eliminate the causes of industrial unrest by
protecting the exercise of their right to self-organization for the purpose of collective bargaining. (b) To
promote sound stable industrial peace and the advancement of the general welfare, and the best interests
of employers and employees by the settlement of issues respecting terms and conditions of employment
through the process of collective bargaining between employers and representatives of their employees.
Atty. Mercader
Paguio Transport Corporation v NLRC

Panganiban, J.:
G.R. No. 119500. August 28, 1998
Facts:
 Wilfredo Melchor was hired by respondent company as a taxi driver under the boundary system. He
was engaged to drive the taxi unit assigned to him on a 24-hour schedule per trip every two days.
 He used to earn an average income from P500 to P700 per trip, exclusive of the P650 boundary and
other deductions imposed on him.
 24 November 1993, complainant allegedly met a vehicular accident- he accidentally bumped a car
which stopped at the intersection even when the traffic light was green and go.
 After he submitted the report, he was advised to stop working and have a rest. After several days, he
allegedly reported for work only to be told that his service was no longer needed. Hence, he filed a
complaint for illegal dismissal.
 NLRC held that private respondent was illegally dismissed employee of the petitioner; that relationship
under the boundary system is that of employer-employee not a lessor-lessee; petitioner was not
afforded the twin requirements of due process. Hence this petition.
 Petitioner Paguio maintained that:
1. No employer-employee relationship between them
The element of control which was the paramount test to determine the existence of such relationship was
lacking. He argued that he had no control over the number of hours private respondent had to work
and routes he had to take.
2. Even if an employer-employee relationship were to be presumed, still complainant’s
termination arose out of a valid cause
Private respondent’s involvement in three vehicular accidents within a span of several months constitutes just
cause for his dismissal.
ISSUE:
1. W/N the relationship created between the parties operating under the boundary system is an
employer- employee relationship;
2. W/N the dismissal is for a just cause;
3. W/N the filing of the complaint for illegal dismissal is a valid justification of the invocation of doctrine
on strained relations;
Held: The petition is not meritorious.
1. YES. In Martinez v NLRC, the Court already ruled that the relationship of taxi owners and taxi
drivers is the same as that jeepney owner and jeepney drivers under the “boundary system”. In
both cases, the employer-employee relationship was deemed to exist. In the lease of chattels, the
lessor loses complete control over the chattel leased. In case of jeepney operators/owners and
jeepney drivers, the former exercise supervision and control over the latter. The fact that the drivers
do not receive fixed wages but get only the excess of that so-called boundary they pay to the
owner/operator is not sufficient to withdraw the relationship between them from that of the employer
and employee. Thus private respondents were employees because they had been engaged to
perform activities which were usually necessary or desirable in the usual trade or business of the
employer.
2. NO. Well-settled is the rule that the employer had the burden of proving that the dismissal of an
employee is for a just cause. Petitioner also asserts that private respondent’s involvement within a span of
several months constitutes just cause for his dismissal. Petitioner however did not submit any proof to
support these allegations. The failure of the employer to discharge this burden means that the dismissal is
not justified and that the employee is entitled to reinstatement and back wages. In this case, petitioner failed
to prove any just or authorized cause for his dismissal.
3. NO. The filing of the complaint for illegal dismissal does not by itself justify the invocation of the
doctrine on strained relations. Because the claim of petitioner has no factual basis, the doctrine on strained
relations cannot be applied in this case. The doctrine on strained relations cannot be applied
indiscriminately since every labor dispute almost invariable results in “strained relations”; otherwise
reinstatement can never be possible simply because some hostility engendered between the parties as a
result of their disagreement.
Atty. Mercader
Teng v. Pahagac
Brion, J.
GR No. 169704 – 17 November 2010
FACTS:
Albert Teng Fish Trading is engaged in deep sea fishing and, for this purpose, owns boats (basnig),
equipment, and other fishing paraphernalia. As owner of the business, Teng claims that he customarily
enters into joint venture agreements with master fishermen (maestros) who are skilled and are experts in
deep sea fishing; they take charge of the management of each fishing venture, including the hiring of the
members of its complement. He avers that the maestros hired the respondent workers as checkers to
determine the volume of the fish caught in every fishing voyage.
On February 20, 2003, the respondent workers filed a complaint for illegal dismissal against Albert Teng.
The respondent workers alleged that Teng hired them, without any written employment contract, to serve
as his "eyes and ears" aboard the fishing boats; to classify the fish caught by bañera; to report to
Teng via radio communication the classes and volume of each catch; to receive instructions from him as to
where and when to unload the catch; to prepare the list of the provisions requested by the maestro and the
mechanic for his approval; and, to procure the items as approved by him. They also claimed that they
received regular monthly salaries, 13th month pay, Christmas bonus, and incentives in the form of shares
in the total volume of fish caught.
They asserted that sometime in September 2002, Teng expressed his doubts on the correct volume
of fish caught in every fishing voyage. In December 2002, Teng informed them that their services had been
terminated.
In his defense, Teng maintained that he did not have any hand in hiring the respondent workers;
the maestros, rather than he, invited them to join the venture. According to him, his role was clearly limited
to the provision of the necessary capital, tools and equipment, consisting of basnig, gears, fuel, food, and
other supplies. The VA rendered a decision in Teng's favor and declared that no employer-employee
relationship existed between Teng and the respondent workers.
On July 21, 2003, the respondent-workers elevated the case to the CA. In its decision of September 21,
2004, the CA reversed the VA's decision after finding sufficient evidence showing the existence of
employer-employee relationship. Teng moved to reconsider the CA's decision, but the CA denied the
motion. He, thereafter, filed the present Petition for Review on Certiorari under Rule 45 of the Rules of
Court, claiming that no employer-employee relationship existed between Teng and the respondent workers.
Teng further insists that the VA was correct in ruling that there was no employer-employee relationship
between him and the respondent workers. What he entered into was a joint venture agreement with
the maestros, where Teng's role was only to provide basnig, gears, nets, and other tools and equipment
for every fishing voyage
ISSUE/S:
1. W/N there is employer-employee relationship between Teng and respondent workers
2. W/N there is illegal Dismissal
1. Yes. There is employer-employee relationship between Teng and respondent workers

While Teng alleged that it was the maestros who hired the respondent workers, it was his company that
issued to the respondent workers identification cards (IDs) bearing their names as employees and Teng's
signature as the employer. Generally, in a business establishment, IDs are issued to identify the holder as
a bona fide employee of the issuing entity.
For the 13 years that the respondent workers worked for Teng, they received wages on a regular basis, in
addition to their shares in the fish caught. The worksheet showed that the respondent workers received
uniform amounts within a given year, which amounts annually increased until the termination of their
employment in 2002. Teng's claim that the amounts received by the respondent workers are mere
Atty. Mercader
commissions is incredulous, as it would mean that the fish caught throughout the year is uniform and
increases in number each year.
More importantly, the element of control – A strong indicator of the existence of an employer-employee
relationship - is present in this case. Teng not only owned the tools and equipment, he directed how the
respondent workers were to perform their job as checkers; they, in fact, acted as Teng's eyes and ears in
every fishing expedition. Teng cannot hide behind his argument that the respondent workers were hired by
the maestros. To consider the respondent workers as employees of the maestros would mean that Teng
committed impermissible labor-only contracting. As a policy, the Labor Code prohibits labor-only contracting
In the present case, the maestros did not have any substantial capital or investment. Teng admitted that he
solely provided the capital and equipment, while the maestros supplied the workers. The power of control
over the respondent workers was lodged not with the maestros but with Teng. As checkers, the respondent
workers' main tasks were to count and classify the fish caught and report them to Teng. They performed
tasks that were necessary and desirable in Teng's fishing business. Taken together, these incidents confirm
the existence of a labor-only contracting which is prohibited in our jurisdiction, as it is considered to be the
employer's attempt to evade obligations afforded by law to employees.
Accordingly, we hold that employer-employee ties exist between Teng and the respondent workers.
A finding that the maestros are labor-only contractors is equivalent to a finding that an employer-employee
relationship exists between Teng and the respondent workers. As regular employees, the respondent
workers are entitled to all the benefits and rights appurtenant to regular employment.
2. Yes. There is illegal dismissal

The dismissal of an employee, which the employer must validate, has a twofold requirement: one is
substantive, the other is procedural. Not only must the dismissal be for a just or an authorized cause, as
provided by law; the rudimentary requirements of due process - the opportunity to be heard and to defend
oneself - must be observed as well. The employer has the burden of proving that the dismissal was for a
just cause; failure to show this, as in the present case, would necessarily mean that the dismissal was
unjustified and, therefore, illegal.The respondent worker's allegation that Teng summarily dismissed them
on suspicion that they were not reporting to him the correct volume of the fish caught in each fishing voyage
was never denied by Teng. Unsubstantiated suspicion is not a just cause to terminate one's employment
under Article 282 of the Labor Code. To allow an employer to dismiss an employee based on mere
allegations and generalities would place the employee at the mercy of his employer, and would emasculate
the right to security of tenure.
Atty. Mercader
Dy Keh Beng vs International Labor and Maritime Union

De Castro, J.:
G.R. No. L-32245, 25 May 1979
Petitioner Dy Keh Beng seeks a review by certiorari of the decision of the Court of Industrial Relations dated
March 23, 1970 in Case No. 3019-ULP and the Court's Resolution en banc of June 10, 1970 affirming said
decision. The Court of Industrial Relations in that case found Dy Keh Beng guilty of the unfair labor practice
acts alleged and order him to reinstate Carlos Solano and Ricardo Tudla to their former jobs with backwages
from their respective dates of dismissal until fully reinstated without loss to their right of seniority and of
such other rights already acquired by them and/or allowed by law.
Republic Act 875: Where an employee is referred to as shall include any employee and shag not be
limited to the employee of a particular employer unless the Act explicitly states otherwise and shall include
any individual whose work has ceased as a consequence of, or in connection with any current labor dispute
or because of any unfair labor practice and who has not obtained any other substantially equivalent and
regular employment. While an employer includes any person acting in the interest of an employer, directly
or indirectly but shall not include any labor organization (otherwise than when acting as an employer) or
anyone acting in the capacity of officer or agent of such labor organization.
Facts:
A charge of unfair labor practice was filed against Dy Keh Beng, proprietor of a basket factory, for
discriminatory acts within the meaning of Section 4(a), sub-paragraph (1) and (4). Republic Act No. 875, by
dismissing on September 28 and 29, 1960, respectively, Carlos N. Solano and Ricardo Tudla for their union
activities. After preliminary investigation was conducted, a case was filed in the Court of Industrial Relations
for in behalf of the International Labor and Marine Union of the Philippines and two of its members, Solano
and Tudla In his answer, Dy Keh Beng contended that he did not know Tudla and that Solano was not his
employee because the latter came to the establishment only when there was work which he did on pakiaw
basis, each piece of work being done under a separate contract. Moreover, Dy Keh Beng countered with a
special defense of simple extortion committed by the head of the labor union, Bienvenido Onayan.
After trial, the Hearing Examiner prepared a report which was subsequently adopted in toto by the
Court of Industrial Relations. An employee-employer relationship was found to have existed between Dy
Keh Beng and complainants Tudla and Solano, although Solano was admitted to have worked on piece
basis.The issue therefore centered on whether there existed an employee employer relation between
petitioner Dy Keh Beng and the respondents Solano and Tudla .
According to the Hearing Examiner, the evidence for the complainant Union tended to show that
Solano and Tudla became employees of Dy Keh Beng from May 2, 1953 and July 15, 1955, respectively,
and that except in the event of illness, their work with the establishment was continuous although their
services were compensated on piece basis. Evidence likewise showed that at times the establishment had
eight (8) workers and never less than five (5); including the complainants, and that complainants used to
receive 5.00 a day, sometimes less.
According to Dy Keh Beng, however, Solano was not his employee for the following reasons:
(1) Solano never stayed long enought at Dy's establishment;
(2) Solano had to leave as soon as he was through with the
(3) order given him by Dy;
(4) When there were no orders needing his services there was nothing for him to do;
(5) When orders came to the shop that his regular workers could not fill it was then that Dy went to his
address in Caloocan and fetched him for these orders; and
(6) Solano's work with Dy's establishment was not continuous. ,
According to petitioner, these facts show that respondents Solano and Tudla are only piece
workers, not employees under Republic Act 875.
Petitioner contends that the private respondents "did not meet the control test in the fight of the ...
definition of the terms employer and employee, because there was no evidence to show that petitioner had
the right to direct the manner and method of respondent's work. Moreover, it is argued that petitioner's
evidence showed that "Solano worked on a pakiaw basis" and that he stayed in the establishment only
when there was work. He points to the case of Madrigal Shipping Co., Inc. v. Nieves Baens del Rosario, et
al., L-13130, October 31, 1959, where the Court ruled that:
Atty. Mercader
The test ... of the existence of employee and employer relationship is whether there is an
understanding between the parties that one is to render personal services to or for the benefit of
the other and recognition by them of the right of one to order and control the other in the
performance of the work and to direct the manner and method of its performance.
Issue:
Whether or not an employee-employer relationship existed between petitioner Dy Keh Beng and the
respondents Solano and Tudla.
Held:
While this Court upholds the control test under which an employer-employee relationship exists
"where the person for whom the services are performed reserves a right to control not only the end to be
achieved but also the means to be used in reaching such end, " it finds no merit with petitioner's arguments
as stated above. It should be borne in mind that the control test calls merely for the existence of the right
to control the manner of doing the work, not the actual exercise of the right. Considering the finding by the
Hearing Examiner that the establishment of Dy Keh Beng is "engaged in the manufacture of baskets known
as kaing, it is natural to expect that those working under Dy would have to observe, among others, Dy's
requirements of size and quality of the kaing. Some control would necessarily be exercised by Dy as the
making of the kaing would be subject to Dy's specifications. Parenthetically, since the work on the baskets
is done at Dy's establishments, it can be inferred that the proprietor Dy could easily exercise control on the
men he employed.
As to the contention that Solano was not an employee because he worked on piece basis, this
Court agrees with the Hearing Examiner that circumstances must be construed to determine indeed if
payment by the piece is just a method of compensation and does not define the essence of the relation.
Units of time ... and units of work are in establishments like respondent just yardsticks whereby to determine
rate of compensation, to be applied whenever agreed upon. We cannot construe payment by the piece
where work is done in such an establishment so as to put the worker completely at liberty to turn him out
and take in another at pleasure.
The SC notes that Justice Perfecto, concurring with Chief Justice Ricardo Paras who penned the
decision in "Sunrise Coconut Products Co. v. Court of Industrial Relations" (83 Phil..518, 523), opined that
judicial notice of the fact that the so-called "pakyaw" system mentioned in this case as generally practiced
in our country, is, in fact, a labor contract -between employers and employees, between capitalists and
laborers.
Atty. Mercader
Insular Life Assurance Co., Ltd v NLRC

Narvaza, J.:
G.R No 84484 November 15, 1989
The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had become the Company's
employee by virtue of the contract invoked by him, thereby placing his claim for unpaid commissions
within the original and exclusive jurisdiction of the Labor Arbiter under the provisions of Section 217 of the
Labor Code,
Article. 217. Jurisdiction of the Labor Arbiters and the Commission. - (a) Except as otherwise provided
under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within
thirty (30) calendar days after the submission of the case by the parties for decision without extension, even
in the absence of stenographic notes, the following cases involving all workers, whether agricultural or non-
agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates
of pay, hours of work and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee
relations;
5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality of
strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other
claims arising from employer-employee relations, including those of persons in domestic or household
service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether
accompanied with a claim for reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.
(c) Cases arising from the interpretation or implementation of collective bargaining agreements and those
arising from the interpretation or enforcement of company personnel policies shall be disposed of by the
Labor Arbiter by referring the same to the grievance machinery and voluntary arbitration as may be provided
in said agreements. (As amended by Section 9, Republic Act No. 6715, March 21, 1989).
Facts:
July 2, 1968 - Insular Life Assurance Co., Ltd. and Melecio T. Basiao entered into a contract by which
Basiao was "authorized to solicit within the Philippines applications for insurance policies and annuities in
accordance with the existing rules and regulations" of the Company.
April, 1972 - Some time later, the parties entered into another contract, an Agency Manager's Contract and
to implement his end of it Basiao organized an agency while concurrently fulfilling his commitments under
the first contract with the Company.
May, 1979 - The Company then terminated the Agency Manager's Contract, after vainly seeking a
reconsideration, Basiao sued the Company in a civil action and this, he was later to claim, prompted the
latter to terminate also his engagement under the first contract and to stop payment of his commissions.
Basiao thereafter filed with the then Ministry of Labor a complaint against the Company and its president.
Without contesting the termination of the first contract, the complaint sought to recover commissions
allegedly unpaid thereunder. The respondents disputed the Ministry's jurisdiction over Basiao's claim,
asserting that he was not the Company's employee, but an independent contractor and that the Company
had no obligation to him for unpaid commissions under the terms and conditions of his contract
Issue : Whether or not there is an employer - employee relationship between the petitioner and Basiao
Held : No
Atty. Mercader
There is no employer-employee relation in the legal and generally accepted sense existed between the
petitioner and Basiao
In determining the existence of employer-employee relationship (Control Test), the following elements are
generally considered, namely: (1) the selection and engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the power to control the employees' conduct — although the
latter is the most important element .
The line should be drawn between rules that merely serve as guidelines towards the achievement of the
mutually desired result without dictating the means or methods to be employed in attaining it, and those
that control or fix the methodology and bind or restrict the party hired to the use of such means. The first,
which aim only to promote the result, create no employer-employee relationship unlike the second, which
address both the result and the means used to achieve it.
The respondents limit themselves to pointing out that Basiao's contract with the Company bound him to
observe and conform to such rules and regulations as the latter might from time to time prescribe. No
showing has been made that any such rules or regulations were in fact promulgated, much less that any
rules existed or were issued which effectively controlled or restricted his choice of methods or the methods
themselves of selling insurance
The Court, therefore, rules that under the contract invoked by him, Basiao was not an employee of the
petitioner, but a commission agent
Atty. Mercader
Tongko v. Manufacturer’s Life Insurance Company

Brion, J.
G.R. No. 167622 – 29 June 2010
This resolves the Motion for Reconsideration dated December 3, 2008 filed by Manufacturer’s Life
Insurance Company (Manulife for brevity) to set aside the November 7, 2008 decision that an employer-
employee relationship existed between Manulife and Gregorio Tongko and that ordered Manulife to pay
Tongko backwages and separation pay for illegal dismissal.
FACTS:
The contractual relationship between Tongko and Manulife had two basic phases. The first or initial phase
began on July 1, 1977, under a Career Agents Agreement which provided that “the Agent is an independent
contractor and nothing contained herein shall be construed or interpreted as creating an employer-
employee relationship between the Company and the Agent.” The second phase started in 1983 when
Tongko was named Unit Manager in Manulife’s Sales Agency Organization. In 1990, he became a Branch
Manager. Six years later, he became a Regional Sales Manager. Tongko’s gross earnings consisted of
commissions, persistency income, and management overrides. Since the beginning, Tongko consistently
declared himself self-employed in his income tax returns. Thus, under oath, he declared his taxable
business income. Manulife withheld the corresponding 10% tax on Tongko’s earnings.
In 2001, Manulife instituted manpower development programs at the regional sales management level
which directed the managers to increase the number of agents to at least 1,000 for a start. It was found
that Tongko’s region was the lowest performer in terms of recruiting in 2000. On November 6, 2001,
respondent Renato Vergel de Dios wrote Tangko a letter regarding concerns that were brought up during
the Metro North Sales Managers Meeting, expressing dissatisfaction of Tongko’s performance in their agent
recruiting business, which resulted in some changes on how Tongko would conduct his duties, including
that Tongko hire at his expense a competent assistant to unload him of routine tasks, which he had been
complaining to be too taxing for him.
On December 18, 2001, de Dios wrote another letter to Tongko terminating his services. Tongko responded
by filing an illegal dismissal complaint with the National Labor Relations Commission (NLRC) Arbitration
Branch. He alleged that he was Manulife’s employee before he was illegally dismissed. Manulife argues
that Tongko had no fixed wage or salary and that under the agreement, Tongko was paid commissions of
varying amounts, computed based on the premium paid in full and actually received by Manulife on policies
obtained through an agent. Manulife also asserts that the labor tribunals have no jurisdiction over Tongko’s
claims as he was not its employee as characterized in the four-fold test and ruling in Carungcong v NLRC.
The labor arbiter decreed that no employer-employee relationship existed between the parties. However,
the NLRC reversed this decision and found that Tongko had been illegally dismissed. In the petition for
certiorari, the CA found that the NLRC gravely abused its discretion in its ruling and reverted to the labor
arbiter’s decision that no employer-employee relationship existed between Tongko and Manulife. The
Supreme Court, on November 7, 2008, reversed the CA’s ruling and found that an employment relationship
existed. Manulife disagreed with the Decision and filed the present motion for reconsideration.
ISSUE:
W/N an employee-employer relationship exists between Tongko and Manulife.
HELD: MOTION FOR RECONSIDERATION GRANTED. PETITION DISMISSED.
No. An employee-employer relationship does not exist between Tongko and Manulife.
 The primary evidence in the case is the Agreement that governed and defined the parties relations
until the Agreements termination in 2001. This Agreement stood for more than two decades and was never
modified or novated. It assumes primacy because it directly dealt with the nature of the parties relationship
up to the very end. By the Agreement’s express terms, Tongko served as an insurance agent for Manulife,
Atty. Mercader
not as an employee. Evidence shows that Tongko’s role as an insurance agent never changed during his
relationship with Manulife. If changes occurred at all, the changes did not appear to be in the nature of their
core relationship. Tongko essentially remained an agent, but moved up in this role through Manulife’s
recognition that he could use other agents approved by Manulife, but operating under his guidance and in
whose commissions he had a share. This interpretation could have been contradicted if other agreements
had been submitted as evidence of the relationship between Manulife and Tongko on the latters expanded
undertakings. In the absence of any such evidence, however, this reading based on the available evidence
and the applicable insurance and civil law provisions must stand, subject only to objective and evidentiary
Labor Code tests on the existence of an employer-employee relationship.
 In applying such Labor Code tests, however, the enforcement of the Agreement during the course
of the parties relationship should be noted. From 1977 until the termination of the Agreement, Tongko’s
occupation was to sell Manulife’s insurance policies and products. Both parties acquiesced with the terms
and conditions of the Agreement. Tongko, for his part, accepted all the benefits flowing from the Agreement,
particularly the generous commissions. Evidence indicates that Tongko consistently clung to the view that
he was an independent agent selling Manulife insurance products since he invariably declared himself a
business or self-employed person in his income tax returns. For want of a better term, Tongko perhaps can
be labeled as a ‘lead agent’ who guided under his wing other Manulife agents.
 Furthermore, the Court distinguished control under the Insurance Code and the Labor Code. Rules
regarding the desired results (e.g., the required volume to continue to qualify as a company agent, rules to
check on the parameters on the authority given to the agent, and rules to ensure that industry, legal and
ethical rules are followed) are builtin elements of control specific to an insurance agency and should not
and cannot be read as elements of control that attend an employment relationship governed by the Labor
Code.
 Based on decided cases, a determination of the presence of the Labor Code element of control
was made on the basis of the stipulations of the subsequent contracts. In this case, while Tongko was later
on designated unit manager, branch manager, and then regional sales manager, no formal contract
regarding these undertakings appears in the records of the case. Any such contract or agreement, had
there been any, could have at the very least provided the bases for properly ascertaining the juridical
relationship established between the parties.
 There was lack of evidence on record showing that Manulife ever exercised meansandmanner
control, even to a limited extent, over Tongko during his ascent in Manulife’s sales ladder. Manulife had
practically left Tongko alone not only in doing the business of selling insurance, but also in guiding the
agents under his wing. Furthermore, the mere presentation of codes or of rules and regulations is not per
se indicative of labor law control. The codes of conduct do not intrude into the agents’ means and manner
of conducting their sales and only control them as to the desired results. Guidelines indicative of labor law
control, based on Insular Life v NLRC, should not merely relate to the mutually desirable result intended by
the contractual relationship; they must have the nature of dictating the means or methods to be employed
in attaining the result, or of fixing the methodology and of binding or restricting the party hired to the use of
these means.
 Hence, the sufficiency of Tongko’s failure to comply with the guidelines of de Dios letter, as a
ground for termination of Tongko’s agency, is a matter that the labor tribunals cannot rule upon in the
absence of an employer-employee relationship. Jurisdiction over the matter belongs to the courts applying
the laws of insurance, agency and contracts.
Atty. Mercader
AFP Mutual Benefit Association, Inc. vs National Labor Relations Commision and Eutiquio
Bustamante
Panganiban, J.
GR No. 102199 – 28 January 1997
FACTS: Eutiquio Bustamante (respondent) was a Sales Insurance Agent at the AFP Mutual Benefit
Association INC (petitioner). Under the Sales Agreement executed between them, respondent is to solicit
exclusively for petitioner and that no employer-employee relationship existed between them, the
respondent being deemed to be an independent contractor. For his compensation, respondent received
commissions based on the percentages of the premiums paid. Later on, respondent was dismissed by
petitioner for misrepresentation and for selling insurance for another life insurance company, in violation of
their Sales Agreement. Respondent seeks the release of his commissions to which he filed a complaint
with the Insurance Commissioner who later recommended that he file a case with the Department of Labor
and Employment who had jurisdiction over such matter. Heeding the Insurance Commissioner’s call,
respondent lodged a complaint with the Labor Arbiter who ruled in favor of him. The Labor Arbiter’s ruling
was affirmed by the National Labor Relations Commission (NLRC), hence this present petition assailing
the said decision. Petitioner contends that the NLRC had no jurisdiction over the case as it only have
jurisdiction over cases wherein an employer-employee relationship is involved.
ISSUE: Whether or not there was an employer-employee relationship between respondent and
petitioner.
HELD: No. In ruling in favor of the petitioner, the Supreme Court held applied the “four-fold test” in
determining whether or not an employer-employee relationship exists, to wit: (1) the power to hire; (2) the
payment of wages; (3) the power to dismiss; and (4) the power to control, the last being the most important
element. In this case, the last element is missing as the petitioner had no power of control over the
respondent which can be gleaned from the Sales Agreement between them. Absent the said element, there
exists no employer-employee relationship between them and that the decision of the NLRC was an error
on its part. With such, the respondent could have instituted a claim for his unpaid commissions through an
ordinary civil action and not through the NLRC.
Atty. Mercader
Corporal v. NLRC
Quisumbing, J.
GR No. 129315 – 2 October 2000
This special civil action for certiorari seeks the review of the Resolution dated October 17, 1996 of
public respondent National Labor Relations Commission (First Division), in NLRC NCR Case No. 00-04-
03163-95, and the Resolution dated March 5, 1997 denying the motion for reconsideration. The
aforecited October 17th Resolution affirmed the Decision dated September 28, 1996 of Labor Arbiter
Potenciano S. Caizares dismissing the petitioners' complaint for illegal dismissal and declaring that
petitioners are not regular employees of private respondent Lao Enteng Company, Inc.
FACTS:
 Five male petitioners worked as barbers while two female petitioners worked as manicurists in New
Look Barber Shop in Quiapo owned by private respondent Lao Enteng Co. Inc.
 Male petitioners: Osias Corporal, Pedro Tolentino, Manuel Caparas, Elpidio Lacap,
Simplicio Padelos
 Female petitioners: Teresitas Flores, Patricia Nas – Nas also worked as watcher and
marketer of Lao Enteng Co. Inc.
 At the start of their employment, New Look Barber Shop was a single proprietorship by Mr. Vicente
Lao
 January 1982: children of Vicente Lao organized a corporation which took over the assets,
equipment, and properties of the New Look Barber Shop and continued the business.
 All petitioners were allowed to continue working
 Trinidad Ong is the new president
 April 15, 1995: Ong informed petitioners that the building wherein New Look Barber Shop was
located had been sold and that their services were no longer needed.
 April 28, 1995: petitioners filed with the arbitration branch of the NLRC, a complaint for illegal
dismissal, illegal deduction, separation pay, non-payment of 13th month pay, and salary
differentials.
 Private respondent contentions:
 Petitioners were joint venture partners, thus, no employer-employee relationship.
 And even if there was an employer-employee relationship, no separation pay because
cessation of operations was due to serious business losses.
 Labor arbiter agreed with the contentions of the private respondent
 NLRC affirmed the findings of labor arbiter since complainants failed to show the existence of
employer-employee relationship under the four-fold test
 Petitioners filed an instant petition assigning that the NLRC committed grave abuse of discretion.
 Petitioners contentions: (petition)
 NLRC gravely erred in declaring that petitioners were independent contractors because
they were under the control of the management.
 NLRC arbitrarily disregarded substantial evidence on record showing petitioners were
registered with the SSS as regular employees of respondent company.
ISSUE:
Whether or not an employer-employee relationship existed between petitioners and private
respondent Lao Enteng Company, Inc.
 Yes. There exists an employer-employee relationship.

Atty. Mercader
 Parties were not engaged in a joint venture because it is unsupported by any documentary
evidence. More specifically, there were no partnership agreements presented. Even the sharing of
proceeds does not mean that the petitioners were not employees of the respondent company.
 Petitioners are not independent contractors as well because they did not carry on an independent
business. They did not undertake cutting hair and manicuring nails, on their own as their
responsibility, and in their own manner and method.
 Petitioners, individually or collectively, did not have substantial capital or investment to
operate a barber shop
 Petitioners owned were only combs, scissors, razors, nail cutters, nail polishers, nippers –
nothing else.
 Petitioners were required to observe rules and regulations of the company pertaining,
observance of daily attendance, job performance, and regularity of job output.
 The nature of work of the petitioners are not clearly directly related to private respondent’s
business of operating barber shops.
 Application of the four-fold test to determine whether or not there is an employer-employee
relationship
 First test satisfied: Vicente Lao engaged the services of the petitioners
 Second test satisfied: Respondent company retained the services of all the petitioners
 Third test satisfied: Respondent company continuously paid their wages.
 For the fourth test, private respondent claims it had no control over petitioners which is erroneous.
 The power to control refers to the existence of the power. It is enough that the employer
has the right to wield that power.
 Facts proving the control test:
 (1) they worked in the barber shop owned and operated by the respondents;
 (2) they were required to report daily and observe definite hours of work;
 (3) they were not free to accept other employment elsewhere but devoted their full time
working in the New Look Barber Shop for all the fifteen (15) years they have worked until
April 15, 1995;
 (4) that some have worked with respondents as early as in the 1960's;
 (5) that petitioner Patricia Nas was instructed by the respondents to watch the other six (6)
petitioners in their daily task.
 Furthermore, private respondents did not show proof to their claim that petitioners were the ones
who solely paid all SSS Contributions. If petitioners are not their employees, they would not pay
the SSS premium.
 Supreme Court agrees that the business closed due to serious business losses and it is in the
exercise of management prerogative that the employer may sell assets and properties. Thus Article
283 mandates the grant of separation pay.
Atty. Mercader
Maraguinot, Jr. vs. NLRC

Davide, Jr., J:.
GR No. 120969 – 22 January 1998
FACTS:
 Viva Films is the trade name of Viva Productions, Inc. It is primarily engaged in the distribution
and exhibition of movies. Vic del Rosario is an executive producer, i.e., the financier who invests
a certain sum of money for the production of movies distributed and exhibited by Viva Films.
 Alejandro Maraguinot was employed by Viva Films through Vic del Rosario on July 18, 1989 as
part of the filming crew with a salary of P375 per week. He was promoted to the rank of
Electrician with a weekly salary of P475.00, which was increased to P593.00 in September 1991.
 Paulino Enero was employed by Viva Films in June 1990 as a member of the shooting crew with
a weekly salary of P375.00, which was increased to P425.00, then to P475.00 on 21 December
1991.
 Maraguinot, Jr. and Enero’s tasks consisted of loading, unloading and arranging movie
equipment in the shooting area as instructed by the cameraman, returning the equipment to Viva
Films warehouse, assisting in the fixing of the lighting system, and performing other tasks that the
cameraman and/or director may assign.
 In June 1992, their supervisor informed them that Mr. del Rosario would agree to increase their
salary only if they signed a blank employment contract. As the two refused to sign, del Rosario
forced Enero to go on leave, then refused to take him back when he reported for work. Meanwhile,
Maraguinot was dropped from the company payroll from 8 to 21 June 1992, but was returned on
22 June 1992. He was again asked to sign a blank employment contract, and when he still refused,
Viva Films terminated his services. Maraguinot, Jr. and Enero thus sued for illegal dismissal.
 Viva Films assert that they contract persons called producers -- also referred to as associate
producers-- to produce or make movies for them; and contend that Maraguinot, Jr. and Enero are
project employees of the associate producers who, in turn, act as independent contractors. As
such, there is no employer-employee relationship between petitioners and private respondents.
They further contend that it was the associate producer of the film Mahirap Maging Pogi, who hired
Maraguinot, and it was only then that Maraguinot was released upon payment of his last salary, as
his services were no longer needed. Anent Enero, he was hired for the movie entitled Sigaw ng
Puso, later re-titled Narito ang Puso. He went on vacation, and by the time he reported for work,
shooting for the movie had already been completed.
 Labor Arbiter: Petitioners were illegally dismissed
 NLRC: Petitioners were not illegally dismissed and were mere project employees
ISSUE/S:
1. W/N there was an employer-employee relationship between Viva Films and the petitioners
2. W/N petitioners are regular employees who were illegally dismissed.
HELD: GRANTED.
1. Yes. The employer-employee relationship between petitioners and VIVA can further be established
by the control test. While four elements are usually considered in determining the existence of an
employment relationship, namely: (a) the selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d) the employers power to control the
employees conduct, the most important element is the employers control of the employees conduct,
not only as to the result of the work to be done but also as to the means and methods to accomplish
the same. These four elements are present here as[T]he PRODUCER has to work within the limits
of the budget he is given by the company, for as long as the ultimate finish[ed] product is acceptable
to the company...To ensure that quality films are produced by the PRODUCER who is an
independent contractor, the company likewise employs a Supervising PRODUCER, a Project
accountant and a Shooting unit supervisor. The Companys Supervising PRODUCER is Mr. Eric
Cuatico, the Project accountant varies from time to time, and the Shooting Unit Supervisor is Ms.
Alejandria Cesario.The Supervising PRODUCER acts as the eyes and ears of the company and of
Atty. Mercader
the Executive Producer to monitor the progress of the PRODUCERs work accomplishment. He is
there usually in the field doing the rounds of inspection to see if there is any problem that the
PRODUCER is encountering and to assist in threshing out the same so that the film project will be
finished on schedule. He supervises about 3 to 7 movie projects simultaneously [at] any given time
by coordinating with each film PRODUCER. The Project Accountant on the other hand assists the
PRODUCER in monitoring the actual expenses incurred because the company wants to insure that
any additional budget requested by the PRODUCER is really justified and warranted especially
when there is a change of original plans to suit the tast[e] of the company on how a certain scene
must be presented to make the film more interesting and more commercially viable. (emphasis
ours)
VIVAs control is evident in its mandate that the end result must be a quality film acceptable to the company. The
means and methods to accomplish the result are likewise controlled by VIVA, viz., the movie project must
be finished within schedule without exceeding the budget, and additional expenses must be justified; certain
scenes are subject to change to suit the taste of the company; and the Supervising Producer, the eyes and
ears of VIVA and del Rosario, intervenes in the movie-making process by assisting the associate producer
in solving problems encountered in making the film. It may not be validly argued then that petitioners are
actually subject to the movie directors control, and not VIVAs direction. The director merely instructs
petitioners on how to better comply with VIVAs requirements to ensure that a quality film is completed within
schedule and without exceeding the budget. At bottom, the director is akin to a supervisor who merely
oversees the activities of rank-and-file employees with control ultimately resting on the employer.
Moreover, appointment slips issued to all crew members state:

During the term of this appointment you shall comply with the duties and responsibilities of
your position as well as observe the rules and regulations promulgated by your superiors and by
Top Management.
The words superiors and Top Management can only refer to the superiors and Top Management
of VIVA.
By commanding crew members to observe the rules and regulations promulgated by VIVA,
the appointment slips only emphasize VIVAs control over petitioners.
2. Yes. The evidence on record shows that petitioner Enero was employed for a total of two (2) years
and engaged in at least eighteen (18) projects, while petitioner Maraguinot was employed for some three
(3) years and worked on at least twenty-three (23) projects. Moreover, as petitioners tasks involved, among
other chores, the loading, unloading and arranging of movie equipment in the shooting area as instructed
by the cameramen, returning the equipment to the Viva Films warehouse, and assisting in the fixing of the
lighting system, it may not be gainsaid that these tasks were vital, necessary and indispensable to the usual
business or trade of the employer. As regards the underscored phrase, it has been held that this is
ascertained by considering the nature of the work performed and its relation to the scheme of the particular
business or trade in its entirety
Atty. Mercader
JOSE Y. SONZA vs. ABS-CBN BROADCASTING CORPORATION

Carpio, J.
G.R. No. 138051 – June 10, 2004
Before this Court is a petition for review on certiorari assailing the 26 March 1999 Decision of the
Court of Appeals in CA-G.R. SP No. 49190 dismissing the petition filed by Jose Y. Sonza ("SONZA"). The
Court of Appeals affirmed the findings of the National Labor Relations Commission ("NLRC"), which
affirmed the Labor Arbiter’s dismissal of the case for lack of jurisdiction.
FACTS:
 In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS-CBN") signed an Agreement

("Agreement") with the Mel and Jay Management and Development Corporation ("MJMDC"). ABS-
CBN was represented by its corporate officers while MJMDC was represented by SONZA, as
President and General Manager, and Carmela Tiangco ("TIANGCO"), as EVP and Treasurer.
Referred to in the Agreement as "AGENT," MJMDC agreed to provide SONZA’s services
exclusively to ABS-CBN as talent for radio and television. The Agreement listed the services
SONZA would render to ABS-CBN, as follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.
ABS-CBN agreed to pay for SONZA’s services a monthly talent fee of ₱310,000 for the first year and ₱317,000 for
the second and third year of the Agreement. ABS-CBN would pay the talent fees on the 10th and 25th days
of the month.
 In April, 1996 – “Mr. Sonza irrevocably resigned in view of recent events concerning his programs
and career. We consider these acts of the station violative of the Agreement and the station as in
breach thereof.” Pertaining to some of his shows cancellation and discontinuance.
 On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor
and Employment, National Capital Region in Quezon City. SONZA complained that ABS-CBN did
not pay his salaries, separation pay, service incentive leave pay, 13th month pay, signing bonus,
travel allowance and amounts due under the Employees Stock Option Plan ("ESOP").
 On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-
employee relationship existed between the parties. SONZA filed an Opposition to the motion
on 19 July 1996.
 Meanwhile, ABS-CBN continued to remit SONZA’s monthly talent fees through his account at
PCIBank, Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN opened a new account
with the same bank where ABS-CBN deposited SONZA’s talent fees and other payments due him
under the Agreement.
ISSUE/S:
1. W/N there exists an employee-employer relationship between the parties.
HELD: DECISION OF THE LABOR ARBITER, NLRC AND C.A. AFFIRMED.
1. No. There is no employee-employer relationship between them.

 SONZA maintains that all essential elements of an employer-employee relationship are present in
this case. Case law has consistently held that the elements of an employer-employee relationship
are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power
of dismissal; and (d) the employer’s power to control the employee on the means and methods by
which the work is accomplished. The last element, the so-called "control test", is the most
important element.
A. Selection and Engagement of Employee
Atty. Mercader
Independent contractors often present themselves to possess unique skills, expertise or talent
to distinguish them from ordinary employees. The specific selection and hiring of SONZA,
because of his unique skills, talent and celebrity status not possessed by ordinary employees,
is a circumstance indicative, but not conclusive, of an independent contractual relationship. If
SONZA did not possess such unique skills, talent and celebrity status, ABS-CBN would not
have entered into the Agreement with SONZA but would have hired him through its personnel
department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively determine
his status. We must consider all the circumstances of the relationship, with the control test
being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC.
SONZA asserts that this mode of fee payment shows that he was an employee of ABS-CBN.
SONZA also points out that ABS-CBN granted him benefits and privileges "which he would not
have enjoyed if he were truly the subject of a valid job contract."
All the talent fees and benefits paid to SONZA were the result of negotiations that led to the
Agreement. If SONZA were ABS-CBN’s employee, there would be no need for the parties to
stipulate on benefits such as "SSS, Medicare, x x x and 13th month pay" which the law
automatically incorporates into every employer-employee contract. Whatever benefits SONZA
enjoyed arose from contract and not because of an employer-employee relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the status
of SONZA as an independent contractor. The parties expressly agreed on such mode of
payment. Under the Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would
have to turn over any talent fee accruing under the Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate their relationship.
SONZA failed to show that ABS-CBN could terminate his services on grounds other than
breach of contract, such as retrenchment to prevent losses as provided under labor laws.
The Labor Arbiter stated that "if it were true that complainant was really an employee, he would
merely resign, instead." SONZA did actually resign from ABS-CBN but he also, as president of
MJMDC, rescinded the Agreement. SONZA’s letter clearly bears this out. However, the manner
by which SONZA terminated his relationship with ABS-CBN is immaterial. Whether SONZA
rescinded the Agreement or resigned from work does not determine his status as employee or
independent contractor.
D. Power of Control
First, SONZA contends that ABS-CBN exercised control over the means and methods of his
work.
SONZA’s argument is misplaced. ABS-CBN engaged SONZA’s services specifically to co-host
the "Mel & Jay" programs. ABS-CBN did not assign any other work to SONZA. To perform his
work, SONZA only needed his skills and talent. How SONZA delivered his lines, appeared on
television, and sounded on radio were outside ABS-CBN’s control. SONZA did not have to
render eight hours of work per day. The Agreement required SONZA to attend only rehearsals
and tapings of the shows, as well as pre- and post-production staff meetings. ABS-CBN could
not dictate the contents of SONZA’s script. However, the Agreement prohibited SONZA from
criticizing in his shows ABS-CBN or its interests. The clear implication is that SONZA had a
free hand on what to say or discuss in his shows provided he did not attack ABS-CBN or its
interests.
Clearly, ABS-CBN’s right not to broadcast SONZA’s show, burdened as it was by the obligation
to continue paying in full SONZA’s talent fees, did not amount to control over the means and
methods of the performance of SONZA’s work. ABS-CBN could not terminate or discipline
SONZA even if the means and methods of performance of his work - how he delivered his lines
Atty. Mercader
and appeared on television - did not meet ABS-CBN’s approval. This proves that ABS-CBN’s
control was limited only to the result of SONZA’s work, whether to broadcast the final product
or not. In either case, ABS-CBN must still pay SONZA’s talent fees in full until the expiry of the
Agreement.
Second, SONZA urges us to rule that he was ABS-CBN’s employee because ABS-CBN
subjected him to its rules and standards of performance. SONZA claims that this indicates
ABS-CBN’s control "not only [over] his manner of work but also the quality of his work."
The Agreement stipulates that SONZA shall abide with the rules and standards of performance
"covering talents" of ABS-CBN. The Agreement does not require SONZA to comply with the
rules and standards of performance prescribed for employees of ABS-CBN. The code of
conduct imposed on SONZA under the Agreement refers to the "Television and Radio Code of
the Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has been adopted by the
COMPANY (ABS-CBN) as its Code of Ethics." The KBP code applies to broadcasters, not to
employees of radio and television stations. Broadcasters are not necessarily employees of
radio and television stations. Clearly, the rules and standards of performance referred to in the
Agreement are those applicable to talents and not to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party indicate that the latter
is an employee of the former. In this case, SONZA failed to show that these rules controlled
his performance. We find that these general rules are merely guidelines towards the
achievement of the mutually desired result, which are top-rating television and radio programs
that comply with standards of the industry.
Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the most extreme form
of control which ABS-CBN exercised over him.
This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an
employee of ABS-CBN. Even an independent contractor can validly provide his services
exclusively to the hiring party. In the broadcast industry, exclusivity is not necessarily the same
as control.
 MJMDC as Agent of SONZA
SONZA protests the Labor Arbiter’s finding that he is a talent of MJMDC, which contracted out his
services to ABS-CBN. The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an
employee of ABS-CBN. SONZA insists that MJMDC is a "labor-only" contractor and ABS-CBN is
his employer.
In a labor-only contract, there are three parties involved: (1) the "labor-only" contractor; (2) the
employee who is ostensibly under the employ of the "labor-only" contractor; and (3) the principal
who is deemed the real employer. Under this scheme, the "labor-only" contractor is the agent of
the principal. The law makes the principal responsible to the employees of the "labor-only
contractor" as if the principal itself directly hired or employed the employees. These circumstances
are not present in this case.
There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-
CBN. MJMDC merely acted as SONZA’s agent. The Agreement expressly states that MJMDC
acted as the "AGENT" of SONZA. The records do not show that MJMDC acted as ABS-CBN’s
agent. MJMDC, which stands for Mel and Jay Management and Development Corporation, is a
corporation organized and owned by SONZA and TIANGCO. The President and General Manager
of MJMDC is SONZA himself. It is absurd to hold that MJMDC, which is owned, controlled, headed
and managed by SONZA, acted as agent of ABS-CBN in entering into the Agreement with SONZA,
who himself is represented by MJMDC. That would make MJMDC the agent of both ABS-CBN and
SONZA.
Atty. Mercader
ABS-CBN Broadcasting Corporation v. Marlyn Nazareno

Callejo, Sr., J..
G.R. No. 164156 – September 26, 2006
Before us is a petition for review on certiorari of the Decision of the Court of Appeals (CA) in CA-
G.R. SP No. 76582 and the Resolution denying the motion for reconsideration thereof. The CA affirmed the
Decision and Resolution of the National Labor Relations Commission (NLRC) in NLRC Case No. V-000762-
2001 (RAB Case No. VII-10-1661-2001) which likewise affirmed, with modification, the decision of the Labor
Arbiter declaring the respondents Marlyn Nazareno, Merlou Gerzon, Jennifer Deiparine and Josephine
Lerasan as regular employees.
FACTS:
Petitioner (ABS-CBN) employed respondents Nazareno, Gerzon, Deiparine, and
Lerasan as production assistants (PAs) on different dates. They were assigned at the
news and public affairs, for various radio programs in the Cebu Broadcasting Station,
with a monthly compensation of P4,000. They were issued ABS-CBN employees
identification cards and were required to work for a minimum of eight hours a day, including
Sundays and holidays. They were made to perform the following tasks and duties:
a) Prepare, arrange airing of commercial broadcasting based on the daily

operations log and digicart of respondent ABS-CBN;
b) Coordinate, arrange personalities for air interviews;
c) Coordinate, prepare schedule of reporters for scheduled news reporting
and lead-in or incoming reports;
d) Facilitate, prepare and arrange airtime schedule for public service
announcement and complaints;
e) Assist, anchor program interview, etc; and
f) Record, log clerical reports, man based control radio.
The PAs were under the control and supervision of Assistant Station Manager
Dante J. Luzon, and News Manager Leo Lastimosa.
On December 19, 1996, petitioner and the ABS-CBN Rank-and-File Employees

executed a Collective Bargaining Agreement (CBA) to be effective during the period from
December 11, 1996 to December 11, 1999. However, since petitioner refused to
recognize PAs as part of the bargaining unit, respondents (PAs) were not included
to the CBA.
On October 12, 2000, respondents filed a Complaint for Recognition of Regular

Employment Status, Underpayment of Overtime Pay, Holiday Pay, Premium Pay, Service
Incentive Pay, Sick Leave Pay, and 13th Month Pay with Damages against the petitioner
before the NLRC. The Labor Arbiter directed the parties to submit their respective position
papers. Upon respondents failure to file their position papers within the reglementary
period, Labor Arbiter Jose G. Gutierrez issued an Order dated April 30, 2001, dismissing
the complaint without prejudice for lack of interest to pursue the case. Respondents
received a copy of the Order on May 16, 2001. Instead of re-filing their complaint with the
NLRC within 10 days from May 16, 2001, they filed, on June 11, 2001, an Earnest Motion
to Refile Complaint with Motion to Admit Position Paper and Motion to Submit Case For
Resolution. The Labor Arbiter granted this motion in an Order dated June 18, 2001, and
forthwith admitted the position paper of the complainants.
Respondents made the following allegations:
Atty. Mercader
1. Complainants were engaged by respondent ABS-CBN as regular and full-time

employees for a continuous period of more than five (5) years with a monthly salary rate
of Four Thousand (P4,000.00) pesos beginning 1995 up until the filing of this complaint
on November 20, 2000. Machine copies of complainants ABS-CBN Employees
Identification Card and salary vouchers.
Complainants (PAs) further pray of this Arbiter to declare them regular and
permanent employees of respondent ABS-CBN as a condition precedent for their
admission into the existing union and collective bargaining unit of respondent company
where they may as such acquire or otherwise perform their obligations thereto or enjoy the
benefits due therefrom.
Petitioner’s contention
Petitioner alleged in its position paper that the respondents were PAs who basically
assist in the conduct of a particular program ran by an anchor or talent. Among their duties
include monitoring and receiving incoming calls from listeners and field reporters and calls
of news sources; generally, they perform leg work for the anchors during a program or a
particular production. They are considered in the industry as program employees in that,
as distinguished from regular or station employees, they are basically engaged by the
station for a particular or specific program broadcasted by the radio station.
Petitioner maintained that PAs, reporters, anchors and talents occasionally
sideline for other programs they produce, such as drama talents in other productions. As
program employees, a PAs engagement is coterminous with the completion of the
program, and may be extended/renewed provided that the program is on-going; a PA may
also be assigned to new programs upon the cancellation of one program and the
commencement of another. As such program employees, their compensation is computed
on a program basis, a fixed amount for performance services irrespective of the time
consumed. At any rate, petitioner claimed, as the payroll will show, respondents were paid
all salaries and benefits due them under the law.
Labor Arbiter’s Decision: Rendered judgment in favor of the respondents, and declared
that they were regular employees of petitioner; as such, they were awarded monetary benefits.
ISSUE/S:
WoN Respondents (PAs) are regular employees?
HELD: YES
There are two kinds of regular employees under the law: (1) those engaged to perform activities
which are necessary or desirable in the usual business or trade of the employer; and (2) those casual
employees who have rendered at least one year of service, whether continuous or broken, with respect to
the activities in which they are employed.
The SC agrees with respondents contention that where a person has rendered at least one year of
service, regardless of the nature of the activity performed, or where the work is continuous or intermittent,
the employment is considered regular as long as the activity exists, the reason being that a customary
appointment is not indispensable before one may be formally declared as having attained regular status.
Article 280 of the Labor Code provides:
“ART. 280. REGULAR AND CASUAL EMPLOYMENT.The provisions of written
agreement to the contrary notwithstanding and regardless of the oral agreement of the
parties, an employment shall be deemed to be regular where the employee has been
engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer except where the employment has been fixed for a
specific project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the work or
services to be performed is seasonal in nature and the employment is for the duration
Atty. Mercader
of the season.”
The law overrides such conditions which are prejudicial to the interest of the worker whose weak
bargaining situation necessitates the succor of the State. What determine whether a certain employment
is regular or otherwise is not the will or word of the employer, to which the worker oftentimes
acquiesces, much less the procedure o hiring the employee or the manner of paying the salary or the actual
time spent at work. It is the character of the activities performed in relation to the particular trade or
business taking into account all the circumstances, and in some cases the length of time of its
performance and its continued existence. It is obvious that one year after they were employed by
petitioner, respondents became regular employees by operation of law.
In this case, it is undisputed that respondents had continuously performed the same activities for
an average of five years. Their assigned tasks are necessary or desirable in the usual business or
trade of the petitioner. The persisting need for their services is sufficient evidence of the necessity and
indispensability of such services to petitioners business or trade. While length of time may not be a sole
controlling test for project
employment, it can be a strong factor to determine whether the employee was hired for a specific
undertaking or in fact tasked to perform functions which are vital, necessary and indispensable to the usual
trade or business of the employer.
It follows then that respondents are entitled to the benefits provided for in the existing CBA between
petitioner and its rank-and-file employees. As regular employees, respondents are entitled to the benefits
granted to all other regular employees of petitioner under the CBA. The Supreme Court quoted the
appealed decision of the CA which states that:
“The award in favor of private respondents of the benefits accorded to rank-and-file employees of
ABS-CBN under the 1996-1999 CBA is a necessary consequence of public respondents ruling that private
respondents as production assistants of petitioner are regular employees.
Atty. Mercader
Fulache v. ABS-CBN
Brion, J.:
G.R. No. 183810, January 21, 2010
FACTS:
The petitioners in this case, namely Farley Fulache, Manolo Jabonero, David Castillo, Jeffrey
Lagunzad, Magdalena Malig-on Bigno, Francisco Cabas, Jr., Harvey Ponce and Alan C. Almendras, and
Cresente Atinen, filed two separate complaints against ABS-CBN Broadcasting Corporation-Cebu, for
regularization, unfair labor practice, and several money claims. The two complaints mentioned were
consolidated and were assigned to Labor Arbiter Julie Rendoque.
According to the records of the case, petitioners were hired by ABS-CBN accordingly: Fulache and
Castillo as drivers/cameramen; Atinen, Lagunzad, and Jabonero were drivers; Ponce and Almendras as
cameramen/editors; Bigno as PA/Teleprompter Operator-Editing; and Cabas as VTR man/editor. However,
on December 17, 1999, ABS-CBN and the ABS-CBN Rank-and-File Employees Union executed a
collective bargaining agreement effective on December 11, 1999 to December 10, 2002, and that they only
became aware of such after obtaining copies of the agreement, from which they found out that the have
been excluded from its coverage because ABS-CBN considered them temporary and not regular
employees. They contend that it was a violation of the Labor Code, and that they have already served the
company for more than a year, hence they should have been recognized as regular employees entitled to
security of tenure and to privileges and benefits enjoyed by regular employees. They claim for overtime
pay, night shift differential, holiday, rest day and service incentive leave pay, as well as moral damages and
attorney’s fees.
On the other hand, ABS-CBN contended that the nature of the petitioners’ employment was within
the framework of its operations. Furthermore, ABS-CBN claimed that it operates in several divisions, such
as Regional Network Group, who exercise control and supervision over all the ABS-CBN local stations to
ensure that ABS-CBN programs are extended to provinces. With that said, a local station like Cebu, can
resort to cost-effective and cost-saving measures to remain viable, because of the competitive nature of
the industry, the changing public demand or preference, and the seasonal nature of media broadcasting
programs. Moreover, they claimed that it contracts on a case-to-case basis the service of persons who
possess the necessary talent, skills, training, expertise or qualifications, to adjust with the fluctuating
business conditions and to meet with the requirements of its programs and productions. They consider
these contracted persons as “talents” and are independent contractors who works for broadcasting
companies. The salaries of these talents are pre-arranged consideration or often called “talent fee” subject
to 10% withholding tax. Therefore, the services of the petitioners are terminated once the programs,
production or segment is completed, and that they should not be regularized because of the nature of their
work as independent contractors.
ABS-CBN also dismissed the drivers for their refusal to sign up contracts of employment with
service contractor Able Services, while the appeal of the regularization case was pending. ABS-CBN
contended that the drivers were dismissed because they belonged to a job category that had already been
contracted out, and even if the petitioners had been found to have been illegally dismissed, reinstatement
would be impossible because the employer-employee relationships had been strained.
ISSUE:
1. Whether or not the petitioners are considered regular employees and that they were members of
the bargaining unit and therefore entitled to the CBA benefits.
2. Whether or not the drivers were dismissed illegally.
HELD:
1st issue: Regularization
Labor Arbiter: Petitioners were regular employees of ABS-CBN.
NLRC: There was employer-employee relationship between the parties because ABS-CBN
exercised control over the petitioners in their work performance, and such work or activities are usually
Atty. Mercader
necessary in the company’s business. Thus, they were paid on a monthly basis, and not on the results of
their work.
CA: Petitioners failed to prove their claim to CBA benefits because they never raised the issue in
the compulsory arbitration proceedings and did not appeal the labor arbiter’s decision which was silent on
their entitlement to CBA benefits.
SUPREME COURT
The court find merit in the claim of the petitioners. The petitioners fall within the coverage of the
bargaining unit, as regular employees, hence they are entitled to the benefits of the collective bargaining
agreement as per law and contract. From the labor arbiter’s level, it was already established that the
petitioners’ employment status was that of the regular employees of ABS-CBN, and from their employment
contract as regulars of ABS-CBN, they fall within the coverage of the subject agreement. Section 1 of their
CBA provides:
Section 1: The parties agree that the appropriate bargaining unit shall be regular rank-
and-file employees of ABS-CBN Broadcasting Corp. but shall not include:
a. Personnel classified as Supervisor and Confidential employees;
b. Personnel who are on casual or probationary status as defined in Section 2;
c. Personnel who are on contract status or who are paid for specified units of work
such as writer-producers, talent-artists, and singers.
Under this provision, it can be inferred that the petitioners are members of the appropriate
bargaining unit because they are regular rank-and-file employees who do not belong to any of the excluded
categories. Furthermore, the Labor Arbiter decision affirmed all the way up to the level of the Court of
Appeals resolved the case against ABS-CBN claim that they are independent contractors.
2nd issue: Illegal dismissal
Labor Arbiter: The petitioners Fulache, Jabonero, Castillo, Lagunzad and Atinend, all drivers for
the company, had been dismissed due to redundancy, an authorized cause under the law.
NLRC: Reversed LA’s decision. Petitioners were illegally dismissed, and in both cases, the
petitioners are entitled to CBA benefits and privileges from the period they became regular employees up
to the time of their dismissal. (In which NLRC later on declared that the petitioners were dismissed due to
redundancy, upholding LA’s decision.)
CA: Upheld the NLRC decision.
SUPREME COURT
The SC ruled that the dismissal of the said driver-employees was in fact attended with bad faith.
The facts of the case prove that the root of such dismissal was that of the regularization case, resulting to
such dismissal amounted with bad faith. The regularization case was filed leading to the decision of labor
arbiter declaring that the petitioners (drivers) to be regular employees, notwithstanding prompting ABS-
CBN to appeal, maintaining its position that said petitioners were independent contractors. During the
appeal, ABS-CBN took matters into its own hands and dismissed the service of the petitioners. To justify
such termination, ABS-CBN used “redundancy” as the authorized cause but offered no explanation or any
supporting evidence. It merely claimed that it was contracting out the petitioners’ activities in the exercise
of its management prerogative. The facts show that the intent of the company was to transfer petitioners
and their activities to a service contractor without paying any attention to the requirements of our labor laws,
and immediately dismissed the petitioners after their refusal to sign up with the service contractor. ABS-
CBN did all these in the efforts of saving itself from the decision declaring the petitioners to be regular
employees, thereby forgetting the essence of labor law.
ABS-CBN forgot that the existing CBA must be respected in any move affecting the security of
tenure of the employees, otherwise it ran the risk of committing unfair labor practice which is both a criminal
and administrative offense. The exercise of management prerogative should be done in good faith, and
with no intent to defeat or circumvent the rights of its employees under the laws or valid agreements.
Atty. Mercader
NELSON V. BEGINO v. ABS-CBN CORPORATION

PEREZ, J.:
GR No. 199166, Apr 20, 2015
The existence of an employer-employee relationship is at the heart of this Petition for Review
on Certiorari filed pursuant to Rule 45 of the Rules of Court, primarily assailing the 29 June 2011 Decision
rendered by the Fourth Division of the Court of Appeals (CA) in CA-G.R. SP No. 116928 which ruled out
said relationship between the parties.
FACTS
 Respondent ABS-CBN Corporation is a television and radio broadcasting corporation which, for its
Regional Network Group in Naga City, employed respondent Amalia Villafuerte as Manager.
 Thru Villafuerte, ABS-CBN engaged the services of petitioners Nelson Begino and Gener Del Valle
sometime in 1996 as Cameramen/Editors for TV Broadcasting.
 Petitioners Ma. Cristina Sumayao and Monina Avila-Llorin were likewise similarly engaged as
reporters sometime in 1996 and 2002, respectively. With their services engaged by respondents thru Talent
Contracts which, though regularly renewed over the years, provided terms ranging from three (3) months
to one (1) year, petitioners were given Project Assignment Forms which detailed, among other matters, the
duration of a particular project as well as the budget and the daily technical requirements thereof. In the
aforesaid capacities, petitioners were tasked with coverage of news items for subsequent daily airings in
respondents’ TV Patrol Bicol Program.
Petitioner’contention:
 Claiming that they were regular employees of ABS-CBN, petitioners filed against respondents the
complaint (NLRC) Sub- Regional Arbitration Branch No. 5, Naga City. In support of their claims for
regularization, underpayment of overtime pay, holiday pay, 13 th month pay, service incentive leave pay,
damages and attorney's fees, petitioners alleged that they performed functions necessary and
desirable in ABS-CBN's business. Mandated to wear company IDs and provided all the equipment they
needed, petitioners averred that they worked under the direct control and supervision of Villafuerte and, at
the end of each day, were informed about the news to be covered the following day, the routes they were
to take and, whenever the subject of their news coverage is quite distant, even the start of their workday.
Due to the importance of the news items they covered and the necessity of their completion for the success
of the program, petitioners claimed that, under pain of immediate termination, they were bound by the
company’s policy on, among others, attendance and punctuality.
Respondent’s contention:
 Respondents argued that, although it occasionally engages in production and generates programs
thru various means, ABS-CBN is primarily engaged in the business of broadcasting television and
radio content. Not having the full manpower complement to produce its own program, the company
had allegedly resorted to engaging independent contractors like actors, directors, artists,
anchormen, reporters, scriptwriters and various production and technical staff, who offered their
services in relation to a particular program. Known in the industry as talents, such independent
contractors inform ABS- CBN of their availability and were required to accomplish Talent
Information Forms to facilitate their engagement for and appearance on designated project days.
Given the unpredictability of viewer preferences, respondents argued that the company cannot
afford to provide regular work for talents with whom it negotiates specific or determinable
professional fees on a per project, weekly or daily basis, usually depending on the budget allocation
for a project.
ISSUE/S:
1. Whether the petitioners are regular employees
2. whether an employer-employee relationship between the parties, despite established jurisprudence
supporting the same.
Atty. Mercader
HELD: WHEREFORE, the Court of Appeals' assailed Decision dated 29 June 2011 and Resolution dated
3 October 2011 in CA-G.R. SP No. 116928 are REVERSED and SET ASIDE. Except for the reinstatement
of Nelson V. Begino, Gener Del Valle, Monina Avila-Llorin and Ma. Cristina Sumayao, the National Labor
and Relations· Commission's 31 March 2010 Decision is, accordingly, REINSTATED.
1. Yes, An employment shall be deemed to be casual if it is not covered by the Article 280: Provided,
That, any employee who has rendered at least one year of service, whether such service is
continuous or broken, shall be considered a regular employee with respect to the activity in which
he is employed and his employment shall continue while such actually exists.
It has been ruled that the foregoing provision contemplates four kinds of employees, namely: (a)
regular employees or those who have been engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer; (b) project employees or those whose employment
has been fixed for a specific project or undertaking, the completion or termination of which has been
determined at the time of the engagement of the employee; (c) seasonal employees or those who work or
perform services which are seasonal in nature, and the employment is for the duration of the season; and
(d) casual employees or those who are not regular, project, or seasonal employees. To the foregoing
classification of employee, jurisprudence has added that of contractual or fixed term employee which, if not
for the fixed term, would fall under the category of regular employment in view of the nature of the
employee’s engagement, which is to perform activity usually necessary or desirable in the employer’s
business.
The Court finds that, notwithstanding the nomenclature of their Talent Contracts and/or Project
Assignment Forms and the terms and condition embodied therein, petitioners are regular employees of
ABS-CBN. Time and again, it has been ruled that the test to determine whether employment is
regular or not is the reasonable connection between the activity performed by the employee in
relation to the business or trade of the employer. As cameramen/editors and reporters, petitioners were
undoubtedly performing functions necessary and essential to ABS-CBN’s business of broadcasting
television and radio content. It matters little that petitioners’ services were engaged for specified periods for
TV Patrol Bicol and that they were paid according to the budget allocated therefor. Aside from the fact that
said program is a regular weekday fare of the ABS-CBN’s Regional Network Group in Naga City, the record
shows that, from their initial engagement in the aforesaid capacities, petitioners were continuously re-hired
by respondents over the years. To the mind of the Court, respondents’ repeated hiring of petitioners for its
long-running news program positively indicates that the latter were ABS-CBN’s regular employees.
If the employee has been performing the job for at least one year, even if the performance is not
continuous or merely intermittent, the law deems the repeated or continuing performance as sufficient
evidence of the necessity, if not indispensability of that activity in the business. Indeed, an employment
stops being co-terminous with specific projects where the employee is continuously re-hired due to the
demands of the employer’s business. When circumstances show, moreover, that contractually stipulated
periods of employment have been imposed to preclude the acquisition of tenurial security by the employee,
this Court has not hesitated in striking down such arrangements as contrary to public policy, morals, good
customs or public order.The nature of the employment depends, after all, on the nature of the activities to
be performed by the employee, considering the nature of the employer’s business, the duration and scope
to be done, and, in some cases, even the length of time of the performance and its continued existence. In
the same manner that the practice of having fixed-term contracts in the industry does not automatically
make all talent contracts valid and compliant with labor law, it has, consequently, been ruled that the
assertion that a talent contract exists does not necessarily prevent a regular employment status.
2. Yes, as cameramen/editors and reporters, it also appears that petitioners were subject to
the control and supervision of respondents which, first and foremost, provided them with the
equipments essential for the discharge of their functions. Prepared at the instance of respondents,
Atty. Mercader
petitioners’ Talent Contracts tellingly provided that ABS-CBN retained “all creative, administrative, financial
and legal control” of the program to which they were assigned. Aside from having the right to require
petitioners “to attend and participate in all promotional or merchandising campaigns, activities or events for
the Program,” ABS-CBN required the former to perform their functions “at such locations and
Performance/Exhibition Schedules” it provided or, subject to prior notice, as it chose determine, modify or
change. Even if they were unable to comply with said schedule, petitioners were required to give advance
notice, subject to respondents’ approval. However obliquely worded, the Court finds the foregoing terms
and conditions demonstrative of the control respondents exercised not only over the results of petitioners’
work but also the means employed to achieve the same.
In finding that petitioners were regular employees, the NLRC further ruled that the exclusivity clause
and prohibitions in their Talent Contracts and/or Project Assignment Forms were likewise indicative of
respondents’ control over them. Brushing aside said finding, however, the CA applied the ruling in Sonza
v. ABS-CBN Broadcasting Corporation where similar restrictions were considered not necessarily
determinative of the existence of an employer-employee relationship. Recognizing that independent
contractors can validly provide his exclusive services to the hiring party, said case enunciated that
guidelines for the achievement of mutually desired results are not tantamount to control. As correctly
pointed out by petitioners, however, parallels cannot be expediently drawn between this case and that
of Sonza case which involved a well-known television and radio personality who was legitimately
considered a talent and amply compensated as such. While possessed of skills for which they were
modestly recompensed by respondents, petitioners lay no claim to fame and/or unique talents for which
talents like actors and personalities are hired and generally compensated in the broadcast industry.
Atty. Mercader
Orozco v. Court of Appeals

Tinga, J.
GR No. 155207 – 29 April, 2005
FACTS:
 This case arose out of the complaint filed by Orozco against private respondents Philippine Daily
Inquirer (PDI) and Leticia Jimenez-Magsanoc (Magsanoc), the editor-in-chief of the PDI at that
time, for illegal dismissal, underpayment, non-payment of allowance, separation pay, retirement
pay, service incentive leave pay, 13th month pay, moral and exemplary damages, discrimination
in pay and for attorney's fees with the Arbitration Branch of the NLRC on 1 June 1993.
 Based on the records of this case, Orozco was engaged as a columnist by PDI on 8 March
1990. She penned the column "Feminist Reflections" which appeared in the Lifestyle.
 She worked by submitting weekly columns with a per article wage of Two Hundred Fifty
Pesos (P250.00) which was later increased to Three Hundred Pesos (P300.00)
 In June 1991, Magsanoc as editor-in-chief of PDI discussed how to improve the Lifestyle section
of the newspaper with the Lifestyle editor. They agreed to cut down the number of columnists
and for this reason, PDI decided to drop or terminate Orozco's column in November 1992.
 Upon inquiry at the office of Magsanoc as to why her column was stopped, the secretary told
Orozco that it was Eugenia Apostol (Apostol), the chairperson of PDI, who had decided to stop her
column. However, Apostol was out of the country at that time so Apostol had to wait until February
1993 to talk to her. Apostol informed Orozco that she had been told by Magsanoc that there
were too many columnists in the Lifestyle Section.
 Aggrieved at the stoppage of her column, Orozco filed the instant case against private
respondents before the NLRC. The PDI raised as primary defense the claim that Orozco was
not an employee of the newspaper.
 In a Decision dated 29 October 1993, Labor Arbiter Arthur L. Amansec ruled that Orozco had
been illegally dismissed, after concluding that Orozco had indeed been an employee of the PDI.
 The PDI received a copy of the Labor Arbiter's Decision on 16 December 1993. It timely filed a
Notice and Memorandum dated 24 December 1993, but it did not lodge a cash or surety bond
in the amount equivalent to the monetary award in the judgment appealed from.
 NLRC: dismissed the appeal in its Decision dated 23 August 1994. In this Decision, it made note
of the failure of PDI to perfect the appeal by filing the cash or surety bond. Nonetheless, the
NLRC ventured to delve on the merits, and thereupon, affirmed the finding of the Labor Arbiter
that Orozco was an employee of PDI.
 Private respondents elevated the case to the Supreme Court by way of the special civil action of
certiorari. Pursuant to the ruling in St. Martin Funeral Homes v. NLRC, this Court referred the case
to the Court of Appeals.
 CA: reversed the decision of the NLRC by holding that Orozco is not an employee of PDI. The
reversal was grounded on factual premises, the appellate court concluding that the NLRC had
misappreciated the facts and rendered a ruling wanting in substantial evidence.
 In her Memorandum, Orozco posits that the Court of Appeals should have dismissed outright the
private respondent's petition for certiorari for their failure to file a cash bond or a surety bond as
provided for in Article 223 of the Labor Code.
 The NLRC in its decision concluded that it had no jurisdiction over PDI's appeal but
proceeded nonetheless to discuss the merits of the case. On the other hand, the Court of
Appeals made no mention at all of the jurisdictional defect, whether in its recital of facts or
discussion of the arguments.
ISSUE/S:
1. Whether or not PDI perfected their appeal as they did not deposit on time any cash or surety bond
pursuant to Art. 223, LC, when they filed an appeal of the Labor Arbiter’s decision to the NLRC.
Atty. Mercader
2. Whether or not failing to do so, the employer loses right to appeal making the decision of the Labor
Arbiter final and executory.
HELD: The Labor Arbiter is ordered to clarify the amount of the award of the petitioner. Private
respondents Philippine Daily Inquirer are ordered to post the requisite bond in accordance with Art.
223 of the Labor Code.
1. YES. While the posting of a cash or surety bond is jurisdictional and is a condition sine qua non to
the perfection of an appeal, there is a plethora of jurisprudence recognizing exceptional
instances wherein the Court relaxed the bond requirement as a condition for posting the
appeal.
In the case of Taberrah v. NLRC, the Court made note of the fact that the assailed
decision of the Labor Arbiter concerned did not contain a computation of the monetary
award due the employees, a circumstance which is likewise present in this case. In said case,
the Court stated:
“As a rule, compliance with the requirements for the perfection of an appeal within the
reglementary period is mandatory and jurisdictional. However, in National Federation of Labor
Unions v. Ladrido as well as in several other cases, this Court relaxed the requirement of
the posting of an appeal bond within the reglementary period as a condition for perfecting the
appeal. This is in line with the principle that substantial justice is better served by allowing the
appeal to be resolved on the merits rather than dismissing it based on a technicality.”
xxx
The judgment of the Labor Arbiter in this case merely stated that petitioner was entitled to
backwages, 13th month pay and service incentive leave pay without however including a computation
of the alleged amounts.
In the case of NFLU v. Ladrido III, this Court postulated that "private respondents cannot be
expected to post such appeal bond equivalent to the amount of the monetary award when the
amount thereof was not included in the decision of the labor arbiter." The computation of the amount
awarded to petitioner not having been clearly stated in the decision of the labor arbiter, private respondents
had no basis for determining the amount of the bond to be posted.
2. NO. While the requirements for perfecting an appeal must be strictly followed as they are
considered indispensable interdictions against needless delays and for orderly discharge of judicial
business, the law does admit of exceptions when warranted by the circumstances. Technicality should not
be allowed to stand in the way of equitably and completely resolving the rights and obligations of the parties.
But while this Court may relax the observance of reglementary periods and technical rules to achieve
substantial justice, it is not prepared to give due course to this petition and make a pronouncement on the
weighty issue obtaining in this case until the law has been duly complied with and the requisite appeal bond
duly paid by private respondents.
Atty. Mercader
WPP Marketing Communications, Inc., et al. vs. Jocelyn M. Galera;

Jocelyn M. Galera vs. WPP Marketing Communications, Inc., et al.
CARPIO, C.J.
GR No. 169207, GR No. 169239 - March 25, 2010
Facts:
Petitioner, Jocelyn Galera (GALERA), an American citizen was recruited from the United States of
America by private respondent John Steedman, Chairman-WPP Worldwide and Chief Executive Officer of
Mindshare, Co., a corporation based in Hong Kong, China, to work in the Philippines for private respondent
WPP Marketing Communications, Inc. (WPP), a corporation registered and operating under the laws of
Philippines. GALERA accepted the offer and she signed an Employment Contract entitled Confirmation of
Appointment and Statement of Terms and Conditions. Employment of GALERA with private respondent
WPP became effective on September 1, 1999 solely on the instruction of the CEO and upon signing of the
contract, without any further action from the Board of Directors of private respondent WPP. Four months
had passed when private respondent WPP filed before the Bureau of Immigration an application for
petitioner GALERA to receive a working visa, wherein she was designated as Vice President of
WPP. Petitioner alleged that she was constrained to sign the application in order that she could remain in
the Philippines and retain her employment.
On December 14, 2000, petitioner GALERA alleged she was verbally notified by private respondent
STEEDMAN that her services had been terminated from private respondent WPP. A termination letter
followed the next day. On 3 January 2001, Galera filed a complaint for illegal dismissal, holiday pay, service
incentive leave pay, 13th month pay, incentive plan, actual and moral damages, and attorney’s fees against
WPP and/or John Steedman (Steedman), Mark Webster (Webster)
land Nominada Lansang (Lansang). The Labor Arbiter held WPP, Steedman, Webster, and Lansang liable
for illegal dismissal and damages. Furthermore, the labor arbiter stated that Galera was not only illegally
dismissed but was also not accorded due process for WPP failed to observe the two-notice rule. WPP did
not give Galera an opportunity to defend herself and explain her side. WPP was found to have conspired
in bad faith to deprive Galera of her right to substantive and procedural due process. The labor arbiter
ordered WPP to reinstate Galera and to pay her backwages, transportation and housing benefits, and moral
and exemplary damages, among others.
On appeal, the NLRC reversed the labor arbiter’s ruling. The NLRC stressed
that Galera was WPPs Vice-President, and therefore, a corporate officer at the time she was removed by
the Board of Directors on 14 December 2000. It is a basic principle in corporation law, which principle is
also embodied in WPPs by-laws that a corporate officer continues to hold his position as such until his
successor has been duly elected and qualified. When Ms. Galera was elected as Vice President on
December 31, 1999, she was supposed to have held that position until her successor has been duly elected
and qualified. The record shows that Ms. Galera was not replaced by anyone. She continued to be Vice
President of WPP with the same operational title of Managing Director for Mindshare and continued to
perform the same functions she was performing prior to her May 31, 2000 election. The imperatives of law
require that we hold that the Arbiter below had no jurisdiction over Galera’s case as, again, she was a
corporate officer at the time of her removal.
The NLRC further stated that an intra-corporate dispute which is beyond the labor arbiters
jurisdiction. These consolidated cases clearly [involve] the relationship between a corporation and its officer
and is properly within the definition of an intra-corporate relationship which, under P.D. No. 902-A, is within
the jurisdiction of the SEC (now the commercial courts).
The NLRC ruled that Galera was WPP’s Vice-President, and therefore, a corporate officer at the
time she was removed by the Board of Directors on 14 December 2000. The NLRC ruled that the labor
arbiter had no jurisdiction over the case because being a corporate officer, a case arising from her
termination is considered as an intra-corporate dispute, which was cognizable by the Securities and
Exchange Commission under P.D. 902-A (but now by the Regional Trial Courts designated as Commercial
Courts by the Supreme Court pursuant to Section 5.2 of RA No.8799).
Atty. Mercader
Galera assailed the NLRC’s decision before the appellate court. The appellate court reversed and
set aside the decision of the NLRC. The appellate court ruled that the NLRCs dismissal of Galera’s appeal
is not in accord with jurisprudence. A person could be considered a corporate officer only if appointed as
such by a corporation’s Board of Directors, or if pursuant to the power given them by either the Articles of
Incorporation or the By-Laws. The Court of Appeals ordered WPP to pay Galera backwages and separation
pay, as well as housing benefits, moral and exemplary damages, and attorney’s fees, among others.
The case was subsequently elevated to the Supreme Court.
Issues:
I. Whether or not the Court of Appeals seriously erred in ruling that the NLRC has jurisdiction over Galera’s
complaint because she was not an employee. [Galera] was a corporate officer of WPP from the beginning
of her term until her removal from office.
II. Whether or not assuming arguendo that the Court of Appeals correctly ruled that the NLRC has
jurisdiction over Galera’s complaint, it should have remanded the case to the Labor Arbiter for reception
of evidence on the merits of the case.
III. Whether or not Galera is an alien, hence, can never attain a regular or permanent working status in the
Philippines.
IV. Whether or not Galera is not entitled to recover backwages, other benefits and damages from WPP.
Held:
I. Whether or not the Court of Appeals seriously erred in ruling that the NLRC has jurisdiction over
Galera’s complaint because she was not an employee. Galera was a corporate officer of WPP from
the beginning of her term until her removal from office.
The Court held that Galera is an employee of WPP. An examination of WPPs by-laws resulted in
a finding that Galeras appointment as a corporate officer (Vice-President with the operational title of
Managing Director of Mindshare) during a special meeting of WPPs Board of Directors is an appointment
to a non-existent corporate office. WPPs by-laws provided for only one Vice-President. At the time
of Galeras appointment on 31 December 1999, WPP already had one Vice-President in the person of
Webster. Galera cannot be said to be a director of WPP also because all five directorship positions provided
in the by-laws are already occupied.
The appellate court further justified that Galera was an employee and not a corporate officer by
subjecting WPP and Galeras relationship to the four-fold test: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to control
the employee with respect to the means and methods by which the work is to be accomplished.
The appellate court found that Sections 1 and 4 of the employment contract mandate where and
how often she is to perform her work; sections 3, 5, 6 and 7 show that wages she receives are completely
controlled by WPP; and sections 10 and 11 clearly state that she is subject to the regular disciplinary
procedures of WPP. Another indicator that she was a regular employee and not a corporate officer is
Section 14 of the contract, which clearly states that she is a permanent employee not a Vice-President or
a member of the Board of Directors.
II. Whether or not assuming arguendo that the Court of Appeals correctly ruled that the NLRC has
jurisdiction over Galera’s complaint, it should have remanded the case to the Labor Arbiter for
reception of evidence on the merits of the case.
Galera being an employee, then the Labor Arbiter and the NLRC have jurisdiction over the present
case. As an employee of WPP, the Labor Arbiter and the NLRC had jurisdiction over her illegal dismissal
complaint. Under Article 217 of the Labor Code, the Labor Arbiters shall have original and exclusive
jurisdiction to hear and decide cases involving all workers, whether agricultural or non-agricultural.
III. Whether or not Galera is an alien, hence, can never attain a regular or permanent working status
in the Philippines.
WPPs dismissal of Galera lacked both substantive and procedural due process.
WPP, Steedman, Webster, and Lansang, however, failed to substantiate the allegations
in Steedman’s letter. Galera, on the other hand, presented documentary evidence. In the form of
Atty. Mercader
congratulatory letters, including one from Steedman, which contents are diametrically opposed to the 15
December 2000 letter.
The law further requires that the employer must furnish the worker sought to be dismissed with two written
notices before termination of employment can be legally effected: (1) notice which apprises the employee
of the particular acts or omissions for which his dismissal is sought; and (2) the subsequent notice which
informs the employee of the employers decision to dismiss him. Failure to comply with the requirements
taints the dismissal with illegality. WPPs acts clearly show that Galeras dismissal did not comply with the
two-notice rule.
IV. Whether or not Galera is not entitled to recover backwages, other benefits and damages from
WPP.
No. Galera is not entitled to recover backwages, other benefits and damages from WPP.
Galera worked in the Philippines without a proper work permit but wants to claim employees benefits under
Philippine labor laws.
The Employment of Galera with private respondent WPP became effective on September 1,
1999 solely on the instruction of the CEO and upon signing of the contract, without any further action from
the Board of Directors of private respondent WPP. Four months had passed when private respondent WPP
filed before the Bureau of Immigration an application for petitioner Galera to receive a working visa, wherein
she was designated as Vice President of WPP.
The law and the rules are consistent in stating that the employment permit must be acquired prior to
employment. The Labor Code states: Any alien seeking admission to the Philippines for employment
purposes and any domestic or foreign employer who desires to engage an alien for employment in the
Philippines shall obtain an employment permit from the Department of Labor.
Section 4, Rule XIV, Book 1 of the Implementing Rules and Regulations provides:
Employment permit required for entry. No alien seeking employment, whether as a resident or non-resident,
may enter the Philippines without first securing an employment permit from the Ministry. If an alien enters
the country under a non-working visa and wishes to be employed thereafter, he may only be allowed to be
employed upon presentation of a duly approved employment permit.
Galera cannot come to this Court with unclean hands. To grant Galera’s prayer is to sanction the
violation of the Philippine labor laws requiring aliens to secure work permits before their employment. The
Court held that the status quo must prevail in the present case and we leave the parties where they are. This
ruling, however, does not bar Galera from seeking relief from other jurisdictions.
Atty. Mercader
Television and Production Exponents, Inc. v. Servaña

Carpio-Morales, J.
GR No. 167648 – 28 January 2008
FACTS:
 TAPE is a domestic corporation engaged in the production of television programs, such as the
long-running variety program, Eat Bulaga!.
 President of TAPE: Antonio P. Tuviera
 Respondent Roberto C. Servaa served as security guard for TAPE from March 1987 until his
termination on March 3, 2000
 Respondent filed a complaint for illegal dismissal and non-payment of benefits against TAPE.
 He alleged that he was first connected with Agro-Commercial Security Agency but was
absorbed as regular company guard by TAPE at Broadway Centrum.
 March 2, 2000: He received a memorandum informing him of his impending dismissal on account
of TAPEs decision to contract the services of a professional security agency
 He was receiving a monthly salary of P6000
 Holiday pay, unpaid vacation and sick leave benefits and other monetary considerations
were all withheld
 He also claims that he was dismissed without due process aggravated by nonpayment of
separation pay
 In a motion to dismiss, TAPE contended that there was no employer-employee relationship and
made the following assertions:
 (1) that respondent was initially employed as a security guard for Radio Philippines
Network (RPN-9);
 (2) that he was tasked to assist TAPE during its live productions, specifically, to control the
crowd;
 (3) that when RPN-9 severed its relationship with the security agency, TAPE engaged
respondents services, as part of the support group and thus a talent, to provide security
service and control the audience during Eat Bulaga!;
 (4) that it was agreed that complainant would render his services until such time that
respondent company shall have engaged the services of a professional security agency;
 (5) that in 1995, when his contract with RPN-9 expired, respondent was retained as a talent
and a member of the support group
 (6) that respondent was not prevented from seeking other employment
 (7) that sometime in late 1999, TAPE started negotiations for the engagement of the Sun
Shield Security Agency; and
 (8) that on 2 March 2000, TAPE issued memoranda to all talents, whose functions would
be rendered redundant by the engagement of the security agency, informing them of their
termination.
 TAPE averred that responded was an independent contractor under talent group category
 Respondent insisted that he was a regular employee as he was engaged in an activity necessary
and desirable to TAPE’s business for 13 years.
 June 92, 2001: Labor Arbiter Daisy G. Cauton-Barcelona declared respondent to be a regular
employee of TAPE but ruled that the termination was valid on the ground of redundancy
 April 22, 2002: NLRC reversed the LA decision and considered respondent a mere program
employee
 June 28, 2002: Respondent’s motion for reconsideration was denied
 Respondent filed a petition for certiorari with CA contending grave abuse of discretion amounting
to lack or excess of jurisdiction on the part of NLRC
 Court of Appeals reversed the decision of NLRC finding respondent a regular employee
 April 8, 2005: Court of Appeals denied TAPE’s motion for reconsideration without merit
ISSUE/S:
Atty. Mercader
Whether or not there exists an employer-employee relationship between TAPE and respondent – YES!
HELD: DECISION OF THE COURT OF APPEALS AFFIRMED WITH MODIFICATION

 selection and engagement of the employee
 When the security agency’s contract with RPN-9 expired in 1995, respondent was
absorbed by TAPE or, in TAPE’s language, retained as talent.
 An identification card was issued identifying the holder as a bona fide employee
 the payment of wages
 It is beyond dispute that respondent received a fixed amount as monthly compensation of
P5,444.44 for the services he rendered to TAPE. This is considered wage under the law
and not talent fee.
 Power of dismissal
 The Memorandum informing respondent of the discontinuance of his service proves that
TAPE had the power to dismiss respondent.
 Employer’s power to control:
 Control is manifested in bundy cards submitted by respondent in evidence
 Required to report daily and observe definite work hours
 Furthermore, TAPE failed to establish that respondent is an independent contractor by not
complying with the requirements laid down in Policy Instruction No. 40 issued by DOLE.
 And for the sake of argument, even if respondent is a program employee, he is still not an
independent contractor because he does not have a substantial capital or investment and does not
account the work or services under his own responsibility.
 Respondent had been continuously under employment of TAPE from 1995 until March 2000 for 5
years which is considered a regular employee under Article 280 of the Labor Code.
 The cause of the dismissal is valid because the ground is redundancy under Article 283, however,
TAPE was not able to give the employee and DOLE a written notice 30 days prior to the effectivity
of his separation.
 Thus, TAPE is liable for non-compliance with procedural requirements of due process.
 With respect to the liability of petitioner Tuviera, president of TAPE, absent any showing
that he acted with malice or bad faith in terminating respondent, he cannot be held solidarily
liable with TAPE.
NOTES:
 Generally, only questions of law are entertained in appeals by certiorari to the Supreme Court. This
rule, however, is not absolute. Among the several recognized exceptions is when the findings of
the Court of Appeals and Labor Arbiters, on one hand, and that of the NLRC, on the other, are
conflicting, as obtaining in the case at bar.
 Jurisprudence is abound with cases that recite the factors to be considered in determining the
existence of employer-employee relationship, namely: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to
control the employee with respect to the means and method by which the work is to be
accomplished.
 The most important factor involves the control test. Under the control test, there is an employer-
employee relationship when the person for whom the services are performed reserves the right to
control not only the end achieved but also the manner and means used to achieve that end.
Atty. Mercader
Calamba Medical Center, Inc. v. NLRC and Lanzanas

Carpio-Morales, J.
GR No. 176484 – 25 November 2008
FACTS:
 March 1992 and August 1995: Petitioner Calamba Medical Center engaged the services of
spouses Dr. Ronaldo Lanzanas and Dr. Merceditha Lanzanas as part of its team of resident
physicians.
 They must report at the hospital twice-a-week on 24-hour shifts
 Paid a monthly retainer of P4800 and a percentage share out of fees charged for out-
patient teatments, operating room assistance, and discharge billing.
 Dr. Raul Desipeda fixed the work schedules of the team of resident physicians.
 Calamba Medical Center issued identification card to the team. They were also enrolled in SSS
and income taxes were withheld.
 March 7, 1998: Dr. Meluz Trinidad (resident physican at the hospital) overheard a phone call
through an extension telephone line between Dr. Ronalso Lanzanas and fellow employee,
Diosdado Miscala.
 The two were discussing the low census or admission of patients to the hospital.
 March 7, 1998: Dr. Desipeda issued to Dr. Lanzanas a Memorandum of March 7, 1998 saying that
Lanzanas has committed acts inimical to the interest of the hospital.
 an affidavit of witness was attached to the memorandum
 Lanzanas was given 24 hours to explain why no disciplinary action should be taken against
him
 Pending the investigation of Lanzanas’ case, he was placed under 30-day preventive suspension
upon the receipt of the memorandum.
 After sending the memorandum to her husband, Dr. Merceditha was not given any work schedule
 She was not informed of the reason why but Human Resources Department officer said
that it was part of Calamba Medical Center’s cost-cutting measures.
 March 9, 1998: Dr. Ronaldo Lanzanas admitted the conversation through a letter but he maintains
that the conversation was taken out of context.
 March 14, 1998: rank-and-file employees of Calamba Medical Center went on strike due to
unresolved grievances over terms and conditions of employment.
 March 20, 1998: Dr. Ronaldo Lanzanas filed a complaint for illegal suspension before the NLRC-
RAB IV while his wife subsequently filed a complaint for illegal dismissal.
 In the meantime, Sec. Cresenciano Trajano of DOLE certified the labor dispute to the NLRC for
compulsory arbitration and issued on April 21, 1998 return-to-work Order to the striking union
officers and employees of petitioner pending resolution of the labor dispute.
 April 22, 1998: Dr. Desipeda directed all union officers and member to return-to-work except those
who were already terminated or serving disciplinary actions.
 April 25, 1998: Dr. Ronaldo Lanzanas received a notice of termination from Calamba Medical
Center
 ground: failure to report back to work despite the DOLE order and his supposed role in the
striking union.
 Dr. Lanzanas thus amended his original complaint to include illegal dismissal. It was consolidated
and docketed with Dr. Merceditha’s complaints.
 March 23, 1999: Labor Arbiter Antonio Macam dismissed the complaints for want of jurisdiction
upon finding that there was no employer-employee relationship.
 May 3, 2002: On appeal, NLRC reversed the decision of Labor Arbiter
 Calamba Medical Center’s motion for reconsideration was denied, so they brought the case to the
CA
 June 20, 2004: Granted the petition at first but reinstated the NLRC decision in an amended
decision finding an employer-employee relationship between the parties
Atty. Mercader
 CA: There was illegal dismissal because there was no evidence that Ronaldo participated
in the strike
 Merceditha was illegally dismissed because of her marriage to Ronaldo that she is
sharing the same sympathies with her husband
ISSUE/S:
Whether or not there exists an employer-employee relationship between petitioner and the spouses-
respondents - YES
HELD: DECISION OF THE COURT OF APPEALS AFFIRMED WITH MODIFICATION
 Under the control test, an employment relationship exists between a physician and a hospital if the
hospital controls both the means and the details of the process by which the physician is to
accomplish his task.
 Private respondents maintained specific work-schedule given by Calamba Medical Center’s
medical director
 Calamba Medical Center exercised control over respondents when in the emergency room,
operating room, any department, or ward, respondents work is monitored through nursing
supervisors, charge nurses and orderlies.
 Without the approval or consent of petitioner or its medical director, no operations can be
undertaken in those areas.
 For control test to apply, it is not essential for the employer to actually supervise the performance
of duties of the employee, it being enough that it has the right to wield the power.
 With respect to respondents sharing in some hospital fees, it does not affect employer-employee
relationship because this is just additional compensation like in the case of commission-based
employees in Article 97(f) of the Labor code.
 Respondents were also subjected to petitioner-hospital’s Code of Ethics
 Material evidences of employment status in this case:
 Identification cards issued
 BIR W-2 (now 2316) Forms which reflect their status as employees
 Calamba Medical enrolled respondents in SSS and Philhealth program
 March 7, 1998 memorandum explicitly saying that respondent is employed
 Termination letter indicating employment status
 Spouses were considered non-training general practitioners, thus, not under the coverage of
Section 15, Rule X of Book III of the Implementing Rules of the Labor Code
 The Court upheld the CA conclusion of illegal dismissal
 Dr. Lanzanas was neither a managerial nor supervisory employee but part of the rank-and-
file.
 Admittedly, Dr. Lanzanas was a union member in the hospital, which is considered
indispensable to the national interest.
 Participation in a strike and intransigence to a return-to-work order must, however, be duly proved
in order to justify immediate dismissal in a national interest case.
 There is nothing in the records that would bear out Dr. Lanzanas actual participation in the strike.
 Medical directors Memorandum of April 22, 1998 contains nothing more than a general directive to
all union officers and members to return-to-work.
 Mere membership in a labor union does not ipso facto mean participation in a strike.
 Dr. Lanzanas claim that, after his 30-day preventive suspension ended on or before April 9, 1998,
he was never given any work schedule was not refuted by petitioner. Petitioner in fact never
released any findings of its supposed investigation into Dr. Lanzanas alleged inimical acts.
 Calamba Medical Center failed to observe the two requirements before dismissal: notice
and hearing
Atty. Mercader
Jardin v. NLRC
QUISUMBING, J
G.R. No. 119268 - February 23, 2000
FACTS:
Private respondent, Philjama International Inc., is a domestic corporation engaged in the operation
of "Goodman Taxi." Petitioners used to drive private respondents’ taxicabs every other day on a 24-hour
work schedule under the boundary system. Petitioners earned an average of P400.00 daily. Private
respondent admitted to regularly deducting the amount of P30.00 supposedly for the washing of the taxi
units, from petitioners’ daily earnings. Believing that the deduction is illegal, petitioners decided to form a
labor union to protect their rights and interests.
When respondent learned of the labor union’s formation, respondent refused to let petitioners drive
their taxicabs when they reported for work on August 6, 1991, and on succeeding days. Petitioners
suspected that they were singled out because they were the leaders and active members of the proposed
union.
Aggrieved, petitioners filed with the labor arbiter a complaint against private respondent for unfair
labor practice, illegal dismissal and illegal deduction of washing fees. The Labor Arbiter dismissed the case
for Lack of Merit. The case was brought to the National Labor Relations Commission, in which case it was
declared that petitioners are employees of private respondent. On reconsideration however, the decision
was reversed by the NLRC tribunal and held that no employer-employee relationship between the parties
exists.
ISSUE/S:
1. Whether the NLRC acted with grave abuse of discretion in granting second reconsideration of
private respondents? YES
2. Whether employer-employee relationship exists in boundary system? YES
RULING:
1. Private respondent (corp.) had already exhausted administrative remedies by filing the 1 st motion
for reconsideration (which was denied) in which the labor tribunal had the ample opportunity to
rectify errors or mistakes before rendering the decision. When the Private respondent filed for a 2 nd
reconsideration, the public respondents should have denied it in accordance with rule 7 Sec.14 of
its New Rules of Procedure, which allows only one motion for reconsideration from the same party.
Rationale for 1 motion of reconsideration: to assist the parties in obtaining an expeditious and
inexpensive settlement of labor cases.
2. The Court used the Four Fold Test: (1) the selection and engagement of the employees (2) the
payment of wages (3) the power of dismissal (4) the power of control the employees conduct (most
important)
The court ruled that owners/operators and drivers have an employer-employee relationship
because the former exercised supervision and control over the latter. The management of the business
is in the hands of the owner. The owner as the holder of the certificate of public convenience must see
to it that the driver follows the route prescribed by the franchising authority and the rules promulgated
as regards its operation.
The fact that the drivers do not receive fixed wages but only excess in boundary is not sufficient
to withdraw it from an employer-employee relationship. Hence, petitioners as employees of Private
respondent can only be dismissed for just cause and with due process.
Atty. Mercader
Francisco v. NLRC
Ynares-Santiago, J.
GR No. 170087 – 31 August 2006
This petition for review on certiorari under Rule 45 of the Rules of Court seeks to annul and set
aside the Decision and Resolution of the Court of Appeals dated October 29, 2004and October 7, 2005,
respectively, in CA-G.R. SP No. 78515 dismissing the complaint for constructive dismissal filed by herein
petitioner Angelina Francisco. The appellate court reversed and set aside the Decision of the National Labor
Relations Commission (NLRC) dated April 15, 2003, in NLRC NCR CA No. 032766-02 which affirmed with
modification the decision of the Labor Arbiter dated July 31, 2002, in NLRC-NCR Case No. 30-10-0-489-
01, finding that private respondents were liable for constructive dismissal.
FACTS:
 1995: Petitioner was hired by Kasei Corporation during its incorporation stage. She was designated as
Accountant and Corporate Secretary and was assigned to handle all the accounting needs of the
company. She was also designated as Liaison Officer to the City of Makati to secure business permits,
construction permits and other license for the initial operation of the company.
 1996: Petitioner was designated Acting Manager and he performed duties as such for five years.
 2001: Petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that she was required
to sign a prepared resolution for her replacement but she was assured that she would still be connected
with Kasei Corporation. Timoteo Acedo, the designated Treasurer, convened a meeting of all
employees of Kasei Corporation and announced that nothing had changed and that petitioner was still
connected with Kasei Corporation as Technical Assistant to Seiji Kamura and in charge of all BIR
matters. Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning January
up to September 2001 for a total reduction of P22,500.00 as of September 2001. Petitioner was not
paid her mid-year bonus allegedly because the company was not earning well. On October 2001,
petitioner did not receive her salary from the company. On October 15,2001, petitioner asked for her
salary from Acedo and the rest of the officers but she was informed that she is no longer connected
with the company.
 Petitioner did not report for work and filed an action for constructive dismissal before the labor
arbiter.
 Private respondents averred that petitioner is not a employee of Kasei Corporation.
ISSUE/S:
1. W/N there was an employer-employee relationship between petitioner and private respondent
Kasei Corporation and if in the affirmative;
2. W/N the petitioner was illegally dismissed

1. Yes. Petitioner is an employee of respondent Kasei Corporation.
 The better approach would therefore be to adopt a two-tiered test involving: (1) the putative
employer’s power to control the employee with respect to the means and methods by which
the work is to be accomplished; and (2) the underlying economic realities of the activity or
relationship. This two-tiered test would provide us with a framework of analysis, which
would take into consideration the totality of circumstances surrounding the true nature of
the relationship between the parties.
 By applying the control test, there is no doubt that petitioner is an employee of
Kasei Corporation because she was under the direct control and supervision of
Seiji Kamura, the corporation’s Technical Consultant. She reported for work
regularly and served in various capacities as Accountant, Liaison Officer,
Technical Consultant, Acting Manager and Cororate Secretary, which substantially
the same job functions, that is, rendering accounting and tax services to the
company and performing functions necessary and desirable for the proper
Atty. Mercader
operation of the company such as securing business permits and other licenses
over an indefinite period of engagement.
 Under the broader economic reality test, the petitioner can likewise be said to be
an employee of respondent corporation because she had to be an employee of
respondent corporation because she had served the company for six years before
her dismissal, receiving check vouhers indicating her salaries/wages, benefits, 13 th
month pay, bonuses and allowances, as well as deductions and Social Security
System contributions from August 1, 1999 to December 18, 2000. When petitioner
was designated General Manager, respondent corporation made a report to SSS
signed by Irene Ballesteros. Petitioner’s membership in the SSS as manifested by
a copy of the SSS specimen signature card which was signed by the President of
Kasei Corporation and the inclusion of her name in the line inquiry system of the
SSS evinces the existence of an employer-employee relationship between
petitioner and respondent corporation. It is therefore apparent that petitioner is
ECONOMICALLY DEPENDENT on respondent corporation for her continued
employment in the latter’s line of business.
 Yes. The corporation constructively dismissed petitioner.

 Constructive dismissal is an involuntary resignation resulting in cessation of work
resorted to when continued employment becomes impossible, unreasonable or
unlikely; when there is a demotion in rank or a diminution in pay; or when a clear
discrimination, insensibility or disdain by an employer becomes unbearable to an
employee. Hence, the corporation constructively dismissed petitioner when it
reduced her salary by P2,500.00 a month from January to September 2001. This
amounts to an illegal termination if employment, where the petitioner is entitled to
full backwages. Since the position of petitioner as accountant is one of trust and
confidence, and under the principle of strained relations, petitioner is further
entitled to separation pay, in lieu of reinstatement.
Atty. Mercader
Tabang v. National Labor Relations Commission

Regalado, J.
FACTS:
 October 30, 1990: The Board of Trustees issued a memorandum appointing petitioner as Medical
Director and Hospital Administrator of private respondent's Pamana Golden Care Medical Center
in Calamba, Laguna. s medical director and hospital administrator, petitioner was tasked to run the
affairs of the aforesaid medical center and perform all acts of administration relative to its daily
operations.
 May 1, 1993: Petitioner was allegedly informed personally by Dr. Ernesto Naval that in a special
meeting held on April 30, 1993, the Board of Trustees passed a resolution relieving her of her
position as Medical Director and Hospital Administrator. Petitioner averred that she thereafter
received a copy of said board resolution.
 June 6, 1993: petitioner filed a complaint for illegal dismissal and non-payment of wages,
allowances and 13th month pay before the labor arbiter.
 Respondents moved for the dismissal of the complaint
 On the ground of lack of jurisdiction over the subject matter
 Petitioner's position as Medical Director and Hospital Administrator was interlinked with her
position as member of the Board of Trustees, hence, her dismissal is an intra-corporate
controversy which falls within the exclusive jurisdiction of the Securities and Exchange
Commission (SEC).
 Petitioners opposed the motion to dismiss
 She contends that her position as Medical Director and Hospital Administrator was
separate and distinct from her position as member of the Board of Trustees
 She claimed that there is no intra-corporate controversy involved since she filed the
complaint in her capacity as Medical Director and Hospital Administrator, or as an
employee of private respondent.
ISSUE/S:
1. W/N petitioner’s removal from the said position was an intra-corporate controversy within the
original and exclusive jurisdiction of the SEC.
 Yes. Petitioner’s ouster as a medical director and/or hospital administrator, which are
corporate offices, is an intra-corporate controversy subject to the jurisdiction of the SEC.
 An intra-corporate controversy is one which arises between a stockholder and the
corporation. There is no distinction, qualification, nor any exemption whatsoever. The
provision is broad and covers all kinds of controversies between stockholders and
corporations.
 A corporate officer's dismissal is always a corporate act, or an intra-corporate
controversy, and the nature is not altered by the reason or wisdom with which the Board
of Directors may have in taking such action.
 a medical director and a hospital administrator are considered as corporate officers under
the by-laws of respondent corporation. Section 2(i), Article I thereof states that one of the
powers of the Board of Trustees is "(t)o appoint a Medical Director,
Comptroller/Administrator, Chiefs of Services and such other officers as it may deem
necessary and prescribe their powers and duties.
 In the case at bar, considering that herein petitioner, unlike an ordinary employee, was
appointed by respondent corporation's Board of Trustees in its memorandum of October
30, 1990, she is deemed an officer of the corporation.
 Perforce, Section 5(c) of Presidential Decree No. 902-A, which provides that the SEC
exercises exclusive jurisdiction over controversies in the election appointment of
directors, trustees, officers or managers of corporations, partnerships or associations,
applies in the present dispute.
 Accordingly, jurisdiction over the same is vested in the SEC, and not in the Labor
Arbiter or the NLRC.
Atty. Mercader
Matling Industrial v. Coros

Bersamin, J.
GR No. 157802 – 13 October 2010
This case reprises the jurisdictional conundrum of whether a complaint for illegal dismissal is
cognizable by the Labor Arbiter (LA) or by the Regional Trial Court (RTC). The determination of whether
the dismissed officer was a regular employee or a corporate officer unravels the conundrum. In the case of
the regular employee, the LA has jurisdiction; otherwise, the RTC exercises the legal authority to adjudicate.
FACTS: After Ricardo Coros' dismissal by Matling as its Vice President for Finance and Administration, a
complaint was filed on August 10, 2000 for illegal suspension and illegal dismissal against Matling and
some of its corporate offcers (petitioners) in the NLRC, Sub-Regional Arbitration Branch XII, Iligan City by
the respondent.
The petitioners moved to dismiss the complaint, raising the ground, among others, that the complaint
pertained to the jurisdiction of the Securities and Exchange Commission (SEC) due to the controversy being
intra-corporate inasmuch as the respondent was a member of Matling's Board of Directors aside from being
its Vice- President for Finance and Administration prior to his termination.
The respondent opposed the petitioners' motion to dismiss, insisting that his status as a member of Matling's
Board of Directors was doubtful, considering that he had not been formally elected as such; that he did not
own a single share of stock in Matling, considering that he had been made to sign in blank an undated
indorsement of the certificate of stock he had been given in 1992; that Matling had taken back and retained
the certificate of stock in its custody; and that even assuming that he had been a Director of Matling, he
had been removed as the Vice President for Finance and Administration, not as a Director, a fact that the
notice of his termination dated April 10, 2000 showed.
The petitioners contend that the position of Vice President for Finance and Administration was a corporate
office, having been created by Matling's President pursuant to By-Law No. V. It states that:
The President shall be the executive head of the corporation; shall preside over the meetings of the
stockholders and directors; shall countersign all certificates, contracts and other instruments of the
corporation as authorized by the Board of Directors; shall have full power to hire and discharge any or all
employees of the corporation; shall have full power to create new offices and to appoint the officers thereto
as he may deem proper and necessary in the operations of the corporation and as the progress of the
business and welfare of the corporation may demand; shall make reports to the directors and stockholders
and perform all such other duties and functions as are incident to his o􏰂ce or are properly required of him
by the Board of Directors. In case of the absence or disability of the President, the Executive Vice President
shall have the power to exercise his functions.
The petitioners argue that the power to create corporate offices and to appoint the individuals to assume
the offices was delegated by Matling's Board of Directors to its President through By-Law No. V, as
amended; and that any office the President created, like the position of the respondent, was as valid and
effective a creation as that made by the Board of Directors, making the office a corporate office.
The respondent counters that Matling's By-Laws did not list his position as Vice President for Finance and
Administration as one of the corporate offices; that Matling's By-Law No. III listed only four corporate
officers, namely: President, Executive Vice President, Secretary, and Treasurer; that the corporate offices
contemplated in the phrase "and such other officers as may be provided for in the by-laws" found in Section
25 of the Corporation Code should be clearly and expressly stated in the By-Laws; that the fact that
Matling's By-Law No. III dealt with Directors & Officers while its By-Law No. V dealt with Officers proved
that there was a differentiation between the officers mentioned in the two provisions, with those classified
under By-Law No. V being ordinary or non-corporate officers; and that the officer, to be considered as a
corporate officer, must be elected by the Board of Directors or the stockholders, for the President could
only appoint an employee to a position pursuant to By-Law No. V.
ISSUE/S:
1. W/N the respondent's position as Vice President for Finance and Administration was a corporate
office within the jurisdiction of the regular courts.
Atty. Mercader
2. W/N his dismissal by the Board of Directors rendered the matter an intra-corporate dispute
cognizable by the RTC pursuant to RA No. 8799.
1. No, it was an ordinary office. To emphasize, the power to create new offices and the power to
appoint the officers to occupy them vested by By-Lay No. V merely allowed Matling's President to
create non-corporate offices to be occupied by ordinary employees of Matling. Section 25 of the
Corporation Code provides: " , and such other officers as may be provided for in the by-laws."
Conformably with Section 25, a position must be expressly mentioned in the By- Laws in order to
be considered as a corporate office. Thus, the creation of an office pursuant to or under a By-Law
enabling provision is not enough to make a position a corporate office. The Board of Directors of
Matling could not validly delegate the power to create a corporate office to the President, in light of
Section 25 of the Corporation Code requiring the Board of Directors itself to elect the corporate
officers. Verily, the power to elect the corporate officers was a discretionary power that the law
exclusively vested in the Board of Directors, and could not be delegated to subordinate officers or
agents. The office of Vice President for Finance and Administration created by Matling's President
pursuant to By Law No. V was an ordinary, not a corporate, office.
Where the complaint for illegal dismissal concerns a corporate officer, however, the controversy falls under
the jurisdiction of the Securities and Exchange Commission (SEC), because the controversy arises out of
intra-corporate or partnership relations between and among stockholders, members, or associates, or
between any or all of them and the corporation, partnership, or association of which they are stockholders,
members, or associates, respectively; and between such corporation, partnership, or association and the
State insofar as the controversy concerns their individual franchise or right to exist as such entity; or
because the controversy involves the election or appointment of a director, trustee, officer, or manager of
such corporation, partnership, or association. Such controversy, among others, is known as an intra-
corporate dispute.
Effective on August 8, 2000, upon the passage of Republic Act No. 8799, otherwise known as The
Securities Regulation Code, the SEC's jurisdiction over all intra- corporate disputes was transferred to the
RTC. Considering that the respondent's complaint for illegal dismissal was commenced on August 10, 2000,
it might come under the coverage of Section 5.2 of RA No. 8799, supra, should it turn out that the
respondent was a corporate, not a regular, officer of Matling.
2. No. The criteria for distinguishing between corporate officers who may be ousted from office at will,
on one hand, and ordinary corporate employees who may only be terminated for just cause, on the other
hand, do not depend on the nature of the services performed, but on the manner of creation of the office.
The respondent was not appointed as Vice President for Finance and Administration because of his being
a stockholder or Director of Matling. He had started working for Matling on September 8, 1966, and had
been employed continuously for 33 years until his termination on April 17, 2000, first as a bookkeeper, and
his climb in 1987 to his last position as Vice President for Finance and Administration had been gradual but
steady. Even though he might have become a stockholder of Matling in 1992, his promotion to the position
of Vice President for Finance and Administration in 1987 was by virtue of the length of quality service he
had rendered as an employee of Matling. His subsequent acquisition of the status of Director/stockholder
had no relation to his promotion. Besides, his status of Director/stockholder was unaffected by his dismissal
from employment as Vice President for Finance and Administration. ESCT
Atty. Mercader
Malcaba v. Prohealth Pharma Philippines

G.R. No. 209085, 6 June 2018.
LEONEN, J.:
FACTS:
ProHealth Pharma Philippines, Inc. (ProHealth) is a corporation engaged in the sale of pharmaceutical
products and health food on a wholesale and retail basis. Generoso Del Castillo (Del Castillo) is the Chair
of the Board of Directors. Malcaba was employed as its President.
Malcaba had been employed with ProHealth since it started in 1997. He was one of its incorporators
together with Del Castillo and Busto, and they were all members of the Board of Directors in 2004. He held
1,000,000 shares in the corporation. He was initially the Vice President for Sales then became President in
2005.
Malcaba alleged that Del Castillo did acts that made his job difficult. He asked to take a leave on October
23, 2007. When he attempted to return on November 5, 2007, Del Castillo insisted that he had already
resigned and had his things removed from his office. He attested that he was paid a lower salary in
December 2007 and his benefits were withheld. On January 7, 2008, Malcaba tendered his resignation
effective February 1, 2008.
Subsequently, Malcaba filed a Complaint before the Labor Arbiter for illegal dismissal. The Labor Arbiter
found that Malcaba was constructively dismissed. He found that ProHealth never controverted the
allegation that Del Castillo made it difficult for Malcaba to effectively fulfill his duties. He likewise ruled that
ProHealth's insistence that Malcaba's leave of absence in October 2007 was an act of resignation was false
since Malcaba continued to perform his duties as President through December 2007.
ProHealth appealed to the National Labor Relations Commission. On September 29, 2010, the National
Labor Relations Commission rendered its Decision, affirming the Labor Arbiter's April 5, 2009 Decision.
ProHealth moved for reconsideration but was denied by the National Labor Relations Commission in its
January 31, 2011 Resolution. Thus, ProHealth, Del Castillo, and Busto filed a Petition for Certiorari before
the Court of Appeals.
On February 19, 2013, the Court of Appeals rendered its Decision reversing and setting aside the National
Labor Relations Commission September 29, 2010 Decision. It held that there was no employer-employee
relationship between Malcaba and ProHealth since he was a corporate officer. Thus, he should have filed
his complaint with the Regional Trial Court, not with the Labor Arbiter, since his dismissal from service was
an intra-corporate dispute.
Malcaba moved for reconsideration but was denied in a Resolution dated September 10, 2013. Hence, this
Petition was filed before this Court.
Petitioner Malcaba alleges that the Court of Appeals erred m dismissing his complaint for lack of jurisdiction,
insisting that he was an employee of respondent, not a corporate officer. On the other hand, respondents
insist that petitioner Malcaba was a corporate officer considering that he was not only an incorporator and
stockholder, but also an elected Director and President of respondent ProHealth. They also point out that
he filed his labor complaint seven (7) months after his resignation and that his voluntary resignation already
disproves his claim of constructive dismissal.
ISSUE: Whether or not the Labor Arbiter and National Labor Relations Commission had jurisdiction over
petitioner Nicanor F. Malcaba's termination dispute considering the allegation that he was a corporate
officer, and not a mere employee.
HELD: NO.
Under Section 25 of the Corporation Code, the President of a corporation is considered a corporate officer.
The dismissal of a corporate officer is considered an intra-corporate dispute, not a labor dispute.
Effective on August 8, 2000, upon the passage of Republic Act No. 8799, otherwise known as The
Securities Regulation Code, the SEC's jurisdiction over all intra-corporate disputes was transferred to the
RTC, pursuant to Section 5.2 of RA No. 8799, to wit:
5.2. The Commission's jurisdiction over all cases enumerated under Section 5 of Presidential Decree No.
902-A is hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court:
Provided, that the Supreme Court in the exercise of its authority may designate the Regional Trial Court
Atty. Mercader
branches that shall exercise jurisdiction over these cases. The Commission shall retain jurisdiction over
pending cases involving intra-corporate disputes submitted for final resolution which should be resolved
within one (1) year from the enactment of this Code. The Commission shall retain jurisdiction over pending
suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally disposed.
The mere designation as a high-ranking employee, however, is not enough to consider one as a corporate
officer. In Tabang, this Court discussed the distinction between an employee and a corporate officer,
regardless of designation:
The president, vice-president, secretary and treasurer are commonly regarded as the principal or executive
officers of a corporation, and modern corporation statutes usually designate them as the officers of the
corporation. However, other offices are sometimes created by the charter or by-laws of a corporation, or
the board of directors may be empowered under the by-laws of a corporation to create additional offices as
may be necessary.
It has been held that an "office" is created by the charter of the corporation and the officer is elected by the
directors or stockholders. On the other hand, an "employee" usually occupies no office and generally is
employed not by action of the directors or stockholders but by the managing officer of the corporation who
also determines the compensation to be paid to such employee.
The clear weight of jurisprudence clarifies that to be considered a corporate officer, first, the office must be
created by the charter of the corporation, and second, the officer must be elected by the board of directors
or by the stockholders.
Petitioner Malcaba was an incorporator of the corporation and a member of the Board of
Directors.Respondent corporation's By-Laws creates the office of the President. That foundational
document also states that the President is elected by the Board of Directors.
Petitioners cite Prudential Bank and Trust Company v. Reyes as basis that even high-ranking officers may
be considered regular employees, not corporate officers.Prudential Bank, however, is not applicable to this
case. In Prudential Bank, an employer was considered estopped from raising the argument of an intra-
corporate dispute since this was only raised when the case was filed with this Court. This Court also noted
that an employee rose from the ranks and was regularly performing tasks integral to the business of the
employer throughout the length of her tenure, thus:
It appears that private respondent was appointed Accounting Clerk by the Bank on July 14, 1963. From
that position she rose to become supervisor. Then in 1982, she was appointed Assistant Vice-President
which she occupied until her illegal dismissal on July 19, 1991. The bank's contention that she merely holds
an elective position and that in effect she is not a regular employee is belied by the nature of her work and
her length of service with the Bank.
An "Assistant Vice President" is not among the officers stated in Section 25 of the Corporation Code. A
corporation's President, however, is explicitly stated as a corporate officer.
Finding that petitioner Malcaba is the President of respondent corporation and a corporate officer, any issue
on his alleged dismissal is beyond the jurisdiction of the Labor Arbiter or the National Labor Relations
Commission. Their adjudication on his money claims is void for lack of jurisdiction. As a matter of equity,
petitioner Malcaba must, therefore, return all amounts received as judgment award pending final
adjudication of his claims. This Court's dismissal of petitioner Malcaba's claims, however, is without
prejudice to his filing of the appropriate case in the proper forum.
Atty. Mercader
Republic of the Philippines, represented by the Social Security Commission and Social Security
System vs. Asiapro Cooperative
Chico- Nazario, J.
GR No. 172101 – 23 November 2007
FACTS:
Asiapro, as a cooperative, is composed of owners-members who are either regular members, those
who are entitled to all the rights and privileges of membership; or associate members, those who have no
rights to vote and be voted upon and shall be entitled only to such rights and privileges provided in its by-
laws. The primary objective for its establishment is to provide savings and credit facilities and to develop
livelihood services for the owner-members. The cooperative entered into several service contracts with
Stanfilco, a division of DOLE Philippines based in Bukidnon, where they are to engage in different areas of
trade from which they would receive the service surplus as their income.
In order to enjoy the benefits of the Social Security Law, they requested Stanfilco for assistance to
register with the SSS as self- employed and to remit their contributions deducted from their income.
However, the Stanfilco sent a letter to the cooperative informing the latter that based on the Service
Contracts it executed with Stanfilco, respondent cooperative is actually a manpower contractor supplying
employees to Stanfilco and for that reason, it is an employer of its owners-members working with Stanfilco.
Thus, respondent cooperative should register itself with petitioner SSS as an employer and make the
corresponding report and remittance of premium contributions in accordance with the Social Security Law.
The cooperative sent a letter asserting that it is not an employer because its owners-members are
the cooperative itself; hence, it cannot be its own employer. The SSS sent a letter to respondent cooperative
ordering the latter to register as an employer and report its owners-members as employees for compulsory
coverage with the petitioner SSS. Respondent cooperative continuously ignored the demand of SSS. The
SSS filed a petition with the SSC against Asiapro and Stanfilco praying that either one of them register as
the employer of the owner-members and to remit the contributions. Asiapro filed a motion to dismiss alleging
that there is no employer-employee relationship between it and its own members and thus, the SSC had
no jurisdiction. Stanfilco filed a cross-claim against Asiapro. The case was brought to the CA where the
case was dismissed, the SSS filed for reconsideration which the court denied. Hence, this petition.
ISSUE:
W/N the petitioner SSC has jurisdiction over the petition- complaint led before it by petitioner SSS against
the respondent cooperative.
HELD: PETITION GRANTED
Yes. The SSC has jurisdiction over the petition-complaint filed before it by the petitioner SSS
against the respondent cooperative
Petitioner SSC's jurisdiction is clearly stated in Section 5 of Republic Act No. 8282 as well
as in Section 1, Rule III of the 1997 SSS Revised Rules of Procedure. It is clear then from the
aforesaid provisions that any issue regarding the compulsory coverage of the SSS is well within
the exclusive domain of the petitioner SSC. It is important to note, though, that the mandatory
coverage under the SSS Law is premised on the existence of an employer-employee
relationship except in cases of compulsory coverage of the self-employed.
The existence of an employer-employee relationship between the respondent cooperative
and its owners-members was put in issue and considering that the compulsory coverage of the
SSS Law is predicated on the existence of such relationship, it behooves the petitioner SSC to
determine if there is really an employer- employee relationship that exists between the respondent
cooperative and its owners-members.
In determining the existence of an employer-employee relationship, the following elements
are considered: (1) the selection and engagement of the workers; (2) the payment of wages by
whatever means; (3) the power of dismissal; and (4) the power to control the worker's conduct, with
the latter assuming primacy in the overall consideration. The most important element is the
employer's control of the employee's conduct, not only as to the result of the work to be done, but
also as to the means and methods to accomplish. The power of control refers to the existence of
Atty. Mercader
the power and not necessarily to the actual exercise thereof. It is not essential for the employer to
actually supervise the performance of duties of the employee; it is enough that the employer has
the right to wield that power. All the aforesaid elements are present in this case.
First. It is expressly provided in the Service Contracts that it is the respondent cooperative
which has the exclusive discretion in the selection and engagement of the owners-members as
well as its team leaders who will be assigned at Stanfilco.
Second. Wages are defined as "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
service rendered or to be rendered." In this case, the weekly stipends or the so-called shares in the
service surplus given by the respondent cooperative to its owners- members were in reality wages,
as the same were equivalent to an amount not lower than that prescribed by existing labor laws,
rules and regulations, including the wage order applicable to the area and industry; or the same
shall not be lower than the prevailing rates of wages. It cannot be doubted then that those stipends
or shares in the service surplus are indeed wages, because these are given to the owners-
members as compensation in rendering services to respondent cooperative's client, Stanfico.
Third. It is also stated in the above-mentioned Service Contracts that it is the respondent
cooperative which has the power to investigate, discipline and remove the owners-members and
its team leaders who were rendering services at Stanfilco.
Fourth. As earlier opined, of the four elements of the employer-employee relationship, the
"control test" is the most important. In the case at bar, it is the respondent cooperative which has
the sole control over the manner and means of performing the services under the Service Contracts
with Stanfilco as well as the means and methods of work. Also, the respondent cooperative is solely
and entirely responsible for its owners-members, team leaders and other representatives at
Stanfilco. All these clearly prove that, indeed, there is an employer- employee relationship between
the respondent cooperative and its owners-members.
Atty. Mercader
Atty. Mercader
De Leon v. NLRC
Fernan, C.J.
GR No. 70705 – 21 August 1989
This petition for certiorari seeks to annul and set aside: (1) the majority decision of the National
Labor Relations Commission First Division, which reversed the Order of Labor Arbiter Bienvenido S.
Hernandez directing the reinstatement of petitioner Moises de Leon by private respondent La Tondeña Inc.
with payment of backwages and other benefits due a regular employee; and, (2) the Resolution denying
petitioner's motion for reconsideration.
Article 281, Labor Code

Regular and casual employment. The provisions of a written agreement to the contrary notwithstanding and
regardless of the oral agreements of the parties, an employment shall be deemed to be regular where the
employee has been engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of the engagement of
the employee or where the work or services to be performed is seasonal in nature and the employment is
for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided,
That any employee who has rendered at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee with respect to the activity in which he is employed and his
employment shall continue while such actually exists.
FACTS:
 1981: Petitioner was employed by private respondent, La Tondeña Inc., at the Maintenance
Section of its Engineering Department. His work consisted mainly of painting company building
and equipment, and other odd jobs relating to maintenance. He was paid on a daily basis
through petty cash vouchers.
 1983: After a service of more than one year, petitioner requested from respondent that lie be
included in the payroll of regular workers, instead of being paid through petty cash vouchers.
The private respondent responded to dismiss petitioner from his employment. Having been
refused reinstatement despite repeated demands, petitioner filed a complaint for illegal
dismissal, reinstatement and payment of backwages before the Office of the Labor Arbiter of
the then Ministry now Department of Labor and Employment.
 1984: Labor Arbiter Bienvenido S. Hernandez rendered a decision finding the complaint
meritorious and the dismissal illegal; Labor Arbiter Hernandez ruled that petitioner was not a
mere casual employee, but a regular employee. He concluded that the dismissal of petitioner
from the service was prompted by his request to be included in the list of regular employees
and to be paid through the payroll and is, thus, an attempt to circumvent the legal obligations
of an employer towards a regular employee.
 The decision of the Labor Arbiter was reversed by the First Division of the National Labor
Relations. The motion for reconsideration was denied. Hence, this recourse.
o Petitioner asserts that the respondent Commission erred and gravely abuse its
discretion in reversing the Order of the Labor Arbiter. The tasks he performed included
not only painting but also other maintenance work which are usually necessary or
desirable in the usual business of private respondent: hence, the reversal violates the
Constitutional and statutory provisions for the protection of labor.
o The private respondent argues that petitioner was hired only as a painter to repaint
specifically the Mama Rosa building at its Tondo compound, which painting work is
not part of their main business; that at the time of his engagement, it was made clear
to him that he would be so engaged on a casual basis, so much so that he was not
required to accomplish an application form or to comply with the usual requisites for
Atty. Mercader
employment; and that, petitioner was never paid his salary through the regular payroll
but always through petty cash vouchers.
ISSUE:
1) W/N petitioner, De Leon, was a regular employee

5) Yes. The petitioner was a regular employee.
 The law on the matter is Article 281 of the Labor Code, which defines regular and casual
employment.
o The provision reinforces the Constitutional mandate to protect the interest of labor.
An employment is deemed regular when the activities performed by the employee
are usually necessary or desirable in the usual business or trade of the employer.
o Not considered regular are the so-called "project employment" the completion
or termination of which is more or less determinable at the time of
employment, such as those employed in connection with a particular construction
project and seasonal employment which by its nature is only desirable for a limited
period of time.
o However, any employee who has rendered at least one year of service, whether
continuous or intermittent, is deemed regular with respect to the activity he
performed and while such activity actually exists.
 The primary standard of determining a regular employment:
o The reasonable connection between the particular activity performed by the
employee in relation to the usual business or trade of the employer.
o The test is whether the former is usually necessary or desirable in the usual
business or trade of the employer. The connection can be determined by
considering the nature of the work performed and its relation to the scheme of the
particular business or trade in its entirety.
o Also, if the employee has been performing the job for at least one year, even if
the performance is not continuous or merely intermittent, the law deems the
repeated and continuing need for its performance as sufficient evidence of the
necessity if not indispensability of that activity to the business. Hence, the
employment is also considered regular, but only with respect to such activity and
while such activity exists.
 The records reveal that the tasks assigned to him included not only painting of company
buildings, equipment and tools but also cleaning and oiling machines, even operating a
drilling machine, and other odd jobs assigned to him when he had no painting job.
 The law demands that the nature and entirety of the activities performed by the employee
be considered. In the case of petitioner, the painting and maintenance work given him
manifest a treatment consistent with a maintenance man and not just a painter, for if
his job was truly only to paint a building there would have been no basis for giving him
other work assignments In between painting activities.
 The petitioner performed his work of painting and maintenance activities during his
employment in respondent's business which lasted for more than one year, when he
demanded to be regularized and was subsequently dismissed. By this fact alone, he is
entitled by law to be considered a regular employee.
 That determines whether a certain employment is regular or casual is the nature of the
activities performed in relation to the particular business or trade considering all
circumstances, and in some cases the length of time of its performance and its
continued existence.
Atty. Mercader
BUENAVENTURA C. MAGSALIN & COCA-COLA BOTTLERS PHILS., INC., vs.

NATIONAL ORGANIZATION OF WORKING MEN (N.O.W.M.) et. al.
VITUG, J
G.R. No. 148492 May 9, 2003
The basic law on the case is Article 280 of the Labor Code
Art. 280. Regular and Casual Employment. The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be
regular where the employee has been engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer, except where the employment has been fixed for
a specific project or undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or services to be performed is seasonal in nature and
the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided,
That, any employee who has rendered at least one year of service, whether such service is continuous or
employment shall continue while such activity exists.
Facts :
Coca-Cola Bottlers Phils., Inc., herein petitioner, engaged the services of respondent workers as sales
route helpers for a limited period of five months. After five months, respondent workers were employed by
petitioner company on a day-to-day basis. According to petitioner company, respondent workers were hired
to substitute for regular sales route helpers whenever the latter would be unavailable or when there would
be an unexpected shortage of manpower in any of its work places or an unusually high volume of work.
The practice was for the workers to wait every morning outside the gates of the sales office of petitioner
company. If thus hired, the workers would then be paid their wages at the end of the day.
Respondent workers asked petitioner company to extend to them regular appointments. Petitioner
company refused
07 November 1997 - twenty-three (23) of the temporary workers (herein respondents) filed with the National
Labor Relations Commission (NLRC) a complaint for the regularization of their employment with petitioner
company. The complaint was amended a number of times to include other complainants that ultimately
totaled fifty-eight (58) workers. Claiming that petitioner company meanwhile terminated their services,
respondent workers filed a notice of strike and a complaint for illegal dismissal and unfair labor practice
with the NLRC.
01 April 1998 - the parties agreed to submit the controversy, including the issue raised in the complaint for
regularization of employment, for voluntary arbitration.
8 May 1998 - the voluntary arbitrator rendered a decision dismissing the complaint on the thesis that
respondents (then complainants) were not regular employees of petitioner company
Respondent workers filed with the Court of Appeals a petition for review under Rule 43 of the Rules of Civil
Procedure assailing the decision of the voluntary arbitrator, therein contending that -
1. The Voluntary Arbitrator committed errors in finding that petitioners voluntarily and knowingly agreed to
be employed on a day-to-day basis; and
2. The Voluntary Arbitrator committed errors in finding that petitioners dismissal was valid.
11 August 2000 - the Court of Appeals reversed and set aside the ruling of the voluntary arbitrator
Issue : whether or not the nature of work of respondents in the company could qualify them to be regular
employees
Atty. Mercader
Held : Yes
While the language of law might have been more definitive, the clarity of its spirit and intent, i.e., to ensure
a regular workers security of tenure, however, can hardly be doubted. In determining whether an
employment should be considered regular or non-regular, the applicable test is the reasonable connection
between the particular activity performed by the employee in relation to the usual business or trade of the
employer. The standard, supplied by the law itself, is whether the work undertaken is necessary or desirable
in the usual business or trade of the employer, a fact that can be assessed by looking into the nature of the
services rendered and its relation to the general scheme under which the business or trade is pursued in
the usual course. It is distinguished from a specific undertaking that is divorced from the normal activities
required in carrying on the particular business or trade. But, although the work to be performed is only for
a specific project or seasonal, where a person thus engaged has been performing the job for at least one
year, even if the performance is not continuous or is merely intermittent, the law deems the repeated and
continuing need for its performance as being sufficient to indicate the necessity or desirability of that activity
to the business or trade of the employer. The employment of such person is also then deemed to be regular
with respect to such activity and while such activity exists
The repeated rehiring of respondent workers and the continuing need for their services clearly attest to the
necessity or desirability of their services in the regular conduct of the business or trade of petitioner
company. The Court of Appeals has found each of respondents to have worked for at least one year with
petitioner company. While this Court, in Brent School, Inc. vs. Zamora, has upheld the legality of a fixed-
term employment, it has done so, however, with a stern admonition that where from the circumstances it is
apparent that the period has been imposed to preclude the acquisition of tenurial security by the employee,
then it should be struck down as being contrary to law, morals, good customs, public order and public policy.
The pernicious practice of having employees, workers and laborers, engaged for a fixed period of few
months, short of the normal six-month probationary period of employment, and, thereafter, to be hired on a
day-to-day basis, mocks the law. Any obvious circumvention of the law cannot be countenanced. The fact
that respondent workers have agreed to be employed on such basis and to forego the protection given to
them on their security of tenure, demonstrate nothing more than the serious problem of impoverishment of
so many of our people and the resulting unevenness between labor and capital. A contract of employment
is impressed with public interest. The provisions of applicable statutes are deemed written into the contract,
and the parties are not at liberty to insulate themselves and their relationships from the impact of labor laws
and regulations by simply contracting with each other
Atty. Mercader
Atty. Mercader
CANADIAN OPPORTUNITIES UNLIMITED v DALANGIN

BRION, J.
G.R. No. 172223– 6 FEB 2012
On November 20, 2001, respondent Bart Q. Dalangin, Jr. filed a complaint for illegal dismissal, with
prayer for reinstatement and backwages, as well as damages (moral and exemplary) and attorneys fees,
against petitioner Canadian Opportunities Unlimited, Inc. (company). The company, based in Pasong
Tamo, Makati City, provides assistance and related services to applicants for permanent residence
in Canada
Article 281 provides:
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.
Section 2, Rule I, Book VI of the Labor Codes Implementing Rules and Regulations provides:
If the termination is brought about by the completion of a contract or phase thereof, or by

failure of an employee to meet the standards of the employer in the 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.
FACTS: On November 20, 2001, respondent Bart Q. Dalangin, Jr. filed a complaint for illegal dismissal,
with prayer for reinstatement and backwages, as well as damages (moral and exemplary) and attorneys
fees, against petitioner Canadian Opportunities Unlimited, Inc. (company). The company, based in Pasong
Tamo, Makati City, provides assistance and related services to applicants for permanent residence
in Canada.
Dalangin was hired by the company only in the previous month, or in October 2001, as Immigration and
Legal Manager, with a monthly salary of P15,000.00. He was placed on probation for six months. He was
to report directly to the Chief Operations Officer, Annie Llamanzares Abad. His tasks involved principally
the review of the clients applications for immigration to Canada to ensure that they are in accordance with
Canadian and Philippine laws.
Through a memorandum dated October 27, 2001, signed by Abad, the company terminated Dalangins
employment, declaring him unfit and unqualified to continue as Immigration and Legal Manager, for the
following reasons:
a) Obstinacy and utter disregard of company policies. Propensity to take
prolonged and extended lunch breaks, shows no interest in familiarizing oneself
with the policies and objectives.
b) Lack of concern for the companys interest despite having just been employed
in the company. (Declined to attend company sponsored activities,
seminars intended to familiarize company employees with Management objectives
and enhancement of company interest and objectives.)
c) Showed lack of enthusiasm toward work.
d) Showed lack of interest in fostering relationship with his co-employees.
Dalangin alleged, in his Position Paper, that the company issued a memorandum requiring its employees
to attend a Values Formation Seminar scheduled for October 27, 2001 (a Saturday) at 2:00 p.m. onwards.
He inquired from Abad about the subject and purpose of the seminar and when he learned that it bore no
relation to his duties, he told Abad that he would not attend the seminar.
Atty. Mercader
Under his employment contract, his work schedule was from 9:00 a.m. to 6:00 p.m., Monday to Friday, and
9:00 a.m. to 2:00 p.m. on Saturdays
Dalangin argued that it has been an established company practice that on Saturdays, office hours end
at 2:00 p.m.; and that an employee cannot be made to stay in the office beyond office hours, except under
circumstances provided in Article 89 of the Labor Code.
LA – Illegal dismissal, NLRC- Reversed, CA – Illegal dismissal
ISSUE/S:
(1) whether there is illegal dismissal
(2) whether Dalangin is entitled to moral and exemplary damages, and attorneys fees.
HELD: (1) NO
Under Article 281 of the Labor Code, is one who is on trial by an employer, during which, the latter
determines whether or not he is qualified for permanent employment. A probationary appointment gives the
employer an opportunity to observe the fitness of a probationer while at work, and to ascertain whether he
would be a proper and efficient employee.
Dalangin was barely a month on the job when the company terminated his employment. He was found
wanting in qualities that would make him a proper and efficient employee or, as the company put it, he was
unfit and unqualified to continue as its Immigration and Legal Manager.
The essence of a probationary period of employment fundamentally lies in the purpose or objective of both
the employer and the employee during the period. While the employer observes the fitness, propriety and
efficiency of a probationer to ascertain whether he is qualified for permanent employment, the latter seeks
to prove to the former that he has the qualifications to meet the reasonable standards for permanent
employment.
The trial period or the length of time the probationary employee remains on probation depends on the
parties agreement, but it shall not exceed six (6) months under Article 281 of the Labor Code, unless it is
covered by an apprenticeship agreement stipulating a longer period. Article 281 provides:
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.
As the Court explained in International Catholic Migration Commission, the word probationary, as used to
describe the period of employment, implies the purpose of the term or period, but not its length. Thus, the
fact that Dalangin was separated from the service after only about four weeks does not necessarily mean
that his separation from the service is without basis.
Contrary to the CAs conclusions, we find substantial evidence indicating that the company was justified in
terminating Dalangins employment, however brief it had been.
Dalangin overlooks the fact, wittingly or unwittingly, that he offered glimpses of his own behavior
and actuations during his four-week stay with the company; he betrayed his negative attitude and regard
for the company, his co-employees and his work.
Dalangin admitted in compulsory arbitration that the proximate cause for his dismissal was his
refusal to attend the companys Values Formation Seminar scheduled for October 27, 2001, a Saturday. He
refused to attend the seminar after he learned that it had no relation to his duties, as he claimed, and that
he had to leave at 2:00 p.m. because he wanted to be with his family in the province. When Abad insisted
that he attend the seminar to encourage his co-employees to attend, he stood pat on not attending, arguing
that marked differences exist between their positions and duties, and insinuating that he did not want to join
the other employees. He also questioned the scheduled 2:00 p.m. seminars on Saturdays as they were not
supposed to be doing a company activity beyond 2:00 p.m. He considers 2:00 p.m. as the close of working
hours on Saturdays; thus, holding them beyond 2:00 p.m. would be in violation of the law.
Atty. Mercader
The Values Formation Seminar incident is an eye-opener on the kind of person and employee
Dalangin was. His refusal to attend the seminar brings into focus and validates what was wrong with him,
as Abad narrated in her affidavit and as reflected in the termination of employment memorandum. It
highlights his lack of interest in himself with the companys objectives and policies. Significantly, the seminar
involved acquainting and updating the employees with the companys policies and objectives. Had he
attended the seminar, Dalangin could have broadened his awareness of the companys policies, in addition
to Abads briefing him about the companys policies on punctuality and attendance, and the procedures to
be followed in handling the clients applications. No wonder the company charged him with obstinacy.
The incident also reveals Dalangins lack of interest in establishing good working relationship with
his co-employees, especially the rank and file; he did not want to join them because of his view that the
seminar was not relevant to his position and duties.
Additionally, very early in his employment, Dalangin exhibited negative working habits, particularly
with respect to the one hour lunch break policy of the company and the observance of the companys
working hours. Thus, Abad stated that Dalangin would take prolonged lunch breaks or would go out of the
office without leave of the company only to call the personnel manager later to inform the latter that he
would be unable to return as he had to attend to personal matters. Without expressly countering or denying
Abads statement, Dalangin dismissed the charge for the companys failure to produce his daily time record.
All along, he had been complaining that he was not able to explain his side, yet from the labor
arbiters level, all the way to this Court, he offered no satisfactory explanation of the charges. In this light,
coupled with Dalangins adamant refusal to attend the companys Values Formation Seminar and a similar
program scheduled earlier, we find credence in the companys submission that Dalangin was unfit to
continue as its Immigration and Legal Manager.
(2) The company contends that it complied with the above rule when it asked Dalangin, through Abads
Memorandum dated October 26, 2001, to explain why he could not attend the seminar scheduled for
October 27, 2001. When he failed to submit his explanation, the company, again through Abad, served him
a notice the following day, October 27, 2001, terminating his employment. Dalangin takes strong exception
to the companys submission. He insists that the company failed to comply with the rules as he was not
afforded a reasonable time to defend himself before he was dismissed.
The records support Dalangins contention. The notice served on him did not give him a reasonable time,
from the effective date of his separation, as required by the rules. He was dismissed on the very day the
notice was given to him, or, on October 27, 2001. Although we cannot invalidate his dismissal in light of the
valid cause for his separation, the companys non-compliance with the notice requirement entitles Dalangin
to indemnity, in the form of nominal damages in an amount subject to our discretion.
Atty. Mercader
ALILING vs. FELICIANO

Velasco, Jr. J.:
G.R. No. 185829. April 25, 2012
FACTS:
 June 2, 2004 respondent Wide Wide Wide World Express Corporation (WWWEC) offered to employ
petitioner Armando Aliling as Account Executive in Safefreight Sales. The offer came with a six (6)- month
probation period condition with this express caveat: “Performance during (sic) probationary period shall
be made as basis for confirmation to Regular or Permanent Status.”
 June 11, 2004 Aliling and WWWEC entered into an Employment Contract under the following terms:
-Conversion to regular status shall be determined on the basis of work performances; and
-Employment services may, at any time, be terminated for just cause or in accordance with the standards
defined at the time of engagement.
 However instead of a Seafreight Sale assignment, WWWEC asked Aliling to handle Ground Express
(GX), a new company product, involving domestic cargo forwarding services for Luzon.
 A month after, Manuel San Mateo III (sales and mrktng director) emailed Aliling to express dissatisfaction
with the latter’s performance. September 25, 2004 Joseph Lariosa (HR Manager) to report to the HR
Dept, to explain his absence without leave from September 20, 2004. To which petitioner responded after
2 days. He denied being absent on the alleged dates, attaching therein a copy of his timesheet. It also
came with a query regarding the withholding of his salary corresponding to September 11 to 25, 2004.
 September 27, 2004 Petitioner tendered his resignation. Subsequently, he demanded reinstatement and
a written apology, claiming to the management that San Mateo had forced him to resign. The HR dept
informed Aliling that his case was still in the process of being evaluated.
 October 6, 2004 Lariosa wrote, this time to advise Aliling of the termination of his services effective as of
that date owing to his “non-satisfactory performance” during his probationary period.
 Earlier, Aliling filed a complaint for illegal dismissal due to forced resignation, non-payment of salaries as
well as damages with the NLRC against WWWEC. In his complaint he alleged that, “At the time of my
engagement, respondents did not make known to me the standards under which I will qualify as a regular
employee.”
 RESPONDENTS: That the letter of petitioner’s appointment contains the following:
1. That petitioner’s and his immediate supervisor shall jointly define his objectives;
2. That his performance shall be reviewed on the 3 rd and 5th month of his 6 month probationary period;
3. And that failure to meet the job requirements during the probation stage means that his services may
be terminated without prior notice and without recourse to separation pay.
And that the dismissal is valid for failure of the petitioner to meet the expected job performance, considering
that the load factor for the GX Shuttles for the period of July to September was only 0.18% as opposed to
the allegedly agreed upon load of 80% targeted for August 5, 2004.
1. Respondents failed to prove that Aliling’s dismal performance constituted gross and habitual
neglect necessary to justify his dismissal;
2. Not having been informed at the time of his engagement of the reasonable standards under
which he will qualify as a regular employee, Aliling was deemed hired from day one as a
regular employee;
3. The strained relationship existing between the parties argues against the propriety of reinstatement.
ISSUE: W/N PETITIONER WAS DURING THE PERIOD MATERIAL, A PROBATIONARY EMPLOYEE.
HELD: NO. PETITIONER IS A REGULAR EMPLOYEE.
Employees must be reminded that while probationary employees do not enjoy permanent status, they enjoy
the constitutional protection of security of tenure. They can only be able terminated for cause or when they
otherwise fail to meet the reasonable standards made known to them by the employer at the time of their
engagement. Respondent WWWEC miserably failed to prove the termination of petitioner was for just
cause nor was there substantial evidence to demonstrate the standards were made known to the latter at
the time of his engagement. Hence, petitioner’s right to security of tenure was breached.
Atty. Mercader
Philippine Daily Inquirer Inc. vs. Leon M. Magtibay Jr. and Philippine Daily Inquirer Employees
Union (PDIEU)
Garcia, J.
GR No. 164532 – 24 July 2007
Facts:
Leonardo Magtibay was hired on a contractual basis by the Philippine Daily Inquirer for a period of
5 months. Before the expiration of the said contract, they agreed to extend it for another 15 days. After
Magtibay’s contractual employment expired, PDI then announced that they created an available position
for a second telephone operator, who will undergo a probationary employment. Since it was a practice of
PDI to give preference to its regular employees for vacancies, Ms. Regina Layague, a regular employee
and a member of the Philippine Daily Inquirer Employees Union (PDIEU), applied for the said available
position but later withdrew his application prompting Magtibay to apply for the same. PDI then hired
Magtibay on a probationary basis for a period of 6 months. A week prior to the expiration of the 6 month
probationary period, Magtibay was handed his termination paper for alleged failure to meet company
standards. For such, he filed a complaint for illegal dismissal and damages before the Labor Arbiter. PDIEU
later joined the case by filing a supplemental complaint for unfair labor practice. The Labor Arbiter ruled in
favor of PDI. The Labor Arbiter, in ruling in favor of PDI relied on the abstract language provided for in the
termination paper which stated that: “you did not meet the standards of the company”, to wit: (1) he
repeatedly violated the company rule prohibiting unauthorized persons from entering the telephone
operators room; (2) he intentionally omitted to indicate in his application form his having a dependent child;
and (3) he exhibited lack of sense of responsibility by locking the door of the telephone operators room on
March 10, 1996 without switching the proper lines to the company guards so that incoming calls may be
answered by them. However, on appeal to the NLRC, it ruled in favor of Magtibay which prompted PDI to
file with it a motion for reconsideration which NLRC denied. PDI then went to CA via a petition for certiorari.
The CA denied due course on PDI’s petition. Hence this appeal.
Issue:
Whether or not Magtibay was illegally dismissed?
Held:
No. A probationary employee’s services, under Art. 281 of the Labor Code, may be terminated
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. In this case, it is undisputed that Magtibay
was duly apprised of the employment standards expected of him at the time of his probationary employment
when he underwent a one-on-one orientation with PDIs personnel assistant, Ms. Rachel Isip-Cuzio. Neither
has he denied nor rebutted PDIs further claim that his direct superior, Benita del Rosario, briefed him
regarding his responsibilities in PDI. Yet, despite of that, he still did not meet the standards of the company
for the reasons earlier found by the Labor Arbiter. Hence, he was not illegally dismissed.
Atty. Mercader
Abbot Laboratories v. Alcaraz

Perlas - Bernabe, J.
G.R. No. 192571-23 July 2013
Assailed in this petition for review on certiorari are the Decision dated December 10,2009 and
Resolution 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.
FACTS:
 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).
 October 4, 2004: 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
 December 7, 2004: Abbott formally offered Alcaraz the position which was an item under the
company’s Hospira Affiliate Local Surveillance Unit (ALSU) department. In Abbott’s offer sheet, it
was stated that Alcaraz was to be employed on a probationary basis. 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.
 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.
 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.
 Abbott’s Probationary Performance Standards and Evaluation (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.
 April 20, 2005: 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 Abbot’s former HR Director, Terrible if Walsh’s action was the normal
process of evaluation. Terrible said that it was not.
 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.Thereafter, Walsh and Terrible requested Alcaraz to tender her resignation, else they be
forced to terminate her services.
 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.
Atty. Mercader
 May 23, 2005: Walsh, Almazar, and Bernardo personally handed to Alcaraz a letter stating that her
services had been terminated effective May 19, 2005.
 Respondent felt that she was unjustly termindated and thus filed a complaint for illegal dismissal
and damages. She contended that:
o 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 295 of the Labor Code.
o 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.
o individual petitioners maliciously connived to illegally dismiss her.
 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.
 Labor Arbiter dismissed Alcaraz’ complaint. 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.
 NLRC reversed the ruling of the LA
o 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.
o 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.
o Abbott did not comply with its own standard operating procedure in evaluating probationary
employees.
 Court of Appeals affirmed the decision of the NLRC. Hence, this petition.
ISSUE/S:
5. Whether or not Alcaraz was sufficiently informed of the reasonable standards to qualify her as a
regular employee.
6. Whether or not Alcaraz was validly terminated from her employment.
7. Whether or not Abbott breached its contractual obligation to Alcaraz when it failed to abide by its
own procedure in evaluating the performance of a probationary employee.
8. Whether or not the individual petitioners herein are liable.

6) Yes. Alcaraz was sufficiently informed of the reasonable standards to qualify her as a
regular employee.
a. 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.
b. 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.
c. 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.
Atty. Mercader
d. 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.
7) Yes. Alcaraz was validly terminated from her employment.

a. A different procedure is applied when terminating a probationary employee; the usual two-
notice rule does not govern.
b. 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."
c. 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.
8) Yes. Abbott breached its contractual obligation to Alcaraz when it failed to abide by its own
procedure in evaluating the performance of a probationary employee.
a. 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. The principle is akin to estoppel. Hence, given
such nature, company personnel policies create an obligation on the part of both the
b. In this case, it is apparent that Abbott failed to follow the procedure in evaluating Alcaraz.
i. There lies a hiatus of evidence that a signed copy of Alcaraz’s PPSE form was
submitted to the HRD;
ii. It was not even shown that a PPSE form was completed to formally assess her
performance;
iii. Neither was the performance evaluation discussed with her during the third and
fifth months of her employment;
iv. Nor did Abbott come up with the necessary Performance Improvement Plan to
properly gauge Alcaraz’s performance with the set company standards.
c. 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.
d. 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.
9) No. The individual petitioners as corporate officers herein are not liable.
Atty. Mercader
a. It is hornbook principle that personal liability of corporate directors, trustees or officers

attaches only when:
i. (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;
ii. (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;
iii. (c) they agree to hold themselves personally and solidarily liable with the
corporation; or
iv. (d) they are made by specific provision of law personally answerable for their
corporate action.
b. 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.
c. 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.
Atty. Mercader
Enchanted Kingdom, Inc vs. Miguel Verzo

Mendoza, J.:
GR No. 209559 – December 9, 2015
FACTS:
 Miguel Verzo was hired by Enchanted to work as Section Head — Mechanical & Instrumentation
Maintenance (SH-MIM) for its theme park in Sta. Rosa City, Laguna, for a period of six (6) months
on probationary status. He was tasked to conduct "mechanical and structural system
assessments," as well as to inspect and evaluate the "conditions, operations and maintenance
requirements of rides, facilities and buildings to ensure compliance with applicable codes,
regulations and standards."
 During te probationary period, Verzo’s fellow section heads cited different incidents which showed
his lack of supervisory skill, technical incompetency and lack of sense of responsibility. (e.g. failure
to replace faucets, mishandling the operation of the park’s submersible pump, failure to put
sufficient water in the ZORB Ball attraction)
 Verzo was also advise by his colleagues to just resign in order for him to be given a Certificate of
Employment rather that waiting for him to be dismissed as he will not be regularized.
 In view of all the reports, Enchanted Kingdom furnished Verzo a copy of the Cast Member
Performance Appraisal for Regularization which reported that he only obtained a score of 70 out of
100.
 Enchanted, then, formally informed Verzo that he did not qualify for regularization because his work
performance for the past 5 months did not meet the requirements of the position of Section Hed for
Mechanical and Instrumentation Maintenance.
 Verzo filed a complaint for illegal dismissal and claimed that he was only informed of the
probationary status after he was formally hired and that he was not advised as to the standards
required for his regularization.
 Labor Arbiter: dismissed Verzo’s complaint; lack of merit
 NLRC: denied Verzo’s appeal; lack of merit
 CA: reversed the decision of LA and NLRC; the probationary contract between the parties failed to
set the standards that would gauge Verzo’s fitness and qualification for regular employment;
NLRC’s supposition that Verzo may not be apprised of the standard for regularization on the
assumption that given his itinerary and education. He has wider comprehension of what is expected
of him professionally is misplaced.
ISSUE/S:
1) W/N Verzo is a probationary employee.
2) W/N Verzo was illegally dismissed.
3) W/N the requirement of notice and hearing is applicable to probationary employees.
HELD: The March 26, 2013 Decision and the October 11, 2013 Resolution of the Court of Appeals in CA-
G.R. SP No. 118075 are hereby REVERSED and SET ASIDE.
The complaint filed by respondent Miguel J. Verzo for illegal dismissal, damages and attorney's fees is
DISMISSED for lack of merit.
1) Yes. the evidence is clear that when Verzo was first hired by Enchanted, he was placed on a
probationary status. A letter, dated August 26, 2009, clearly reflects not only the agreement of both
parties as to the probationary status of the employment and its duration, but also the fact that Enchanted
informed Verzo of the standards for his regularization. Clearly, Enchanted informed Verzo that he was
being placed on probation. Aside from the probationary nature of his employment, the agreement of
the parties specifically showed: the duration of such status; the benefits to which he was entitled once
regularized; and most importantly, the standard with which he must comply in order to be regularized.
To deserve regularization, he must be able to conduct "mechanical and structural system
assessments," as well as inspect and evaluate the "conditions, operations and maintenance
Atty. Mercader
requirements of rides, facilities and buildings to ensure compliance with applicable codes, regulations
and standards." A detailed enumeration of his specific duties accompanied this letter of employment to
ensure that he was made aware and informed of his duties and responsibilities.
Verzo makes much noise of the fact that the letter was not served upon him immediately at the very
start of his employment. The purpose of the law in requiring that an employee be notified of the
standards for his regularization during his probationary employment is to simply afford him due process,
so that the employee will be aware that he will be under close observation and his performance of his
assigned duties and functions would be under continuous scrutiny by his superiors. s long as the
probationary employee is given a reasonable time and opportunity to be made fully aware of what is
expected of him during the early phases of the probationary period, the requirement of the law has
been satisfied. At any rate, a total of only fourteen (14) days had just lapsed when Verzo officially
received the letter containing what he already knew — that he was still a probationary employee. It is
ludicrous to think that Enchanted conjured this up as an afterthought to justify his termination before
probationary period would be over.
2) No. First, Verzo himself admitted that the performance evaluation he received on February 3, 2010 was
accompanied by the respective reports of Schoefield, Montemayor and Velesrubio. As earlier stated,
these reports detailed the reasons why Verzo failed to meet the standards set by Enchanted and
compromised the safety of its patrons. Second, granting that Verzo was not informed of his specific
duties and responsibilities, nonetheless, his dismissal was valid because he failed to adhere to the
dictates of common sense which required that he act in accordance with the necessary work ethics and
basic skills required by his position as SH-MIM and by his profession as licensed engineer. Third, while
the CA considered the fact that Velesrubio advised Verzo to resign because he was not going to be
regularized even before his performance appraisal, the Court finds that such should not be taken as an
indication of bad faith on the part of Enchanted. For this Court, the same could only be Velesrubio's
own opinion of Verzo, because he was the one supervising his performance. Whether Enchanted had
decided to discontinue Verzo's employment cannot, at that point, be said to have been a foregone
conclusion.
3) No. Section 2 Rule I Book VIof the Implementing Rules of Labor Code states that “If the termination is
brought about by the completion of a contract or phase thereof, or by failure of an employee to meet
the standards of the employer in the 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”. Notice
and hearing are not required in case a probationary employee is not retained for failure to comply with
the reasonable standards set by his employer. Thus: Unlike under the first ground for the valid
termination of probationary employment which is for cause, the second ground does not require notice
and hearing. Due process of law for this second ground consists of making the reasonable standards
expected of the employee during his probationary period known to him at the time of his probationary
employment. By the very nature of a probationary employment, the employee knows from the very start
that he will be under close observation and his performance of his assigned duties and functions would
be under continuous scrutiny by his superiors. It is in apprising him of the standards against which his
performance shall be continuously assessed where due process regarding the second ground lies, and
not in notice and hearing as in the case of the first ground.
NOTES:
Probationary Employee- one who, for a given period of time, is being observed and evaluated to
determine whether or not he is qualified for permanent employment.
Atty. Mercader
INTERNATIONAL CATHOLIC MIGRATION COMMISSION vs.

NATIONAL LABOR RELATIONS COMMISSION and BERNADETTE GALANG
Fernan, CJ.
G. R. No. 72222 January 30, 1989
The issue to be resolved in the instant case is whether or not an employee who was terminated
during the probationary period of her employment is entitled to her salary for the unexpired portion of her
six-month probationary employment.
FACTS:
Petitioner International Catholic Migration Commission (ICMC), a non-profit organization dedicated
to refugee service at the Philippine Refugee Processing Center in Morong, Bataan engaged the services
of private respondent Bernadette Galang on January 24, 1983 as a probationary cultural orientation teacher
with a monthly salary of P2,000.00.
Three (3) months thereafter, or on April 22, 1983, private respondent was informed, orally and in
writing, that her services were being terminated for her failure to meet the prescribed standards of petitioner
as reflected in the performance evaluation of her supervisors during the teacher evaluation program she
underwent along with other newly-hired personnel.
Despite her termination, records show that private respondent did not leave the ICMC refugee
camp at Morong, Bataan, but instead stayed thereat for a few days before leaving for Manila, during which
time, she was observed by petitioner to be allegedly acting strangely.
On July 24, 1983, private respondent returned to Morong, Bataan on board the service bus of
petitioner to accomplish the clearance requirements. In the evening of that same day, she was found at the
Freedom Park of Morong wet and shivering from the rain and acting bizarrely. She was then taken to
petitioner's hospital where she was given the necessary medical attention.
Two (2) days later, or on July 26, 1983, she was taken to her residence in Manila aboard petitioner's
service bus. Thru a letter, her father expressed appreciation to petitioner for taking care of her daughter.
On that same day, her father received, on her behalf, the proportionate amount of her 13th month pay and
the equivalent of her two week pay.
On August 22, 1983, private respondent filed a complaint for illegal dismissal, unfair labor practice
and unpaid wages against petitioner with the then Ministry of Labor and Employment, praying for
reinstatement with backwages, exemplary and moral damages.
Labor Arbiter Pelagio A. Carpio rendered his decision dismissing the complaint for illegal dismissal
as well as the complaint for moral and exemplary damages but ordering the petitioner to pay private
respondent the sum of P6,000.00 as payment for the last three (3) months of the agreed employment
period pursuant to her verbal contract of employment.
On August 22, 1985, the NLRC, by a majority vote of Commissioners Guillermo C. Medina and
Gabriel M. Gatchalian, sustained the decision of the Labor Arbiter and thus dismissed both appeals
for lack of merit. Commissioner Miguel Varela, on the other hand, dissented and voted for the reversal of
the Labor Arbiter's decision for lack of legal basis considering that the termination of services of Galang
was effected during her probationary period on valid grounds made known to her.
ISSUE/S:
WoN Galang is entitled to her salary for the unexpired portion of her six-month probationary
employment.
HELD: NO
There is justifiable basis for the reversal of public respondent's award of salary for the unexpired
three-month portion of private respondent's six-month probationary employment in the light of its express
finding that there was no illegal dismissal. There is no dispute that private respondent was terminated during
Atty. Mercader
her probationary period of employment for failure to qualify as a regular member of petitioner's teaching
staff in accordance with its reasonable standards. Records show that private respondent was found by
petitioner to be deficient in classroom management, teacher-student relationship and teaching
techniques. Failure to qualify as a regular employee in accordance with the reasonable standards of the
employer is a just cause for terminating a probationary employee specifically recognized under Article 282
(now Article 281) of the Labor Code which provides thus:
“ART. 281. Probationary employment. — Probationary employment shall not exceed six months
from the date the employee started working, unless it is covered by an apprenticeship agreement stipulating
a longer period. The services of an employer who has been engaged in a probationary basis may be
terminated for a just cause or when he fails to qualify as a regular employer in accordance with reasonable
standard made known by the employer to the employer at the time of his engagement. An employee who
is allowed to work after a probationary period shall be considered a regular employee.”
A probationary employee, as understood under Article 282 (now Article 281) of the Labor Code,
is one who is on trial by an employer during which the employer determines whether or not he is qualified
for permanent employment. A probationary appointment is made to afford the employer an opportunity to
observe the fitness of a probationer while at work, and to ascertain whether he will become a proper and
efficient employee. The word "probationary", as used to describe the period of employment, implies the
purpose of the term or period, but not its length.
Being in the nature of a "trial period" the essence of a probationary period of employment
fundamentally lies in the purpose or objective sought to be attained by both the employer and the employee
during said period. The length of time is immaterial in determining the correlative rights of both in dealing
with each other during said period. While the employer, as stated earlier, observes the fitness, propriety
and efficiency of a probationer to ascertain whether he is qualified for permanent employment, the
probationer, on the other, seeks to prove to the employer, that he has the qualifications to meet the
reasonable standards for permanent employment.
It is well settled that the employer has the right or is at liberty to choose who will be hired and who
will be denied employment. In that sense, it is within the exercise of the right to select his employees that
the employer may set or fix a probationary period within which the latter may test and observe the conduct
of the former before hiring him permanently.
As the law now stands, Article 281 of the Labor Code gives ample authority to the employer to
terminate a probationary employee 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. There is nothing under Article 281 of the Labor Code that would preclude the employer from
extending a regular or a permanent appointment to an employee once the employer finds that the employee
is qualified for regular employment even before the expiration of the probationary period. Conversely, if the
purpose sought by the employer is neither attained nor attainable within the said period, Article 281 of the
Labor Code does not likewise preclude the employer from terminating the probationary employment on
justifiable causes as in the instant case.
Atty. Mercader
Magis Young Achievers’ Learning Center and Carino vs. Manalo

Nachura, J.
GR No. 178835 – 13 February 2009
This is a petition for review on certiorari of the Decision and of the Resolution of the Court of
Appeals in CA-G.R. SP No. 93917 entitled Magis Young Achievers’ Learning Center and Violeta T. Carino
v. National Labor Relations Commission, 3rd Division, Quezon City, and Adelaida P. Manalo.
FACTS:
 April 2002: Respondent Manalo was hired as a teacher and acting principal of petitioner Magis.
 March 2003: Manalo wrote a letter of resignation addressed to Carino, directress of Magis,
effective April 1, 2003 due to personal and family reasons.Two days later, respondent received a
letter of termination from Magis. Her employment is being terminated due to a systematic
reorganization which will entail streamlining of human resources. Thus, the position of Principal will
be abolished next school year.
 April 2003: Manalo instituted a complaint for illegal dismissal and non-payment of 13th month pay,
with prayer for reinstatement, award of full backwages and moral and exemplary damages. She
claimed that her termination violated provisions of her employment contract, and that the alleged
abolition of the position of Principal was not among the grounds for termination by an employer
under Article 282 of the LC. She further asserted that petitioner infringed Article 283 of the LC. She
also claimed that she was terminated from service for the alleged expiration of her employment,
but that her contract did not prove for a fixed term or period.
 Magis countered that Manalo was legally terminated because the one-year probationary period had
already lapsed and she failed to meet the criteria set by the school pursuant to the Manual of
Regulation of Private Schools, adopted by the DECS.
 December 2003: LA dismissed the complaint for illegal dismissal, but ordered payment of 13th
month pay. LA held that Manalo was not illegally dismissed because she resigned.In the absence
of any circumstance tending to show she was probably coerced, her resignation must be upheld.
 October 2005: NLRC reversed the LA’s ruling. Magis was ordered to reinstate Manalo as a
teacher, who shall be credited with one year service of probationary employment, and to pay her
13th month pay and backwages.
 January 2007: CA affirmed NLRC decision and dismissed Magis’ appeal.
ISSUE/S:
2) WON resignation of Manalo was ineffective due to alleged lack of acceptance
3) WON Manalo is a permanent employee
4) WON contract of employment between Magis and Manalo did not stipulate a period
5) WON Manalo was illegally dismissed
HELD: PETITION DENIED. Assailed Decision and Resolution of the CA AFFIRMED.
10) Yes. There was no express acceptance thereof by the employer and there is a cloud of doubt
as to the voluntariness of respondent’s resignation.
 Resignation is the voluntary act of an employee who finds himself in a situation where he
believes that personal reasons cannot be sacrificed in favour of the exigency of the service,
and that he has no other choice but to dissociate himself from employment.
 Voluntary resignation is made with the intention of relinquishing an office, accompanied
by the act of abandonment. It is the acceptance of an employee’s resignation that renders
it operative.
Atty. Mercader
 Resignation is inconsistent with the filinf of a complaint for illegal dismissal. To be valid,
the resignation must be unconditional, with the intent to operate as such. In this case,
Manalo actively pursued her illegal dismissal case against Magis, such that she cannot be
said to have voluntarily resigned from her job.
11) No. Manalo is a probationary teacher.

 Manalo has not completed the requisite 3-year period of probationary employment as
provided in the Manual
 Her appointment as Acting Principal is merely temporary.
 One who holds a temporary appointment has no fixed tenure of office. His employment can
be terminated any time at the pleasure of the appointing power without need to show that
it is for cause.
12) Yes. Manalo’s copy of the employment agreement should be followed. The contract of
employment has no period.
 Article 1702 of the LC provides that in case of doubt, all labor contracts shall be construed
in favour of the labourer. As there are two copies presented, the conflict must be resolved
in favour of Manalo’s copy of the contract of employment which did not stipulate any period.
4) Yes. Manalo was illegally dismissed.
 Manalo was hired as a probationary teacher and as such, it was incumbent upon Magis to
show that she did not meet the standards set by the school. The termination of Manalo
was effected by a letter stating that she was being relieved from employment because the
school authorities allegedly decided that the position of Principal was to be abolished.
Nowhere in that letter was respondent informed that her performance as a school
teacher was less than satisfactory.
 Absent any concrete proof that her performace as a teacher was unsatisfactory, Manalo is
entitled to continue her 3-year probationary period.
NOTES:
 Probationary Employee/Probationer – one who is on trial for an employer, during which the latter
determines whether or not he is qualified for permanent employment
 The word probationary, as used to describe the period of employment, implied the purpose of the
term or period, not its length.
 Article 281 of Labor Code – maximum “trial period” during which the employer may test the fitness
and efficiency of the employee
o “...shall not exceed six 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 the reasonable
standards made known by the employer at the time of his engagement. An employee who
is allowed to work after a probationary period shall be considered a regular employee.”
 Section 92 of 1992 Manual of Regulations for Private Schools – governs probationary employment
of academic personnel in private schools, colleges and universities
o “...shall not be more than 3 consecutive years of satisfactory service for those in the
elementary and secondary levels, 6 consecutive regular semesters of satisfactory service
for those in the tertiary level, and 9 consecutive trimesters of satisfactory service for those
in the tertiary level where collegiate courses are offered on a trimester basis.”
 Period of probation for academic personnel shall be counted in terms of school years and not
calendar years.
 Academic Personnel- all school personnel who are formally engaged in actual teaching service
or in research assignments, either on full-time or part-time basis; as well as those who possess
Atty. Mercader
certain prescribed academic functions directly supportive of teaching, such as registrars, librarians,
guidance counsellors, researchers, and other similar persons. They include school officials
responsible for academic matters, and may include other school officials.
 Escudero vs. Office of the President of the Philippines: Labor Code authorizes different
probationary periods, according to the requirements of the particular job. For private school
teachers, the period of probation is governed by the 1970 Manual of Regulations for Private
Schools.
 Labajo vs. Alejandro: A regular or permanent employment status may, under certain conditions,
be attained in less than 3 years...whether or not one has indeed attained permanent status in one’s
employment, before the passage of 3 years, is a matter of proof.
 Mere rendition of service for 3 consecutive years does not automatically ripen into a permanent
appointment. It is also necessary that the employee be a full-time teacher, and that the services he
rendered are satisfactory.
 Failure to stipulate the period in a contract of probationary employment could lead to the inference
that the contract is binding for the full 3-year probationary period.
 Biboso vs. Victorias Milling Co.: Probationary employees enjoy security of tenure. They cannot
be removed except for cause provided by law, or if at the end of every yearly contract during the 3-
year period, theemployee does not meet the reasonable standards set by the employer at the time
of engagement. Once that period expires, the constitutional protection can no longer be invoked.
Atty. Mercader
Mercado v. AMA Computer College

BRION, J.:
G.R. No. 183572, 13 April 2010
FACTS
AMACC is an educational institution engaged in computer-based education in the country. One of AMACCs
biggest schools in the country is its branch at Paranaque City. The petitioners were faculty members who
started teaching at AMACC on May 25, 1998. The petitioner Mercado was engaged as a Professor 3, while
petitioner Tonog was engaged as an Assistant Professor 2.On the other hand, petitioners De Leon, Lachica
and Alba, Jr., were all engaged as Instructor 1. The petitioners executed individual Teachers Contracts for
each of the trimesters that they were engaged to teach, with the following common stipulation:
1. POSITION. The TEACHER has agreed to accept a non-tenured appointment to work

in the College of xxx effective xxx to xxx or for the duration of the last term that the
TEACHER is given a teaching loadbased on the assignment duly approved by the
DEAN/SAVP-COO. [Emphasis supplied]
For the school year 2000-2001, AMACC implemented new faculty screening guidelines, set forth in its
Guidelines on the Implementation of AMACC Faculty Plantilla. Under the new screening guidelines,
teachers were to be hired or maintained based on extensive teaching experience, capability, potential, high
academic qualifications and research background. The performance standards under the new screening
guidelines were also used to determine the present faculty members entitlement to salary increases. The
petitioners failed to obtain a passing rating based on the performance standards; hence AMACC
did not give them any salary increase.
Because of AMACCs action on the salary increases, the petitioners filed a complaint with the Arbitration
Branch of the NLRC on July 25, 2000, for underpayment of wages, non-payment of overtime and overload
compensation, 13th month pay, and for discriminatory practices.
On September 7, 2000, the petitioners individually received a memorandum from AMACC, through Human
Resources Supervisor Mary Grace Beronia, informing them that with the expiration of their contract to teach,
their contract would no longer be renewed.
Petitioner’s Contention:
The petitioners amended their labor arbitration complaint to include the charge of illegal dismissal against
AMACC. The petitioners claimed that their dismissal was illegal because it was made in retaliation for their
complaint for monetary benefits and discriminatory practices against AMACC. The petitioners also
contended that AMACC failed to give them adequate notice; hence, their dismissal was ineffectual.
Respondent’s Contention:
AMACC contended in response that the petitioners worked under a contracted term under a non-tenured
appointment and were still within the three-year probationary period for teachers. Their contracts were not
renewed for the following term because they failed to pass the Performance Appraisal System for Teachers
(PAST) while others failed to comply with the other requirements for regularization, promotion, or increase
in salary. This move, according to AMACC, was justified since the school has to maintain its high academic
standards.
ISSUE/S:
Whether the petitioners’ probationary status be disregarded simply because the contracts were
fixed-term
HELD: Petition granted.

No, the provision on employment on probationary status under the Labor Code is a primary example of the
fine balancing of interests between labor and management that the Code has institutionalized pursuant to
the underlying intent of the Constitution.
On the one hand, employment on probationary status affords management the chance to fully scrutinize
the true worth of hired personnel before the full force of the security of tenure guarantee of the Constitution
comes into play. Based on the standards set at the start of the probationary period, management is given
Atty. Mercader
the widest opportunity during the probationary period to reject hirees who fail to meet its own adopted but
reasonable standards. These standards, together with the just and authorized causes for termination of
employment the Labor Code expressly provides, are the grounds available to terminate the employment of
a teacher on probationary status.
Labor, for its part, is given the protection during the probationary period of knowing the company
standards the new hires have to meet during the probationary period, and to be judged on the basis of
these standards, aside from the usual standards applicable to employees after they achieve permanent
status. Under the terms of the Labor Code, these standards should be made known to the teachers on
probationary status at the start of their probationary period, or at the very least under the circumstances of
the present case, at the start of the semester or the trimester during which the probationary standards are
to be applied. Of critical importance in invoking a failure to meet the probationary standards, is that the
school should show as a matter of due process how these standards have been applied. This is
effectively the second notice in a dismissal situation that the law requires as a due process guarantee
supporting the security of tenure provision, and is in furtherance, too, of the basic rule in employee dismissal
that the employer carries the burden of justifying a dismissal. These rules ensure compliance with the
limited security of tenure guarantee the law extends to probationary employees.
The fixed-term character of employment essentially refers to the period agreed upon between the
employer and the employee; employment exists only for the duration of the term and ends on its own when
the term expires. In a sense, employment on probationary status also refers to a period because of the
technical meaning probation carries in Philippine labor law a maximum period of six months, or in the
academe, a period of three years for those engaged in teaching jobs. Their similarity ends there, however,
because of the overriding meaning that being on probation connotes, i.e., a process of testing and
observing the character or abilities of a person who is new to a role or job.
Understood in the above sense, the essentially protective character of probationary status for
management can readily be appreciated. But this same protective character gives rise to the countervailing
but equally protective rule that the probationary period can only last for a specific maximum period and
under reasonable, well-laid and properly communicated standards. Otherwise stated, within the period of
the probation, any employer move based on the probationary standards and affecting the continuity of the
employment must strictly conform to the probationary rules.
Under the given facts where the school year is divided into trimesters, the school apparently utilizes
its fixed-term contracts as a convenient arrangement dictated by the trimestral system and not because the
workplace parties really intended to limit the period of their relationship to any fixed term and to finish this
relationship at the end of that term. If we pierce the veil, so to speak, of the parties so-called fixed-term
employment contracts, what undeniably comes out at the core is a fixed-term contract conveniently used
by the school to define and regulate its relations with its teachers during their probationary period.
To be sure, nothing is illegitimate in defining the school-teacher relationship in this manner. The
school, however, cannot forget that its system of fixed-term contract is a system that operates during the
probationary period and for this reason is subject to the terms of Article 281 of the Labor Code. Unless this
reconciliation is made, the requirements of this Article on probationary status would be fully
negated as the school may freely choose not to renew contracts simply because their terms have
expired. The inevitable effect of course is to wreck the scheme that the Constitution and the Labor
Code established to balance relationships between labor and management.
Given the clear constitutional and statutory intents, we cannot but conclude that in a
situation where the probationary status overlaps with a fixed-term contract not specifically used for
the fixed term it offers, Article 281 should assume primacy and the fixed-period character of the
contract must give way. This conclusion is immeasurably strengthened by the petitioners and the
AMACCs hardly concealed expectation that the employment on probation could lead to permanent
status, and that the contracts are renewable unless the petitioners fail to pass the schools
standards.
Atty. Mercader
Colegio del Santisimo Rosario v. Rojo,

Del Castillo, J.
G.R. No. 170388, 4 September 2013
This Petition for Review on Certiorari1 assails the August 31, 2005 Decision2 and the November
10, 2005 Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 85188, which affirmed the July 31,
2003 Decision4 of the National Labor Relations Commission (NLRC). Said NLRC Decision affirmed with
modification the October 7, 2002 Decision5 of the Labor Arbiter (LA) which, in turn, granted respondent
Emmanuel Rojo’s (respondent) Complaint6 for illegal dismissal.
FACTS:
Colegio del Santisimo Rosario (CSR) hired respondent as a high school teacher on probationary basis for
the school years 1992-1993, 1993-19947 and 1994-1995.
On April 5, 1995, CSR, through petitioner Sr. Zenaida S. Mofada, OP (Mofada), decided not to renew
respondent’s services.
Thus, on July 13, 1995, respondent filed a Complaint for illegal dismissal. He alleged that since he had
served three consecutive school years which is the maximum number of terms allowed for probationary
employment, he should be extended permanent employment. Citing paragraph 75 of the 1970 Manual of
Regulations for Private Schools (1970 Manual), respondent asserted that “full- time teachers who have
rendered three (3) consecutive years of satisfactory services shall be considered permanent.”
On the other hand, petitioners argued that respondent knew that his Teacher’s Contract for school year
1994-1995 with CSR would expire on March 31, 1995. Accordingly, respondent was not dismissed but his
probationary contract merely expired and was not renewed. Petitioners also claimed that the “three years”
mentioned in paragraph 75 of the 1970 Manual refer to “36 months,” not three school years. And since
respondent served for only three school years of 10 months each or 30 months, then he had not yet served
the “three years” or 36 months mentioned in paragraph 75 of the 1970 Manual.
Ruling of Labor Arbiter: LA ruled that “three school years” means three years of 10 months, not 12 months.
Therefore, Rojo has already attained regular employment status. The LA also found petitioners guilty of
bad faith for treating the termination as merely an expiration of contract.
On appeal, the NLRC affirmed the LA’s Decision with modification. According to the CA, respondent has
attained the status of a regular employee after he was employed for three consecutive school years as a
full-time teacher and had served CSR satisfactorily. Aside from being a high school teacher, he was also
the Prefect of Discipline, a task entailing much responsibility.
ISSUE/S: W/N TEACHER HIRED FOR THREE (3) CONSECUTIVE SCHOOL YEARS AS A
PROBATIONARY EMPLOYEE AUTOMATICALLY AND/OR BY LAW BECOMES A PERMANENT
EMPLOYEE UPON COMPLETION OF HIS THIRD YEAR OF PROBATION
HELD: Petition denied.
Yes. This scheme “of fixed-term contract is a system that operates during the probationary period and for
this reason is subject to Article 281 of the Labor Code,” which provides:
“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.”
Atty. Mercader
If we pierce the veil, so to speak, of the parties’ so-called fixed-term employment contracts, what undeniably
comes out at the core is a fixed-term contract conveniently used by the school to define and regulate its
relations with its teachers during their probationary period.
This Court has definitively pronounced that “in a situation where the probationary status overlaps with a
fixed-term contract not specifically used for the fixed term it offers, Article 281 should assume primacy and
the fixed-period character of the contract must give way.”
For teachers on probationary employment, in which case a fixed term contract is not specifically used for
the fixed term it offers, it is incumbent upon the school to have not only set reasonable standards to be
followed by said teachers in determining qualification for regular employment, the same must have also
been communicated to the teachers at the start of the probationary period, or at the very least, at the start
of the period when they were to be applied. Corollarily, should the teachers not have been apprised of such
reasonable standards at the time specified above, they shall be deemed regular employees.
In this case, glaringly absent from petitioners’ evidence are the reasonable standards that respondent was
expected to meet that could have served as proper guidelines for purposes of evaluating his performance.
Nowhere in the Teacher’s Contract could such standards be found. Neither was it mentioned that the same
were ever conveyed to respondent. Even assuming that respondent failed to meet the standards set forth
by CSR and made known to the former at the time he was engaged as a teacher on probationary status,
still, the termination was flawed for failure to give the required notice to respondent.
In a quandary as to what could have been the basis of such evaluation, as no evidence were adduced to
show the reasonable standards with which respondent’s performance was to be assessed or that he was
informed thereof. Notably too, none of the supposed performance evaluations were presented. These flaws
violated respondent’s right to due process. As such, his dismissal is, for all intents and purposes, illegal.
NOTES: Sec. 93. Regular or Permanent Status. - Those who have served the probationary period shall be
made regular or permanent. Full-time teachers who have satisfactorily completed their probationary period
shall be considered regular or permanent.
Atty. Mercader
Buiser v. Hon. Leogardo

Guerrero, J.:
GR No. L-63316, 31 July 1984
This is a petition for certiorari seeking to set aside the Order of the Deputy Minister of Labor and
Employment, affirming the Order of the Regional Director, National Capital Region, in Case No. NCR-STF-
5-2851-81, which dismissed the petitioners' complainant for alleged illegal dismissal and unpaid
commission.
FACTS:
The petitioners in this case namely Buiser and Intengan entered into an “Employment Contract
(on Probationary Status)” with private respondent General Telephone Directory Company, wherein they
were employed as sales representatives with an obligation of soliciting advertisements to be included in a
telephone directory. Private respondent is a corporation known in the field of publication and circulation of
the directory of the Philippine Long Distance Telephone Company. The said employment contract included
the following provisions:
l. The company hereby employs the employee as telephone representative on a
probationary status for a period of eighteen (18) months, i.e. from May 1980 to
October 1981, inclusive. It is understood that during the probationary period of
employment, the Employee may be terminated at the pleasure of the company without
the necessity of giving notice of termination or the payment of termination pay.
The Employee recognizes the fact that the nature of the telephone sales
representative's job is such that the company would be able to determine his true
character, conduct and selling capabilities only after the publication of the directory,
and that it takes about eighteen (18) months before his worth as a telephone saw
representative can be fully evaluated inasmuch as the advertisement solicited by him
for a particular year are published in the directory only the following year.
In line with this, private respondent prescribed sales quotas to be accomplished or met by
petitioners. However, when they failed to meet their respective quotas, the petitioners were dismissed.
Hence, petitioners filed a complaint for illegal dismissal with claims for backwages, earned commissions
and other benefits, in the National Capital Region, Ministry of Labor and Employment.
The Regional Director of said ministry dismissed the complaints of petitioners, except for their claim
for allowances in which they ordered private respondent to pay. Upon petitioners’ motion for
reconsideration, which was then treated as an appeal to the Minister of Labor, Minister Vicente Leogardo
affirmed the previous order of the Regional Director, explaining that the petitioners have not attained
permanent status since private respondent was justified in requiring a longer period of probation, and that
the termination of petitioners’ services was valid because of their failure to meet the sales quotas.
Petitioners then filed a petition for certiorari on the ground that public respondent committed grave
abuse of discretion amounting to lack of jurisdiction. In addition, they contend that under Art. 281 and 282
of the Labor Code, having served the respondent company for over 6 months, they have become
automatically regular employees notwithstanding an agreement to the contrary. Moreover, they have the
following contentions:
a. The probationary employment cannot exceed 6 months, and the only exception are the
apprenticeship and learnership agreements as provided by law, and thus the law does not allow
any discretion on the part of the Minister to extend the probationary period for a longer period
except in the aforecited instances.
b. The policy instruction of the Minister of Labor and Employment nor any agreement of the parties
could prevail over the mandatory requirement of the law.
c. That the 6 months prescription of the Labor Code was to give further efficacy to the constitutionally
guaranteed security of tenure of workers.
d. That they are regular employees, and can only be dismissed with just and valid causes.
ISSUE:
1. Whether or not petitioners’ contention of illegal probationary period for 18 months is correct.
2. Whether or not petitioners were illegally dismissed.
HELD:
1. NO. The probationary period of 18 months is not invalid and illegal.
Atty. Mercader
In general, the probationary period of employment is limited to 6 months. The exception to such
rule is when the parties may agree otherwise to an employment contract, such as when the same is
established by company policy or when the same is needed due to the nature of the employee’s work. The
records of the case show that it is the latter instance that applies in this case, because there is a need to
exercise managerial prerogative requiring a longer period of probationary employments, such in this case
where it was set for 18 months, because the employee must learn a particular kind of work such as selling,
or when the job requires certain qualifications, skills, experience or training.
Policy Instruction No. 11 of the Minister of Labor and Employment has clarified any and all doubts
on the period of probationary employment as follows:
Probationary Employment has been the subject of misunderstanding in some quarter.
Some people believe six (6) months is the probationary period in all cases. On the other
hand employs who have already served the probationary period are sometimes required
to serve again on probation.
Under the Labor Code, six (6) months is the general probationary period ' but the
probationary period is actually the period needed to determine fitness for the job. This
period, for lack of a better measurement is deemed to be the period needed to learn the
job.
The purpose of this policy is to protect the worker at the same time enable the employer
to make a meaningful employee selection. This purpose should be kept in mind in
enforcing this provision of the Code. This issuance shall take effect immediately.
In this case, private respondent needs atleast 18 months to determine the character and
selling capabilities of the petitioners as sales representatives. The company is engaged in
advertisement and publication in the Yellow Pages of the PLDT Phone Directories. The solicited ads
that were published were only made a year after the sale has been made and only then will the
company has the ability to evaluate and determine the efficiency, conduct, and selling ability of its
employees, particularly sales representatives, the evaluation being based on the published ads.
Moreover, an 18 month probationary period is recognized by the Labor Union in the private
respondent company, the very contracts of employment signed and acquiesced to by petitioners
specifically indicate that “the company hereby employs the employee as telephone sales
representatives on a probationary status for a period of 18 months.” Such stipulation is not contrary
to law, morals, and public policy.
2. NO. The dismissal of the petitioners was not illegal.

The laying-off workers done and practiced by certain companies because their employees have
failed to make the work quota has been recognized in this jurisdiction. In the case at bar, the failure of
petitioners to meet the sales quota assigned to each of them constitute a just cause of their dismissal,
regardless of the permanent or probationary status of their employment. Failure to observe prescribed
standards of work, or to fulfill reasonable work assignments due to inefficiency may constitute just cause.
This is considered as a management prerogative by requiring standards necessary for their work as long
as they are exercised in good faith for the advancement of the employer’s interest.
Atty. Mercader
MARIWASA MANUFACTURING, INC. vs. HON. VICENTE LEOGARDO, JR.

Narvasa, J.
G.R. No. 74246. January 26, 1989
FACTS:
 Jan 10, 1979: Joaquin A. Dequila was hired on probation by petitioner Mariwasa Manufacturing,
Inc. as a general utility-worker.
 Upon the expiration of the probationary period of six months, Dequila was informed by his employer
that his work had proved unsatisfactory and had failed to meet the required standards. To give him
a chance to improve his performance and qualify for regular employment, with his written consent
Mariwasa extended his probation period for another three months. However, his performance did
not improve at the end of extended period which led to his termination. Hence, illegal dismissal
case was filed.
 Ministry of Labor: dismissed the case.
 Appeal on the office of the minister: Deputy Minister Vicente Leogardo, Jr reversed and held that
Dequila was already a regular employee at the time of his dismissal, therefore, could not have been
lawfully dismissed for failure to meet company standards as a probationary worker.
ISSUE:
Whether or not, Article 282 of the Labor Code notwithstanding, probationary employment may validly be
extended beyond the prescribed six-month period by agreement of the employer and the employee.
The Court agrees with the Solicitor General, who takes the same position as the petitioners, that such an
extension may lawfully be covenanted, notwithstanding the seemingly restrictive language of Art. 282 of
the Labor Code.
Buiser vs. Leogardo, Jr. recognized agreements stipulating longer probationary periods as constituting
lawful exceptions to the statutory prescription limiting such periods to six months, when it upheld as valid
an employment contract between an employer and two of its employees that provided for an eighteen-
month probation period. The single difference between Buiser and the present case: that in the former
involved an eighteen-month probationary period stipulated in the original contract of employment, whereas
the latter refers to an extension agreed upon at or prior to the expiration of the statutory six-month period,
is hardly such as to warrant or even suggest a different ruling here.
The extension of Dequila's probation was ex gratia, an act of liberality on the part of his employer affording
him a second chance to make good after having initially failed to prove his worth as an employee. By
voluntarily agreeing to an extension of the probationary period, Dequila ineffect waived any beneDt
attaching to the completion of said period if he still failed tomake the grade during the period of extension.
Atty. Mercader
Atty. Mercader
ALU-TUCP v. NLRC
Feliciano, J.
G.R. No. 109902 August 2, 1994
This petition for Certiorari, petitioners assail the Resolution of the National Labor Relations Commission
("NLRC") dated 8 January 1993 which declared petitioners to be project employees of private respondent
National Steel Corporation ("NSC"), and the NLRC's subsequent Resolution of 15 February 1993, denying
petitioners' motion for reconsideration.
FACTS:
 13 petitioners filed separate complaints for unfair labor practice, regularization and monetary
benefits which were later on consolidated.
 LA Decision on 7 June 1991, declared petitioners "regular project employees who shall continue
their employment as such for as long as such activity exists," but entitled to the salary of a regular
employee pursuant to the provisions in the collective bargaining agreement.
 NLRC affirmed the Labor Arbiter's holding that petitioners were project employees since they were
hired to perform work in a specific undertaking — the Five Years Expansion Program, the
completion of which had been determined at the time of their engagement and which operation was
not directly related to the business of steel manufacturing.
 Petitioners contention: They are "regular" employees of NSC because:
 their jobs are "necessary, desirable and work-related to private respondent's main
business, steel-making"; and
 they have rendered service for six (6) or more years to private respondent NSC.
 Private respondents defense: petitioners are project employees as they were employed to
undertake a specific project — NSC's Five Year Expansion Program (FAYEP I & II).
ISSUE:
Whether or not petitioners are properly characterized as "project employees" rather than "regular
employees" of NSC.
SC finds that petitioners are indeed project employees. The principal test for determining whether particular
employees are properly characterized as "project employees" as distinguished from "regular employees,"
is whether or not the "project employees" were assigned to carry out a "specific project or undertaking," the
duration and scope of which were specified at the time the employees were engaged for that project.
"Project" could refer to one or the other of at least two (2) distinguishable types of activities.
 Firstly, a project could refer to a particular job or undertaking that is within the regular or usual
business of the employer company, but which is distinct and separate, and identifiable as such,
from the other undertakings of the company. Such job or undertaking begins and ends at
determined or determinable times. The typical example of this first type of project is a particular
construction job or project of a construction company.
 Secondly, a particular job or undertaking that is not within the regular business of the corporation.
Such a job or undertaking must also be identifiably separate and distinct from the ordinary or regular
business operations of the employer. The job or undertaking also begins and ends at determined
or determinable times. The case at bar presents what appears to our mind as a typical example of
this kind of "project."
NSC undertook the ambitious Five Year Expansion Program I and II with the ultimate end in view of
expanding the volume and increasing the kinds of products that it may offer for sale to the public. NSC
opted to execute and carry out its Five Yeear Expansion Projects "in house," as it were, by administration.
During the time petitioners rendered services to NSC, their work was limited to one or another of the specific
component projects which made up the FAYEP I and II. There is nothing in the record to show that
petitioners were hired for, or in fact assigned to, other purposes, especially steel-making.
The simple fact that the employment of petitioners as project employees had gone beyond one (1) year,
does not detract from, or legally dissolve, their status as project employees. The second paragraph of Article
280 of the Labor Code providing that an employee who has served for at least one (1) year, shall be
considered a regular employee, relates to casual employees, not to project employees.
Atty. Mercader
Leyte Geothermal Power Progressive Employees Union

V. Philippine National Oil Company Energy
Development Corporation
Nachura, J.
GR No. 170351 - 30 March, 2011
FACTS:
● PNOC-EDC is a government-owned and controlled corporation engaged in exploration,
development, utilization, generation and distribution of energy resources like geothermal energy.
Petitioner is a legitimate labor organization, duly registered with the Department of Labor and
Employment (DOLE) Regional Office No. VIII, Tacloban City.
● Among respondent's geothermal projects is the Leyte Geothermal Power Project located at the
Greater Tongonan Geothermal Reservation in Leyte. The said Project is composed of the
Tongonan Geothermal Project (T1GP) and the Leyte Geothermal Production Field Project (LGPF)
which provide the power and electricity needed not only in the provinces and cities of Central and
Eastern Visayas (Region VII and VIII), but also in the island of Luzon as well. Thus, the
respondent hired and employed hundreds of employees on a contractual basis, whereby,
their employment was only good up to the completion or termination of the project and
would automatically expire upon the completion of such project.
● Majority of the employees hired by respondent in its Leyte Geothermal Power Projects had become
members of petitioner. In view of that circumstance, the petitioner demands from the respondent
for recognition of it as the collective bargaining agent of said employees and for a CBA negotiation
with it. However, the respondent did not heed such demands of the petitioner.
● Sometime in 1998 when the project was about to be completed, the respondent proceeded to serve
Notices of Termination of Employment upon the employees who are members of the petitioner.
● On December 28, 1998, the petitioner filed a Notice of Strike with DOLE against the respondent on
the ground of purported commission by the latter of unfair labor practice for "refusal to bargain
collectively, union busting and mass termination." On the same day, the petitioner declared a strike
and staged such strike.
● To avert any work stoppage, then Secretary of Labor Bienvenido E. Laguesma intervened and
issued the Order, dated January 4, 1999, certifying the labor dispute to the NLRC for compulsory
arbitration. All the striking workers were directed to return to work within twelve (12) hours from
receipt of the Order and for the respondent to accept them back under the same terms and
conditions of employment prior to the strike. Further, the parties were directed to cease and desist
from committing any act that would exacerbate the situation.
● The petitioner remained adamant and unreasonable in its position, causing the failure of the
negotiation towards a peaceful compromise. In effect, the petitioner did not abide by the assumption
order issued by the Secretary of Labor.
● Consequently, on January 15, 1999, the respondent filed a Complaint for Strike Illegality,
Declaration of Loss of Employment and Damages at the NLRC-RAB VIII in Tacloban City and at
the same time, filed a Petition for Cancellation of Petitioner's Certificate of Registration with DOLE,
Regional Office No. VIII.
● In due course, the NLRC 4th Division rendered a decision in favor of respondent.
1. Declaring the officers and members of petitioner Union as project employees;
2. Declaring the termination of their employment by reason of the completion of the project, or a phase or
portion thereof, to which they were assigned, as valid and legal;
3. Declaring the strike staged and conducted by petitioner Union through its officers and members on
December 28, 1998 to January 6, 1999 as illegal for failure to comply with the mandatory
requirements of the law on strike;
4. Declaring all the officers and members of the board of petitioner Union who instigated and spearheaded
the illegal strike to have lost their employment;
5. Dismissing the claim of petitioner Union against PNOC-EDC for unfair labor practice for lack of merit;
6. Dismissing both parties' claims against each other for violation of the Assumption Order dated January
4, 1999 for lack of factual basis;
7. Dismissing all other claims for lack of merit.
Atty. Mercader
● Petitioner Union filed a motion for reconsideration of the NLRC decision, which was subsequently
denied.
● Petitioner Union filed a motion for reconsideration of the NLRC decision, which was subsequently
denied.
● Appeal to CA was denied too, hence this petition.
ISSUE/S:
1) W/N the members of the petitioner Union are regular employees of the respondent employer
2) W/N the lack of interval in the employment contracts of its officer member negates their status as
mere project employees
3) W/N there was strike conducted by the petitioner union
HELD: WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals is AFFIRMED.
1. NO. The distinction between a regular and a project employment is provided in Article 280,
paragraph 1, of the Labor Code:
ART. 280. Regular and Casual Employment. — The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade
of the employer, except where the employment has been fixed for a specific project
or undertaking the completion or termination of which has been determined at the
time of the engagement of the employee or where the work or service to be
performed is seasonal in nature and the employment is for the duration of the
season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph:

Provided, That, any employee who has rendered at least one year of service, whether such
service is continuous or broken, shall be considered a regular employee with respect to
the activity in which he is employed and his employment shall continue while such actually
exists.
Project employment contracts which fix the employment for a specific project or undertaking remain
valid under the law:
…By entering into such a contract, an employee is deemed to understand that his
employment is coterminous with the project. He may not expect to be employed
continuously beyond the completion of the project…
…The employer's interest is equally important as that of the employee[s'] for theirs
is the interest that propels economic activity. While it may be true that it is the employer
who drafts project employment contracts with its business interest as overriding
consideration, such contracts do not, of necessity, prejudice the employee. Neither is the
employee left helpless by a prejudicial employment contract. After all, under the law, the
interest of the worker is paramount.
In the case at bar, the records reveal that the officers and the members of petitioner Union signed
employment contracts indicating the specific project or phase of work for which they were hired, with a fixed
period of employment.
For, as is evident from the provisions of Article 280 of the Labor Code, quoted earlier, the principal
test for determining whether particular employees are properly characterized as "project employees" as
distinguished from "regular employees," is whether or not the "project employees" were assigned to carry
out a "specific project or undertaking," the duration (and scope) of which were specified at the time the
employees were engaged for that project.
Atty. Mercader
In the realm of business and industry, we note that "project" could refer to one or the other of at
least two (2) distinguishable types of activities. Firstly, a project could refer to a particular job or undertaking
that is within the regular or usual business of the employer company, but which is distinct and separate,
and identifiable as such, from the other undertakings of the company. Such job or undertaking begins and
ends at determined or determinable times. Employees who are hired for the carrying out of one of these
separate projects, the scope and duration of which has been determined and made known to the employees
at the time of employment, are properly treated as "project employees," and their services may be lawfully
terminated at completion of the project.
The term "project"' could also refer to, secondly, a particular job or undertaking that is not within
the regular business of the corporation. Such a job or undertaking must also be identifiably separate and
distinct from the ordinary or regular business operations of the employer. The job or undertaking also begins
and ends at determined or determinable times.
2. NO. Petitioner Union's members' employment for more than a year does equate to their regular
employment with respondent. In Mercado v. NLRC:
The second paragraph of Art. 280 demarcates as "casual" employees, all other
employees who do not fall under the definition of the preceding paragraph. The proviso, in
said second paragraph, deems as regular employees those "casual" employees who have
rendered at least one year of service regardless of the fact that such service may be
continuous or broken.
Petitioners, in effect, contend that the proviso in the second paragraph of Art. 280
is applicable to their case and that the Labor Arbiter should have considered them regular
by virtue of said proviso. The contention is without merit.
The general rule is that the office of a proviso is to qualify or modify only the phrase
immediately preceding it or restrain or limit the generality of the clause that it immediately
follows. Thus, it has been held that a proviso is to be construed with reference to the
immediately preceding part of the provision to which it is attached, and not to the statute
itself or to other sections thereof. The only exception to this rule is where the clear
legislative intent is to restrain or qualify not only the phrase immediately preceding it (the
proviso) but also earlier provisions of the statute or even the statute itself as a whole.
Policy Instruction No. 12 of the Department of Labor and Employment discloses

that the concept of regular and casual employees was designed to put an end to casual
employment in regular jobs, which has been abused by many employers to prevent so —
called casuals from enjoying the benefits of regular employees or to prevent casuals from
joining unions. The same instructions show that the proviso in the second paragraph of Art.
280 was not designed to stifle small-scale businesses nor to oppress agricultural land
owners to further the interests of laborers, whether agricultural or industrial. What it seeks
to eliminate are abuses of employers against their employees and not, as petitioners would
have us believe, to prevent small-scale businesses from engaging in legitimate methods
to realize profit. Hence, the proviso is applicable only to the employees who are deemed
"casuals" but not to the "project" employees nor the regular employees treated in paragraph
one of Art. 280.
Clearly, therefore, petitioners being project employees, or, to use the correct term,
seasonal employees, their employment legally ends upon completion of the project or the
[end of the] season. The termination of their employment cannot and should not constitute
an illegal dismissal.
3. YES. Art. 263. Strikes, picketing, and lockouts. —
(c) In cases of bargaining deadlocks, the duly certified or recognized bargaining agent may
file a notice of strike or the employer may file a notice of lockout with the Department at least 30
Atty. Mercader
days before the intended date thereof. In cases of unfair labor practice, the period of notice shall
be 15 days and in the absence of a duly certified bargaining agent, the notice of strike may be filed
by any legitimate labor organization in behalf of its members. However, in case of dismissal from
employment of union officers duly elected in accordance with the union constitution and by-laws,
which may constitute union busting, where the existence of the union is threatened, the 15-day
cooling-off period shall not apply and the union may take action immediately.
(d) The notice must be in accordance with such implementing rules and regulations as the
Department of Labor and Employment may promulgate.
(e) During the cooling-off period, it shall be the duty of the Department to exert all efforts
at mediation and conciliation to effect a voluntary settlement. Should the dispute remain unsettled
until the lapse of the requisite number of days from the mandatory filing of the notice, the labor
union may strike or the employer may declare a lockout.
(f) A decision to declare a strike must be approved by a majority of the total union
membership in the bargaining unit concerned, obtained by secret ballot in meetings or referenda
called for that purpose. A decision to declare a lockout must be approved by a majority of the board
of directors of the corporation or association or of the partners in a partnership, obtained by secret
ballot in a meeting called for that purpose. The decision shall be valid for the duration of the dispute
based on substantially the same grounds considered when the strike or lockout vote was taken.
The Department may, at its own initiative or upon the request of any affected party, supervise the
conduct of the secret balloting. In every case, the union or the employer shall furnish the
Department the results of the voting at least seven days before the intended strike or lockout,
subject to the cooling-off period herein provided.
In fine, petitioner Union's bare contention that it did not hold a strike cannot trump the factual
findings of the NLRC that petitioner Union indeed struck against respondent. In fact, and more importantly,
petitioner Union failed to comply with the requirements set by law prior to holding a strike.
Atty. Mercader
Malicdem v. Marulas Industrial Corporation

Mendoza, J.
G.R. No. 204406, 26 February 2014
A complaint for illegal dismissal, separation pay and money claims was filed by petitioners
Malicdem and Flores against respondents Marulas Industrial Corporation (Marulas) and Mike Mancilla
(Mancilla), who were engaged in the business of manufacturing sacks intended for local and export
markets, on the ground that they were regular employees and not merely contractual employees as the
respondents contend.
Article 281 of the Labor Code:

An employee who is allowed to work after a probationary period shall be considered a regular employee.
FACTS:
Malicdem and Flores were first hired by Marulas as extruder operators in 2006, as shown by their
employment contracts. They were responsible for the bagging of filament yarn, the quality of pp yarn
package and the cleanliness of the work place area. Their employment contracts were for a period of one
year. Every year thereafter, they would sign a Resignation/Quitclaim in favor of Marulas a day after their
contracts ended, and then sign another contract for one (1) year. Until one day, Flores was told not to report
for work anymore after being asked to sign a paper by Marulas' HR Head to the effect that he acknowledged
the completion of his contractual status. Malicdem was also terminated after signing a similar document.
Thus, both claimed to have been illegally dismissed. Marulas countered that their contracts showed that
they were fixed-term employees for a specific undertaking which was to work on a particular order of a
customer for a specific period. Their severance from employment was due to the expiration of their
contracts. CA considering that there was no dismissal explained that "the repeated and successive rehiring
of project employees do not qualify them as regular employees, as length of service is not the controlling
determinant of the employment tenure of a project employee, but whether the employment has been fixed
for a specific project or undertaking, its completion has been determined at the time of the engagement of
the employee." It ruled that payment of backwages, separation pay, damages, and attorney's fees had no
factual and legal bases. Respondents averred that the petitioners failed to show that the CA erred in
affirming the NLRC decision. They posit that the petitioners were contractual employees and their rehiring
did not amount to regularization.
ISSUE/S:
W/N petitioners were contractual employees and their rehiring did not amount to regularization
1) NO. The petitioners have convincingly shown that they should be considered regular
employees and, as such, entitled to full backwages and other entitlements.
A reading of the employment contracts, denominated as "Project Employment Agreement," reveals
that there was a stipulated probationary period of six (6) months from its commencement. It was provided
therein that in the event that they would be able to comply with the company’s standards and criteria within
such period, they shall be reclassified as project employees with respect to the remaining period of the
effectivity of the contract. Under Article 281 of the Labor Code, however, "an employee who is allowed to
work after a probationary period shall be considered a regular employee." When an employer renews a
contract of employment after the lapse of the six-month probationary period, the employee thereby
becomes a regular employee. No employer is allowed to determine indefinitely the fitness of its employees.
While length of time is not the controlling test for project employment, it is vital in determining if the employee
was hired for a specific undertaking or tasked to perform functions vital, necessary and indispensable to
the usual business of trade of the employer. A project or work pool employee, who has been: (1)
Atty. Mercader
continuously, as opposed to intermittently, rehired by the same employer for the same tasks or nature of
tasks; and (2) those tasks are vital, necessary and indispensable to the usual business or trade of the
employer, must be deemed a regular employee.
The test to determine whether employment is regular or not is the reasonable connection between
the particular activity performed by the employee in relation to the usual business or trade of the employer.
If the employee has been performing the job for at least one year, even if the performance is not continuous
or merely intermittent, the law deems the repeated and continuing need for its performance as sufficient
evidence of the necessity, if not indispensability of that activity to the business. The Court is of the
considered view that there was clearly a deliberate intent to prevent the regularization of the petitioners. To
begin with, there is no actual project. The only stipulations in the contracts were the dates of their effectivity,
the duties and responsibilities of the petitioners as extruder operators, the rights and obligations of the
parties, and the petitioners’ compensation and allowances. As there was no specific project or undertaking
to speak of, the respondents cannot invoke the exception in Article 280 of the Labor Code. This is a clear
attempt to frustrate the regularization of the petitioners and to circumvent the law. Next, granting that they
were project employees, the petitioners could only be considered as regular employees as the two factors
are present in this case. It is undisputed that the petitioners were continuously rehired by the same employer
for the same position as extruder operators. As such, they were responsible for the operation of machines
that produced the sacks. Hence, their work was vital, necessary and indispensable to the usual business
or trade of the employer.
The respondents cannot use the alleged expiration of the employment contracts of the petitioners
as a shield of their illegal acts. The project employment contracts that the petitioners were made to sign
every year since the start of their employment were only a stratagem to violate their security of tenure in
the company. Now that it has been clearly established that the petitioners were regular employees, their
termination is considered illegal for lack of just or authorized causes.
Atty. Mercader
Maraguinot, Jr. vs. NLRC

Davide, Jr., J:.
GR No. 120969 – 22 January 1998
FACTS:
 Viva Films is the trade name of Viva Productions, Inc. It is primarily engaged in the distribution
and exhibition of movies. Vic del Rosario is an executive producer, i.e., the financier who invests
a certain sum of money for the production of movies distributed and exhibited by Viva Films.
 Alejandro Maraguinot was employed by Viva Films through Vic del Rosario on July 18, 1989 as
part of the filming crew with a salary of P375 per week. He was promoted to the rank of
Electrician with a weekly salary of P475.00, which was increased to P593.00 in September 1991.
 Paulino Enero was employed by Viva Films in June 1990 as a member of the shooting crew with
a weekly salary of P375.00, which was increased to P425.00, then to P475.00 on 21 December
1991.
 Maraguinot, Jr. and Enero’s tasks consisted of loading, unloading and arranging movie
equipment in the shooting area as instructed by the cameraman, returning the equipment to Viva
Films warehouse, assisting in the fixing of the lighting system, and performing other tasks that the
cameraman and/or director may assign.
 In June 1992, their supervisor informed them that Mr. del Rosario would agree to increase their
salary only if they signed a blank employment contract. As the two refused to sign, del Rosario
forced Enero to go on leave, then refused to take him back when he reported for work. Meanwhile,
Maraguinot was dropped from the company payroll from 8 to 21 June 1992, but was returned on
22 June 1992. He was again asked to sign a blank employment contract, and when he still refused,
Viva Films terminated his services. Maraguinot, Jr. and Enero thus sued for illegal dismissal.
 Viva Films assert that they contract persons called producers -- also referred to as associate
producers-- to produce or make movies for them; and contend that Maraguinot, Jr. and Enero are
project employees of the associate producers who, in turn, act as independent contractors. As
such, there is no employer-employee relationship between petitioners and private respondents.
They further contend that it was the associate producer of the film Mahirap Maging Pogi, who hired
Maraguinot, and it was only then that Maraguinot was released upon payment of his last salary, as
his services were no longer needed. Anent Enero, he was hired for the movie entitled Sigaw ng
Puso, later re-titled Narito ang Puso. He went on vacation, and by the time he reported for work,
shooting for the movie had already been completed.
 Labor Arbiter: Petitioners were illegally dismissed
 NLRC: Petitioners were not illegally dismissed and were mere project employees
ISSUE/S:
4) W/N there was an employer-employee relationship between Viva Films and the petitioners
5) W/N petitioners are regular employees who were illegally dismissed.
HELD: GRANTED. The assailed decision of the National Labor Relations Commission as well as its
Resolution, are hereby ANNULLED and SET ASIDE for having been rendered with grave abuse of
discretion, and the decision of the Labor Arbiter is REINSTATED
1) Yes. The employer-employee relationship between petitioners and VIVA can further be
established by the control test. While four elements are usually considered in determining the
existence of an employment relationship, namely: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to
control the employees conduct, the most important element is the employers control of the
employees conduct, not only as to the result of the work to be done but also as to the means and
methods to accomplish the same. These four elements are present here as[T]he PRODUCER
has to work within the limits of the budget he is given by the company, for as long as the ultimate
finish[ed] product is acceptable to the company...To ensure that quality films are produced by the
PRODUCER who is an independent contractor, the company likewise employs a Supervising
Atty. Mercader
PRODUCER, a Project accountant and a Shooting unit supervisor. The Companys Supervising
PRODUCER is Mr. Eric Cuatico, the Project accountant varies from time to time, and the
Shooting Unit Supervisor is Ms. Alejandria Cesario.The Supervising PRODUCER acts as the
eyes and ears of the company and of the Executive Producer to monitor the progress of the
PRODUCERs work accomplishment. He is there usually in the field doing the rounds of
inspection to see if there is any problem that the PRODUCER is encountering and to assist in
threshing out the same so that the film project will be finished on schedule. He supervises about 3
to 7 movie projects simultaneously [at] any given time by coordinating with each film
PRODUCER. The Project Accountant on the other hand assists the PRODUCER in monitoring
the actual expenses incurred because the company wants to insure that any additional budget
requested by the PRODUCER is really justified and warranted especially when there is a change
of original plans to suit the tast[e] of the company on how a certain scene must be presented to
make the film more interesting and more commercially viable. (emphasis ours)
VIVAs control is evident in its mandate that the end result must be a quality film acceptable to the
company. The means and methods to accomplish the result are likewise controlled by VIVA, viz.,
the movie project must be finished within schedule without exceeding the budget, and additional
expenses must be justified; certain scenes are subject to change to suit the taste of the company;
and the Supervising Producer, the eyes and ears of VIVA and del Rosario, intervenes in the
movie-making process by assisting the associate producer in solving problems encountered in
making the film. It may not be validly argued then that petitioners are actually subject to the movie
directors control, and not VIVAs direction. The director merely instructs petitioners on how to
better comply with VIVAs requirements to ensure that a quality film is completed within schedule
and without exceeding the budget. At bottom, the director is akin to a supervisor who merely
oversees the activities of rank-and-file employees with control ultimately resting on the employer.
Moreover, appointment slips issued to all crew members state:

During the term of this appointment you shall comply with the duties and responsibilities
of your position as well as observe the rules and regulations promulgated by your superiors and
by Top Management.
The words superiors and Top Management can only refer to the superiors and Top Management
of VIVA. By commanding crew members to observe the rules and regulations promulgated by
VIVA, the appointment slips only emphasize VIVAs control over petitioners.
2) Yes. The evidence on record shows that petitioner Enero was employed for a total of two (2)
years and engaged in at least eighteen (18) projects, while petitioner Maraguinot was employed
for some three (3) years and worked on at least twenty-three (23) projects. Moreover, as
petitioners tasks involved, among other chores, the loading, unloading and arranging of movie
equipment in the shooting area as instructed by the cameramen, returning the equipment to the
Viva Films warehouse, and assisting in the fixing of the lighting system, it may not be gainsaid
that these tasks were vital, necessary and indispensable to the usual business or trade of the
employer. As regards the underscored phrase, it has been held that this is ascertained by
considering the nature of the work performed and its relation to the scheme of the particular
business or trade in its entirety.
Atty. Mercader
Liganza v. RBL Shipyard Corporation

Tinga, J.
G.R. No. 159862, October 17, 2006
This is a petition for certiorari to review the Decision of the Court of Appeals in CA-G.R. SP No.
71459 affirming the ruling of the National Labor Relations Commission (NLRC) that petitioner is a project
employee..
FACTS:
After working as a carpenter for respondent since August 1991, petitioners employment was terminated on
30 October 1999. This prompted petitioner to file a complaint for illegal dismissal, alleging that on said date
he was verbally informed that he was already terminated from employment and barred from entering the
premises. On the same occasion, he was told to look for another job. Thus, he claimed that he was
unceremoniously terminated from employment without any valid or authorized cause. On the other hand,
respondent insisted that petitioner was a mere project employee who was terminated upon completion of
the project for which he was hired.
Petitioner claims he is a regular employee since he worked for respondent continuously and without
interruption from 13 August 1991 up to 30 October 1999 and that his work as a carpenter was necessary
and desirable to the latters usual business of shipbuilding and repair. He asserts that when he was hired
by respondent in 1991, there was no employment contract fixing a definite period or duration of his
engagement, and save for the contract covering the period 20 September 1999 to 19 March 2000,
respondent had been unable to show the other project employment contracts ever since petitioner started
working for the company. Furthermore, respondent failed to file as many termination reports as there are
completed projects involving petitioner, he adds. On the other hand, respondent insists that petitioner is a
project employee as evidenced by the project employment contracts it signed with him and employee
termination reports it submitted to the DOLE.
The Labor Arbiter: Petitioner is a regular employee since respondent failed to present the alleged project
employment contracts. Petitioner’s dismissal was not done in accordance with the due process requirement
of twin notices hence dismissal is illegal.
On appeal to the NLRC: respondent presented the other project employment contracts with petitioner and
the termination reports submitted to the Department of Labor and Employment (DOLE). Set aside the Labor
Arbiters Decision. Petitioners service of eight (8) years is not the controlling factor in determining the nature
of his employment, it appearing that the employment contracts he entered into were renewed every six (6)
months and that from the contracts he knew beforehand when his engagement was supposed to end.
CA: Petitioner via a petition for review on certiorari, posits that the NLRC committed grave abuse of
discretion. It was dismissed. While it is true that petitioner has worked for more than a year for respondent
and that his work as a carpenter is necessary and desirable to respondents usual trade or business, still he
cannot be considered a regular employee. It noted that (i) petitioners appointment papers provided for the
specific project to be undertaken and the duration of such project; (ii) that he was issued an accountability
clearance; and (iii) that respondent submitted the requisite employment termination reports.
ISSUE/S:
1. Whether or not petitioner is a project employee
2. Whether or not his termination was illegal.
HELD: The petition must be granted.
1. Whether or not petitioner is a project employee. NO.

A project employee is one whose "employment has been fixed for a specific project or undertaking, the
completion or termination of which has been determined at the time of the engagement of the employee or
Atty. Mercader
where the work or service to be performed is seasonal in nature and the employment is for the duration of
the season." Before an employee hired on a per project basis can be dismissed, a report must be made to
the nearest employment office of the termination of the services of the workers every time it completed a
project, pursuant to Policy Instruction No. 20.
While the appropriate evidence to show that a person is a project employee is the employment contract
specifying the project and the duration of such project, the existence of such contract is not always
conclusive of the nature of ones employment. In the instant case, respondent seeks to prove the status of
petitioners employment through four (4) employment contracts covering a period of only two (2) years to
declare petitioner as a project employee.
All that respondent submitted were four (4) contracts covering the periods 29 July 1997 to 28 January
1998, 24 August 1998 to 25 February 1999, 3 March 1999 to 2 September 1999, and 20 September 1999
to 19 March 2000, as well as the employment termination reports for January 1998, August 1998, February
1999 and October 1999. Respondent failed to present the contracts purportedly covering petitioners
employment from 1991 to July 1997, spanning six (6) years of the total eight (8) years of his employment.
To explain its failure in this regard, respondent claims that the records and contracts covering said period
were destroyed by rains and flashfloods that hit the companys office. The four employment contracts are
not sufficient to reach the conclusion that petitioner was, and has been, a project employee earlier since
1991. The Court is not satisfied with the explanation that the other employment contracts were destroyed
by floods and rains. Respondent could have used other evidence to prove project employment, but it did
not do so, seemingly content with the convenient excuse of destroyed documents.
As respondent has affirmed, it executes three (3)-month or six (6)- month contracts with its so-called
project employees. Except for respondents claim that petitioner and its other project employees are free to
seek work after the termination of their contracts, no other proof was shown to this effect. In fact, from the
very scant record of petitioners employment, it may be inferred that the contracts entered into by petitioner
could not have been spaced so far apart as to allow petitioner seek lucrative employment elsewhere.
 Contrary to the Court of Appeals observation, the situation obtaining in this case is not at all in pari
materia with that of Sandoval Shipyards, Inc. v. NLRC. In the cited case, a company engaged in
the building and repair of vessels hired welders, helpers and construction workers to work in the
repair or construction of a specified vessel. Upon completion of only one particular project, several
workers were terminated from work, and the termination was reported to the then Ministry of Labor
and Employment. Petitioner, as carpenter, was tasked to make and repair cabinet, flooring,
quarters, ceiling, windows, doors, kitchen and other parts of the vessel that needs to be repaired.
As such, petitioners work was necessary or desirable to respondents business. However, unlike in
Sandoval where the complaining employees were hired for only one project lasting for three (3)
months at most, petitioner in this case was employed by respondent continuously from 1991 to
1999. Assuming, without granting that petitioner was initially hired for specific projects or
undertakings, the repeated re-hiring and continuing need for his services for over eight (8) years
have undeniably made him a regular employee.
 Respondent capitalizes on our ruling in D.M. Consunji, Inc. v. NLRC which reiterates the rule that
the length of service of a project employee is not the controlling test of employment tenure but
whether or not the employment has been fixed for a specific project or undertaking the completion
or termination of which has been determined at the time of the engagement of the employee.
Surely, length of time is not the controlling test for project employment. Nevertheless, it is vital in
determining if the employee was hired for a specific undertaking or tasked to perform functions
vital, necessary and indispensable to the usual business or trade of the employer. Here, respondent
had been a project employee several times over. His employment ceased to be coterminous with
specific projects when he was repeatedly re-hired due to the demands of petitioners business.
Where from the circumstances it is apparent that periods have been imposed to preclude the
acquisition of tenurial security by the employee, they should be struck down as contrary to public
policy, morals, good customs or public order.
All considered, there are serious doubts in the evidence on record that petitioner is a project employee, or
that he was terminated for just cause. These doubts shall be resolved in favor of petitioner, in line with the
policy of the law to afford protection to labor and construe doubts in favor of labor.
 Employment ceases to be co-terminous with specific projects when the employee is continuously
rehired due to the demands of employers business and re-engaged for many more projects without
Atty. Mercader
interruption. In Maraguinot, Jr. v. NLRC, the Court ruled that once a project or work pool employee
has been: (1) continuously, as opposed to intermittently, rehired by the same employer for the same
tasks or nature of tasks; and (2) these tasks are vital, necessary and indispensable to the usual
business or trade of the employer, then the employee must be deemed a regular employee,
pursuant to Article 280 of the Labor Code and jurisprudence.
The import of this decision is not to impose a positive and sweeping obligation upon the employer to re-hire
project employees. What this decision merely accomplishes is a judicial recognition of the employment
status of a project or work pool employee in accordance with what is fait accompli, i.e., the continuous re-
hiring by the employer of project or work pool employees who perform tasks necessary or desirable to the
employers usual business or trade. x x x [
2. Whether or not his termination was illegal. YES
Even assuming that petitioner is a project employee, respondent failed to prove that his termination
was for a just and valid cause. While it is true that the employment contract states that the contract ends
upon a specific date, or upon completion of the project, respondent failed to prove that the last project was
indeed completed so as to justify petitioners termination from employment. In termination cases, the burden
of proof rests on the employer to show that the dismissal is for a just cause. Thus, employers who hire
project employees are mandated to state and, once its veracity is challenged, to prove the actual basis for
the latters dismissal. Respondent could have easily proved that the project or phase for which petitioner
was hired has already been completed. A certificate from the owner of the vessel serviced by the company,
pictures perhaps, of the work accomplished, and other proof of completion could have been procured by
respondent. However, all that we have is respondents self-serving assertion that the project has been
completed.
Atty. Mercader
Hanjin Heavy Industries v. Ibanez

Chico-Nazario, J.
G.R. No. 170181, 26 June 2008.
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the
Decision,1 dated 28 July 2005, rendered by the Court of Appeals, reversing the Decision,2 promulgated by
the National Labor Relations Commission (NLRC) on 7 May 2004. The Court of Appeals, in its assailed
Decision, declared that respondents are regular employees who were illegally dismissed by petitioner
Hanjin Heavy Industries and & Construction Company, Limited (HANJIN)
FACTS:
Petitioner HANJIN is a foreign company duly registered with the Securities and Exchange Commission
to engage in the construction business in the Philippines. Petitioners Hak Kon Kim and Jhunie Adajar were
employed as Project Director and Supervisor, respectively, by HANJIN.
On 11 April 2002, respondents Felicito Ibañez, Aligwas Carolino, Elmer Gacula, Enrique Dagotdot,
Ruel Calda, and four other co-workers filed a complaint before the NLRCfor illegal dismissal with prayer for
reinstatement and full backwages against petitioners. In their Position Paper dated, respondents alleged
that HANJIN hired them for various positions on different dates, hereunder specified:
 Felicito Ibañez: Tireman, 7 March 2000
 Elmer Gacula: Crane Operator, 1992
 Enrique Dagotdot: Welder, 1995
 Aligwas Carolino: Welder, September 1994
 Ruel Calda: Warehouseman, 26 January 1996
Respondents:
 stated that their tasks were usual and necessary or desirable in the usual business or trade of
HANJIN. Respondents additionally averred that they were employed as members of a work pool
from which HANJIN draws the workers to be dispatched to its various construction projects; with
the exception of Ruel Calda, who as a warehouseman was required to work in HANJIN's main
office. Among the various construction projects to which they were supposedly assigned,
respondents named the North Harbor project in 1992-1994; Manila International Port in 1994-1996;
Batangas Port in 1996-1998; the Batangas Pier, and La Mesa Dam.
 On 15 April 2002, Hanjin dismissed respondents from employment. Respondents claimed that at
the time of their dismissal, HANJIN had several construction projects that were still in progress,
such as Metro Rail Transit (MRT) II and MRT III, and continued to hire employees to fill the positions
vacated by the respondents.
Petitioners:
 denied the respondents' allegations. They maintained that respondents were hired as project
employees for the construction of the LRT/MRT Line 2 Package 2 and 3 Project. HANJIN and
respondents purportedly executed contracts of employment, in which it was clearly stipulated that
the respondents were to be hired as project employees for a period of only three months, but that
the contracts may be renewed. However, petitioners failed to furnish the Labor Arbiter a copy of
said contracts of employment.
 asserted that respondents were duly informed of HANJIN's policies, rules and regulations, as well
as the terms of their contracts. Copies of the employees' rules and regulations were posted on the
bulletin boards of all HANJIN campsite offices.
 further emphasized that prior to 15 April 2002, Hak Kon Kim, HANJIN's Project Director, notified
respondents of the company's intention to reduce its manpower due to the completion of the
LRT/MRT Line 2 Package 2 and 3 Project. Respondents were among the project employees who
were thereafter laid off, as shown in the Establishment Termination Report filed by HANJIN before
Atty. Mercader
the Department of Labor and Employment (DOLE) Regional Office (IV) in Cainta, Rizal. Finally,
petitioners insist that in accordance with the usual practice of the construction industry, a
completion bonus was paid to the respondents.
 Petitioners attached copies of the Quitclaims, executed by the respondents, which uniformly stated
that the latter received all wages and benefits that were due them and released HANJIN and its
representatives from any claims in connection with their employment.
LA: found merit in the respondents' complaint and declared that they were regular employees who
had been dismissed without just and valid causes and without due process.
NLRC: reversed the Labor Arbiter's Decision and pronounced that the respondents were project
employees who were legally terminated from employment. Overruled the Labor Arbiter's award of moral
and exemplary damages.
CA: reversed the NLRC Decision. CA ruled that respondents were regular employees and upheld
the Labor Arbiter's finding that they were illegally dismissed. However, adopted the NLRC's deletion of the
award of damages.
ISSUE/S:
1. Whether or not petitioners are regular employees

2. Whether or not petitioners are illegally dismissed
HELD: The Petition is without merit.
1. Whether or not petitioners are regular employees. YES
Due to petitioners' failure to adduce any evidence showing that petitioners were project employees who
had been informed of the duration and scope of their employment, they were unable to discharge the burden
of proof required to establish that respondents' dismissal was legal and valid. Furthermore, it is a well-
settled doctrine that if doubts exist between the evidence presented by the employer and that by the
employee, the scales of justice must be tilted in favor of the latter. For these reasons, respondents are to
be considered regular employees of HANJIN.
From Article 280 of the Labor Code, the principal test for determining whether particular employees are
properly characterized as "project employees" as distinguished from "regular employees" is whether or not
the project employees were assigned to carry out a "specific project or undertaking," the duration and scope
of which were specified at the time the employees were engaged for that project.
The length of service or the re-hiring of construction workers on a project-to-project basis does not
confer upon them regular employment status, since their re-hiring is only a natural consequence of the fact
that experienced construction workers are preferred. Employees who are hired for carrying out a separate
job, distinct from the other undertakings of the company, the scope and duration of which has been
determined and made known to the employees at the time of the employment, are properly treated as
project employees and their services may be lawfully terminated upon the completion of a project. Should
the terms of their employment fail to comply with this standard, they cannot be considered project
employees.
 Abesco Construction and Development Corporation v. Ramirez: Court considered it crucial

that the employees were informed of their status as project employees. Such duration, as well as
the particular work/service to be performed, is defined in an employment agreement and is made
clear to the employees at the time of hiring.
Atty. Mercader
In this case, petitioners did not have that kind of agreement with respondents. Neither did they inform
respondents of the nature of the latters' work at the time of hiring. Hence, for failure of petitioners to
substantiate their claim that respondents were project employees, we are constrained to declare them as
regular employees.
 In Caramol v. National Labor Relations Commission and Salinas, Jr. v. National Labor
Relations Commission, the Court markedly stressed the importance of the employees' knowing
consent to being engaged as project employees when it clarified that "there is no question that
stipulation on employment contract providing for a fixed period of employment such as `project-to-
project' contract is valid provided the period was agreed upon knowingly and voluntarily by the
parties, without any force, duress or improper pressure being brought to bear upon the employee
and absent any other circumstances vitiating his consent x x x."
Petitioners' failure to produce respondents' contracts of employment was already noted. Respondents
denied having executed such contracts with HANJIN. While the absence of a written contract does not
automatically confer regular status, it has been construed by this Court as a red flag in cases involving the
question of whether the workers concerned are regular or project employees.
Even though the absence of a written contract does not by itself grant regular status to respondents,
such a contract is evidence that respondents were informed of the duration and scope of their work and
their status as project employees. In this case, where no other evidence was offered, the absence of an
employment contract puts into serious question whether the employees were properly informed at the onset
of their employment status as project employees.
Absent any other proof that the project employees were informed of their status as such, it will be
presumed that they are regular employees in accordance with Clause 3.3(a) of Department Order No. 19,
Series of 1993, which states that:
a) Project employees whose aggregate period of continuous employment in a construction company is
at least one year shall be considered regular employees, in the absence of a "day certain" agreed upon by
the parties for the termination of their relationship. Project employees who have become regular shall be
entitled to separation pay.
A "day" as used herein, is understood to be that which must necessarily come, although it may not be
known exactly when. This means that where the final completion of a project or phase thereof is in fact
determinable and the expected completion is made known to the employee, such project employee may
not be considered regular, notwithstanding the one-year duration of employment in the project or phase
thereof or the one-year duration of two or more employments in the same project or phase of the project.
Petitioners call attention to the fact that they complied with two of the indicators of project employment,
as prescribed under Section 2.2(e) and (f) of Department Order No. 19, Series of 1993, entitled Guidelines
Governing the Employment of Workers in the Construction Industry, issued by the DOLE:
2.2 Indicators of project employment. - Either one or more of the following circumstances, among
others, may be considered as indicators that an employee is a project employee.
(e) The termination of his employment in the particular project/undertaking is reported to the
Department of Labor and Employment (DOLE) Regional Office having jurisdiction over the workplace
within 30 days following the date of his separation from work, using the prescribed form on employees'
terminations/dismissals/suspensions.
(f) An undertaking in the employment contract by the employer to pay completion bonus to the project
employee as practiced by most construction companies. (Emphasis provided.)
Petitioners insist that the payment to the respondents of a completion bonus indicates that respondents
were project employees. Petitioners failed to present evidence showing that they undertook to pay
respondents such a bonus upon the completion of the project, as provided under Section 2.2(f) of
Department Order No. 19, Series of 1993. Petitioners did not even allege how the "completion bonus" was
to be computed or the conditions that must be fulfilled before it was to be given.
A completion bonus, if paid as a mere afterthought, cannot be used to determine whether or not the
employment was regular or merely for a project. Otherwise, an employer may defeat the workers' security
of tenure by paying them a completion bonus at any time it is inclined to unjustly dismiss them.
Department Order No. 19, Series of 1993, provides that in the absence of an undertaking that the
completion bonus will be paid to the employee, as in this case, the employee may be considered a non-
project employee, to wit:
Atty. Mercader
3.4 Completion of the project. Project employees who are separated from work as a result of the
completion of the project or any phase thereof in which they are employed are entitled to the pro-rata
completion bonus if there is an undertaking by for the grant of such bonus. An undertaking by the
employer to pay a completion bonus shall be an indicator that an employee is a project employee.
Where there is no such undertaking, the employee may be considered a non-project employee. The
pro-rata completion bonus may be based on the industry practice which is at least the employee's one-
half (1/2) month salary for every 12 months of service and may be put into effect for any project bid (in
case of bid projects) or tender submitted (in case of negotiated projects) thirty (30) days from the date
of issuances of these Guidelines.
Furthermore, after examining the payroll documents submitted by petitioners, this Court finds that the
payments termed as "completion bonus" are not the completion bonus paid in connection with the
termination of the project. First of all, the period from 4 April 2002 to 20 April 2002, as stated in the payrolls,
bears no relevance to a completion bonus. A completion bonus is paid in connection with the completion
of the project, and is not based on a fifteen-day period. Secondly, the amount paid to each employee as
his completion bonus was uniformly equivalent to his fifteen-day wages, without consideration of the
number of years of service rendered. Section 3.4 of Department Order No. 19, Series of 1993, provides
that based on industry practice, the completion bonus is at least the employee's one-half month salary for
every twelve months of service.
Finally, the Quitclaims which the respondents signed cannot bar them from demanding what is legally
due them as regular employees. As a rule, quitclaims and waivers or releases are looked upon with disfavor
and frowned upon as contrary to public policy. They are thus ineffective to bar claims for the full measure
of a worker's legal rights, particularly when the following conditions are applicable: 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.
To determine whether the Quitclaims signed by respondents are valid, one important factor that must
be taken into account is the consideration accepted by respondents; the amount must constitute a
reasonable settlement equivalent to the full measure of their legal rights. In this case, the Quitclaims signed
by the respondents do not appear to have been made for valuable consideration.
Respondents, who are regular employees, are entitled to backwages and separation pay and,
therefore, the Quitclaims which they signed cannot prevent them from seeking claims to which they are
entitled
2. Whether or not petitioners are illegally dismissed. YES
Records failed to show that HANJIN afforded respondents, as regular employees, due process prior to
their dismissal, through the twin requirements of notice and hearing. Respondents were not served notices
informing them of the particular acts for which their dismissal was sought. Nor were they required to give
their side regarding the charges made against them. Certainly, the respondents' dismissal was not carried
out in accordance with law and was, therefore, illegal.
Atty. Mercader
PNOC-Energy Development Corporation v. NLRC

Callejo Sr., J.
G.R. No. 169353 13 April 2007
FACTS:
Petitioner PNOC-Energy Development Corporation is a government-owned and controlled corporation
engaged in the exploration, development, and utilization of energy. It undertakes several projects in areas
where geothermal energy has been discovered. Aside from its projects in Negros Oriental, petitioner also
had geothermal projects in Negros Occidental, Leyte, Albay, Sorsogon, and North Cotabato.
Petitioners Southern Negros Geothermal Production Field in Negros Oriental is divided into two phases:
Palinpinon I (PAL I) and Palinpinon II (PAL II). To augment its manpower requirement occasioned by the
increased activities in the development of PAL II, petitioner hired the following employees in the
Administration and Maintenance Section: Leonora Torres, Rosela Calimpong, Arnel Amor, Wilson Nuay,
Roberto Renzal and Alejandro Tabaera. The termination/expiration of their respective employment were
specified in their initial employment contracts, which, however, were renewed and extended on their
respective expiry dates.
Later on, petitioner submitted reports to the Department of Labor and Employment (DOLE) Regional Sub-
Branch No. VII in Dumaguete City, stating that six of its employees were being terminated. They thereafter
furnished the employees uniformly worded notices of termination, stating that they were being terminated
from employment effective June 30, 1998 due to the substantial completion of the civil works phase of PAL
II.
The six employees filed before the National Labor Relations Commission (NLRC) a complaint for illegal
dismissal against petitioner. They averred that they had rendered continuous and satisfactory services from
the dates of their respective employment until illegally dismissed on June 30, 1998. They added their
dismissal from employment was a clear case of union busting for they had previously sought union
membership and actually filed a notice of strike.
Petitioner contended that respondents were contractual employees; as such, they cannot claim to have
been illegally dismissed because upon the expiration of the term of the contract or the completion of the
project, their employer-employee relationship also ended.
Labor Arbiter: Dismissed the complaint for lack of legal and factual basis. It ruled that respondents were
not dismissed from work; the employer-employee relationship between the parties was severed upon the
expiration of the respective contracts of respondents and the completion of the projects concerned.
Respondents appealed to the NLRC, which reversed the ruling of the Labor Arbiter.
NLRC: It ruled that respondents were regular non-project employees for having worked for more than one
year in positions that required them to perform activities necessary and desirable in the normal business or
trade of petitioner. Further, the employment contracts of respondents were not for a specific project or for
a fixed period. The dismissals made on June 30, 1998 under the pretext of project completion were illegal,
being founded on an invalid, unjust, and unauthorized cause.
CA: affirmed NLRC’s decision. Petitioner then appealed to SC via petition for review on certiorari.
ISSUE/S:
1) W/N respondents were project employees or regular employees
2) W/N they were illegally dismissed from employment
1) Petitioners were regular employees.

Atty. Mercader
The applicable formula to ascertain whether an employment should be considered regular or non-regular
is the reasonable connection between the particular activity performed by the employee in relation to the
usual business or trade of the employer.
As defined, project employees are those workers hired (1) for a specific project or undertaking, and (2) the
completion or termination of such project or undertaking has been determined at the time of the
engagement of the employee.
The alleged projects stated in the employment contracts were either too vague or imprecise to be
considered as the specific undertaking contemplated by law. Petitioners act of repeatedly and continuously
hiring respondents to do the same kind of work belies its contention that respondents were hired for a
specific project or undertaking. The absence of a definite duration for the project/s has led the Court to
conclude that respondents are, in fact, regular employees.
In Filipinas Pre-Fabricated Building Systems (Filsystems), Inc. v. Puente, the Court ruled that the length of
service of a project employee is not the controlling test of employment tenure but whether or not the
employment has been fixed for a specific project or undertaking the completion or termination of which has
been determined at the time of the engagement of the employee.
Respondents had been project employees several times over. Their employment ceased to be coterminous
with specific projects when they were repeatedly re-hired by petitioner. Where the employment of project
employees is extended long after the supposed project has been finished, the employees are removed from
the scope of project employees and are considered regular employees.
2) Yes. Petitioners were illegally dismissed from employment.

As regular workers, respondents are entitled to security of tenure under Article 279 of the Labor Code and
can only be dismissed for a just or authorized cause. Article 279 of the Labor Code. The notices of
termination indicated that respondents services were terminated due to the completion of the project.
However, this allegation is contrary to the statement of petitioner in some of its pleadings that the project
was merely substantially completed.
Since respondents were illegally dismissed from work, they are entitled to reinstatement without loss of
seniority rights, full backwages, inclusive of allowances and other benefits or their monetary equivalent
computed from the time their compensation was withheld from them up to the time of their actual
reinstatement, pursuant to Article 279 of the Labor Code.
Atty. Mercader
Filsystems v. Puente
Panganiban, J.
GR No. 153832 – 18 March 2005
FACTS:
Respondent avers that he started working with Filsystems, Inc., a corporation engaged in construction
business, on June 12, 1989. he was initially hired by petitioner as an ‘installer’. He was later promoted to
mobile crane operator and was stationed at the company premises at No. 69 Industria Road,
Bagumbayan, Quezon City. He also argues that his work was not dependent on the completion or
termination of any project; that since his work was not dependent on any project, his employment with the
petitioner company was continuous and without interruption for the past ten (10) years;
On October 1, 1999, he was dismissed from his employment allegedly because he was a project
employee. He filed a complaint for illegal dismissal against the petitioner company on November 18,
1999.
The petitioner company however claims that complainant was hired as a project employee in the
company’s various projects; that his employment contracts showed that he was a project worker with
specific project assignments; that after completion of each project assignment, his employment was
likewise terminated and the same was correspondingly reported to the DOLE.
Labor Arbiter Veneranda C. Guerrero dismissed the complaint for lack of merit. When Respondent
appealed, the NLRC dismissed the same and the subsequent motion for reconsideration. Upon appeal to
CA, The Court of Appeals reversed the NLRC and the labor arbiter stating that the employment contracts
signed by Puente do not have the specified duration for each project contrary to the provision of Article
280 of the Labor Code, nor did petitioner work in the project sites, but had always been assigned at the
company plant attending to the maintenance of all mobile cranes of the company, performing tasks vital
and desirable in the employer’s usual business for ten (10) continuous years.
The CA concluded that respondent was a regular employee of petitioners.
ISSUE/S:
1. W/N Puente is a regular employee
2. W/N he is entitled to reinstatement with full back wages
HELD: PETITION PARTLY MERITORIOUS.
 No. Puente is a project employee.

A project employee is one whose "employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the engagement of the employee
or where the work or services to be performed is seasonal in nature and the employment is for the
duration of the season." In D.M. Consunji, Inc. v. NLRC, this Court has ruled that "the length of service of
a project employee is not the controlling test of employment tenure but whether or not ‘the employment
has been fixed for a specific project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee.’"In the present case, the contracts of
employment of Puente attest to the fact that he was hired for specific projects. His employment was
coterminous with the completion of the projects for which he had been hired. Those contracts expressly
provided that his tenure of employment depended on the duration of any phase of the project or on the
completion of the construction projects. Furthermore, petitioners regularly submitted to the labor
department reports of the termination of services of project workers. Such compliance with the reportorial
requirement confirms that respondent was a project employee.
With regard specifically to the last employment contract executed by the parties, the supreme court found
that he worked at the site of the World Finance Plaza project. That he did is amply proven by the Affidavit
of Eduardo Briagas, another employee who was also stationed at the World Finance Plaza project.
Atty. Mercader
Furthermore, respondent’s Complaint specified the address of Filsystems, as "69 INDUSTRIA ROAD,
B.BAYAN Q.C.," but specified his place of work as "PROJECT TO PROJECT." These statements,
coupled with the other pieces of evidence presented by petitioners, convinces the Court that -- contrary to
the subsequent claims of respondent -- he performed his work at the project site, not at the company’s
premises.
His employment contract does not mention particular dates that establish the specific duration of the
project does not preclude his classification as a project employee. This fact is clear from the provisions of
Clause 3.3(a) of Department Order No. 19, which states:
a) Project employees whose aggregate period of continuous employment in a construction company is at

least one year shall be considered regular employees, in the absence of a "day certain" agreed upon by
the parties for the termination of their relationship. Project employees who have become regular shall be
entitled to separation pay.
A "day" as used herein, is understood to be that which must necessarily come, although is may not be
known exactly when. This means that where the final completion of a project or phase thereof is in fact
determinable and the expected completion is made known to the employee, such project employee may
not be considered regular, notwithstanding the one-year duration of employment in the project or phase
thereof or the one-year duration of two or more employments in the same project or phase of the object.
Evidently, although the employment contract did not state a particular date, it did specify that the
termination of the parties’ employment relationship was to be on a "day certain" -- the day when the
phase of work termed "Lifting & Hauling of Materials" for the "World Finance Plaza" project would be
completed. Thus, respondent cannot be considered to have been a regular employee. He was a project
employee.
That he was employed with Petitioner Filsystems for ten years in various projects did not ipso facto make
him a regular employee, considering that the definition of regular employment in Article 280 of the Labor
Code makes a specific exception with respect to project employment. The mere rehiring of respondent on
a project-to-project basis did not confer upon him regular employment status.19 "The practice was
dictated by the practical consideration that experienced construction workers are more preferred."20 It did
not change his status as a project employee.
 Yes. He is entitled to reinstatement with full backwages
In termination cases, the burden of proving that an employee has been lawfully dismissed lies with the
employer. Thus, employers who hire project employees are mandated to state and, once its veracity is
challenged, to prove the actual basis for the latter’s dismissal.
In the present case, petitioners claim that respondent’s services were terminated due to the completion of
the project.There is no allegation or proof, however, that the World Finance Plaza project -- or the phase
of work therein to which respondent had been assigned -- was already completed by October 1, 1999, the
date when he was dismissed. The inescapable presumption is that his services were terminated for no
valid cause prior to the expiration of the period of his employment; hence, the termination was illegal.
Reinstatement with full back wages, inclusive of allowances and other benefits or their monetary
equivalents -- computed from the date of his dismissal until his reinstatement -- is thus in order.
However, if indeed the World Finance Plaza project has already been completed during the pendency of
this suit, then respondent -- being a project employee -- can no longer be reinstated.Instead, he shall
entitled to the payment of his salary and other benefits corresponding to the unexpired portion of his
employment, specifically from the time of the termination of his employment on October 1, 1999, until the
date of the completion of the World Finance Plaza project.
Atty. Mercader
E. GANZON, INC. (EGI) and EULALIO GANZON vs. FORTUNATO B. ANDO, JR.
G.R. No. 214183 – February 20, 2017
Peralta, J.
FACTS:
 On May 16, 2011, respondent Fortunato B. Ando, Jr. (Ando) filed a complaint against petitioner E.
Ganzon, Inc. (EGI) and its President, Eulalio Ganzon, for illegal dismissal and money claims for:
underpayment of salary, overtime pay, and 13th month pay; non-payment of holiday pay and
service incentive leave; illegal deduction; and attorney’s fees.
 He alleged that he was a regular employee working as a finishing carpenter in the construction
business of EGI; he was repeatedly hired from January 21, 2010 until April 30, 2011 when he was
terminated without prior notice and hearing; his daily salary of ₱292.00 was below the amount
required by law; and wage deductions were made without his consent, such as rent for the
barracks located in the job site and payment for insurance premium.
 The Labor Arbiter declared Ando a project employee of EGI but granted some of his money
claims.
 Both parties elevated the case to the NLRC, which dismissed the appeals filed and affirmed in
toto the Decision of the Labor Arbiter. Ando filed a motion for reconsideration, but it was denied.
Still aggrieved, he filed a Rule 65 petition before the CA, which granted the same. CA’s decision:
WHEREFORE, finding the petition to be impressed with merit, the same is hereby GRANTED.
The assailed NLRC resolutions dated May 25, 2012 and July 17, 2012, are hereby ANNULLED
insofar as the matter of illegal dismissal is concerned and a new judgment is hereby ENTERED
declaring petitioner Fortunato Ando, Jr. illegally dismissed from work. Private respondent E.
Ganzon, Inc. (EGI) is hereby ORDERED to pay petitioner Ando, Jr. his full backwages inclusive
of his allowances and other benefits computed from April 30, 2011 (the date of his dismissal) until
finality of this decision. EGI is further ordered to pay petitioner Ando, Jr. separation pay
equivalent to one month salary.
ISSUE/S:
1. W/N the petitioner is a project employee or a regular employee of the respondent company.
HELD: GRANTED. DECISION OF THE LABOR ARBITER is REINSTATED, NLRC AND C.A. SET
ASIDE.
 In this case, the three project employment contracts signed by Ando explicitly stipulated the
agreement "to engage [his] services as a Project Worker"30 and that:
“[His] services with the Project will end upon completion of the phase of work for which [he was] hired for
and is tentatively set on (written date). However, this could be extended or shortened depending
on the work phasing.”
 Records show that Ando's contracts for Bahay Pamulinawen Project were extended until
December 31, 201032(from the original stated date of September 30, 2010) and shortened
to February 15, 201133 (from the original stated date of February 28, 2011) while his
services in West Insula Project was extended until April 30, 201134 (from the original stated
date of March 31, 2011). These notwithstanding, he is still considered as a project, not
regular, employee of EGI.
 Here, Ando was adequately notified of his employment status at the time his services were
engaged by EGI for the Bahay Pamulinawen and the West Insula Projects. The contracts he
signed consistently stipulated that his services as a project worker were being sought. There
was an informed consent to be engaged as such. His consent was not vitiated. As a matter
of fact, Ando did not even allege that force, duress or improper pressure were used against
him in order to agree. His being a carpenter does not suffice.
 There was no attempt to frustrate Ando's security of tenure. His employment was for a
specific project or undertaking because the nature of EGI's business is one which will not
allow it to employ workers for an indefinite period. As a corporation engaged in construction
and residential projects, EGI depends for its business on the contracts it is able to obtain.
Since work depends on the availability of such contracts, necessarily the duration of the
employment of its work force is not permanent but coterminous with the projects to which
they are assigned and from whose payrolls they are paid. It would be extremely burdensome
Atty. Mercader
for EGI as an employer if it would have to carry them as permanent employees and pay
them wages even if there are no projects for them to work on.
 The duration of the specific/identified undertaking for which Ando was engaged was
reasonably determinable. Although the employment contract provided that the stated date
may be "extended or shortened depending on the work phasing," it specified the termination
of the parties' employment relationship on a "day certain," which is "upon completion of the
phase of work for which [he was] hired for."
 Where the final completion of a project or phase thereof is in fact determinable and the
expected completion is made known to the employee, such project employee may not be
considered regular, notwithstanding the one-year duration of employment in the project or
phase thereof or the one-year duration of two or more employments in the same project or
phase of the project.
 When the projects were completed, he was validly terminated from employment since his
engagement was coterminous thereto.
 The fact that Ando was required to render services necessary or desirable in the operation
of EGI's business for more than a year does not in any way impair the validity of his project
employment contracts.
 Finally, the second paragraph of Article 280, stating that an employee who has rendered
service for at least one (1) year shall be considered a regular employee, is applicable only to
a casual employee and not to a project or a regular employee referred to in paragraph one
thereof.
Atty. Mercader
Mercado v. NLRC
Padilla, J.
GR No. 79869 – 5 September 1991
FACTS:
This petition originated from a complaint for illegal dismissal, underpayment of wages, non-
payment of overtime pay, holiday pay, service incentive leave benefits, emergency cost of living
allowances and 13th month pay, filed by above-named petitioners against private respondents Aurora L.
Cruz, Francisco Borja, Leticia C. Borja and Sto. Niño Realty Incorporated, with Regional Arbitration
Branch No. III, National Labor Relations Commission in San Fernando, Pampanga. Petitioners alleged in
their complaint that they were agricultural workers utilized by private respondents in all the agricultural
phases of work on the 7 1/2 hectares of rice land and 10 hectares of sugar land owned by the latter; and
were all allegedly dismissed from their employment.|Private respondent Aurora Cruz in her answer to
petitioners' complaint denied that said petitioners were her regular employees and instead averred that
she engaged their services, through Spouses Fortunato Mercado, Sr. and Rosa Mercado, their
"mandarols", that is, persons who take charge in supplying the number of workers needed by owners of
various farms, but only to do a particular phase of agricultural work necessary in rice production and/or
sugar cane production, after which they would be free to render services to other farm owners who need
their services.|Respondent Labor Arbiter Luciano P. Aquino ruled in favor of private respondents and held
that petitioners were not regular and permanent workers of the private respondents, for the nature of the
terms and conditions of their hiring reveal that they were required to perform phases of agricultural work
for a definite period of time after which their services would be available to any other farm owner|||
ISSUE/S: W/N petitioners were illegally dismissed
HELD: THE PETITION IS NOT IMPRESSED WITH MERIT.
The contention of petitioners that the second paragraph of Article 280 of the Labor Code should
have been applied in their case presents an opportunity to clarify the afore-mentioned provision of law.
Article 280 of the Labor Code reads in full:
"Article 280. Regular and Casual Employment. — The provisions of written agreement
to the contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade
of the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or services to be performed is
seasonal in nature and the employment is for the duration of the season.
"An employment shall be deemed to be casual if it is not covered by the preceding
paragraph: Provided, That, any employee who has rendered at least one year of service
whether such service is continuous or broken, shall be considered a regular employee
with respect to the activity in which he is employed and his employment shall continue
while such actually exists."
The first paragraph answers the question of who are regular employees. It states that,
regardless of any written or oral agreement to the contrary, an employee is deemed regular where he
is engaged in necessary or desirable activities in the usual business or trade of the employer, except
for project employees. A project employee has been defined to be one whose employment has been
fixed for a specific project or undertaking, the completion or termination of which has been determined
at the time of the engagement of the employee, or where the work or service to be performed is
seasonal in nature and the employment is for the duration of the season, as in the present case. The
second paragraph of Art. 280 demarcates as "casual" employees, all other employees who do not fall
under the definition of the preceding paragraph. The proviso, in said second paragraph, deems as
regular employees those "casual" employees who have rendered at least one year of service regardless
of the fact that such service may be continuous or broken. Clearly, therefore, petitioners being project
employees, or, to use the correct term, seasonal employees, their employment legally ends upon
completion of the project or the season. The termination of their employment cannot and should not
constitute an illegal dismissal. WHEREFORE, the petition is DISMISSED. The decision of the National
Labor Relations Commission affirming that of the Labor Arbiter, under review, is AFFIRMED. No
pronouncement as to costs.
Atty. Mercader
Cocomangas Hotel Beach Resort v. Visca

Austria-Martinez, J;
G.R. No. 167045. August 29, 2008
The present controversy stemmed from five individual complaints for illegal dismissal filed on
June 15, 1999 by Federico F. Visca (Visca), Johnny G. Barredo, Ronald Q. Tibus, Richard G. Visca and
Raffie G. Visca (respondents) against Cocomangas Hotel Beach Resort and/or its owner-manager,
Susan Munro (petitioners)
FACTS: In their consolidated Position Paper, respondents alleged that they were regular employees of
petitioners, with designations and dates of employment as follows:
Name Designation Date Employed
Federico F. Visca Foreman October 1, 1987

Johnny G. Barredo Carpenter April 23, 1993
Ronald Q. Tibus Mason November 9, 1996
Richard G. Visca Carpenter April 1988
Raffie G. Visca Mason/Carpenter March 27, 1993
tasked with the maintenance and repair of the resort facilities; on May 8, 1999, Maria Nida Iñigo-Tañala,
the Front Desk Officer/Sales Manager, informed them not to report for work since the ongoing
constructions and repairs would be temporarily suspended because they caused irritation and
annoyance to the resort's guests; as instructed, they did not report for work the succeeding days; John
Munro, husband of petitioner Susan Munro, subsequently visited respondent foreman Visca and
informed him that the work suspension was due to budgetary constraints; when respondent Visca later
discovered that four new workers were hired to do respondents' tasks, he confronted petitioner Munro
who explained that respondents' resumption of work was not possible due to budgetary constraints;
when not less than ten workers were subsequently hired by petitioners to do repairs in two cottages of
the resort and two workers were retained after the completion without respondents being allowed to
resume work, they filed their individual complaints for illegal dismissal. In addition to reinstatement with
payment of full backwages, respondents prayed for payment of premium pay for rest day, service
incentive leave pay, 13th month pay, and cost-of-living allowance, plus moral and exemplary damages
and attorney's fees.
In their Position Paper, petitioners denied any employer-employee relationship with
respondents and countered that respondent Visca was an independent contractor who was called upon
from time to time when some repairs in the resort facilities were needed and the other respondents
were selected and hired by him.
On June 30, 2000, the Labor Arbiter (LA) rendered a Decision dismissing the complaint, holding
that respondent Visca was an independent contractor and the other respondents were hired by him
to help him with his contracted works at the resort; that there was no illegal dismissal but completion of
projects; that respondents were project workers, not regular employees.
On August 29, 2002, the NLRC rendered a Decision, setting aside the Decision of the LA and
ordering the payment to respondents of backwages.
The NLRC held that respondents were regular employees of petitioners since all the factors
determinative of employer-employee relationship were present and the work done by respondents was
clearly related to petitioners' resort business. It took into account the following: (a) respondent Visca
was reported by petitioners as an employee in the Quarterly Social Security System (SSS) report; (b)
all of the respondents were certified to by petitioner Munro as workers and even commended for their
satisfactory performance; (c) respondents were paid their holiday and overtime pay; and (d)
respondents had been continuously in petitioners' employ from three to twelve years and were all paid
by daily wage given weekly.
The CA held respondents were regular employees, not project workers, since in the years that
petitioners repeatedly hired respondents' services, the former failed to set, even once, specific periods
when the employment relationship would be terminated; that the repeated hiring of respondents
Atty. Mercader
established that the services rendered by them were necessary and desirable to petitioners' resort
business; at the least, respondents were regular seasonal employees, hired depending on the tourist
season and when the need arose in maintaining petitioners' resort for the benefit of guests.
|
ISSUE/S: whether the CA committed an error in reversing the NLRC Resolution||
HELD: The petition is bereft of merit|||
After a careful examination of the records, the Court finds that the CA did not err in finding that
respondents were regular employees, not project employees. A project employee is one whose
"employment has been fixed for a specific project or undertaking, the completion or termination of which
has been determined at the time of the engagement of the employee or where the work or service to
be performed is seasonal in nature and the employment is for the duration of the season." Before an
employee hired on a per-project basis can be dismissed, a report must be made to the nearest
employment office, of the termination of the services of the workers every time a project is completed,
pursuant to Policy Instruction No. 20. IS
In the present case, respondents cannot be classified as project employees, since they worked
continuously for petitioners from three to twelve years without any mention of a "project" to which they
were specifically assigned. While they had designations as "foreman", "carpenter" and "mason", they
performed work other than carpentry or masonry. They were tasked with the maintenance and repair
of the furniture, motor boats, cottages, and windbreakers and other resort facilities. There is likewise
no evidence of the project employment contracts covering respondents' alleged periods of employment.
More importantly, there is no evidence that petitioners reported the termination of respondents'
supposed project employment to the DOLE as project employees.
Department Order No. 19, as well as the old Policy Instructions No. 20, requires employers to submit
a report of an employee's termination to the nearest public employment office every time his
employment is terminated due to a completion of a project. Petitioners' failure to file termination reports
is an indication that the respondents were not project employees but regular employees.
This Court has held that an employment ceases to be coterminous with specific projects when
the employee is continuously rehired due to the demands of employer's business and re-engaged for
many more projects without interruption.
The Court is not persuaded by petitioners' submission that respondents' services are not
necessary or desirable to the usual trade or business of the resort. The repeated and continuing need for
their services is sufficient evidence of the necessity, if not indispensability, of their services to petitioners'
resort business.
In Maraguinot, Jr. v. National Labor Relations Commission, the Court ruled that "once a project
or work pool employee has been: (1) continuously, as opposed to intermittently, rehired by the same
employer for the same tasks or nature of tasks; and (2) these tasks are vital, necessary and
indispensable to the usual business or trade of the employer, then the employee must be deemed a
regular employee, pursuant to Article 280 of the Labor Code and jurisprudence."
Thus, substantial evidence supported the CA finding that respondents were regular employees.
Being regular employees, they were entitled to security of tenure, and their services may not be
terminated except for causes provided by law.
Atty. Mercader
Gadia v Sykes Asia

Perlas-Bernabe, J:
G.R. No. 209499 - January 28, 2015
Assailed in this petition for review on certiorari are the Decision dated April 29, 2013 and the Resolution
dated October 3, 2013 of the Court of Appeals (CA) in CA-G.R. SP No. 120433, which annulled and set
aside the Decision dated November 15, 2010 and the Resolution dated May 10, 2011 of the National Labor
Relations Commission (NLRC), in NLRC LAC No. 07-001583-10, and reinstated the Decision dated June
23, 2010 of the Labor Arbiter (LA), holding that herein petitioners Ma. Charito C. Gadia (Gadia), Ernesto M.
Peñas, Gemmabelle B. Remo (Remo), Lorena S. Quesea (Quesea), Marie Joy Francisco, Beverly A.
Cabingas, Ivee U. Balingit (Balingit), Roma Angelica O. Borja, Marie Joan Ramos, Kim Guevarra, Lynn S.
De Los Santos, Caren C. Encanto, Eiden Baldovino, Jacqueline B. Castrence (Castrence), Ma. Estrella V.
Lapuz (Lapuz), Joselito L. Lord (Lord), Raymond G. Santos, Abigail M. Viloria (Viloria), Rommel C. Acosta
(Acosta), Francis Jan S. Baylon, Eric O. Padiernos, Ma. Lenell P. Aaron, Crisnell P. Aaron, and Lawrence
Christopher F. Papa (petitioners) are project employees of respondent Sykes Asia, Inc. (Sykes Asia), and
thus, were validly terminated from employment.
Facts:
Sykes Asia is a corporation engaged in Business Process Outsourcing (BPO). On September 2,
2003, Alltel Communications, Inc. (Alltel), a United States-based telecommunications firm, contracted
Sykes Asia's services to accommodate the needs and demands of Alltel clients for its postpaid and prepaid
services (Alltel Project). Thus, on different dates, Sykes Asia hired petitioners as customer service
representatives, team leaders, and trainers for the Alltel Project. Alltel sent two (2) letters to Sykes Asia
dated August 7, 2009 and September 9, 2009 informing the latter that it was terminating all support services
provided by Sykes Asia related to the Alltel Project. Sykes Asia sent each of the petitioners end-of-life
notices, informing them of their dismissal from employment due to the termination of the Alltel Project.
Aggrieved, petitioners filed separate complaints for illegal dismissal against respondents alleging that their
dismissal from service was unjust as the same was effected without substantive and procedural due
process. Petitioners alleged that their dismissal from service was unjust as the same was effected without
substantive and procedural due process.
Respondents averred that petitioners were not regular employees but merely project-based
employees, and as such, the termination of the Alltel Project served as a valid ground for their dismissal.
Respondents noted that it was expressly indicated in petitioners' respective employment contracts that their
positions are "project-based" and thus, "co-terminus to the project.” Respondents further maintained that
they complied with the requirements of procedural due process in dismissing petitioners by furnishing each
of them their notices of termination at least thirty (30) days prior to their respective dates of dismissal.
The Labor Arbiter (LA) ruled in favor of respondents, and accordingly, dismissed petitioners'
complaints for lack of merit. It found that petitioners are merely project-based employees, as their respective
employment contracts indubitably provided for the duration and term of their employment, as well as the
specific project to which they were assigned. Dissatisfied, petitioners appealed to the NLRC. The NLRC
modified the LA Decision, ruling that petitioners are regular employees but were validly terminated due to
redundancy. Respondents moved for reconsideration, which was, however, denied in a Resolution dated
May 10, 2011. Unconvinced, Sykes Asia elevated the case to the CA on certiorari. In a Decision dated April
29, 2013, the CA annulled and set aside the ruling of the NLRC, and accordingly, reinstated that of the LA.
It held that a perusal of petitioners' respective employment contracts readily shows that they were hired
exclusively for the Alltel Project and that it was specifically stated therein that their employment would be
project-based. Petitioners moved for reconsideration, which was, however, denied in a Resolution dated
October 3, 2013, hence, this petition.
Issue: Whether or not the employees were project-based employees or regular employees.
Held:
The employees were project-based employees. the Court finds that the CA correctly granted
respondents' certiorari petition before it, since the NLRC gravely abused its discretion in ruling that
Atty. Mercader
petitioners were regular employees of Sykes Asia when the latter had established by substantial evidence
that they were merely project-based.
Article 294 of the Labor Code, as amended, distinguishes a project-based employee from a regular
employee as follows:
Art. 294. Regular and casual employment. — The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be
deemed to be regular where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the employer, except where the
employment has been fixed for a specific project or undertaking the completion or termination of
which has been determined at the time of the engagement of the employee or where the work or
services to be performed is seasonal in nature and the employment is for the duration of the season.
A project employee is assigned to a project which begins and ends at determined or determinable
times. Unlike regular employees who may only be dismissed for just and/or authorized causes under the
Labor Code, the services of employees who are hired as "project[-based] employees" may be lawfully
terminated at the completion of the project. The principal test for determining whether particular employees
are properly characterized as "project[-based] employees" as distinguished from "regular employees," is
whether or not the employees were assigned to carry out a "specific project or undertaking," the duration
(and scope) of which were specified at the time they were engaged for that project. Verily, for an employee
to be considered project-based, the employer must show compliance with two (2) requisites, namely that:
(a) the employee was assigned to carry out a specific project or undertaking; and (b) the duration and scope
of which were specified at the time they were engaged for such project. In this case, records reveal that
Sykes Asia adequately informed petitioners of their employment status at the time of their engagement, as
evidenced by the latter's employment contracts which similarly provide that they were hired in connection
with the Alltel Project, and that their positions were "project-based and as such is co-terminus to the project."
In this light, the CA correctly ruled that petitioners were indeed project-based employees, considering that:
(a) they were hired to carry out a specific undertaking, i.e., the Alltel Project; and (b) the duration and scope
of such project were made known to them at the time of their engagement, i.e., "co-terminus with the
project."
Atty. Mercader
Atty. Mercader
Hacienda Fatima v. National Federation of Sugarcane Workers

Panganiban, J.
G.R. No. 149440 - 28 January 2003
Although the employers have shown that respondents performed work that was seasonal in nature,
they failed to prove that the latter worked only for the duration of one particular season. In fact, petitioners
do not deny that these workers have served them for several years already. Hence, they are regular — not
seasonal — employees
"Art. 280. Regular and Casual Employment. — The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be
regular where the employee has been engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer, except where the employment has been fixed for
a specific project or undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or services to be performed is seasonal in nature and
the employment is for the duration of the season.
"An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided,
That, any employee who has rendered at least one year of service, whether such service is continuous or
employment shall continue while such activity exist."
FACTS:
The Labor Arbiter found that the respondents refused to work and/or were choosy in the kind of
jobs they wanted to perform, however, contrary to such findings, NLRC found that the records were replete
with respondent’s persistence and dogged determination in going back to work.
The facts below are summarized by the NLRC
It would appear that petitioners did not look with favor workers' having organized themselves into
a union. Thus, when complainant union was certified as the collective bargaining representative in the
certification elections, petitioners under the pretext that the result was on appeal, refused to sit down with
the union for the purpose of entering into a collective bargaining agreement. Moreover, the workers
including complainants herein were not given work for more than one month. In protest, complainants
staged a strike which was however settled upon the signing of a Memorandum of Agreement.
However, alleging that complainants failed to load the fifteen wagons, petitioners reneged on its
commitment to sit down and bargain collectively. Instead, petitioners employed all means including the use
of private armed guards to prevent the organizers from entering the premises.
Moreover, starting September 1991, petitioners did not any more give work assignments to the
complainants forcing the union to stage a strike on January 2, 1992. But due to the conciliation efforts by
the DOLE, another Memorandum of Agreement was signed by the complainants and respondents
When respondents again reneged on its commitment; complainants filed a complaint. But for all
their persistence, the risk they had to undergo in conducting a strike in the face of overwhelming odds,
complainants in an ironic twist of fate now find themselves being accused of 'refusing to work and being
choosy in the kind of work they have to perform.
Court of Appeals: affirmed that while the work of respondents was seasonal in nature, they were
considered to be merely on leave during the off-season and were therefore still employed by petitioners.
Moreover, the workers enjoyed security of tenure. Any infringement upon this right was deemed by the CA
to be tantamount to illegal dismissal. "rhyme nor reason in petitioner's argument that it was the workers
themselves who refused to or were choosy in their work." As found by the NLRC, the record of this case is
"replete with complainants' persistence and dogged determination in going back to work.
ISSUE/S:
1. Whether or not the respondents were regular employees
2. Whether or the Court of Appeals erred in rejecting the ruling in Mercado case and relying instead
on rulings which are not directly applicable to the case at bar.
Atty. Mercader
3. Whether or not petitioners were guilty of unfair labor practice making the private respondents
considered as illegally dismissed.
HELD:
1. Yes. Respondents were regular employees.

 For respondents to be excluded from those classified as regular employees, it is not
enough that they perform work or services that are seasonal in nature. They must have
also been employed only for the duration of one season. The evidence proves the
existence of the first, but not of the second, condition.
 The fact that respondents — with the exception of Luisa Rombo, Ramona Rombo, Bobong
Abriga and Boboy Silva — repeatedly worked as sugarcane workers for petitioners for
several years is not denied by the latter. Evidently, petitioners employed respondents for
more than one season. Therefore, the general rule of regular employment is applicable.
 [T]he fact that [respondents] do not work continuously for one whole year but only for the
duration of the . . . season does not detract from considering them in regular employment
since in a litany of cases this Court has already settled that seasonal workers who are
called to work from time to time and are temporarily laid off during off-season are not
separated from service in said period, but merely considered on leave until re-employed."
2. No. CA did not err when it ruled that Mercado v. NLRC was not applicable to the case at bar.
 In the earlier case, the workers were required to perform phases of agricultural work for a
definite period of time, after which their services would be available to any other farm
owner. They were not hired regularly and repeatedly for the same phase/s of agricultural
work, but on and off for any single phase thereof.
 On the other hand, herein respondents, having performed the same tasks for petitioners
every season for several years, are considered the latter's regular employees for their
respective tasks. Petitioners' eventual refusal to use their services — even if they were
ready, able and willing to perform their usual duties whenever these were available — and
hiring of other workers to perform the tasks originally assigned to respondents amounted
to illegal dismissal of the latter.
 The sudden changes in work assignments reeked of bad faith. These changes were
implemented immediately after respondents had organized themselves into a union and
started demanding collective bargaining. Those who were union members were effectively
deprived of their jobs. Petitioners' move actually amounted to unjustified dismissal of
respondents, in violation of the Labor Code.
3. Yes. Petitioners were guilty of unfair labor practice hence, the private respondents were
illegally dismissed.
 The Court finds no reason to disturb the CA's dismissal of what petitioners claim was their
valid exercise of a management prerogative. The sudden changes in work assignments
reeked of bad faith. These changes were implemented immediately after respondents had
organized themselves into a union and started demanding collective bargaining. Those
who were union members were effectively deprived of their jobs. Petitioners' move actually
amounted to unjustified dismissal of respondents, in violation of the Labor Code.
 "Indeed, from petitioners’ refusal to bargain, to their acts of economic inducements
resulting in the promotion of those who withdrew from the union, the use of armed guards
to prevent the organizers to come in, and the dismissal of union officials and members,
one cannot but conclude that respondents did not want a union in their hacienda—a clear
interference in the right of the workers to self-organization."
Atty. Mercader
Gapayao v. Fulo,
SERENO, CJ.:
G.R. No. 193493, 13 June 2013
FACTS:
The Deceased w was made to work as a laborer in the agricultural landholdings, a harvester in the abaca
plantation, and a repairman/utility worker in several business establishments owned by petitioner.
On 4 November 1997, Jaime Fulo (deceased) died of "acute renal failure secondary to 1st degree burn
70% secondary electrocution" while doing repairs at the residence and business establishment of
petitioner located at San Julian, Irosin, Sorsogon. Petitioner extended some financial assistance to
private respondent. On 16 November 1997, the latter executed an Affidavit of Desistance 6 stating that she
was not holding them liable for the death of her late husband, Jaime Fulo, and was thereby waiving her
right and desisting from filing any criminal or civil action against petitioner.
Both parties executed a Compromise Agreement,the relevant portion of which is quoted below:
We, the undersigned unto this Honorable Regional Office/District Office/Provincial Agency Office
respectfully state:
1. The undersigned employer, hereby agrees to pay the sum of FORTY THOUSAND PESOS
(₱40,000.00) to the surviving spouse of JAIME POLO, an employee who died of an accident, as a
complete and full payment for all claims due the victim.
2. On the other hand, the undersigned surviving spouse of the victim having received the said
amount do hereby release and discharge the employer from any and all claims that maybe due the
victim in connection with the victim’s employment thereat.
Private Respondent claims her husband was an employee of petitioner until his unitmley death that her
late husband had been in the employ of petitioner for 14 years, from 1983 to 1997. During that period, he
was made to work as a laborer in the agricultural landholdings, a harvester in the abaca plantation, and a
repairman/utility worker in several business establishments owned by petitioner.
Private respondent filed a claim for social security benefits with the Social Security System (SSS)–
Sorosogon Branch. However, upon verification and evaluation, it was discovered that the deceased was
not a registered member of the SSS.
Petitioner alleges that the deceased is a freelance worker. Since he was engaged on a pakyaw basis and
worked for a short period of time, in the nature of a farm worker every season, he was not precluded from
working with other persons and in fact worked for them. Under Article 280 of the Labor Code, seasonal
employees are not covered by the definitions of regular and casual employees. Petitioner cites Mercado,
Sr. v. NLRC, in which the Court held that seasonal workers do not become regular employees by the
mere fact that they have rendered at least one year of service, whether continuous or broken
ISSUE/S:
Can Private Respondent claim the SSS benefits of her deceased husband who was only emplyoed o a
pakyaw basis?
HELD: Yes.
Jurisprudence has identified the three types of employees mentioned in the provision: (1) regular
employees or those who have been engaged to perform activities that are usually necessary or desirable
in the usual business or trade of the employer; (2) project employees or those whose employment has been
fixed for a specific project or undertaking, the completion or termination of which has been determined at
the time of their engagement, or those whose work or service is seasonal in nature and is performed for
the duration of the season; and (3) casual employees or those who are neither regular nor project
employees.
Pakyaw workers may be considered reegular employees when subject to the control of the employer.The
records reveals that the deceased was indeed a farm worker who was in the regular employ of petitioner.
From year to year, starting January 1983 up until his death, the deceased had been working on petitioner’s
Atty. Mercader
land by harvesting abaca and coconut, processing copra, and clearing weeds. His employment was
continuous in the sense that it was done for more than one harvesting season. Moreover, no amount of
reasoning could detract from the fact that these tasks were necessary or desirable in the usual business of
petitioner.
Being the owner of the farm on which the latter worked, petitioner – on his own or through his overseer –
necessarily had the right to review the quality of work produced by his laborers. It matters not whether the
deceased conducted his work inside petitioner’s farm or not because petitioner retained the right to control
him in his work, and in fact exercised it through his farm manager Amado Gacelo. The latter himself testified
that petitioner had hired the deceased as one of the pakyaw workers whose salaries were derived from the
gross proceeds of the harvest. The other tasks allegedly done by the deceased outside his usual farm work
only bolster the existence of an employer-employee relationship. As found by the SSC, the deceased was
a construction worker in the building and a helper in the bakery, grocery, hardware, and piggery – all owned
by petitioner. This fact only proves that even during the off-season, the deceased was still in the employ of
petitioner.
The employee has been performing the job for at least one year, even if the performance is not continuous
or merely intermittent, the law deems the repeated and continuing need for its performance as sufficient
evidence of the necessity if not indispensability of that activity to the business. Hence, the employment is
also considered regular, but only with respect to such activity and while such activity exists. continuous
work was done by the deceased in the sense that it was done for more than one harvesting season.
Moreover, no amount of reasoning could detract from the fact that these tasks were necessary or desirable
in the usual business of petitioner.
Take note that petitioner voluntarily executed a compromise agreement that where he was described as
the employer, his belated attempt to circumvent the agreement should not be given any consideration or
weight by this Court.
Atty. Mercader
Universal Robina Sugar Milling Corporation (URSUMCO) v Acibo

Brion, J.
GR No. 186439 – 15 January 2014
FACTS:
The complainants were employees of URSUMCO who were hired between February 1988 and
April 1996 to perform different roles i.e drivers, crane operators, bucket hookers, welders, etc. They signed
contracts of employment for a period of 1 month or for some given season. They were repeatedly hired to
perform the same duties and to sign new employment contracts for the duration of 1 month or a given
season. Complainants filed before the Labor Arbiter (LA) complaints for regulations, to entitle them to the
benefits under the existing Collective Bargaining Agreement (CBA) and attorney’s fees.
BEFORE THE LA: The complaint was dismissed for lack of merit. It held that complainants were seasonal
or project workers and not regular employees. They were not entitled to the benefits under the CBA, as
provided, as it only covered regular employees. LA reasoned that the complainant’s work was only for a
definite period, and were not directly related to petitioner’s main operations. 7 complainants from the original
22 complainants appealed the ruling before the National Labor Relations Commission (NLRC).
BEFORE THE NLRC: NLRC reversed LA’s ruling; declaring complainants as regular employees and
granted their monetary claims under the CBA. It reasoned that complainants performed activities which are
usually necessary and desirable in the usual trade or business of petitioner and were repeatedly hired for
the same undertaking every season. Hence, following Art 280 (renumbered Art 295) of the Labor Code,
complainants are regular employees.
BEFORE THE CA: CA affirmed NLRC’s decision but deleted the grant of monetary benefits under the
CBA. It reasoned that the complainant’s tasks were necessary, if not indispensable to the petitioner’s
business. They can not be covered by the CBA because it only pertains to regular employees who were
performing tasks needed by petitioner for the entire years with no regard to the changing sugar milling
season.
ISSUE/S:
1. Whether the respondents are regular employees of URSUMCO
2. Whether affirmative relief can be given to the fifteen (15) of the complainants who did not appeal
the LA's decision.
HELD: The Court to partially grant the decision. Except for the denial of respondent’s claim for
CBA benefits, CA resolution and decision are set aside. The complaint is dismissed for lack of
merit.
1. No. Respondents are regular seasonal employees.

Seasonal employment operates much in the same way as project employment, albeit it involves work
or service that is seasonal in nature or lasting for the duration of the season. As with project employment,
although the seasonal employment arrangement involves work that is seasonal or periodic in nature, the
employment itself is not automatically considered seasonal so as to prevent the employee from attaining
regular status.
To exclude the asserted "seasonal" employee from those classified as regular employees, the employer
must show that: (1) the employee must be performing work or services that are seasonal in nature; and (2)
he had been employed for the duration of the season. Hence, when the "seasonal" workers are continuously
and repeatedly hired to perform the same tasks or activities for several seasons or even after the cessation
of the season, this length of time may likewise serve as badge of regular employment. In fact, even though
denominated as "seasonal workers," if these workers are called to work from time to time and are only
temporarily laid off during the off-season, the law does not consider them separated from the service during
the off-season period. The law simply considers these seasonal workers on leave until re-employed.
Atty. Mercader
The respondents are regular seasonal workers and the following factual considerations support
this conclusion:
1.Respondents were tasked to perform duties regularly and habitually needed in URSUMCO's operations
during the milling season. They performed activities which are necessary and desirable in sugarcane
production and in the milling of sugarcane, the plantation workers perform their duties only during the
planting season.
2. Respondents were regularly and repeated hired to perform their respective tasks. The regular and
repeated hiring of the same workers for 2 separate seasons has put in place the system of regular seasonal
employment in the sugar industry and other industries with similar nature of operations.
Under the system, the plantation workers or the mill employees do not work continuously for one
whole year but only for the duration of the growing of the sugarcane or the milling season. Their seasonal
work, however, does not detract from considering them in regular employment since in a litany of
cases, this Court has already settled that seasonal workers who are called to work from time to time
and are temporarily laid off during the off-season are not separated from the service in said period,
but are merely considered on leave until re-employment. Be this as it may, regular seasonal
employees, like the respondents in this case, should not be confused with the regular employees
of the sugar mill such as the administrative or office personnel who perform their tasks for the
entire year regardless of the season.
The NLRC, therefore, gravely erred when it declared the respondents regular employees of
URSUMCO without qualification and that they were entitled to the benefits granted, under the CBA, to
URSUMCO' S regular employees.
3. While the petitioners assert that the respondents were free to work elsewhere during the off-season, the
records do not support this assertion. There is no evidence on record showing that after the completion of
their tasks at URSUMCO, the respondents sought and obtained employment elsewhere.
2. No. The issue of granting affirmative relief to the complainants who did not appeal the CA
ruling has become academic.
Atty. Mercader
Paz v. Northern Tobacco Redrying

Leonen, J.
GR No. 199554 – 18 February 2015
FACTS:
Northern Tobacco Redrying Co., Inc (NTRCI), a flue-curing and redrying of tobacco leaves business,
employs approximately 100 employees with seasonal workers to sort, process, store and transport
tobacco leaves during the tobacco season of March to September. Zenaida Paz was hired and re-hired
by NTRCI since 1974 as a seasonal sorter and paid P185 daily. She signed a seasonal job contract at the
start of her employment and a pro-forma application letter prepared by NTRCI in order to qualify for the
next season.
On May 18, 2003, Paz was 63 years old when NTRCI informed her that she was considered
retired under the company policy and a year later, was told that she would receive P12,000 as retirement
pay. Paz then filed a Complaint for illegal dismissal against NTRCI which she amended into Complaint for
payment of retirement benefits as P12,000 seemed inadequate for her 29 years of service. NTRCI
contended that no CBA existed between NTRCI and its workers and thus, it computed the retirement pay
of its seasonal workers based on Article 287 of the Labor Code.
The Labor Arbiter confirmed the retirement pay was only P12,487.5 based on the computation
of NTRCI. On the other hand, the NLRC modified the Labor Arbiter’s Decision and that the retirement
pay should be computed pursuant to RA 7641 and that all the months she was engaged to work for
NTRCI for the last 28 years should be added and divided by six to get the number of years for her
retirement pay. The Court of Appeals dismissed the petition and modified the NLRC’s Decision in that
financial assistance is awarded to Zenaida Paz in the amount of P60,356.25. The CA found that while
applying Ateicle 287, the amount was so meager that it could hardly support Paz, now that she is weak
and old, unable to find employment. It discussed jurisprudence on financial assistance and deemed it
appropriate to apply the formula: One half-month pay multiplied by 29 years of service divided by two
yielded P60,356.12.
Paz then came before the Supreme Court seeking to reinstate the NLRC’s computation. She
contends that NTRCI failed to prove the alleged company policy on compulsory retirement for employees
who reached 60 years of age or who rendered 30 years of service, whichever comes first. She adds that
while one may opt to retire at 60 years old, the compulsory retirement age is 65 years old under Art. 287,
as amended. Furthermore, she contends that lack of legal basis that “an employee should have at least
worked for 6 months for a particular season for that season to be included in the computation of
retirement pay. She submits that regular seasonal employees are still considered employees during off
season, and length of service determination should be applied in retiree’s favor.
NTRCI argues that unlike regular employees, seasonal workers like Paz can offer their services
to other employers during off-season. Thus, the 6-month rule avoids the situation where seasonal
workers receive retirement pay twice – an even more favorable position compared with regular employee.
ISSUE/S:
1. W/N Paz, a seasonal employee, is considered as a regular seasonal employee.
2. W/N Paz was illegally dismissed from service.
3. W/N NTRCI complied with both procedural and substantive due process.
4. W/N the retirement pay pursuant to Article 287 was correctly computed.
5. W/N the CA erred in awarding financial assistance to Paz.
HELD: COURT OF APPEALS DECISION IS AFFIRMED WITH MODIFICATION.
1. Yes. Paz is a regular seasonal employee.

Article 280 of the Labor Code and jurisprudence identified 3 types of employees, namely:
1. Regular employee or those who have been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer;
2. Project employees or those whose employment has been determined at the time of the
engagement of the employee or where the work or service to be performed is seasonal in
nature and the employment is for the duration of the season; and
Atty. Mercader
3. Casual employees or those who are neither regular nor project employees.
Jurisprudence also recognizes the status of regular seasonal employees. In the case La Union
Tobacco Redrying Corp. v NLRC, the workers were considered regular seasonal employees since they
performed services necessary and indispensable to the business for over 20 years, even if their work was
only during tobacco season. The court applied the test laid down in De Leon v NLRC for determining
regular employment status: “The primary standard of determining regular employment is the reasonable
connection between the particular activity performed by the employee in relation to the usual trade or
business of the employer. The connection can be determined by considering the nature of the work
performed and its relation to the scheme of the particular business or trade in its entirety. Also if the
employee has been performing the job for at least a year, even if the performance is not continuous and
merely intermittent, the law deems repeated and continuing need for its performance as sufficient
evidence of the necessity if not indispensability of the activity to the business. Hence, the employment is
considered regular, but only with respect to such activity, and while such activity exists.”
In this case, the services Paz performed as a sorter were necessary and indispensable to NTRCI’s
business. She was also regularly rehired as a sorter during the tobacco season for 29 years since 1974.
These considerations taken together allowed the conclusions that Paz was a regular seasonal employee,
entitled to rights under Article 279 of the Labor Code.
2. Yes. Paz was illegally dismissed.
The amendment of Paz of her Complaint was not fatal to her cause of action for illegal dismissal. This
is because Paz never abandoned her argument that she had not reached the compulsory retirement age
of 65 pursuant to Article 287, as amended. Furthermore, the NLRC found that NTRCI failed to prove a
valid company retirement policy, yet it required its workers to retire after they had reached the age of 60.
Jurisprudence provides that “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 his or her employment with the former.” Article 287, as amended, allows for optional
retirement at the age of at least 60 years old. Hence, if the intent to retire is not clearly established or if
the retirement is involuntary, it is to be treated as discharge.
The complaint of Paz that she was illegally dismiss is an implied lack of intent to retire until she
reached the compulsory age of 65. Thus, she should be considered as illegally dismissed and should be
entitled to full backwages.
3. No. NTRCI did not comply with the due process requisites.
The Labor Code requires employers to comply with both procedural and substantive due process in
dismissing employees. This provides that the dismissal must be based on a just cause under Art. 282 of
the Labor Code, for an authorized cause under Art. 283, or for health reasons under Art. 284. Moreover,
as regards due process, the Section 2 of the Labor Code provides that in all cases of termination of
employment, the standards of due process shall be substantially observed.
In this case, Paz was illegally dismissed for having no just or authorized cause and that there was a
violation of due process. NTRCI had considered Paz retired at the age of 63 before she reached the
compulsory age of 65. This does not fall under the just causes of termination, the authorized causes, or
disease as a ground for termination. Furthermore, there was no showing that NTRCI complied with the
due process requisites of notice.
4. Yes. The retirement pay was correctly computed.
An employer may provide for retirement benefits in an agreement with its employees such as in a
CBA. Otherwise, Article 287 of the Labor Code, as amended, governs. Since NTRCI failed to present a
copy of a CBA, the court applied Art, 287, as amended by RA 7641. This provides for the proper
computation of retirement benefits in the absence of a retirement plan or agreement. NTRCI followed the
formula in Art. 287 and offered Paz the amount of P12,487.5 as retirement pay based on the 3 years she
worked for at least 6 months in 1995, 1999, and 2000.
In the case of Philippine Tobacco, Article 283 and 284 of the labor Code in separation pay, and these
articles include the proviso “a fraction of at least six (6) months being considered as one whole year."
While the present case involves retirement pay and not separation pay, Article 287 of the Labor Code
provides the same proviso. Hence, this proviso applies in this case. An employee must have rendered at
least 6 months in a year for said year to be considered in the computation. Based on the factual findings
that Paz rendered at least 6 months of service for 1995, 1999, and 2000 only, retirement pay pursuant to
Art. 287 of the Labor Code was correctly computed at P12,487.50.
Atty. Mercader
5. No. The CA correctly granted financial assistance to Paz.

The Supreme Court agrees with the CA that Paz be awarded a financial assistance in the amount of
P60,356.25 by applying the formula: one-half-month pay multiplied by 29 years in service and then
divided by 2. This is because the retirement pay is indeed to meager to support Paz who has become old,
weak, and unable to find employment. RA 7641 is a social legislation with the purpose of providing for the
retiree’s sustenance and hopefully even comfort, when he or she no longer has the stamina to continue
earning his or her livelihood. The CA recognized Paz’s 3 decades of hard work and service with NTRCI
however disagreed with the NLRC’s retirement pay computation for lack of factual basis.
In any event, the SC still awarded financial assistance as a measure of social justice in exceptional
circumstances, and as an equitable concession. The Court, in this case, calls upon the same “social and
compassionate justice” cited in several cases allowing financial assistance. The circumstances
indubitably merit equitable concessions, via the principle of “compassionate justice” for the working
class.
The Court agrees with the CA that Paz’s circumstances “indubitable merit equitable concessions.”
Paz worked for NTRCI for close to 3 decades and she had no record of any malfeasance or violation of
company rules in her long years of service. Her advanced age has rendered her weak and lessened her
employment opportunities. The award of P60,356.25 as financial assistance will serve its purpose in
providing Paz sustenance and comfort for her long years of service.
Atty. Mercader
Atty. Mercader
Kimberly Independent Union Labor v. NLRC

Regalado, J.
G.R. No. L-77629 May 9, 1990
Before us are two consolidated petitions for certiorari filed by the above-named petitioner union (hereinafter
referred to as KILUSAN-OLALIA, for conciseness) and individual complainants therein, to wit (a) G.R.
77629, which seeks to reverse and set aside the decision, dated November 13, 1986, 1 and the resolution,
dated January 9, 1987, 2respectively handed down by the two former Ministers of Labor, both rendered in
BLR Case No. NS-5-164-86; and (b) G.R. No. 78791, which prays for the reversal of the resolutions of the
National Labor Relations Commission, dated May 25, 1987 3 and June 19,1987 4 issued in Injunction Case
No. 1442 thereof.
FACTS:
 Kimberly-Clark Philippines, Inc. (KIMBERLY, for brevity) executed a three-year collective
bargaining agreement (CBA) with United Kimberly-Clark Employees Union-Philippine Transport
and General Workers' Organization (UKCEU-PTGWO) which expired on June 30, 1986.
 Within the 60-day freedom period prior to the expiration of and during the negotiations for the
renewal of the aforementioned CBA, some members of the bargaining unit formed another union
called "Kimberly Independent Labor Union for Solidarity, Activism and Nationalism-Organized
Labor Association in Line Industries and Agriculture (KILUSAN-OLALIA)."
 April 21, 1986: KILUSAN-OLALIA filed a petition for certification election. KIMBERLY and
(UKCEU-PTGWO) did not object to the holding of a certification election but objected to the
inclusion of the so-called contractual workers whose employment with KIMBERLY was coursed
through an independent contractor, Rank Manpower Company (RANK for short), as among the
qualified voters.
 May 7, 1986: Pending resolution of the petition for certification election by the med-arbiter,
KILUSAN-OLALIA filed a notice of strike with the Bureau of Labor Relations charging KIMBERLY
with unfair labor practices based on the following alleged acts:
 (1) dismissal of union members (KILUSAN-OLALIA);
 (2) non-regularization of casuals/contractuals with over six months service;
 (3) non-implementation of appreciation bonus for 1982 and 1983;
 (4) non-payment of minimum wages;
 (5) coercion of employees; and
 (6) engaging in CBA negotiations despite the pendency of a petition for certification
election.
 This was later amended to withdraw the charge of coercion but to add, as new charges, the
dismissal of Roque Jimenez and the non-payment of backwages of the reinstated Emerito Fuentes
.
 Conciliation proceedings conducted by the bureau proved futile, and KILUSAN-OLALIA declared a
strike at KIMBERLY's premises in San Pedro, Laguna. KIMBERLY petitioned MOLE to assume
jurisdiction over the labor dispute.
 Finding that the labor dispute would adversely affect national interest, then Minister Augusto S.
Sanchez issued an assumption order ordering the striking union and its members are hereby
enjoined to lift the picket and remove all obstacles to the free ingress to and egress from
the company premises and to return to work, including the 28 contractual workers who were
dismissed; likewise, the company is directed to resume its operations immediately thereafter
and to accept all the employees back under the same terms and conditions of employment
prevailing prior to the industrial action.
 In obedience to said assumption order, KILUSAN-OLALIA terminated its strike and picketing
activities effective after a compliance agreement was entered into by it with KIMBERLY.
 Med-Arbiter Bonifacio 1. Marasigan, who was handling the certification election case, issued an
order declaring the following as eligible to vote in the certification election, thus:
 The regular rank-and-file laborers/employees of the respondent company consisting of 537
should be considered qualified to vote;
Atty. Mercader
 Those casuals who have worked at least six (6) months as appearing in the payroll months
prior to the filing of the instant petition; and
 Those contractual employees who are allegedly in the employ of an independent contractor
and who have also worked for at least six (6) months as appearing in the payroll month
prior to the filing of the instant petition.
 During the pre-election conference, 64 casual workers were challenged by KIMBERLY and
(UKCEU-PTGWO) on the ground that they are not employees, of KIMBERLY but of RANK. It
was agreed by all the parties that the 64 voters shall be allowed to cast their votes but that their
ballots shall be segregated and subject to challenge proceedings. The certification election was
conducted, with a total of 581 votes
 July 2, 1986: KILUSAN-OLALIA filed with the med-arbiter a "Protest and Motion to Open and Count
Challenged Votes" on the ground that the 64 workers are employees of KIMBERLY within the
meaning of Article 212(e) of the Labor Code.
 July 7, 1986: KIMBERLY filed an opposition to the protest and motion, asserting that there is no
employer-employee relationship between the casual workers and the company, and that the
med-arbiter has no jurisdiction to rule on the issue of the status of the challenged workers which is
one of the issues covered by the assumption order.
 The med-arbiter opted not to rule on the protest until the issue of regularization has been resolved
by MOLE.
 November 13, 1986: Then Minister Sanchez rendered a decision the disposition wherein is
summarized as follows:
 The service contract for janitorial and yard maintenance service between KIMBERLY and
RANK was declared legal;
 The other casual employees not performing janitorial and yard maintenance services were
deemed labor-only contractual and since labor-only contracting is prohibited, such
employees were held to have attained the status of regular employees, the regularization
being effective as of the date of the decision;
 UKCEU-PTGWO having garnered more votes than KILUSAN-OLALIA was certified as the
exclusive bargaining representative of KIMBERLY's employees;
 The reinstatement of 28 dismissed KILUSAN-OLALIA members was ordered;
 Roque Jimenez was ordered reinstated without backwages, the period when he was out
of work being considered as penalty for his misdemeanor;
 The decision of the voluntary arbitrator ordering the reinstatement of Ermilo Fuentes with
backwages was declared as already final and unappealable; and
 KIMBERLY was ordered to pay appreciation bonus for 1982 and 1983. November 25,
1986: KIMBERLY filed a motion for reconsideration with respect to the regularization of
contractual workers, the appreciation bonus and the reinstatement of Roque Jimenez.
 December 11, 1986: KILUSAN-OLALIA filed a motion for reconsideration questioning the authority
of the Minister of Labor to assume jurisdiction over the representation issue. In the meantime,
KIMBERLY and UKCEU-PTGWO continued with the negotiations on the new collective bargaining
agreement (CBA), no restraining order or junctive writ having been issued, a new CBA was
concluded and ratified by 440 out of 517 members of the bargaining unit.
 In an order, former Labor Minister Franklin Drilon denied both motions for reconsideration filed by
KIMBERLY and KILUSAN-OLALIA. The new CBA executed between KIMBERLY and UKCEU-
PTGWO was signed.
 KILUSAN-OLALIA filed a petition for certiorari
ISSUE:
Whether or not those in janitorial or yard maintenance, and the other casual employees are regular
employees
HELD: PETITION DISMISSED
1. YES.
Atty. Mercader
The SC find and so hold that the former labor minister gravely abused his discretion in holding that
those workers not engaged in janitorial or yard maintenance service attained the status of regular
employees only on November 13, 1986, which thus deprived them of their constitutionally
protected right to vote in the certification election and choose their rightful bargaining
representative.
The Labor Code defines who are regular employees, as follows:
Art. 280. Regular and Casual Employment. — The provisions of written agreement to the contrary
not withstanding and regardless of the oral agreements of the parties, an employment shall be
deemed to be regular where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the employer, except where the
employment has been fixed for a specific project or under the completion or termination of which
has been determined at the time of the engagement of the employee or where the work or services
to be performed is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding
paragraph: Provided, That any employee who has rendered at least one year of service, whether
such service is continuous or broken, shall be considered a regular employee with respect to the
activity in which he is employed and his employment shall continue while such activity exists.
The law thus provides for two. kinds of regular employees, namely: (1) those who are engaged to
perform activities which are usually necessary or desirable in the usual business or trade of the
employer; and (2) those who have rendered at least one year of service, whether continuous or
broken, with respect to the activity in which they are employed. The individual petitioners herein
who have been adjudged to be regular employees fall under the second category. These are the
mechanics, electricians, machinists machine shop helpers, warehouse helpers, painters,
carpenters, pipefitters and masons It is not disputed that these workers have been in the employ
of KIMBERLY for more than one year at the time of the filing of the Petition for certification election
by KILUSAN-OLALIA.
Owing to their length of service with the company, these workers became regular employees, by
operation of law, one year after they were employed by KIMBERLY through RANK. While the actual
regularization of these employees entails the mechanical act of issuing regular appointment papers
and compliance with such other operating procedures as may be adopted by the employer, it is
more in keeping with the intent and spirit of the law to rule that the status of regular employment
attaches to the casual worker on the day immediately after the end of his first year of service. To
rule otherwise, and to instead make their regularization dependent on the happening of some
contingency or the fulfillment of certain requirements, is to impose a burden on the employee which
is not sanctioned by law.
That the first stated position is the situation contemplated and sanctioned by law is further
enhanced by the absence of a statutory limitation before regular status can be acquired by a
casual employee. The law is explicit. As long as the employee has rendered at least one year of
service, he becomes a regular employee with respect to the activity in which he is employed. The
law does not provide the qualification that the employee must first be issued a regular
appointment or must first be formally declared as such before he can acquire a regular status.
Obviously, where the law does not distinguish, no distinction should be drawn.
The submission that the decision of November 13, 1986 has become final and executory, on the
grounds that no timely appeal has been made therefrom and that KILUSAN-OLALIA has impliedly
acceded thereto, is untenable.
Atty. Mercader
PHILIPPINE GEOTHERMAL, INC vs NLRC

G.R. Nos. 82643-67 , August 30, 1990
PARAS, J.
This is a petition for review on certiorari seeking to annul and set aside; (a) the Resolution of the National
Labor Relations Commission * dated November 9, 1987 in Labor Cases Nos. RAB-403-85 to 427-85 and
RAB Nos. 0392-85 to 0393-85 entitled Teodulo C. Cuebillas, et. al. vs. Philippine Geothermal, Inc. et al.
and Efren N. Clerigo et. al. vs. Phil. Geothermal Inc. respectively which declared respondent employees as
regular and permanent employees of petitioner company and ordered their reinstatement and (b) the
Resolution dated March 9,1988 which denied the Motion for Reconsideration.
Facts:
Petitioner Philippine Geothermal, Inc. is a U.S. corporation engaged in the exploration and development
of geothermal energy resources as an alternative source of energy. It is duly authorized to engage in
business in the Philippines and at present is the prime contractor of the National Power Corporation at the
latter's operation of the Tiwi, Albay and the Makiling-Banahaw Geothermal Projects.
Private respondents, on the other hand, are employees of herein petitioner occupying various positions
ranging from carpenter to Clerk II who had worked with petitioner company under individual contracts,
categorized as contractual employment, for a period ranging from fifteen (15) days to three (3) months.
These contracts were regularly renewed to the extent that individual private respondents had rendered
service from three (3) to five (5) years until 1983 and 1984 when petitioner started terminating their
employment by not renewing their individual contracts. Subsequently petitioner entered into job
contracting agreement with Dra. Generosa Gonzales who supplies it with skilled manpower.
Sometime in July 1983, herein private respondents organized a separate labor union in view of their
exclusion in the bargaining unit of the regular rank and file employees represented by the Federation of
Free Workers.
August 1983, they filed a petition for certification election with the Ministry of Labor and Employment
Because of this, herein petitioner allegedly started harassing them and replaced them with so called
"contract workers". Thus, complainant union and herein respondent employees filed a case for illegal
lock-out and unfair labor practice,
Labor Arbiter Voltaire A. Balitaan rendered a decision in favor of the respondents
On Appeal, the National Labor Relations Commission on November 9, 1987 rendered a decision
dismissing the appeal and affirming the decision of the Labor Arbiter.
A motion for reconsideration was denied on March 9, 1988 for lack of merit
Issue : Whether or not private respondents may be considered regular and permanent employees
Held : PREMISES CONSIDERED, the decision of the National Labor Relations Commission is
hereby AFFIRMED.
Yes , Petitioner alleges that it engaged the services of private respondents on a monthly basis to ensure
that manpower would be available when and where needed. Private respondents were fully aware of the
nature of their employment as this was clearly spelled out in the employment contracts. What happened
to them was not a case of unwarranted dismissal but simply one of expiration of the tenure of
employment contracts and the completion of the phase of the project for which their services were hired
This Court classified the two kinds of regular employees, as: 1) those who are engaged to perform
activities which are usually necessary or desirable in the usual business or trade of the employer; and 2)
Atty. Mercader
those who have rendered at least one (1) year of service, whether continuous or broken with respect to
the activity in which they are employed. While the actual regularization of these employees entails the
mechanical act of issuing regular appointment papers and compliance with such other operating
procedures, as may be adopted by the employer, it is more in keeping with the intent and spirit of the law
to rule that the status of regular employment attaches to the casual employee on the day immediately
after the end of his first year of service.
Assuming therefore, that an employee could properly be regarded as a casual (as distinguished from a
regular employee) he becomes entitled to be regarded as a regular employee of the employer as soon as
he has completed one year of service. Under the circumstances, employers may not terminate the service
of a regular employee except for a just cause or when authorized under the Labor Code. It is not difficult
to see that to uphold the contractual arrangement between the employer and the employee would in
effect be to permit employers to avoid the necessity of hiring regular or permanent employees indefinitely
on a temporary or casual status, thus to deny them security of tenure in their jobs. Article 106 of the Labor
Code is precisely designed to prevent such result.
It is the policy of the state to assure the right of workers to "security of tenure." The guarantee is an act of
social justice. When a person has no property, his job may possibly be his only possession or means of
livelihood. Therefore, he should be protected against any arbitrary deprivation of his job. Article 280 of the
Labor Code has construed "security of tenure" as meaning that "the employer shall not terminate the
services of the employee except for a just cause or when authorized by the Code."
Atty. Mercader
BRENT SCHOOL, vs. ZAMORA

Narvasa, J.
G.R. No. L-48494 February 5, 1990
FACTS:
The root of the controversy at bar is an employment contract in virtue of which Doroteo R. Alegre
was engaged as athletic director by Brent School, Inc. at a yearly compensation of P20,000.00. The
contract fixed a specific term for its existence, five (5) years, i.e., from July 18, 1971, the date of execution
of the agreement, to July 17, 1976.
Some three months before the expiration of the stipulated period, or more precisely on April 20,1976, Alegre
was given a copy of the report filed by Brent School with the Department of Labor advising of the termination
of his services effective on July 16, 1976. The stated ground for the termination was "completion of contract,
expiration of the definite period of employment.
However, at the investigation conducted by a Labor Conciliator of said report of termination of his services,
Alegre protested the announced termination of his employment. He argued that although his contract did
stipulate that the same would terminate on July 17, 1976, since his services were necessary and desirable
in the usual business of his employer, and his employment had lasted for five years, he had acquired the
status of a regular employee and could not be removed except for valid cause. The Regional Director
considered Brent School's report as an application for clearance to terminate employment (not a report of
termination), and accepting the recommendation of the Labor Conciliator, refused to give such clearance
and instead required the reinstatement of Alegre, as a "permanent employee," to his former position without
loss of seniority rights and with full back wages.
Brent School filed a motion for reconsideration. The Regional Director denied the motion and forwarded the
case to the Secretary of Labor for review. The latter sustained the Regional Director. Brent appealed to the
Office of the President. Again it was rebuffed. That Office dismissed its appeal for lack of merit and affirmed
the Labor Secretary's decision, ruling that Alegre was a permanent employee who could not be dismissed
except for just cause, and expiration of the employment contract was not one of the just causes provided
in the Labor Code for termination of services.
Issue: Whether or not the provisions of the Labor Code, as amended, have anathematized "fixed period
employment" or employment for a term.
Ruling: No
There is, on the other hand, the Civil Code, which has always recognized, and continues to recognize, the
validity and propriety of contracts and obligations with a fixed or definite period, and imposes no restraints
on the freedom of the parties to fix the duration of a contract, whatever its object, be it specie, goods or
services, except the general admonition against stipulations contrary to law, morals, good customs, public
order or public policy.
There can of course be no quarrel with the proposition that where from the circumstances it is apparent that
periods have been imposed to preclude acquisition of tenurial security by the employee, they should be
struck down or disregarded as contrary to public policy, morals, etc. But where no such intent to circumvent
the law is shown, or stated otherwise, where the reason for the law does not exist,.
Accordingly, and since the entire purpose behind the development of legislation culminating in the present
Article 280 of the Labor Code clearly appears to have been, as already observed, to prevent circumvention
of the employee's right to be secure in his tenure, the clause in said article indiscriminately and completely
ruling out all written or oral agreements conflicting with the concept of regular employment as defined
therein should be construed to refer to the substantive evil that the Code itself has singled out: agreements
entered into precisely to circumvent security of tenure. It should have no application to instances where
a fixed period of employment was agreed upon knowingly and voluntarily by the parties, without
Atty. Mercader
any force, duress or improper pressure being brought to bear upon the employee and absent any
other circumstances vitiating his consent, or where it satisfactorily appears that the employer and
employee dealt with each other on more or less equal terms with no moral dominance whatever
being exercised by the former over the latter. Unless thus limited in its purview, the law would be made
to apply to purposes other than those explicitly stated by its framers; it thus becomes pointless and arbitrary,
unjust in its effects and apt to lead to absurd and unintended consequences.
Paraphrasing Escudero, respondent Alegre's employment was terminated upon the expiration of his last
contract with Brent School on July 16, 1976 without the necessity of any notice. The advance written advice
given the Department of Labor with copy to said petitioner was a mere reminder of the impending expiration
of his contract, not a letter of termination, nor an application for clearance to terminate which needed the
approval of the Department of Labor to make the termination of his services effective. In any case, such
clearance should properly have been given, not denied.
WHEREFORE, the public respondent's Decision complained of is REVERSED and SET ASIDE.
Respondent Alegre's contract of employment with Brent School having lawfully terminated with and by
reason of the expiration of the agreed term of period thereof, he is declared not entitled to reinstatement
and the other relief awarded and confirmed on appeal in the proceedings below.
Atty. Mercader
Pakistan International Airlines v Ople

G.R. No. 61594. September 28, 1990
Feliciano, J.
Facts:
On 2 December 1978, petitioner Pakistan International Airlines Corporation ("PIA"), a foreign corporation
licensed to do business in the Philippines, executed in Manila two (2) separate contracts of employment,
one with private respondent Ethelynne B. Farrales and the other with private respondent Ma. M.C.
Mamasig.
Pertinent provisions of the contract provides that:
•Duration of Employment- 3yrs but can be extended by mutual consent of the parties; (Par.5)
•Termination- PIA reserves the right to terminate this agreement at any time by giving the EMPLOYEE
notice in writing in advance one month before the intended termination or in lieu thereof, by paying the
EMPLOYEE wages equivalent to one month's salary.
•Applicable law- This agreement shall be construed and governed under and by the laws of Pakistan, and
only the Courts of Karachi, Pakistan shall have the jurisdiction to consider any matter arising out of or under
this agreement (par.6)
Respondents then commenced training in Pakistan. After their training period, they began discharging their
job functions as flight attendants, with base station in Manila and flying assignments to different parts of the
Middle East and Europe
Roughly one (1) year and four (4) months prior to the expiration of the contracts of employment, PIA through
Mr. Oscar Benares, counsel for and official of the local branch of PIA, sent separate letters both dated 1
August 1980 to private respondents Farrales and Mamasig advising both that their services as flight
stewardesses would be terminated "effective 1 September 1980, conformably to clause 6 (b) of the
employment agreement [they had) executed with [PIA]."
On 9 September 1980, private respondents Farrales and Mamasig jointly instituted a complaint, for illegal
dismissal and non-payment of company benefits and bonuses, against PIA with the then Ministry of Labor
and Employment ("MOLE").
PIA’s claims:
 that both private respondents were habitual absentees;
 that both were in the habit of bringing in from abroad sizeable quantities of "personal effects";
 and that PIA personnel at the Manila International Airport had been discreetly warned by customs
officials to advise private respondents to discontinue that practice. PIA further claimed that the
services of both private respondents were terminated pursuant to the provisions of the employment
contract.
Regional Director (MOLE): Issued an Order stated that private respondents had attained the status of
regular employees after they had rendered more than a year of continued service; that the stipulation
limiting the period of the employment contract to three (3) years was null and void as violative of the
provisions of the Labor Code and its implementing rules and regulations on regular and casual employment;
and that the dismissal, having been carried out without the requisite clearance from the MOLE, was illegal
and entitled private respondents to reinstatement with full backwages.
Hon. Vicente Leogardo, Jr., Deputy Minister, MOLE: adopted the findings of fact and conclusions of the
Regional Director and affirmed the latter's award save for the portion thereof giving PIA the option, in lieu
of reinstatement, "to pay each of the complainants [private respondents] their salaries corresponding to the
unexpired portion of the contract[s] [of employment]
ISSUE: WON the relationship between petitioner and private respondents was governed by the provisions
of the contract rather than by the Labor Code.
SC: NO.
Examining the provisions of paragraphs 5 and 6 of the employment agreement between petitioner PIA and
private respondents, the Court consider that those provisions must be read together and when so read, the
fixed period of three (3) years specified in paragraph 5 will be seen to have been effectively neutralized by
Atty. Mercader
the provisions of paragraph 6 of that agreement. Paragraph 6 in effect took back from the employee the
fixed three (3)-year period ostensibly granted by paragraph 5 by rendering such period in effect a facultative
one at the option of the employer PIA. For petitioner PIA claims to be authorized to shorten that term, at
any time and for any cause satisfactory to itself, to a one-month period, or even less by simply paying the
employee a month's salary. Because the net effect of paragraphs 5 and 6 of the agreement here involved
is to render the employment of private respondents Farrales and Mamasig basically employment at the
pleasure of petitioner PIA, the Court considers that paragraphs 5 and 6 were intended to prevent any
security of tenure from accruing in favor of private respondents even during the limited period of three (3)
years, and thus to escape completely the thrust of Articles 280 and 281 of the Labor Code.
And that private respondents Farrales and Mamasig were illegally dismissed and that public respondent
Deputy Minister, MOLE, had not committed any grave abuse of discretion nor any act without or in excess
of jurisdiction in ordering their reinstatement with backwages. Private respondents are entitled to three (3)
years backwages without qualification or deduction. Should their reinstatement to their former or other
substantially equivalent positions not be feasible in view of the length of time which has gone by since their
services were unlawfully terminated, petitioner should be required to pay separation pay to private
respondents amounting to one (1) month's salary for every year of service rendered by them, including the
three (3) years service putatively rendered.
The rule in Article 1306, of our Civil Code is that the contracting parties may establish such stipulations as
they may deem convenient, "provided they are not contrary to law, morals, good customs, public order or
public policy." Thus, counter-balancing the principle of autonomy of contracting parties is the equally
general rule that provisions of applicable law, especially provisions relating to matters affected with public
policy, are deemed written into the contract. Put a little differently, the governing principle is that parties
may not contract away applicable provisions of law especially peremptory provisions dealing with matters
heavily impressed with public interest. The law relating to labor and employment is clearly such an area
and parties are not at liberty to insulate themselves and their relationships from the impact of labor laws
and regulations by simply contracting with each other.
Atty. Mercader
Philips Semiconductors (Phils) Inc. vs. Eloisa Fadriquela

Callejo Sr., J.
GR No. 141717 – 14 April 2004
Facts:
Eloisa Fadriquela (respondent) was hired by Philips as a production operator. She was assigned to wire
building at the transistor division for a period of 3 months which was later extended for another 2 months
after obtaining a performance of 3.15 which is above the required performance appraisal rating of 3.0
required by the company. It was further extended for another 2 months when she garnered a rating of 3.8.
After the expiration of her last contract, it was extended for another 3 months. However, she incurred a total
of 12 absences during the subsistence of her last contract. Her Line Supervisor, Shirley F. Verlayo warned
her of non-renewal of her contract should she fail to have valid justifications for such absences. For failure
to do so, and in violation of the company rules and regulations, she obtained a performance rating of 2.8
which resulted to the non-renewal of her contract. Respondent filed a case before the NLRC for illegal
dismissal but petitioner contends that she was not illegally dismissed but that her last contract merely
expired and it was not renewed for her low performance. The Labor Arbiter ruled in favor of the company
contending that the respondent who has rendered less than 17 months of service is not deemed to have
acquired a regular status. The Labor Arbiter based its decision on the collective bargaining agreement
between the company and the Philips Semiconductor Phils., Inc., Workers Union that a contractual
employee would be deemed a regular employee after completion of 17 months of service with a 3.0 rating.
The ruling of the Labor Arbiter was affirmed by the NLRC, to which she countered by filing a motion for
reconsideration which was likewise denied by the NLRC. Respondent, then filed a petition for certiorari
before the Court of Appeals to which the appellate court reversed the earlier decisions of the Labor Arbiter
and the NLRC. Hence, this petition filed by petitioner.
ISSUES:
1)Whether or not the respondent was still a contractual employee of the petitioner as of June 4, 1993;
2) Whether or not the petitioner dismissed the respondent from her employment;
3) If so, whether or not she was accorded the requisite notice and investigation prior to her dismissal;
and,
Held:
1. No. The Supreme Court held that there are two kinds of regular employees under the law, to wit: (1)
those engaged to perform activities which are necessary or desirable in the usual business or trade of
the employer; and (2) those casual employees who have rendered at least one year of service,
whether continuous or broken, with respect to the activities in which they are employed. In this case,
it is undisputed that the work of the respondent was necessary or desirable in the business or trade of
the petitioner, hence she is not a contractual employee.
2-3
On the second and third issues, the Supreme Court found that respondent was dismissed by the
petitioner without the requisite notice and without any formal investigation. In ruling so, it held that
dismissal is too harsh a penalty and could have been dealt with a less punitive sanction and that neither
can the conferences purportedly held between the respondent and the line supervisor be deemed
substantial compliance with the requirements of notice and investigation as to warrant observance of due
process.
Atty. Mercader
Fuji Television Network, Inc. vs. Arlene Espiritu

Leonen, J.:
GR Nos. 204944-45 – December 3, 2014
FACTS:
 Fuji Television Network, Inc. is engaged in the business of broadcasting, including news programming.
It is based in Japan and has overseas offices to cover international news. In 2005, Arlene Espiritu was
engaged by Fuji as a news correspondent/producer "tasked to report Philippine news to Fuji through
its Manila Bureau field office." Arlene's employment contract initially provided for a term of one (1) year
but was successively renewed on a yearly basis with salary adjustment upon every renewal.
 Sometime in January 2009, Arlene was diagnosed with lung cancer. She informed Fuji about her
condition. In turn, the Chief of News Agency of Fuji, Yoshiki Aoki, informed Arlene "that the company
will have a problem renewing her contract" since it would be difficult for her to perform her job. She
"insisted that she was still fit to work as certified by her attending physician."
 After several verbal and written communications, Arlene and Fuji signed a non-renewal contract where
it was stipulated that her contract would no longer be renewed after its expiration on May 31, 2009.
The contract also provided that the parties release each other from liabilities and responsibilities under
the employment contract.
 In consideration of the non-renewal contract, Arlene "acknowledged receipt of the total amount of
US$18,050.00 representing her monthly salary from March 2009 to May 2009, year-end bonus, mid-
year bonus, and separation pay." However, Arlene affixed her signature on the non-renewal contract
with the initials "U.P." for "under protest."
 A day after Arlene signed the non-renewal contract, she filed a complaint for illegal dismissal and
attorney's fees with the National Capital Region Arbitration Branch of the National Labor Relations
Commission. She alleged that she was forced to sign the non-renewal contract when Fuji came to
know of her illness and that Fuji withheld her salaries and other benefits when she refused to sign.
 Arlene claimed that she was left with no other recourse but to sign the non-renewal contract, and it
was only upon signing that she was given her salaries and bonuses, in addition to separation pay
equivalent to four (4) years.
 Labor Arbiter: dismissed Arlene's complaint. Citing Sonza v. ABS-CBN and applying the four-fold test,
the Labor Arbiter held that Arlene was not Fuji's employee but an independent contractor.
 National Labor Relations Commission reversed the Labor Arbiter's decision. It held that Arlene was a
regular employee with respect to the activities for which she was employed since she continuously
rendered services that were deemed necessary and desirable to Fuji's business.
 Court of Appeals affirmed the National Labor Relations Commission with the modification that Fuji
immediately reinstate Arlene to her position as News Producer without loss of seniority rights, and pay
her backwages, 13th-month pay, mid-year and year-end bonuses, sick leave and vacation leave with
pay until reinstated, moral damages, exemplary damages, attorney's fees, and legal interest of 12%
per annum of the total monetary awards.
ISSUE/S:
1. Whether or not there is an employer-employee relationship between Arlene and Fuji
2. Whether or not Espiritu is a regular employee or a fixed-term contractual employee
3. Whether or not Espiritu was illegally dismissed
HELD: The assailed Court of Appeals decision dated June 25, 2012 is AFFIRMED with the modification
that backwages shall be computed from June 2009. Legal interest shall be computed at the rate of 6% per
annum of the total monetary award from date of finality of this decision until full satisfaction.
RULING:
1. Yes. The Court of Appeals did not err when it relied on the ruling in Dumpit-Murillo, declaring
newscasters and co-anchors as employees of ABC, that Arlene was a regular employee. Arlene
was hired by Fuji as a news producer, but there was no showing that she was hired because of
unique skills that would distinguish her from ordinary employees. Neither was there any showing
that she had a celebrity status. Her monthly salary amounting to US$1,900.00 appears to be a
substantial sum, especially if compared to her salary when she was still connected with GMA.
Atty. Mercader
Indeed, wages may indicate whether one is an independent contractor. Wages may also indicate
that an employee is able to bargain with the employer for better pay. However, wages should not be
the conclusive factor in determining whether one is an employee or an independent contractor.
Fuji had the power to dismiss Arlene, as provided for in her professional employment contract. Her
contract also indicated that Fuji had control over her work because she was required to work for eight
(8) hours from Monday to Friday, although on flexible time. Sonza was not required to work for eight (8)
hours, while Dumpit-Murillo had to be in ABC to do both on-air and off-air tasks. On the power to control,
Arlene alleged that Fuji gave her instructions on what to report and even the mode of transportation in
carrying out her functions was controlled by Fuji. Thus, Arlene was not an independent contractor but
an employee.
2. Regular Employee with a Fixed Term. The successive renewals of Arlene's contract indicated
the necessity and desirability of her work in the usual course of Fuji's business. Because of this, Arlene had
become a regular employee with the right to security of tenure. She was hired for the primary purpose of
news gathering and reporting to the television network's headquarters. Arlene was not contracted on
account of any peculiar ability or special talent and skill that she may possess which the network desires to
make use of. Parenthetically, if it were true that Espiritu is an independent contractor, as claimed by Fuji,
the fact that everything that she uses to perform her job is owned by the company including the laptop
computer and mini camera discounts the idea of job contracting.
With regard to Fuji's argument that Arlene's contract was for a fixed term, Philips Semiconductors,
Inc. v. Fadriquela was cited and it was held that where an employee's contract "had been continuously
extended or renewed to the same position, with the same duties and remained in the employ without
any interruption," then such employee is a regular employee. The continuous renewal is a scheme to
prevent regularization. On this basis, the Court of Appeals ruled in favor of Arlene. Arlene's contract
indicating a fixed term did not automatically mean that she could never be a regular employee. Further,
an employee can be a regular employee with a fixed-term contract. The law does not preclude the
possibility that a regular employee may opt to have a fixed-term contract for valid reasons. This was
recognized in Brent: For as long as it was the employee who requested, or bargained, that the contract
have a "definite date of termination," or that the fixed-term contract be freely entered into by the employer
and the employee, then the validity of the fixed-term contract will be upheld.
3. Yes. As a regular employee, Arlene was entitled to security of tenure and could be dismissed only
for just or authorized causes and after the observance of due process. The right to security of tenure is
guaranteed under Article XIII, Section 3 of the 1987 Constitution and Article 279 of the Labor Code. It was
found that Arlene was dismissed because of her health condition. Disease as a ground for termination is
recognized under Article 284 of the Labor Code. For dismissal under Article 284 to be valid, two
requirements must be complied with: (1) the employee's disease cannot be cured within six (6) months and
his "continued employment is prohibited by law or prejudicial to his health as well as to the health of his co-
employees"; and (2) certification issued by a competent public health authority that even with proper
medical treatment, the disease cannot be cured within six (6) months. The burden of proving compliance
with these requisites is on the employer. Non-compliance leads to the conclusion that the dismissal was
illegal. There is no evidence showing that Arlene was accorded due process. After informing her employer
of her lung cancer, she was not given the chance to present medical certificates. Fuji immediately concluded
that Arlene could no longer perform her duties because of chemotherapy. It did not ask her how her
condition would affect her work. Neither did it suggest for her to take a leave, even though she was entitled
to sick leaves. Worse, it did not present any certificate from a competent public health authority. What Fuji
did was to inform her that her contract would no longer be renewed, and when she did not agree, her salary
was withheld. Thus, for failure of Fuji to comply with due process, Arlene was illegally dismissed.
Atty. Mercader
Samonte v La Salle Green Hills

Perez, J.
GR No. 199683 – February 10, 2016
FACTS:
From 1989, and for fifteen (15) years thereafter, LSGI contracted the services of medical professionals,
specifically pediatricians, dentists and a physician, to comprise its Health Service Team (HST).
Petitioners, along with other members of the HST signed uniform one-page Contracts of Retainer for the
period of a specific academic calendar beginning in June of a certain year (1989 and the succeeding 15 years) and
terminating in March of the following year when the school year ends.
After fifteen consecutive years of renewal each academic year, where the last Contract of Retainer was for
the school year of 2003-2004 i.e., June 1, 2003 to March 31, 2004, LSGI Head Administrator, Herman Rochester, on
that last day of the school year, informed the Medical Service Team, including herein petitioners, that their contracts
will no longer be renewed for the following school year by reason of LSGI's decision to hire two (2) full-time doctors
and dentists. One of the physicians from the same Health Service Team was hired by LSGI as a full-time doctor.
When petitioners', along with their medical colleagues', requests for payment of their separation pay were
denied, they filed a complaint for illegal dismissal with prayer for separation pay, damages and attorney's fees before
the NLRC. They included the President of LSGI, Bro. Bernard S. Oca, as respondent.
In their Position Paper, petitioners alleged that they were regular employees who could only be dismissed
for just and authorized causes.
To further bolster their claim of regular employment, complainants pointed out the following in their
Position Paper:
In the course of their employment, each of the complainants served an average of nine hours a week. But
beyond their duty hours, they were on call for any medical exigencies of the La Sallian community. Furthermore,
over the years, additional tasks were assigned to the complainants and were required to suffer the following
services/activites:
a) To attend staff meetings and to participate in the formulation/adoption of policies and programs
designed to enhance the School services to its constituents and to upgrade the School's standards. Complainants'
involvement in Staff Meetings of the Health Services Unit of respondent school was a regular activity associated with
personnel who are regular employees of an institution;
b) To participate in various gatherings and activities sponsored by the respondent school such as the
Kabihasnan (the bi-annual school fair), symposiums, seminars, orientation programs, workshops, lectures, etc.,
including purely political activities such as the NAMFREL quick count, of which the respondent school is a staunch
supporter;
c) Participation of the complainants in Medical/Dental Missions in the name of respondent school;
d) Formulation of the Health Services Unit Manual;
e) Participation in the collation of evaluation of services rendered by the Health Services Unit, as required
for the continuing PAASCU (Philippine Association of Accredited Schools Colleges & Universities) accreditation of the
School;
f) Participation in the yearly evaluation of complainants, which is a function of regular employees in the
HRD-CENTRO Operations, of the HRD-CENTRO Head Administrator;
g) Designation of certain complainants, particularly Dr. Jennifer A. Ramirez, as member of panel of
investigation to inquire into an alleged misdemeanor of a regular employee of respondent school; and
h) Regular inspection of the canteen concessionaire and the toilet facilities of the school premises to insure
its high standards of sanitation.
On the other hand, in their Position Paper, LSGI denied that complainants were regular employees,
asserting that complainants were independent contractors who were retained by LSGI by reason of their medical
skills and expertise to provide ancillary medical and dental services to both its students and faculty, consistent with
the following circumstances:
Atty. Mercader
1. Complainants were professional physicians and dentists on retainer basis, paid on monthly retainer fees, not
regular salaries;
2. LSGI had no power to impose disciplinary measures upon complainants including dismissal from employment;
3. LSGI had no power of control over how complainants actually performed their professional services.
In the main, LSGI invoked the case of Sonza v. ABS-CBN7 to justify its stance that complainants were independent
contractors and not regular employees citing, thus:
“SONZA's argument is misplaced. ABS-CBN engaged SONZA's services specifically to co-host the "Mel & Jay"
programs. ABS-CBN did not assign any other work to SONZA. To perform his work, SONZA only needed his skills and
talent. How SONZA delivered his lines, appeared on television, and sounded on radio were outside ABS-CBN's
control. SONZA did not have to render 8 hours of work per day. The Agreement required SONZA to attend only
rehearsals and tapings of the shows, as well as pre and post-production staff meetings. ABS-CBN could not dictate
the contents of SONZA's script. However, the Agreement prohibited SONZA from criticising in his shows ABS-CBN or
its interests. The clear implication is that SONZA had a free hand on what to say or discuss in his shows provided he
did not attack ABS-CBN or its interests.”
LA RULING: DISMISSED COMPLAINT. Petitioners were independent contractors.

Complainants, as propounded by LSGI, were independent contractors under retainership contracts and
never became regular employees of LSGI. The Labor Arbiter based its over-all finding of the absence of control by
LSGI over complainants on the following points:
1. The professional services provided by complainants, including herein petitioners, cannot be considered as
necessary to LSGI's business of providing primary and secondary education to its students.
2. The pay slips of complainants are not salaries but professional fees less taxes withheld for the medical services
they provided;
3. Issuance of identification cards to, and the requirement to log the time-in and time-out of, complainants are not
indicia of LSGI's power of control over them but were only imposed for security reasons and in compliance with the
agreed clinic schedules of complainants at LSGI premises.
4. In contrast to regular employees of LSGI, complainants: (a) were not required to attend or participate in school-
sponsored activities and (b) did not enjoy benefits such as educational subsidy for their dependents.
5. On this score alone, complainants' respective clinic schedule at LSGI for two (2) to three (3) days a week for three
(3) hours a day, for a maximum of nine (9) hours a week, was not commensurate to the required number of hours
work rendered by a regular employee in a given week of at least 40 hours a week or 8 hours a day for five (5) days.
In addition, the appointed clinic schedule was based on the preference of complainants.
NLRC RULING: Petitioners were fixed-term employees

At the outset, the NLRC disagreed with the Labor Arbiter's ruling that complainants were independent
contractors based on the latter's opinion that the services rendered by complainants are not considered necessary
to LSGI's operation as an educational institution. The NLRC noted that Presidential Decree No. 856, otherwise known
as the Sanitation Code of the Philippines, requires that private educational institutions comply with the sanitary
laws.
Nonetheless, the NLRC found that complainants were fixed-period employees whose terms of employment
were subject to agreement for a specific duration. In all, the NLRC ruled that the Contracts of Retainer between
complainants and LSGI are valid fixed-term employment contracts where complainants as medical professionals
understood the terms thereof when they agreed to such continuously for more than ten (10) years. Consequently,
the valid termination of their retainership contracts at the end of the period stated therein, did not entitle
complainants to reinstatement, nor, to payment of separation pay.
CA RULING: AFFIRMED NLRC DECISION
The Court of Appeals found that the NLRC's ruling was based on the Contracts of Retainer signed by
petitioners who, as professionals, supposedly ought to have known the import of the contracts they voluntarily
Atty. Mercader
signed, i.e. (a) temporary in character; (b) automatically ceasing on the specified expiration date, or (c) likewise
deemed terminated if job/task shall be completed on a date prior to specified expiration date.
ISSUE/S:
WoN Petitioners are regular employees
HELD:
1. YES.
In the case at bar, the Court of Appeals disregarded the repeated renewals of the Contracts of
Retainer of petitioners spanning a decade and a half. The Court of Appeals ruled that petitioners never
became regular employees.
The uniform one-page Contracts of Retainer signed by petitioners were prepared by LSGI alone.
Petitioners, medical professionals as they were, were still not on equal footing with LSGI as they
obviously did not want to lose their jobs that they had stayed in for fifteen (15) years. There is no
specificity in the contracts regarding terms and conditions of employment that would indicate that
petitioners and LSGI were on equal footing in negotiating it. Notably, without specifying what are
the tasks assigned to petitioners, LSGI "may upon prior written notice to the retainer, terminate [the]
contract should the retainer fail in any way to perform his assigned job/task to the satisfaction of La Salle
Greenhills, Inc. or for any other just cause."
While vague in its sparseness, the Contract of Retainer very clearly spelled out that LSGI had
the power of control over petitioners.
Time and again we have held that the power of control refers to the existence of the power and
not necessarily to the actual exercise thereof, nor is it essential for the employer to actually supervise the
performance of duties of the employee. It is enough that the employer has the right to wield that power.
In all, given the following: (1) repeated renewal of petitioners' contract for fifteen years,
interrupted only by the close of the school year; (2) the necessity of the work performed by petitioners as
school physicians and dentists; and (3) the existence of LSGI's power of control over the means and
method pursued by petitioners in the performance of their job, we rule that petitioners attained regular
employment, entitled to security of tenure who could only be dismissed for just and authorized causes.
Consequently, petitioners were illegally dismissed and are entitled to the twin remedies of payment of
separation pay and full back wages. We order separation pay in lieu of reinstatement given the time that
has lapsed, twelve years, in the litigation of this case.
Atty. Mercader
Poseidon Fishing/Terry De Jesus vs. National Labor Relations Commission and Jimmy S.
Estoquia
Chico-Nazario, J.
GR No. 168052 – 20 February 2006
This petition assails the Decision of the Court of Appeals which affirmed that of the National Labor
Relations Commission. The NLRC had affirmed with modification the Decision of the Labor Arbiter,
declaring private respondent to have been illegally dismissed and entitled to backwages and separation
pay.
FACTS:
 Petitioner Poseidon Fishing is a fishing company engaged in deep-sea fishing industry. One of its
boat crew was private respondent Estoquia. Petitioner de Jesus is the manager of Poseidon.
 1988: Estoquia was employed by Poseidon as Chief Mate. After five years, he was promoted to
Boat Captain.
 1999: Petitioners demoted respondent from Boat Captain to Radio Operator. As Radio Operator,
he monitored the daily activities in their office and recorded in the duty logbook the names of the
callers and the time of their calls.
 2000: Estoquia failed to record a call in one of the logbooks. However, he was able to record the
same in the other logbook. When he reviewed the two logbooks, he noticed that he was not able
to record the said call in one of the logbooks so he immediately recorded the 7:25am call after the
7:30am entry.
 The next day, de Jesus detected the error in the entry in the logbook. She asked Estoquia to
prepare an incident report. That same day, Poseidon’s secretary summoned Estoquia to get his
separation pay. He refused to accept the amount as he believed that he did nothing illegal to
warrant his immediate discharge from work.
 Estoquia filed a complaint for illegal dismissal alleging nonpayment of wages with prayer for back
wages, damages, attorney’s fees, and other monetary benefits. Petitioners strongly asserted that
Estoquia was a contractual or a casual employee whose services could be terminated at the end
of the contract even without a just or authorized cause. They further posited that when he was
engaged, it was made clear to him that he was being employed only on a “por viaje” or per trip
basis and that his employment would be terminated at the end of the trip for which he was being
hired.
 LA: In favor of Estoquia; even if he was a casual employee, he became a regular employee after
one year and, thereafter had attained tenuarial security which could only be lost due to a legal
cause after observing due process.
 NLRC: Affirmed decision of Labor Arbiter with modifications
 CA: No grave abuse of discretion on the part of NLRC
ISSUE:
WON Estoquia is a regular employee at the time his employment was terminated
HELD: PETITION DENIED. THE DECISION OF THE COURT OF APPEALS IS AFFIRMED WITH
MODIFICATION.
YES, ESTOQUIA IS A REGULAR EMPLOYEE AT THE TIME HIS EMPLOYMENT WAS TERMINATED.
 The Kasunduan had an objective—to frustrate the security of tenure of Estoquia.
 Petitioners’ intent to evade the application of Art. 280 of the Labor Code is unmistakable.
Estoquia’s work was necessary and important to the business of the employer. Such being the
scenario, he is considered a regular employee of petitioner under Art. 280.
 The terms of employment as provided in the Kasunduan was not only vague, it also failed to
provide an actual or specific date or period for the contract. The date under the heading
“Pagdating” had been placed there merely to indicate the possible date of arrival of the vessel
and is not an indication of the status of employment of the crew of the vessel.
Atty. Mercader
 Private respondent was repeatedly hired as part of the boat’s crew and he acted in various
capacities onboard the vessel.
 The act of hiring and re-hiring in various capacities is a mere gambit employed by petitioner to
thwart the tenurial protection of private respondent. Such pattern of re-hiring and the recurring
need for his services are testament to the necessity and indispensability of such services to
petitioner’s business or trade.
 There is no basis to deduct six months’ worth of salary form the total backwages that private
respondent is entitled to. Estoquia was not negligent on account of his failure to properly record a
call in the log book. He corrected straight away the recording of the call and petitioners failed to
prove the damage or injury that such inadvertence caused the company.
 Deep-sea fishing is not a seasonal industry. The activity of catching fish is a continuous process
and could hardly be considered as seasonal in nature.
 Petitioners’ assertion that Estoquia is a project employee is mistaken. They have not shown that
he was informed that he will be assigned to a specific project or undertaking.
Atty. Mercader
Fabela vs. San Miguel Corporation

Carpio-Morales, J.
GR No. 150658 – 09 February 2007
On review is the July 30, 2001 Decision of the Court of Appeals reversing the ruling of the National Labor
Relations Commission (NLRC) and the Labor Arbiter finding petitioners to have been illegally dismissed.
ART. 280. Regular and casual employment. — The provisions of written agreement to the contrary notwithstanding
and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the
employee has been engaged to perform activities which are usually necessary or desirable in the usual business or
trade of the employer, except where the employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the engagement of the employee or where
the work or services to be performed is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That any
employee who has rendered at least one year of service, whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in which he is employed and his employment shall continue
while such activity actually exists. (Emphasis, italics and underscoring supplied)
FACTS: Petitioners, along with Joselito de Lara and John Alovera, were hired by respondent San Miguel Corporation
(SMC) as "Relief Salesmen" for the Greater Manila Area (GMA) under separate but almost similarly worded
"Contracts of Employment With Fixed Period." After having entered into successive contracts of the same nature
with SMC, the services of petitioners, as well as de Lara and Alovera, were terminated after SMC no longer agreed
to forge another contract with them.
Respondent SMC and its co-respondent Arman Hicarte, who was its Human Resources Manager, claimed that the
hiring of petitioners was not intended to be permanent, as the same was merely occasioned by the need to fill in a
vacuum arising from SMC's gradual transition to a new system of selling and delivering its products.
Respondents explained that SMC previously operated under the "Route System," but began implementing in 1993
the "Pre-Selling System" in which the salesmen under the earlier system would be replaced by Accounts Specialists
which called for upgraded qualifications.
While some of the qualified regular salesmen were readily upgraded to the position of Accounts Specialist,
respondents claimed that SMC still had to sell its beer products using the conventional routing system during the
transition stage, thus giving rise to the need for temporary employees; and the members of the regular Route Crew
then existing were required to undergo a training program to determine whether they possessed or could be trained
for the necessary attitude and aptitude required of an Accounts Specialist, hence, the hiring of petitioners and others
for a fixed period, co-terminus with the completion of the transition period and Training Program for all prospective
Accounts Specialists.
Labor Arbiter Manuel P. Asuncion held that except for de Lara and Alovera, the complainants-herein petitioners
were illegally dismissed.
The Decision of the Labor Arbiter was affirmed on appeal by the NLRC, by Resolution of April 28, 2000. Respondents'
Motion for Reconsideration was denied, hence, they filed a Petition for Certiorari with the Court of Appeals before
which they contended that herein petitioners were validly hired for a fixed period which was not renewed, hence,
the termination of their services was valid.
By Decision of July 30, 2001, the Court of Appeals granted respondents' petition and accordingly reversed the
decision of the Labor Arbiter and of the NLRC. The appellate court accordingly dismissed petitioners' complaints.
ISSUE: Whether or not the employees herein are hired only for a fixed period?
No. Respondents, without disputing that the duties of petitioners consisted of activities necessary or desirable in its
usual business or trade, claim that the contracts of employment entered into by respondent SMC with the herein
petitioners are valid fixed- term contracts under the Brent doctrine.
Atty. Mercader
Respondents' contention that there are fixed periods stated in the contracts of employment does not lie. Brent
instructs that a contract of employment stipulating a fixed- term, even if clear as regards the existence of a period,
is invalid if it can be shown that the same was executed with the intention of circumventing security of tenure, and
should thus be ignored. Indeed, substantial evidence exists in the present case showing that the subject contracts
were utilized to deprive petitioners of their security of tenure.
The contract of employment of petitioner Fabela, for instance, states that the transition period from the Route
System to the Pre-Selling System would be twelve (12) months from April 4, 1995.
Petitioner Fabela, besides being hired again for another fixed period of four (4) months after the lapse in April 1996
of the one-year contract, had already been working for respondent SMC on a fixed-term basis as early as 1992, or
one year before respondent SMC even began its shift to the Pre-selling System in 1993.
Similarly, petitioner Marcelo dela Cruz III was hired prior to the alleged transition to the new system. In fact, he was
hired in December 1991, even earlier than petitioner Fabela.
The NLRC had sufficient basis to believe that the shift of SMC to the Pre- Selling System was not the real basis for
the forging of fixed-term contracts of employment with petitioners and that the periods were fixed only as a means
to preclude petitioners from acquiring security of tenure.
Affidavit of Mariano N. Lopez, respondents have presented no evidence that the shift to the Pre-Selling System
occurred as early as 1993. The employment contracts presented by respondents in support of their claim that
petitioners were hired only for the transition stage are dated not earlier than April 1995. Even the contract of
petitioner Fabela expressly states that the transition period is twelve months, beginning in1995, rather than 1993.
If the shift to the new system only began in 1995, however, then not only petitioners Fabela and dela Cruz were
hired prior to the transition, but also petitioner Quines, who was hired in 1994.
As Brent pronounces, a fixed-term employment is valid only under certain circumstances, such as when the
employee himself insists upon the period, or where the nature of the engagement is such that, without being
seasonal or for a specific project, a definite date of termination is a sine qua non.
That petitioners themselves insisted on the one-year fixed-term is not even alleged by respondents. In fact, the
sustained desire of each of the petitioners to enter into another employment contract upon the termination of the
earlier ones clearly indicates their interest in continuing to work for SMC.
Moreover, respondents have not established that the engagement of petitioners' services, which is not in the nature
of a project employment, required a definite date of termination as a sine qua non.
Atty. Mercader
GMA Network, Inc., vs. Pabriga

LEONARDO-DE CASTRO, J.
G.R. No. 176419 November 27, 2013
This is a Petition for Review on Certiorari filed by petitioner GMA Network Inc. assailing the Decision 1 of
the Court of Appeals dated September 8, 2006 and the subsequent Resolution2 dated January 22 2007
denying reconsideration in CA-G.R. SP No. 73652.
FACTS: On July 19,1999 due to the miserable working conditions private respondents were forced to file
a complaint against petitioner before the National Labor Relations Commission Regional Arbitration Branch
No. VII Cebu City assailing their respective employment circumstances as follows:
NAME DATE HIRED POSITION
Carlos Pabriga 2 May 1997 Television Technicians
Geoffrey Arias 2 May 1997 Television Technicians
Kirby Campo 1 Dec. 1993 Television Technicians
Arnold Laganit 11 Feb. 1996 Television Technicians
Armand Catubig 2 March 1997 Television Technicians
Private respondents were engaged by petitioner to perform the following activities, to wit:
1) Manning of Technical Operations Center:
(a) Responsible for the airing of local commercials; and
(b) Logging/monitoring of national commercials (satellite)
2) Acting as Transmitter/VTR men:
(a) Prepare tapes for local airing;
(b) Actual airing of commercials;
(c) Plugging of station promo;
(d) Logging of transmitter reading; and
(e) In case of power failure, start up generator set to resume program;
3) Acting as Maintenance staff;
(a) Checking of equipment;
(b) Warming up of generator;
(c) Filling of oil, fuel, and water in radiator; and
4) Acting as Cameramen
On 4 August 1999, petitioner received a notice of hearing of the complaint. The following day, petitioner’s
Engineering Manager, Roy Villacastin, confronted the private respondents about the said complaint.
On 9 August 1999, private respondents were summoned to the office of petitioner’s Area Manager, Mrs.
Susan Aliño, and they were made to explain why they filed the complaint. The next day, private respondents
were barred from entering and reporting for work without any notice stating the reasons therefor.
On 13 August 1999, private respondents, through their counsel, wrote a letter to Mrs. Susan Aliño
requesting that they be recalled back to work.
On 23 August 1999, a reply letter from Mr. Bienvenido Bustria, petitioner’s head of Personnel and Labor
Relations Division, admitted the non-payment of benefits but did not mention the request of private
respondents to be allowed to return to work.
On 15 September 1999, private respondents sent another letter to Mr. Bustria reiterating their request to
work but the same was totally ignored. On 8 October 1999, private respondents filed an amended complaint
raising the following additional issues: 1) Unfair Labor Practice; 2) Illegal dismissal; and 3) Damages and
Attorney’s fees.
On 23 September 1999, a mandatory conference was set to amicably settle the dispute between the parties,
however, the same proved to be futile. As a result, both of them were directed to file their respective position
papers.
Atty. Mercader
On 10 November 1999, private respondents filed their position paper and on 2 March 2000, they received
a copy of petitioner’s position paper. The following day, the Labor Arbiter issued an order considering the
case submitted for decision.3
In his Decision dated August 24, 2000, the Labor Arbiter dismissed the complaint of respondents for illegal
dismissal and unfair labor practice, but held petitioner liable for 13th month pay.
ISSUE/S:
1. Whether respondents are project employees
2. Whether the requisites of a valid fixed term employment are met

1. No, they are regular employees. It is evidently important to become clear about the meaning and
scope of the term "project" in the present context. The "project" for the carrying out of which "project
employees" are hired would ordinarily have some relationship to the usual business of the
employer. Exceptionally, the "project" undertaking might not have an ordinary or normal relationship
to the usual business of the employer. In this latter case, the determination of the scope and
parameters of the "project" becomes fairly easy. It is unusual (but still conceivable) for a company
to undertake a project which has absolutely no relationship to the usual business of the company;
thus, for instance, it would be an unusual steel-making company which would undertake the
breeding and production of fish or the cultivation of vegetables. From the viewpoint, however, of
the legal characterization problem here presented to the Court, there should be no difficulty in
designating the employees who are retained or hired for the purpose of undertaking fish culture or
the production of vegetables as "project employees," as distinguished from ordinary or "regular
employees," so long as the duration and scope of the project were determined or specified at the
time of engagement of the "project employees." For, as is evident from the provisions of Article 280
of the Labor Code, quoted earlier, the principal test for determining whether particular employees
are properly characterized as "project employees" as distinguished from "regular employees," is
whether or not the "project employees" were assigned to carry out a "specific project or
undertaking," the duration (and scope) of which were specified at the time the employees were
engaged for that project.
In the realm of business and industry, we note that "project" could refer to one or the other of at least
two (2) distinguishable types of activities. Firstly, a project could refer to a particular job or undertaking
that is within the regular or usual business of the employer company, but which is distinct and separate,
and identifiable as such, from the other undertakings of the company. Such job or undertaking begins and
ends at determined or determinable times. The typical example of this first type of project is a particular
construction job or project of a construction company. A construction company ordinarily carries out two or
more [distinct] identifiable construction projects: e.g., a twenty-five-storey hotel in Makati; a residential
condominium building in Baguio City; and a domestic air terminal in Iloilo City. Employees who are hired
for the carrying out of one of these separate projects, the scope and duration of which has been determined
and made known to the employees at the time of employment, are properly treated as "project employees,"
and their services may be lawfully terminated at completion of the project.
The term "project" could also refer to, secondly, a particular job or undertaking that is not within the regular
business of the corporation. Such a job or undertaking must also be identifiably separate and distinct from
the ordinary or regular business operations of the employer. The job or undertaking also begins and ends
at determined or determinable times. x x x. 11 (Emphases supplied, citation omitted.)
These jobs and undertakings (see facts) are clearly within the regular or usual business of the
employer company and are not identifiably distinct or separate from the other undertakings of the
company. There is no denying that the manning of the operations center to air commercials, acting
as transmitter/VTR men, maintaining the equipment, and acting as cameramen are not undertakings
separate or distinct from the business of a broadcasting company.
Petitioner’s allegation that respondents were merely substitutes or what they call pinch-hitters
(which means that they were employed to take the place of regular employees of petitioner who
were absent or on leave) does not change the fact that their jobs cannot be considered projects
within the purview of the law. Every industry, even public offices, has to deal with securing substitutes
for employees who are absent or on leave. Such tasks, whether performed by the usual employee or by a
substitute, cannot be considered separate and distinct from the other undertakings of the company. While
Atty. Mercader
it is management’s prerogative to device a method to deal with this issue, such prerogative is not absolute
and is limited to systems wherein employees are not ingeniously and methodically deprived of their
constitutionally protected right to security of tenure. We are not convinced that a big corporation such as
petitioner cannot device a system wherein a sufficient number of technicians can be hired with a regular
status who can take over when their colleagues are absent or on leave, especially when it appears from
the records that petitioner hires so-called pinch-hitters regularly every month.
2. No, petitioner interchangeably characterizes respondents’ service as project and fixed term
employment. These types of employment, however, are not the same. While the former requires a project
as restrictively defined above, the duration of a fixed-term employment agreed upon by the parties may be
any day certain, which is understood to be "that which must necessarily come although it may not be known
when."25 The decisive determinant in fixed-term employment is not the activity that the employee is called
upon to perform but the day certain agreed upon by the parties for the commencement and termination of
the employment relationship.26
Cognizant of the possibility of abuse in the utilization of fixed-term employment contracts, we emphasized
in Brent that where from the circumstances it is apparent that the periods have been imposed to preclude
acquisition of tenurial security by the employee, they should be struck down as contrary to public policy or
morals.27 We thus laid down indications or criteria under which "term employment" cannot be said
to be in circumvention of the law on security of tenure, namely:
1) The fixed period of employment was knowingly and voluntarily agreed upon by the parties
without any force, duress, or improper pressure being brought to bear upon the employee and
absent any other circumstances vitiating his consent; or
2) It satisfactorily appears that the employer and the employee dealt with each other on more or
less equal terms with no moral dominance exercised by the former or the latter. 28 (Citation omitted.)
These indications, which must be read together, make the Brent doctrine applicable only in a few special
cases wherein the employer and employee are on more or less in equal footing in entering into the contract.
The reason for this is evident: when a prospective employee, on account of special skills or market forces,
is in a position to make demands upon the prospective employer, such prospective employee needs less
protection than the ordinary worker. Lesser limitations on the parties’ freedom of contract are thus required
for the protection of the employee. These indications were applied in Pure Foods Corporation v. National
Labor Relations Commission,29 where we discussed the patent inequality between the employer and
employees therein:
[I]t could not be supposed that private respondents and all other so-called "casual" workers of [the petitioner]
KNOWINGLY and VOLUNTARILY agreed to the 5-month employment contract. Cannery workers are never
on equal terms with their employers. Almost always, they agree to any terms of an employment contract
just to get employed considering that it is difficult to find work given their ordinary qualifications. Their
freedom to contract is empty and hollow because theirs is the freedom to starve if they refuse to work as
casual or contractual workers. Indeed, to the unemployed, security of tenure has no value. It could not then
be said that petitioner and private respondents "dealt with each other on more or less equal terms with no
moral dominance whatever being exercised by the former over the latter.
To recall, it is doctrinally entrenched that in illegal dismissal cases, the employer has the burden of proving
with clear, accurate, consistent, and convincing evidence that the dismissal was valid. 30 It is therefore the
employer which must satisfactorily show that it was not in a dominant position of advantage in dealing with
its prospective employee. Thus, in Philips Semiconductors (Phils.), Inc. v. Fadriquela, 31 this Court rejected
the employer’s insistence on the application of the Brent doctrine when the sole justification of the fixed
terms is to respond to temporary albeit frequent need of such workers:
We reject the petitioner’s submission that it resorted to hiring employees for fixed terms to augment or
supplement its regular employment "for the duration of peak loads" during short-term surges to respond to
cyclical demands; hence, it may hire and retire workers on fixed terms, ad infinitum, depending upon the
needs of its customers, domestic and international. Under the petitioner's submission, any worker hired by
it for fixed terms of months or years can never attain regular employment status. x x x.
Atty. Mercader
Atty. Mercader
COCA-COLA BOTTLERS PHILIPPINES, INC. vs. RICKY E. DELA CRUZ, ROLANDO M. GUASIS,
MANNY C. PUGAL, RONNIE L. HERMO, ROLANDO C. SOMERO, JR., DIBSON D. DIOCARES, and
IAN B. ICHAPARE
Brion, J.
G.R. No. 184977 December 7, 2009
The present petition for review on certiorari challenges the decision and resolution of the Court of Appeals
(CA) rendered on August 29, 2008 and October 13, 2008, respectively, in CA-G.R. SP No. 102988.
FACTS:
The respondents alleged that they are route helpers assigned to work in the petitioner’s trucks.
They go from the Coca- Cola sales offices or plants to customer outlets such as sari-sari stores, restaurants,
groceries, supermarkets and similar establishments; they were hired either directly by the petitioner or by
its contractors, but they do not enjoy the full remuneration, benefits and privileges granted to the petitioner’s
regular sales force. They argued that the services they render are necessary and desirable in the regular
business of the petitioner.
The respondents filed in July 2000 two separate complaints for regularization with money claims
against Coca-Cola Bottlers Philippines, Inc., (petitioner or the company). The complaints were consolidated
and subsequently amended to implead Peerless Integrated Service, Inc. (Peerless) as a party-respondent.
The petitioner contended that it entered into contracts of services with Peerless and Excellent
Partners Cooperative, Inc. to provide allied services; under these contracts, Peerless and Excellent retained
the right to select, hire, dismiss, supervise, control and discipline and pay the salaries of all personnel they
assign to the petitioner; in return for these services, Peerless and Excellent were paid a stipulated fee. The
petitioner posited that there is no employer-employee relationship between the company and the
respondents.
In reply, the respondents countered that they worked under the control and supervision of the
company’s supervisors who prepared their work schedules and assignments. Peerless and Excellent, too,
did not have sufficient capital or investment to provide services to the petitioner. The respondents thus
argued that the petitioner’s contracts of services with Peerless and Excellent are in the nature of "labor-
only" contracts prohibited by law.
Labor Arbiter Joel S. Lustria dismissed the complaint for lack of jurisdiction in his decision of
September 28, 2004, after finding that the respondents were the employees of either Peerless or Excellent
and not of the petitioner. The NLRC denied the appeal and affirmed the labor arbiter’s ruling. The CA
examined the circumstances of the contractual arrangements between Peerless and Excellent, on the one
hand, and the company, on the other, and found that Peerless and Excellent were engaged in labor-only
contracting, a prohibited undertaking. The CA faulted the labor tribunals for relying solely on the contract of
services in determining who the real employer is. Again invoking our 7K Corporation ruling, it pointed out
that the language of a contract is not wholly determinative of the relationship of the parties; whether a labor-
only or a job contractor relationship exists must be determined using the criteria established by law.
ISSUE/S:
1. W/N labor-only contracting situation is found to exist
HELD: We resolve to deny the petition for lack of merit.
The law allows contracting and subcontracting involving services but closely regulates these activities for
the protection of workers. Thus, an employer can contract out part of its operations, provided it complies
with the limits and standards provided in the Code and in its implementing rules.
Contracting and sub-contracting are "hot" labor issues for two reasons. The first is that job contracting and
labor-only contracting are technical Labor Code concepts that are easily misunderstood. For one, there is
a lot of lay misunderstanding of what kind of contracting the Labor Code prohibits or allows. The second,
echoing the cry from the labor sector, is that the Labor Code provisions on contracting are blatantly and
pervasively violated, effectively defeating workers’ right to security of tenure.
The directly applicable provision of the Labor Code on contracting and subcontracting is Article 106 which
provides:
Atty. Mercader
“Whenever, an employer enters into a contract with another person for the performance of the former’s
work, the employees of the contractor and of the latter’s subcontractor shall be paid in accordance with the
provisions of this Code.”
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to
protect the rights of workers established under this Code. In so prohibiting or restricting, he may make
appropriate distinctions between labor-only contracting and job contracting as well as differentiations within
these types of contracting and determine who among the parties involved shall be considered the employer
for purposes of this Code.
There is "labor-only" contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such persons are performing activities which are directly
related to the principal business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the workers in the same manner
and extent as if the alter were directly employed by him
The Department of Labor and Employment implements this Labor Code provision through its Department
Order No. 18-02 (D.O. 18-02).
A manufacturer can sell its products on its own, or allow contractors, independently operating on their own,
to sell and distribute these products in a manner that does not violate the regulations. From the terms of
the above-quoted D.O. 18-02, the legitimate job contractor must have the capitalization and equipment to
undertake the sale and distribution of the manufacturer’s products, and must do it on its own using its own
means and selling methods.
In the present case, both the capitalization of Peerless and Excellent and their control over the means and
manner of their operations are live sub-issues before us.
The CA noted that both the Peerless and the Excellent contracts show that their obligation was solely to
provide the company with "the services of contractual employees,” and nothing more. These contracted
services were for the handling and delivery of the company’s products and allied services. Following D.O.
18-02 and the contracts that spoke purely of the supply of labor, the CA concluded that Peerless and
Excellent were labor-only contractors unless they could prove that they had the required capitalization and
the right of control over their contracted workers.
The CA concluded that other than the petitioner’s bare allegation, there is no indication in the records that
Peerless and Excellent had substantial capital, tools or investment used directly in providing the contracted
services to the petitioner. Thus, in the handling and delivery of company products, the contracted personnel
used company trucks and equipment in an operation where company sales personnel primarily handled
sales and distribution, merely utilizing the contracted personnel as sales route helpers.
In plainer terms, the contracted personnel (acting as sales route helpers) were only engaged in the marginal
work of helping in the sale and distribution of company products; they only provided the muscle work that
sale and distribution required and were thus necessarily under the company’s control and supervision in
doing these tasks.
Still another way of putting it is that the contractors were not independently selling and distributing company
products, using their own equipment, means and methods of selling and distribution; they only supplied the
manpower that helped the company in the handing of products for sale and distribution. In the context of
D.O. 18-02, the contracting for sale and distribution as an independent and self-contained operation is a
legitimate contract, but the pure supply of manpower with the task of assisting in sales and distribution
controlled by a principal falls within prohibited labor-only contracting.
Atty. Mercader
Temic Automotive Philippines, Inc. vs. Temic Automotive Philippines, Inc. Employees Union-FFW
Brion, J.:
G.R. No. 186965 – December 23, 2009
FACTS:
Petitioner in this case is a corporation known in the field of manufacturing electronic brake systems and
comfort body electronics for automotive vehicles. It consisted of several departments, such as the
warehouse department which also has two warehouses: the electronic braking system and the comfort
body electronics. These warehouses are further divided into four sections namely: receiving section, raw
materials warehouse section, indirect warehouse section, and finished goods section. The respondent on
the other hand, is the exclusive bargaining agent of the petitioner’s rank-and-file employees. The union
members are regular rank-and-file employees working in the said latter sections as clerks, material
handlers, system encoders and general clerks. Both the petitioner and the union executed a collective
bargaining agreement.
The issue sprouted when the petitioner contracts out some of the work in the warehouse
department, specifically those in the receiving and finished goods sections, to three independent service
providers or forwarders namely: Diversified Cargo Services, Inc; Airfreight 2100; and Kuehne & Nagel, Inc.
(KNI). It was done by practice that was established since 1998. The said forwarders also have their
employees who hold the positions of clerk, material handler, system encoder and general clerk. Petitioner’s
own regular employees and those of the forwarders share the same work area and use the same
equipment, tools, and computers all belonging to the petitioner. Their functions include: receiving and
recording of incoming deliveries, raw materials and spare parts; checking and booking-in deliveries, raw
materials and spare parts with the use of the petitioner’s system application processing; generating
barcodes and sticking these on boxes and automotive parts; and issuing or releasing spare parts and
materials as may be needed at the production area, and piling them up by means of the company’s
equipment, forklift or jacklift.
With that said, such arrangement caused the union grievance regarding the scope and coverage
of the collective bargaining unit, the union demanding that the forwarders’ employees be absorbed into
regular employee force of the petitioner and be given positions within the bargaining unit. However, the
petitioner, on the condition lending them to believe that the contracting arrangement with the forwarders is
a valid exercise of its management prerogative, contended that the union’s position is a violation of its
management prerogative to establish and determine who to hire and what to contract out, and that the
regular rank-and-file employees and their forwarders’ employees serving as its clerks, material handlers,
system encoders and general clerks do not have the same functions as regular employees, for greater
economy and efficiency in its operations. It also contends that the services rendered by the forwarders’
employees are not the same as the functions undertaken by regular rank-and-file employees covered by
the bargaining unit.
ISSUES:
1. Whether or not the company validly contracted out or outsourced the services involving forwarding,
packing, loading and clerical activities related thereto;
2. Whether or not the functions of the forwarders’ employees are functions being performed by regular
rank-and-file employees covered by the bargaining unit.
HELD:
1st ISSUE
Voluntary Arbitration: Defined “forwarding” as a universally accepted and normal business practice or
activity, and ruled that the company validly contracted out its forwarding services, and the outsourcing of
forwarding work is expressly allowed by the rules implementing the Labor Code.
CA: Affirmed VA
Supreme Court: Yes, the company validly contracted out said services.
The voluntary arbitration decision itself established, without objection from the parties, the
description of the work of forwarding as a basic premise for its ruling. To quote the voluntary arbitration
decision: As forwarders they act as travel agents for cargo. They specialize in arranging transport and
completing required shipping documentation of respondent's company's finished products. They provide
custom crating and packing designed for specific needs of respondent company. These freight forwarders
are actually acting as agents for the company in moving cargo to an overseas destination. These agents
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are familiar with the import rules and regulations, the methods of shipping, and the documents related to
foreign trade. They recommend the packing methods that will protect the merchandise during transit.
Freight forwarders can also reserve for the company the necessary space on a vessel, aircraft, train or
truck.In the examination of records, the agreement that the forwarding arrangement complies with the
requirements of Art. 106 of the Labor Code and its implementing rules. To reiterate, no evidence or
argument questions the company’s basic objective of achieving greater economy and efficiency of
operations. The forwarding arrangement has been in place since 1998 and no evidence has been presented
showing that any regular employee has been dismissed or displaced by the forwarders’ employees since
then. Thus, on the whole, we see no evidence or argument effectively showing that the outsourcing of the
forwarding activities violate labor laws, regulations, and the parties’ CBA, specifically that it interfered with,
restrained or coerced employees in the exercise of their rights to self-organization as provided in Section
6, par. (f) of the implementing rules. The only exception, of course, is what the union now submits as a
voluntary arbitration issue – i.e., the failure to recognize certain forwarder employees as regular company
employees and the effect of this failure on the CBA’s scope of coverage – which issue shall be further
discussed below.
2nd ISSUE
Voluntary Arbitration: Petitioner went beyond the limits of the legally allowable contracting out because
the forwarders’ employees encroached upon the functions of the petitioner’s regular rank-and-file workers,
and declared the forwarders as employees entitled to all the rights and privileges of regular employees,
including security of tenure.
CA: Affirmed VA Supreme Court: No, the functions performed by forwarders’ employees are not the same
with those of the regular rank-and-file employees.
The job or forwarding consists not only of a single activity but of several services that complement
one another and can be best viewed as one whole process involving a package of services. These services
include packing, loading, materials handling and support clerical activities, all of which are directed at the
transport of company goods, usually to foreign destinations. It is in the appreciation of these forwarder
services as one whole package of inter-related services that the court discerns a basic misunderstanding
that results in the error of equating the functions of the forwarders’ employees with those of regular rank-
and-file employees of the company. For example, a clerical job may similarly involve typing and paper
pushing activities and may be done on the same company products that the forwarders’ employees and
company employees may work on, but these similarities do not necessarily mean that all these employees
work for the company. Certainly, the regular company employees work for the company under its
supervision and control, but forwarder employees work for the forwarder in the forwarder’s own
operation that is itself a contracted work from the company. The company control its employees in
the means, method and results of their work, in the same manner that the forwarder controls its
own employees in the means, manner and results of their work. In the union perspective, such
agreements were already placed in the CBA when it was signed. By the union’s silence and acceptance, it
has agreed that the jobs related to the contracted forwarding activities are not regular company activities
and are not to be undertaken by regular employees falling within the scope of the bargaining unit but by the
forwarders’ employees. Moreover, the skills requirements and job content between the jobs of the
forwarders and bargaining unit may be the same, they may even work on the same company products, but
their work for different purposes and for different entities completely distinguish and separate forwarder and
company employees from one another. Before the inclusion of the forwarders’ employees in the bargaining
unit can be considered, these employees must first be proven to be regular company employees. However,
the evidence presented does not prove the union’s point that forwarder employees undertake company
rather than the forwarders’ activities. The union does not even have the personality to make this claim for
these forwarders’ employees. With regard to the issue of jurisdiction of the voluntary arbitration, the
petitioner argues that the voluntary arbitrator neither had jurisdiction nor basis to declare the to forwarders’
personnel as regular employees of the company because the matter was not among the issues submitted
by the parties for arbitration, and the forwarders and their employees were not parties to the voluntary
arbitration case and thus cannot be bound by the voluntary arbitrator’s decision. The court finds merit in
such contentions because the forwarders, with whom the petitioner had written contracts for these services,
were never made parties (and could not have been parties to the voluntary arbitration except with their
consent) so that the various forwarders’ agreements could not have been validly impugned through
voluntary arbitration and declared invalid as against the forwarders.
Atty. Mercader
Alviado v. Procter & Gamble Philippines, Inc.

Del Castillo, J:
G.R. No. 160506 - March 9, 2010
FACTS:
Petitioners worked as merchandisers of P&G from various dates. They all individually signed
employment contracts with either Promm-Gem or SAPS for periods of more or less five months at a time.
They were assigned at different outlets, supermarkets and stores where they handled all the products of
P&G. They received their wages from Promm-Gem or SAPS. SAPS and Promm-Gem imposed disciplinary
measures on erring merchandisers for reasons such as habitual absenteeism, dishonesty or changing day-
off without prior notice.
P&G is principally engaged in the manufacture and production of different consumer and health
products, which it sells on a wholesale basis to various supermarkets and distributors. To enhance
consumer awareness and acceptance of the products, P&G entered into contracts with Promm-Gem and
SAPS for the promotion and merchandising of its products.
In December 1991, petitioners filed a complaint against P&G for regularization, service incentive
leave pay and other benefits with damages. The complaint was later amended to include the matter of their
subsequent dismissal.
The Labor Arbiter dismissed the complaint for lack of merit and ruled that there was no employer-
employee relationship between petitioners and P&G. He found that the selection and engagement of the
petitioners, the payment of their wages, the power of dismissal and control with respect to the means and
methods by which their work was accomplished, were all done and exercised by Promm-Gem/SAPS. He
further found that Promm-Gem and SAPS were legitimate independent job contractors. The NLRC affirmed
the Decision of the Labor Arbiter. The Court of Appeals affirmed with modification that respondent Procter
& Gamble Phils., Inc. is ordered to pay service incentive leave pay to petitioners.
Petitioners insist that they are employees of P&G. They claim that they were recruited by the
salesmen of P&G and were engaged to undertake merchandising chores for P&G long before the existence
of Promm-Gem and/or SAPS. They further claim that when the latter had its so-called re-alignment
program, petitioners were instructed to fill up application forms and report to the agencies which P&G
created.
P&G argues that findings of facts of the NLRC, particularly where the NLRC and the Labor Arbiter
are in agreement, are deemed binding and conclusive on the Supreme Court. P&G further argues that there
is no employment relationship between it and petitioners. It was Promm-Gem or SAPS that (1) selected
petitioners and engaged their services; (2) paid their salaries; (3) wielded the power of dismissal; and (4)
had the power of control over their conduct of work. P&G also contends that the Labor Code neither defines
nor limits which services or activities may be validly outsourced. Thus, an employer can farm out any of its
activities to an independent contractor, regardless of whether such activity is peripheral or core in nature. It
insists that the determination of whether to engage the services of a job contractor or to engage in direct
hiring is within the ambit of management prerogative.
ISSUES:
(1) Whether or not P&G is the employer of petitioners;
(2) Whether or not petitioners were illegally dismissed; and
(3) Whether or not the petitioners are entitled for payment of actual, moral and exemplary damages as well
as litigation costs and attorneys fees.
HELD:
The petition has merit.
(1) Whether or not P&G is the employer of petitioners - YES for employees recruited by SAPS.
Under the circumstances, Promm-Gem cannot be considered as a labor-only
contractor. The financial statements of Promm-Gem show that it has authorized capital stock of P1 million
and a paid-in capital, or capital available for operations, of P500, 000.00 as of 1990. The Court finds that it
is a legitimate independent contractor.
Atty. Mercader
On the other hand, the Articles of Incorporation of SAPS shows that it has a paid-in capital of
only P31,250.00. There is no other evidence presented to show how much its working capital and assets
are. Furthermore, there is no showing of substantial investment in tools, equipment or other assets.
Where labor-only contracting exists, the Labor Code itself establishes an employer-employee
relationship between the employer and the employees of the labor-only contractor. The statute establishes
this relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The contractor is
considered merely an agent of the principal employer and the latter is responsible to the employees of the
labor-only contractor as if such employees had been directly employed by the principal employer.
Thus, the petitioners recruited by SAPS are considered P&G employees. The petitioners who
worked under Promm-Gem are not, since the latter is a legitimate job contractor.
(2) Whether or not petitioners were illegally dismissed - YES

In cases of regular employment, the employer shall not terminate the services of an employee
except for a just or authorized cause. In the instant case, the termination letters given by Promm-Gem to
its employees uniformly specified the cause of dismissal as grave misconduct and breach of trust after they
sought regularization from P&G. Promm-Gem claimed that this “assailed the integrity of the company as a
legitimate and independent promotion firm.”
To be a just cause for dismissal, misconduct (a) must be serious; (b) must relate to the performance
of the employee’s duties; and (c) must show that the employee has become unfit to continue working for
the employer.
In the instant case, petitioners-employees of Promm-Gem may have committed an error of

judgment in claiming to be employees of P&G, but it cannot be said that they were motivated by any
wrongful intent in doing so. As such, we find them guilty of only simple misconduct for assailing the integrity
of Promm-Gem as a legitimate and independent promotion firm. A misconduct which is not serious or grave,
as that existing in the instant case, cannot be a valid basis for dismissing an employee.
While Promm-Gem had complied with the procedural aspect of due process in terminating the
employment of petitioners-employees, i.e., giving two (2) notices and in between such notices, an
opportunity for the employees to answer and rebut the charges against them, it failed to comply with the
substantive aspect of due process as the acts complained of neither constitute serious misconduct nor
breach of trust.
(3) Whether or not the petitioners are entitled for payment of actual, moral and exemplary damages
as well as litigation costs and attorneys fees
With regard to the employees of Promm-Gem, there being no evidence of bad faith, fraud or any
oppressive act on the part of the latter, we find no support for the award of damages.
As for P&G, the records show that it dismissed its employees through SAPS in a manner oppressive
to labor. The sudden and peremptory barring of the concerned petitioners from work, and from admission
to the workplace, after just a one-day verbal notice, and for no valid cause bellows oppression and utter
disregard of the right to due process of the concerned petitioners. Hence, an award of moral damages is
called for.
Attorneys fees may likewise be awarded to the concerned petitioners who
were illegally dismissed in bad faith and were compelled to litigate or incur expenses to protect their rights
by reason of the oppressive acts of P&G. Lastly, under Article 279 of the Labor Code, an employee who is
unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other
privileges, inclusive of allowances, and other benefits or their monetary equivalent from the time the
compensation was withheld up to the time of actual reinstatement. Hence, all the petitioners, having been
illegally dismissed are entitled to reinstatement without loss of seniority rights and with full back wages and
other benefits from the time of their illegal dismissal up to the time of their actual reinstatement.
Atty. Mercader
NERI vs. NLRC

Bellosillo, J.
G.R. Nos. 97008-09. July 23, 1993
FACTS:
 Virginia G. Neri and Jose Cabelin applied for positions with, and were hired by, respondent BCC,
a corporation engaged in providing technical maintenance, engineering, housekeeping, security
and other specific services to its clientele. They were assigned to work in the Cagayan De Oro City
Branch of respondent FEBTC on 1 May 1979 and 1 August 1980, respectively, Neri as radio/telex
operator and Cabelin as janitor, before being promoted to messenger on 1 April 1989.
 On 28 June 1989, petitioners instituted complaints against FEBTC and BCC to compel the bank to
accept them as regular employees and for it to pay the differential between the wages being paid
them by BCC and those received by FEBTC employees.
 Respondent’s contention: BCC was considered an independent contractor because it proved it had
substantial capital.
 Petitioner’s contention: BCC is engaged in "labor-only" contracting because it failed to adduce
evidence purporting to show that it invested in the form of tools, equipment, machineries, work
premises and other materials which are necessary in the conduct of its business. Moreover,
petitioners argue that they perform duties which are directly related to the principal business or
operation of FEBTC.
ISSUE:
Whether or not BCC is engaged in labor-only contracting
 Respondent BCC need not prove that it made investments in the form of tools, equipment,
machineries, work premises, among others, because it has established that it has sufficient
capitalization.
 There is “labor-only" contracting where: (a) the person supplying workers to an employer does not
have substantial capital or investment in the form of tools, equipment, machineries, work premises,
among others; and (b) the workers recruited and placed by such person are performing activities
which are directly related to the principal business of the employer.
 The law does not require both substantial capital and investment in the form of tools, equipment,
machineries, etc. This is clear from the use of the conjunction "or".
 Under the "right of control" test they must still be considered employees of BCC. In the case of
petitioner Neri, it is admitted that FEBTC issued a job description which detailed her functions as a
radio/telex operator. Cursory reading of the job description shows that what was sought to be
controlled by FEBTC was actually the end-result of the task, e.g., that the daily incoming and
outgoing telegraphic transfer of funds received and relayed by her, respectively, tallies with that of
the register. The record is replete with evidence disclosing that BCC maintained supervision and
control over petitioners through its Housekeeping and Special Services Division: petitioners
reported for work wearing the prescribed uniform of BCC; leaves of absence were filed directly with
BCC; and salaries were drawn only from BCC. It was BCC alone which had the power to reassign
petitioners.
Atty. Mercader
ALEXANDER VINOYA vs. NATIONAL LABOR RELATIONS COMMISSION, REGENT FOOD

CORPORATION AND/OR RICKY SEE (PRESIDENT)
Kapunan, J.
G.R. No. 126586 – February 2, 2000
This petition for certiorari under Rule 65 seeks to annul and set aside the decision, promulgated
on 21 June 1996, of the National Labor Relations Commission ("NLRC") which reversed the decision of
the Labor Arbiter, rendered on 15 June 1994, ordering Regent Food Corporation ("RFC") to reinstate
Alexander Vinoya to his former position and pay him backwages.
FACTS:
1. Private respondent Regent Food Corporation is a domestic corporation principally engaged in the
manufacture and sale of various food products. Private respondent Ricky See, on the other hand,
is the president of RFC and is being sued in that capacity.
3. Petitioner Alexander Vinoya, the complainant, worked with RFC as sales representative until his
services were terminated on 25 November 1991.
4. Petitioner Alexander Vinoya claims that he applied and was accepted by RFC as sales
representative on 26 May 1990. On the same date, a company identification card was issued to
him by RFC. Petitioner alleges that he reported daily to the office of RFC, in Pasig City, to take the
latter's van for the delivery of its products. According to petitioner, during his employ, he was
assigned to various supermarkets and grocery stores where he booked sales orders and collected
payments for RFC. For this task, he was required by RFC to put up a monthly bond of P200.00 as
security deposit to guarantee the performance of his obligation as sales representative.
5. He avers that on 1 July 1991, he was transferred by RFC to Peninsula Manpower Company,
Inc.("PMCI"), an agency which provides RFC with additional contractual workers pursuant to a
contract for the supply of manpower services (hereinafter referred to as the "Contract of Service").
After his transfer to PMCI, petitioner was allegedly reassigned to RFC as sales representative.
Subsequently, on 25 November 1991, he was informed by Ms. Susan Chua, personnel manager
of RFC, that his services were terminated and he was asked to surrender his ID card. Petitioner
was told that his dismissal was due to the expiration of the Contract of Service between RFC and
PMCI. Petitioner claims that he was dismissed from employment despite the absence of any notice
or investigation.
6. Private respondent Regent Food Corporation, on the other hand, maintains that no employer-
employee relationship existed between petitioner and itself. It insists that petitioner is actually an
employee of PMCI, allegedly an independent contractor, which had a Contract of Service with RFC.
To prove this fact, RFC presents an Employment Contract signed by petitioner on 1 July 1991,
wherein PMCI appears as his employer. RFC denies that petitioner was ever employed by it prior
to 1 July 1991. It avers that petitioner was issued an ID card so that its clients and customers would
recognize him as a duly authorized representative of RFC. With regard to the P200.00 pesos
monthly bond posted by petitioner, RFC asserts that it was required in order to guarantee the
turnover of his collection since he handled funds of RFC.
7. While RFC admits that it had control and supervision over petitioner, it argues that such was
exercised in coordination with PMCI. Finally, RFC contends that the termination of its relationship
with petitioner was brought about by the expiration of the Contract of Service between itself and
PMCI and not because petitioner was dismissed from employment.
8. The Labor Arbiter concluded that RFC was the true employer of petitioner for the following reasons:
(1) Petitioner was originally with RFC and was merely transferred to PMCI to be deployed as an
agency worker and then subsequently reassigned to RFC as sales representative; (2) RFC had
direct control and supervision over petitioner; (3) RFC actually paid for the wages of petitioner
although coursed through PMCI; and (4) Petitioner was terminated per instruction of RFC.
9. RFC appealed the adverse decision of the Labor Arbiter to the NLRC. In a decision, dated 21 June
1996, the NLRC reversed the findings of the Labor Arbiter. The NLRC opined that PMCI is an
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independent contractor because it has substantial capital and, as such, is the true employer of
petitioner. The NLRC, thus, held PMCI liable for the dismissal of petitioner.
ISSUE/S:
1. Whether petitioner was an employee of RFC or PMCI; and
2. Whether petitioner was lawfully dismissed
HELD:
Based on the foregoing, PMCI can only be classified as a labor-only contractor and, as such,
cannot be considered as the employer of petitioner.
WHEREFORE, the petition is GRANTED., The decision of the NLRC, dated 21 June 1996, as well as
its resolution, promulgated on 20 August 1996, are ANNULLED and SET ASIDE. The decision of
the Labor Arbiter, rendered on 15 June 1994, is hereby REINSTATED and AFFIRMED.
1. YES. The resolution of the first issue initially boils down to a determination of the true status
of PMCI, whether it is a labor-only contractor or an independent contractor. In the case at bar,
RFC alleges that PMCI is an independent contractor on the sole ground that the latter is
a highly capitalized venture. To buttress this allegation, RFC presents a copy of the Articles
of Incorporation and the Treasurer's Affidavit submitted by PMCI to the Securities and
Exchange Commission showing that it has an authorized capital stock of One Million Pesos
(P1,000,000.00), of which Three Hundred Thousand Pesos (P300,000.00) is subscribed and
Seventy-Five Thousand Pesos (P75,000.00) is paid-in. According to RFC, PMCI is a duly
organized corporation engaged in the business of creating and hiring a pool of temporary
personnel and, thereafter, assigning them to its clients from time to time for such duration as
said clients may require. RFC further contends that PMCI has a separate office, permit and
license and its own organization.
Labor-only contracting, a prohibited act, is an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to perform a job, work or service for
a principal. In labor-only contracting, the following elements are present:
(a) The contractor or subcontractor does not have substantial capital or investment to
actually perform the job, work or service under its own account and responsibility;
(b) The employees recruited, supplied or placed by such contractor or subcontractor
are performing activities which are directly related to the main business of the principal.
On the other hand, permissible job contracting or subcontracting refers to an
arrangement whereby a principal agrees to put out or farm out with a contractor or
subcontractor the performance or completion of a specific job, work or service within a
definite or predetermined period, regardless of whether such job, work or service is to
be performed or completed within or outside the premises of the principal. A person is
considered engaged in legitimate job contracting or subcontracting if the following conditions
concur:
(a) The contractor or subcontractor carries on a distinct and independent business and
undertakes to perform the job, work or service on its own account and under its own
responsibility according to its own manner and method, and free from the control and
direction of the principal in all matters connected with the performance of the work except
as to the results thereof;
(b) The contractor or subcontractor has substantial capital or investment; and
(c) The agreement between the principal and contractor or subcontractor assures the
contractual employees entitlement to all labor and occupational safety and health
standards, free exercise of the right to self-organization, security of tenure, and social and
welfare benefits.
It is not enough to show substantial capitalization or investment in the form of tools,
equipment, machineries and work premises, among others, to be considered as an
independent contractor. In fact, jurisprudential holdings are to the effect that in determining the
existence of an independent contractor relationship, several factors might be considered such
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as, but not necessarily confined to, whether the contractor is carrying on an independent
business; the nature and extent of the work; the skill required; the term and duration of the
relationship; the right to assign the performance of specified pieces of work; the control and
supervision of the workers; the power of the employer with respect to the hiring, firing and
payment of the workers of the contractor; the control of the premises; the duty to supply
premises, tools, appliances, materials and labor; and the mode, manner and terms of payment.
Given the above standards and the factual milieu of the case, the Court has to agree with
the conclusion of the Labor Arbiter that PMCI is engaged in labor-only contracting.
First of all, PMCI does not have substantial capitalization or investment in the form of tools,
equipment, machineries, work premises, among others, to qualify as an independent
contractor. While it has an authorized capital stock of P1,000,000.00, only P75,000.00 is
actually paid-in, which, to our mind, cannot be considered as substantial capitalization. In the
case of Neri, which was promulgated in 1993, BCC had a capital stock of P1,000,000.00 which
was fully subscribed and paid-for.
Second, PMCI did not carry on an independent business nor did it undertake the
performance of its contract according to its own manner and method, free from the control and
supervision of its principal, RFC. The evidence at hand shows that the workers assigned by
PMCI to RFC were under the control and supervision of the latter. The Contract of Service itself
provides that RFC can require the workers assigned by PMCI to render services even beyond
the regular eight (8) hour working day when deemed necessary. Furthermore, RFC undertook
to assist PMCI in making sure that the daily time records of its alleged employees faithfully
reflect the actual working hours. With regard to petitioner, RFC admitted that it exercised control
and supervision over him.
Third, PMCI was not engaged to perform a specific and special job or service, which is one
of the strong indicators that an entity is an independent contractor as explained by the Court in
the cases of Neri and Fuji. As stated in the Contract of Service, the sole undertaking of PMCI
was to provide RFC with a temporary workforce able to carry out whatever service may be
required by it. Such venture was complied with by PMCI when the required personnel were
actually assigned to RFC. Apart from that, no other particular job, work or service was required
from PMCI. Obviously, with such an arrangement, PMCI merely acted as a recruitment agency
for RFC. Since the undertaking of PMCI did not involve the performance of a specific job, but
rather the supply of manpower only, PMCI clearly conducted itself as labor-only contractor.
The fourth and most important requirement in ascertaining the presence of employer-
employee relationship is the power of control. It should be borne in mind, that the "control test"
calls merely for the existence of the right to control the manner of doing the work, and not
necessarily to the actual exercise of the right. In the case at bar, we need not belabor ourselves
in discussing whether the power of control exists. RFC already admitted that it exercised control
and supervision over petitioner.
2. NO. Since petitioner, due to his length of service, already attained the status of a regular
employee he is entitled to the security of tenure provided under the labor laws. Hence, he may only be
validly terminated from service upon compliance with the legal requisites for dismissal.
As the employer, RFC has the burden of proving that the dismissal of petitioner was for a
cause allowed under the law and that petitioner was afforded procedural due process. Sad to
say, RFC failed to discharge this burden. Indeed, RFC never pointed to any valid or authorized
cause under the Labor Code which allowed it to terminate the services of petitioner. Its lone
allegation that the dismissal was due to the expiration or completion of contract is not even one
of the grounds for termination allowed by law. Neither did RFC show that petitioner was given
ample opportunity to contest the legality of his dismissal. In fact, no notice of such impending
termination was ever given him. Petitioner was, thus, surprised that he was already terminated
from employment without any inkling as to how and why it came about. Petitioner was definitely
denied due process. Having failed to establish compliance with the requirements on termination
of employment under the Labor Code, the dismissal of petitioner is tainted with illegality.
Atty. Mercader
San Miguel Corporation v. Semillano

Mendoza, J.
G.R. No. 164257; July 5, 2010
FACTS:
 AMPCO hired the services of Vicente et al. respondents herein on different dates. All of them were
assigned to work in SMC’s Bottling Plant situated at in order to perform the following tasks: segregating
bottles, removing dirt therefrom, filing them in designated places, loading and unloading the bottles to
and from the delivery trucks, and performing other tasks as may be ordered by SMC’s officers. They
were required to work inside the premises of SMC using SMC’s equipment. They rendered service with
SMC for more than 6 months.
 They claim that they were under the control and supervision of SMC personnel and have worked for
more than six (6) months in the company. As such, they assert that they are regular employees of SMC.
However, SMC utilized AMPCO making it appear that the latter was their employer, so that SMC may
evade the responsibility of paying the benefits due them under the law. Hence, complainants contend
that they were illegally dismissed from service.
 On the other hand, respondent SMC raised the defense that it is not the employer of the complainants.
According to SMC, AMPCO is their employer because the latter is an independent contractor. Labor
Arbiter (LA) declared herein complainants as regular employees of San Miguel Corporation.
 NLRC absolved petitioner from liability and instead held AMPCO, as employer of respondents. In
holding that AMPCO was an independent contractor, NLRC was of the view that the law only required
substantial capital or investment. Since AMPCO had "substantial capital of nearly one (1) million" then
it qualified as an independent contractor. The NLRC added that even under the control test, AMPCO
would be the real employer of the respondents, since it had assumed the entire charge and control of
respondents’ services. Hence, an employer-employee relationship existed between AMPCO and the
respondents.
 The CA, however, found that petitioner SMC wielded (i) the power of control over respondent, as SMC
personnel supervised respondents’ performance of loading and unloading of beer bottles, and (ii) the
power of dismissal, as respondents were refused entry by SMC to its premises and were instructed by
the AMPCO manager "to wait for further instructions from the SMC’s supervisor." The CA added that
AMPCO was a labor-only contractor since "a capital of nearly one million pesos" was insufficient for it
to qualify as an independent contractor.
 Petitioner SMC argues that the CA wrongly assumed that it exercised power of control over the
respondents just because they performed their work within SMC’s premises. In advocacy of its claim
that AMPCO is an independent contractor, petitioner relies on the provisions of the service contract
between petitioner and AMPCO, wherein the latter undertook to provide the materials, tools and
equipment to accomplish the services contracted out by petitioner. The same contract provides that
AMPCO shall have exclusive discretion in the selection, engagement and discharge of its
employees/personnel or otherwise in the direction and control thereof. Petitioner also adds that AMPCO
determines the wages of its employees/personnel who shall be within its full control.
ISSUE/S:
Whether or not AMPCO is a legitimate job contractor
NO. AMPCO is not a legitimate job contractor.
The existence of an independent and permissible contractor relationship is generally established

by the following criteria: whether or not the contractor is carrying on an independent business; the nature
and extent of the work; the skill required; the term and duration of the relationship; the right to assign the
performance of a specified piece of work; the control and supervision of the work to another; the employer's
power with respect to the hiring, firing and payment of the contractor's workers; the control of the premises;
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the duty to supply the premises, tools, appliances, materials, and labor; and the mode, manner and terms
of payment.
Although there may be indications of an independent contractor arrangement between petitioner

and AMPCO, the most determinant of factors exists which indicate otherwise. Petitioner’s averment that
AMPCO had total assets amounting to ₱932,599.22 and income of ₱2,777,603.46 in 1994 was squarely
debunked by the LA as there are no pieces of evidence that AMPCO has substantial capital or investment.
In contrast, the AMPCO’s main business activity is trading, maintaining a store catering to members
and the public. Its job contracting with SMC is only a minor activity or sideline. The component of AMPCO’s
substantial capital are in fact invested and used in the trading business. Neither did petitioner prove that
AMPCO had substantial equipment, tools, machineries, and supplies actually and directly used by it in the
performance or completion of the segregation and piling job. The tools and equipment utilized by
respondents are owned by petitioner SMC. It is likewise noteworthy that neither petitioner nor AMPCO has
shown that the latter had clients other than petitioner. Therefore, AMPCO has no independent business.
In connection therewith, DOLE Department Order No. 10 also states that an independent contractor
carries on an independent business and undertakes the contract work on his own account, under his own
responsibility, according to his own manner and method, and free from the control and direction of his
employer or principal in all matters connected with the performance of the work except as to the results
thereof. This embodies what has long been jurisprudentially recognized as the control test to determine the
existence of employer-employee relationship.
Petitioner cannot rely either on AMPCO’s Certificate of Registration as an Independent Contractor

issued by the proper Regional Office of the DOLE to prove its claim. It is not conclusive evidence of such
status. The fact of registration simply prevents the legal presumption of being a mere labor-only contractor
from arising. The evidence is clear that respondents performed activities which were directly related to
petitioner’s main line of business. Petitioner is primarily engaged in manufacturing and marketing of beer
products, and respondents’ work of segregating and cleaning bottles is unarguably an important part of its
manufacturing and marketing process. Thus, petitioner SMC, as principal employer, is solidarily liable with
AMPCO, the labor-only contractor, for all the rightful claims of respondents. Under this set-up, AMPCO, as
the "labor-only" contractor, is deemed an agent of the principal (SMC). The law makes the principal
responsible over the employees of the "labor-only" contractor as if the principal itself directly hired the
employees.

issued by the proper Regional Office of the DOLE to prove its claim. It is not conclusive evidence of such
status. The fact of registration simply prevents the legal presumption of being a mere labor-only contractor
from arising. The evidence is clear that respondents performed activities which were directly related to
petitioner’s main line of business. Petitioner is primarily engaged in manufacturing and marketing of beer
products, and respondents’ work of segregating and cleaning bottles is unarguably an important part of its
manufacturing and marketing process. Thus, petitioner SMC, as principal employer, is solidarily liable with
AMPCO, the labor-only contractor, for all the rightful claims of respondents. Under this set-up, AMPCO, as
the "labor-only" contractor, is deemed an agent of the principal (SMC). The law makes the principal
responsible over the employees of the "labor-only" contractor as if the principal itself directly hired the
employees.
Atty. Mercader
Baguio v, NLRC
Melencio-Herrera, J.
G.R. No. 79004-08 – October 4, 1991
The liability of an employer in job contracting, vis-a-vis his contractor's employees, is the sole issue
brought to the fore in this labor dispute.
This Petition for certiorari seeks to set aside the Resolution, dated 27 February 1987, of public
respondent National Labor Relations Commission (NLRC), Third Division, which reversed the Resolution
of its First Division, dated 27 December 1985, and absolved private respondent General Milling
Corporation (GMC) from any and all liability to petitioners.
FACTS:
Sometime in 1983, private respondent Feliciano LUPO, a building contractor, entered into a contract with
GMC, a domestic corporation engaged in flour and feeds manufacturing, for the construction of an annex
building inside the latter's plant in Cebu City. In connection with the aforesaid contract, LUPO hired herein
petitioners either as carpenters, masons or laborers.
Subsequently, LUPO terminated petitioners' services, on different dates. As a result, petitioners
filed Complaints against LUPO and GMC before the NLRC Regional Arbitration Branch No. VII, Cebu City,
for unpaid wages, COLA differentials, bonus and overtime pay.
 the Executive Labor Arbiter, Branch VII: found LUPO and GMC jointly and severally liable to
petitioners, premised on Article 109 of the Labor Code, infra, and ordered them to pay the
aggregate amount of P95,382.92.
 NLRC (First Division): denied the same for lack of merit.
 Upon Motion for Reconsideration the case was reassigned to the NLRC (Third Division): absolved
GMC from any liability. It opined that petitioners were only hired by LUPO as workers in his
construction contract with GMC and were never meant to be employed by the latter.
 SC: Petitioners now assail that judgment in this Petition for Certiorari.
Petitioner:
 contends that GMC is jointly and severally liable with LUPO for the latter's obligations to them.
 seeks recovery from GMC based on Article 106 of the Labor Code, infra, which holds the employer
jointly and severally liable with his contractor for unpaid wages of employees of the latter.
Solicitor General:
 recognizes the solidary liability of GMC and LUPO but bases recovery on Article 108 of the Labor
Code, infra, contending that inasmuch as GMC failed to require them LUPO a bond to answer for
the latter's obligations to his employees, as required by said provision, GMC should,
correspondingly, be deemed solidarily liable.
GMC and the NLRC:

 maintain that Article 106 finds no application in the instant case because it is limited to situations
where the work being performed by the contractor's employees are directly related to the principal
business of the employer. The NLRC further opines that Article 109 on "Solidary Liability" finds no
application either because GMC was neither petitioners' employer nor indirect employer.
ISSUE/S:
1. Whether or not GMC is an indirect employer; and
2. Whether or not GMC and LIPO are solidarily liable in favor of employees whom he had earlier
employed and dismissed
HELD: Petition for certiorari is GRANTED.
We uphold the solidary liability of GMC and LUPO for the latter's liabilities in favor of
employees whom he had earlier employed and dismissed. Recovery, however, should not be based
Atty. Mercader
on Article 106 of the Labor Code. This provision treats specifically of "labor-only" contracting,
which is not the set-up between GMC and LUPO.
1. Whether or not GMC is an indirect employer - YES

Art. 106. Contractor or subcontractor. — Whenever an employer enters into a contract with
another person for the performance of the former's work, the employees of the contractor and of the latter's
subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his contractor or
subcontractor to such employees to the extent of the work performed under the contract, in the same
manner and extent that he is liable to employees directly employed by him.
xxx xxx xxx
There is "labor-only" contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such persons are performing activities which are directly
related to the principal business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the workers in the same manner
and extent as if the latter were directly employed by him.
In other words, a person is deemed to be engaged in "labor only" contracting where (1) the person
supplying workers to an employer does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others; and (2) the workers recruited and placed by such
person are performing activities which are directly related to the principal business of such employer (See
Section 9, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code).
Since the construction of an annex building inside the company plant has no relation
whatsoever with the employer's business of flour and feeds manufacturing, "labor-only"
contracting does not exist. Article 106 is thus inapplicable.
Instead, it is "job contracting," covered by Article 107, which is involved, reading:
Art. 107. Indirect Employer. — The provisions of the immediately preceding Article shall likewise
apply to any person, partnership, association or corporation which, not being an employer, contracts with
an independent contractor for the performance of any work, task, job or project.
Specifically, there is "job contracting" where (1) the contractor carries on an independent business
and undertakes the contract work on his own account under his own responsibility according to his own
manner and method, free from the control and direction of his employer or principal in all matters connected
with the performance of the work except as to the results thereof; and (2) the contractor has substantial
capital or investment in the form of tools, equipment, machineries, work premises, and other materials
which are necessary in the conduct of his business. It may be that LUPO subsequently ran out of capital
and was unable to satisfy the award to petitioners. That was an after-the-fact development, however, and
does not detract from his status as an independent contractor.
Based on the foregoing, GMC qualifies as an "indirect employer." It entered into a contract with
an independent contractor, LUPO, for the construction of an annex building, a work, task, job or project not
directly related to GMC's business of flour and feeds manufacturing.
Under the peculiar set-up herein, GMC is, in fact, "not an employer" (in the sense of not being a
direct employer) as understood in Article 106 of the Labor Code, but qualifies as an "indirect employer"
under Article 107 of said Code.
The distinction between Articles 106 and 107:

Atty. Mercader
 Article 106 deals with "labor-only" contracting. Here, by operation of law, the contractor is merely
considered as an agent of the employer, who is deemed "responsible to the workers to the same
extent as if the latter were directly employed by him."
 Article 107 deals with "job contracting." In the latter situation, while the contractor himself is the
direct employer of the employees, the employer is deemed, by operation of law, as an indirect
employer.
In other words, the phrase "not an employer" found in Article 107 must be read in conjunction with
Article 106. A contrary interpretation would render the provisions of Article 107 meaningless considering
that every time an employer engages a contractor, the latter is always acting in the interest of the former,
whether directly or indirectly, in relation to his employees.
It should be recalled that a finding that a contractor is a "labor-only" contractor is equivalent to

declaring that there is an employer-employee relationship between the owner of the project and the
employees of the "labor-only" contractor (Associated Anglo-American Tobacco Corp. v. Clave, G.R. No.
50915, 30 August 1990, 189 SCRA 127; Industrial Timber Corp. v. NLRC, G.R. No. 83616, 20 January
1989, 169 SCRA 341). This is evidently because, as heretofore stated, the "labor-only" contractor is
considered as a mere agent of an employer. In contrast, in "job contracting," no employer-employee
relationship exists between the owner and the employees of his contractor. The owner of the project is not
the direct employer but merely an indirect employer, by operation of law, of his contractor's employees.
As an indirect employer, and for purposes of determining the extent of its civil liability, GMC
is deemed a "direct employee" of his contractor's employees pursuant to the last sentence of Article
109 of the Labor Code. As a consequence, GMC can not escape its joint and solidary liability to
petitioners.
2. Whether or not GMC and LIPO are solidarily liable in favor of employees whom he had earlier
employed and dismissed - YES
Being an "indirect employer," GMC is solidarily liable with LUPO for any violation of the
Labor Code pursuant to Article 109 thereof, reading:
Art. 109. Solidary Liability. — The provisions of existing laws to the contrary notwithstanding, every
employer or indirect employer shall be held responsible with a contractor or subcontractor for any violation
of any provision of this Code. For purposes of determining the extent of their civil liability under this Chapter,
they shall be considered as direct employers.
Further, Article 108 of the Labor Code requires the posting of a bond to answer for wages that a
contractor fails to pay, thus.
Article 108. Posting of Bond. — An employer or indirect employer may require the contractor or
subcontractor to furnish a bond equal to the cost of labor under contract, on condition that the bond will
answer for the wages due the employees showed the contractor or subcontractor, as the case may be, fails
to pay the same.
Having failed to require LUPO to post such a bond, GMC must answer for whatever liabilities
LUPO may have incurred to his employees. This is without prejudice to its seeking reimbursement
from LUPO for whatever amount it will have to pay petitioners.
Atty. Mercader
San Miguel Corporation vs. Semillano

Mendoza, J.
G.R. No. 164257, 5 July 2010
FACTS:
AMPCO hired the services of Vicente et al. [Vicente Semillano, Nelson Mondejar, Jovito Remada and Alex
Hawod. All of them were assigned to work in SMCs Bottling Plant situated at Brgy. Granada Sta. Fe,
Bacolod City, in order to perform the following tasks: segregating bottles, removing dirt therefrom, filing
them in designated places, loading and unloading the bottles to and from the delivery trucks, and performing
other tasks as may be ordered by SMCs officers. They were required to work inside the premises of SMC
using SMCs equipment. They rendered service with SMC for more than six (6) months.
Vicente et al filed a complaint for illegal dismissal with the Labor Arbiter against AMPCO, Merlyn V.
Polidario, SMC and Rufino I. Yatar [SMC Plant Manager], as respondents. They alleged that they were
fillers of SMC Bottling Plant assigned to perform activities necessary and desirable in the usual business
of SMC. They claim that they were under the control and supervision of SMC personnel and have worked
for more than six (6) months in the company. As such, they assert that they are regular employees of SMC.
Respondent SMC raised the defense that it is not the employer of the complainants. According to SMC,
AMPCO is their employer because the latter is an independent contractor. SMC also alleged that it was
AMPCO that directly paid their salaries and remitted their contributions to the SSS. Finally, SMC assails
the jurisdiction of the Labor Arbiter contending that the instant dispute is intra-cooperative in nature falling
within the jurisdiction of the Arbitration Committee of the Cooperative Development Authority (CDA).
Labor Arbiter: Declared herein complainants as regular employees of San Miguel Corporation.
NLRC: Affirmed LA’s ruling, but after MR, reversed its former ruling. NLRC absolved petitioner from liability
and instead held AMPCO, as employer of respondents, liable to pay for respondents backwages, accrued
salaries, allowances, and attorneys fees. In holding that AMPCO was an independent contractor, NLRC
was of the view that the law only required substantial capital or investment. Since AMPCO had substantial
capital of nearly one (1) million then it qualified as an independent contractor. The NLRC added that even
under the control test, AMPCO would be the real employer of the respondents, since it had assumed the
entire charge and control of respondents services. Hence, an employer-employee relationship existed
between AMPCO and the respondents.
Respondents filed a petition for review on certiorari under Rule 65 with the Court of Appeals (CA), which
favorably acted on it.
ISSUE:
NO. The test to determine the existence of independent contractorship is whether or not the one claiming
to be an independent contractor has contracted to do the work according to his own methods and without
being subject to the control of the employer, except only as to the results of the work.
The existence of an independent and permissible contractor relationship is generally established by the
following criteria: whether or not the contractor is carrying on an independent business; the nature and
extent of the work; the skill required; the term and duration of the relationship; the right to assign the
performance of a specified piece of work; the control and supervision of the work to another; the employer's
power with respect to the hiring, firing and payment of the contractor's workers; the control of the premises;
the duty to supply the premises, tools, appliances, materials, and labor; and the mode, manner and terms
of payment.
Atty. Mercader
AMPCOs main business activity is trading, maintaining a store catering to members and the public. Its job
contracting with SMC is only a minor activity or sideline. There is nothing in AMPCO’s list of fixed assets,
machineries, tools, and equipment which it could have used, actually and directly, in the performance or
completion of its contracted job, work or service with petitioner. For said reason, there can be no other
logical conclusion but that the tools and equipment utilized by respondents are owned by petitioner SMC.
It is likewise noteworthy that neither petitioner nor AMPCO has shown that the latter had clients other than
petitioner. Therefore, AMPCO has no independent business.
The Court is not convinced that AMPCO wielded exclusive discretion in the discharge of respondents. As
the CA correctly pointed out, Merlyn Polidario, AMPCO’s project manager, even told respondents to wait
for further instructions from the SMCs supervisor after they were prevented from entering petitioner SMCs
premises. Based on the foregoing, no other logical conclusion can be reached than that it was petitioner,
not AMPCO, who wielded power of control.
Despite the fact that the service contracts contain stipulations which are earmarks of independent
contractorship, they do not make it legally so. The language of a contract is neither determinative nor
conclusive of the relationship between the parties. Petitioner SMC and AMPCO cannot dictate, by a
declaration in a contract, the character of AMPCOs business, that is, whether as labor-only contractor, or
job contractor. AMPCO’s character should be measured in terms of, and determined by, the criteria set by
statute.
issued by the proper Regional Office of the DOLE to prove its claim. It is not conclusive evidence of
such status. The fact of registration simply prevents the legal presumption of being a mere labor-
only contractor from arising. In distinguishing between permissible job contracting and prohibited labor-
only contracting, the totality of the facts and the surrounding circumstances of the case are to be considered.
Petitioner also argues that among the permissible contracting arrangements include work or services not
directly related or not integral to the main business or operation of the principal including work related to
manufacturing processes of manufacturing establishments. The evidence is clear that respondents
performed activities which were directly related to petitioners main line of business. Petitioner is primarily
engaged in manufacturing and marketing of beer products, and respondents work of segregating and
cleaning bottles is unarguably an important part of its manufacturing and marketing process.
Atty. Mercader
Consolidated Building Maintenance v. Asprec

Reyes, Jr., J.
GR No. 217301 – 06 June 2018
FACTS:
CBMI is a corporation engaged in the business of providing janitorial, kitchen, messengerial, elevator
maintenance and allied services to various entities. Among CBMI's clients is Philippine Pizza, Inc. Pizza
Hut (PPI). For PPI, CBMI provides kitchen, delivery, sanitation and other related services pursuant to
contracts of services, which are valid for one-year periods. Rolando Asprec, Jr. (Asprec) and Jonalen
Bataller (Bataller) (collectively referred to as the respondents) alleged that they are regular employees
of PPI, the former having commenced work as a "Rider" in January 2001 and the latter as "team
member/slice cashier" in March 2008, both assigned at PPI's Pizza Hut, Marcos Highway, Marikina City
Branch.
Asprec averred that after the expiration of his contract on November 4, 2001, PPI advised him to go on
leave for one (1) month and ten (10) days. Thereafter, he was called for an interview by PPI's Area Manager,
Rommel Blanco. After passing the same, he was told to proceed to the office of CBMI where he signed a
contract. Asprec stated that except for the fact that the payslips were then issued by CBMI, work proceeded
as usual with him being assigned at the same branch and performing his usual duties as "Rider/Production
Person." Bataller had a similar experience as she narrated in her Sinumpaang Salaysay dated February 8,
2011. She related that before the expiration of her employment contract, she was informed by Pizza Hut
Restaurant Manager Jun Samar that as a precondition for continued employment, she had to "submit first
a resignation letter, had to pass through CBMI, and after six (6) months she should go on vacation for one
month." Thereafter, she was interviewed by PPI General Manager Edilberto Garcia. Bataller advanced that
after she passed the interview, PPI prepared her documents and then forwarded the same to CBMI. She
then resumed employment in December 2008 until July 23, 2010, with her being assigned at the same
branch, performing her usual duties, and receiving the same salary.
On the other hand, CBMI posited that the respondents are its employees. CBMI claimed that the
respondents were investigated based on an Incident Report by PPI's Store Manager Karl Clemente of an
attempted theft on July 23, 2010. On which date, one Jessie Revilla (Revilla) supposedly delivered an
excess of two (2) boxes to PPI's slice booth at the Light Rail Train (LRT) Santolan, Pasig Station, which the
respondents failed to report. Anent the incident, Asprec asserted that he has no knowledge of such actions
by Revilla and claimed that the same is outside his responsibility as a "production person." Nonetheless,
Asprec claimed that on account of the incident, he has been suspended for eight (8) days and then was
eventually dismissed.On the other hand, Bataller, who was manning the slice booth at the LRT Santolan,
Pasig Station on the day of the incident, claimed that when Revilla brought the three (3) boxes of pizza
which she ordered, she was busy attending to customers and thus did not notice that there has been an
excess in the delivery. Nonetheless, she posited that immediately upon discovery, she called Revilla but
the latter was already far from the station and as such could no longer go back. Revilla allegedly went back
to get the two (2) extra pizza boxes later that day.Bataller likewise submitted that she has informed the area
manager of the incident, but was thereafter asked to proceed to PPI's Marcos Highway branch. There, she
was interviewed along with Asprec and Revilla, and then told to report to the head office. Starting July 24,
2010, she was allegedly no longer allowed to return to work.On November 12, 2010, the respondents filed
their Complaint against the petitioners for constructive illegal dismissal, illegal suspension, and non-
payment of separation pay.
In their Complaint, the respondents argued two (2) points: first, that their transfer from PPI to CBMI
constituted labor-only contracting and was a mere scheme by PPI to prevent their regularization; and
second, that they were illegally dismissed without cause and due process of law.LA: Granted the
complaint – PPI and CBMI are liable for illegal dismissal. Ordered the reinstatement of Asprec and
Bataller and their entitlement to backwages plus damages
In its decision, the LA applied the four-fold test and ruled that the respondents are employees of PPI.
Consequently, the LA held that the arrangement between CBMI and PPI constitutes labor-only contracting
and imposed upon them solidary liability for the respondents' claim.The LA ruled that as the employer, the
burden is upon PPI to prove that the dismissal was based on a just cause and that there has been
Atty. Mercader
compliance with procedural due process, which it failed to do. Thus, the LA concluded that the respondents
have been illegally dismissed.
With this ruling, the petitioners and PPI appealed to the NLRC.NLRC: Affirmed LA’s decision with
modification as to who the employer is.
In contrast with the finding of the LA, the NLRC held that the respondents are regular employees of CBMI.
In so ruling, the NLRC relied heavily on the employment contract and CBMI's admission of the respondents'
employment. In this regard, and considering that there is no allegation of under payment or non-payment
of wages, the NLRC ordered PPI to be dropped from the case. The parties herein separately filed their
appeal via petitions for certiorari with the CA.CA: NLRC’s resolution was set aside and LA’s was
reinstated
The CA held that the NLRC erred in dropping PPI as a party to the case, as contrary to its findings, CBMI
failed to prove that it was an independent contractor, or was engaged in permissible job
contracting.According to the CA, the totality of the circumstances surrounding the case established that it
was PPI and not CBMI which has the discretion and control over the manner and method by which the
respondents' works are to be accomplished.Furthermore, considering that the respondents performed tasks
which are necessary and desirable to the usual trade or business of PPI, and use tools and equipment of
the latter in their work, the CA concluded that CBMI falls under the definition of a "labor only contractor,"
which is prohibited under Article 106 of the Labor Code. Hence:
Being a labor-only contractor, CBMI was deemed to be an agent of Pizza Hut, which in tum, was therefore,
the principal of CBMI. Concomitantly, an employer-employee relationship was created between Pizza Hut
as principal, and private respondents as employees. Pizza Hut, as a result is solidarity liable with petitioners
for private respondents' claims.
As agent of PPI, the CA ruled that it is incumbent upon the petitioners to prove that the dismissal was for a
just and valid cause which it failed to do, accordingly, the CA concluded that the dismissal is illegal and the
respondents are entitled to their money claims.
ISSUE/S:
1. W/N CBMI is a labor only contractor; and
2. W/N the Respondents were illegally dismissed
HELD: PETITION PARTLY MERITORIOUS.
1. NO. CBMI is an independent contractor.

In support of its position that it is engaged in legitimate job contracting, CBMI attached for the Court's
reference, its Certificate of Registration with the Department of Labor and Employment (DOLE).
Furthermore, it cites that it has been in operation for almost 50 years, counting various institutions among
its clients.Labor-only contracting is defined by Article 106 of the Labor Code of the Philippines, as an
arrangement where a person, who does not have substantial capital or investment, supplies workers to an
employer to perform activities which are directly related to the principal business of such employer.
Furthermore, jurisprudence instructs that the existence of an independent contract relationship may be
indicated by several factors, viz.:Such as, but not necessarily confined to, whether the contractor was
carrying on an independent business; the nature and extent of the work; the skill required; the term and
duration of the relationship; the right to assign the performance of specified pieces of work; the control and
supervision of the workers; the power of the employer with respect to the hiring, firing and payment of the
workers of the contractor; the control of the premises; the duty to supply premises, tools, appliances,
materials and labor; and the mode, manner and terms of payment.
The issue in this case being the status of the respondents, the pertinent Department Order (DO)
implementing the aforecited provision of the Labor Code is DOLE DO No. 18-02, Series of 2002, the
regulation in force at the time the respondents were hired and assigned to PPI.
DO No. 18-02 reiterates the prohibition against labor-only contracting, viz.:Section 5. Prohibition against
labor-only contracting. Labor-only contracting is hereby declared prohibited. For this purpose, labor-only
contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies or
Atty. Mercader
places workers to perform a job, work or service for a principal, and any of the following elements are
present:
i. The contractor or subcontractor does not have substantial capital or investment which relates to the job,
work, or service to be performed and the employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the main business of the principal; or ii.
The contractor does not exercise the right to control the performance of the work of the contractual
employee.From the foregoing, it is clear that job contracting is not absolutely prohibited. Indeed, an
employer is allowed to farm out the performance or completion of a specific job, work or service, within a
definite or specified period, and regardless of whether the said task is to be performed or completed within
or outside its premises. Job contracting is deemed legitimate and permissible when the contractor has
substantial capital or investment, and runs a business that is independent and free from control by the
principal. Further,it is required that "the agreement between the principal and the contractor or
subcontractor assures the contractual employees' entitlement to all labor and occupational safety and
health standards, free exercise of the right to self-organization, security of tenure, and social welfare
benefits.The absence of any of these elements results in a finding that the contractor is engaged in labor-
only contracting.While the Certificate of Registration offered as evidence pertains only to a period of three
years from February 13, 2008 until February 14, 2011, case law dictates that the status of CBMI may be
evaluated on the basis of the corporation's activities and status prior to their registration. In this case,
the Court finds that CBMI has established compliance with the requirements of legitimate job contracting
previously cited.Per documentary evidence attached by CBMI, the company's total assets at the time of
filing of the respondents' complaint before the NLRC in 2010 amounted to Php 84,351,349.00. Based on
its attached Audited Financial Statements for the years 2008 and 2009, its total assets, which consists of
cash, receivables, and property and equipment, amounted to Php 79,203,902.00 and Php
76,189,554.00, respectively.Clearly, CBMI has substantial capital to maintain its manpower business. From
the evidence adduced by CBMI, it is also clear that it runs a business independent from the PPI. Based on
its registration with the Securities and Exchange Commission (SEC), CBMI has been in existence since
1967; and has since provided a variety of services to entities in various fields, such as banking, hospitals,
and even government institutions
Above all, CBMI maintains the "right of control" over the respondents. For purposes of determining whether
a job contractor is engaged in legitimate contracting or prohibited labor-only contracting, DO No. 18-02,
defines the "right of control" as:
The right reserved to the person for whom the services of the contractual workers are performed, to
determine not only the end to be achieved, but also the manner and means in achieving that end. From
these, it can readily be inferred that the element of control that is determinative of an employer-relationship
"does not merely relate to the mutually desirable result intended by the contractual relationship; they must
have the nature of dictating the means and methods to be employed in attaining the result. The power of
control refers merely to the existence of the power and not to the actual exercise thereof. It is not essential
for the employer to actually supervise the performance of duties of the employee; it is enough that the
former has a right to wield the power.
The contract of service, while of itself is not determinative of the relationship between the parties,
nonetheless provides useful leads into the relationship between the principal on the one hand, and the job
contractor on the other. In this case, the "Contract of Services" between CBMI and PPI for the year 2000,
imposes upon the former the obligation to provide not only the necessary personnel to perform "kitchen,
busing, rider/delivery, and sanitation services" but as well to provide tools and equipment necessary for the
rendition of such services. Also, it is understood under the agreement that upon deployment, the personnel
are already qualified and possessed of the necessary skills for their assigned tasks. The Contract of
Services further detailed these provisions, in that the contract provided that CBMI has the "sole authority to
control and direct the performance of the details of the work of its employees." Further, that any complaints
or reports regarding the performance, misconduct, or negligence of the persons so deployed shall be made
in writing and addressed by PPI to CBMI, the latter having the sole authority to discipline its employees.
It is indisputable from the respondents' employment contracts that they were hired by CBMI. It was also the
latter who assigned respondents at PPI's Marcos Highway Branch after they were briefed of company
policies and their duties. It is also CBMI who pays the respondents their salaries, and remits premiums to
Atty. Mercader
PhilHealth and Social Security System. All these, without doubt indicate that CBMI possesses the power of
control over the respondents; which in turn supports the conclusion that CBMI carries a business
independent of PPI.
2. YES. Respondents were illegally dismissed.

The extension of the period of suspension by the CBMI is unwarranted under the attendant circumstances.
Section 4, Rule XIV of the Omnibus Rules Implementing the Labor Code is explicit in that the period of
preventive suspension should not exceed thirty (30) days, after which, the employee must be reinstated
and paid the wages and other benefits due, viz.:
SECTION 4. Period of suspension. - No preventive suspension shall last longer than 30 days. The employer
shall thereafter reinstate the worker in his former or in a substantially equivalent position or the employer
may extend the period of suspension provided that during the period of extension, he pays the wages and
other benefits due to the worker. In such case, the worker shall not be bound to reimburse the amount paid
to him during the extension if the employer decides, after completion of the hearing, to dismiss the worker.
In this case, after the conduct of administrative hearing, the respondents have been suspended by CBMI
for a period of 15 days or from August 5 to 19, 2010. Thereafter, allegedly due to the reduced need of PPI
and on account of the incident subject of investigation, respondents have been placed on "temporary-lay-
off status" for a period of six (6) months or from August 20, 2010 until February 20, 2011. Succinctly,
respondents have been under preventive suspension for more than the maximum period allowed by law,
without any word as to the result of the investigation, and without having been reinstated to their former or
to a substantially equivalent position, which thus renders the period of extended suspension illegal. the
Omnibus Rules Implementing the Labor Code requires that the employer act within the 30-day period of
preventive suspension by concluding the investigation either by absolving the respondents of the charges
or meting corresponding penalty if liable. Otherwise, the employer must reinstate the employee, or extend
the period of suspension provided the employee's wages and benefits are paid in the interim. Failure by
the employer to comply with these, the preventive suspension is deemed illegal as it amounts to a
constructive dismissal.
Atty. Mercader
Mago v. Sun Power Manufacturing

Reyes, JR., J.
GR No. 210961 – 24 January 2018
This is a petition for review on certiorari under Rule 45 of the Rules of Court, seeking the review of the
Decision dated October 8, 2013 and Resolution dated January 13, 2014 of the Court of Appeals (CA) in
CA-G.R. SP No. 131059. In these assailed issuances, the CA reversed the decision of the National Labor
Relations Commission (NLRC) declaring Leo V. Mago (Leo) and Leilanie E. Colobong (Leilanie)
(petitioners) as employees of Sunpower Philippines Manufacturing Limited (Sunpower) and consequently,
holding that Jobcrest Manufacturing, Incorporated (Jobcrest) was a labor-only contractor. The NLRC in turn
reversed the ruling of the labor arbiter (LA) dismissing the petitioners' complaint for illegal dismissal.
FACTS:
The petitioners are former employees of Jobcrest, a corporation duly organized under existing laws of the
Philippines, engaged in the business of contracting management consultancy and services. Jobcrest was
licensed by the Department of Labor and Employment (DOLE) through Certificate of Registration No. NCR-
MUNTA-64209-0910-087-R. During the time material to this case, the petitioners' co-habited together.
On October 10, 2008, Jobcrest and Sunpower entered into a Service Contract Agreement, in which
Jobcrest undertook to provide business process services for Sunpower, a corporation principally engaged
in the business of manufacturing automotive computer and other electronic parts. Jobcrest then trained its
employees, including the petitioners, for purposes of their engagement in Sunpower. After the satisfactory
completion of this training, the petitioners were assigned to Sunpower's plant in Laguna Technopark. Leo
was tasked as a Production Operator in the Coinstacking Station on July 25, 2009, while Leilanie was
assigned as a Production Operator, tasked with final visual inspection in the Packaging Station on June 27,
2009. Jobcrest's On-site Supervisor, Allan Dimayuga (Allan), supervised the petitioners during their
assignment with Sunpower.
It was alleged that sometime in October 2011, Sunpower conducted an operational alignment, which
affected some of the services supplied by Jobcrest. Sunpower decided to terminate the
Coinstacking/Material Handling segment and the Visual Inspection segment. Meanwhile, Leo and Leilanie
were respectively on paternity and maternity leave because Leilanie was due to give birth to their common
child.
When Leo reported for work to formally file his paternity leave, Allan purportedly informed Leo that his
employment was terminated due to his absences. Leo, however, further alleged that he was asked to report
to Jobcrest on December 14, 2011 for his assignment to Sunpower. In their defense, both Jobcrest and
Allan denied terminating Leo's employment from Jobcrest.
Leo complied with the directive to go to Jobcrest's office on December 14, 2011. While he was there,
Jobcrest's Human Resource Manager, Noel J. Pagtalunan (Noel), served Leo with a "Notice of Admin
Charge/Explanation Slip." The notice stated that Leo violated the Jobcrest policy against falsification or
tampering because he failed to disclose his relationship with Leilanie. Leilanie, on the other hand, alleged
that when she reported for work at Jobcrest on November 29, 2011, she was informed by one of the
Jobcrest personnel that she will be transferred to another client company. She was likewise provided a
referral slip for a medical examination, pursuant to her new assignment.
Instead of complying with Jobcrest's directives, Leo and Leilanie filed a complaint for illegal dismissal and
regularization.
Ruling of the LA: Jobcrest is a legitimate independent contractor and the petitioners’ statutory employer.
Ruling of the NLRC: Petitioners are regular employees of Sunpower, Jobcrest being a mere labor-only
contractor that petitioners were illegally dismissed.
Ruling of the CA: The decision of LA is reinstated.
ISSUE/S:
1. W/N Jobcrest is a legitimate and independent contractor
 Jobcrest is a legitimate and independent contractor.

Atty. Mercader
Article 106 of the Labor Code defines labor-only contracting as a situation "where the person supplying
workers to an employer does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by such person are
performing activities which are directly related to the principal business of such employer.
Ordinarily, a contractor is presumed to be a labor-only contractor, unless the contractor is able to
discharge the burden of overcoming this presumption. In cases when it’s the principal claiming the
legitimacy of the contractor, then the burden is borne by the principal. But since the petitioners do not
dispute that Jobcrest was a duly-registered contractor under Section 11 of DOLE DO No. 18-02, there is
no operative presumption that Jobcrest is a labor-only contractor.
Conversely, the fact of registration with DOLE does not necessarily create a presumption that Jobcrest is
a legitimate and independent contractor. The Court emphasizes, however, that the DOLE Certificate of
Registration issued in favor of Jobcrest is presumed to have been issued in the regular performance
of official duty. The petitioners must overcome the presumption of regularity accorded to the official act of
DOLE, which is no less than the agency primarily tasked with the regulation of job contracting.
 Jobcrest has substantial capital.
Substantial capital or investment was defined in DOLE DO No. 18-02 as "capital stocks and subscribed
capitalization in the case of corporations, tools, equipment, implements, machineries and work premises,
actually and directly used by the contractor or subcontractor in the performance or completion of the job,
work or service contracted out." As per DOLE DO No. 18-A, series of 2011, that substantial capital refers
to paid-up capital stocks/shares of at least Php 3,000,000.00 in the case of corporations. For the year
ended December 31, 2011, the paid-up capital of Jobcrest increased to Php 8,000,000.00, notably
more than the required capital under DOLE DO No. 18-A. Evidently, Jobcrest had substantial capital to
perform the business process services it provided Sunpower.
DOLE DO No. 18-02 and DO No. 18-A, as well as Article 106 of the Labor Code itself, all use the conjunctive
term "or" in prescribing that the contractor should have substantial capital or investment. Having established
that Jobcrest had substantial capital, it is unnecessary for this Court to determine whether it had sufficient
investment in the form of tools, equipment, machinery and work premises.
The agreement between Jobcrest and Sunpower also complied with the statutory requirement of ensuring
the observance of the contractual employees' rights under the law. Specifically, paragraph 7 of the Service
Contract Agreement obligates Jobcrest to observe all laws, rules and regulations pertaining to the
employment of its employees.
 Suncrest does not control the manner by which the petitioners accomplished their work.
As per DOLE DO No. 18-02, the "right to control" shall refer to the right reserved to the person for whom
the services of the contractual workers are performed, to determine not only the end to be achieved, but
also the manner and means to be used in reaching that end.
Upon review of the records, the Court finds that the evidence clearly points to Jobcrest as the entity that
exercised control over the petitioners' work with Sunpower. Upon the petitioners' assignment to Sunpower,
Jobcrest conducted a training and certification program, during which time, the petitioners reported directly
to the designated Jobcrest trainer. The affidavit of Jobcrest's Operations Manager, Kathy T. Morales
(Kathy), states that operational control over Jobcrest employees was exercised to make sure that they
conform to the quantity and time specifications of the service agreements with Jobcrest's clients. She
narrated that manager and shift supervisors were assigned to the premises of Sunpower, with the task to
oversee the accomplishment of the target volume of work. She also mentioned that there is administrative
control over Jobcrest employees because they monitor the employees' attendance and punctuality, and the
employees' observance of other rules and regulations.
The petitioners' very own sworn statements further establish this point. In his statement, Leo averred
that when he reported for work to file his application for paternity leave, he reported to Allan, Jobcrest's
supervisor, who then approved his leave application. He likewise narrated that it was Jobcrest's Human
Resource Manager, Noel, who informed Leo about the disciplinary charge against him for allegedly violating
the Jobcrest Code of Conduct. The same conclusion holds for Leilanie. In her statement, Leilanie narrated
that she reported for work to the Jobcrest office on November 29, 2011 after giving birth to her second child.
Atty. Mercader
She also alleged in her affidavit that similar to Leo, it was Noel who informed her of the disciplinary action
against her, through the service of a copy of the "Notice of Admin Charge/Explanation Slip."
The fact that the petitioners were working within the premises of Sunpower, by itself, does not negate
Jobcrest's control over the means, method, and result of the petitioners' work. Job contracting is permissible
"whether such job, work, or service is to be performed or completed within or outside the premises of the
principal" for as long as the elements of a labor-only contractor are not present. Since Jobcrest was a
provider of business process services, its employees would necessarily work within the premises of its
client companies in order for Jobcrest to perform its contractual undertaking.
 The petitioners were regular employees of Jobcrest.
The four-fold test is the established standard for determining the existence of an employer-employee
relationship: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power
of dismissal; and (d) the power of control over the employee's conduct. The petitioners themselves admit
that they were hired by Jobcrest. In their subsequent engagement to Sunpower, it was Jobcrest that
selected and trained the petitioners. Despite their assignment to Sunpower, Jobcrest paid the petitioners'
wages, including their contributions to the Social Security System (SSS), Philippine Health Insurance
Corporation (Philhealth), and Home Development Mutual Fund (HDMF, also known as Pag-IBIG). The
power to discipline the petitioners was also retained by Jobcrest, as evidenced by the "Notice of Admin
Charge/Explanation Slip" furnished the petitioners through Jobcrest's Human Resource department. The
Court further notes that on December 27, 2010 and January 25, 2011, Leilanie and Leo were respectively
confirmed as regular employees of Jobcrest.
A review of the petitioners' repeated submissions reveals that while they claim to have been illegally
dismissed from employment, Jobcrest actually intended to assign Leo again to Sunpower, and provide
Leilanie with another engagement with a different client company.
Atty. Mercader
Jaguar Security and Investigation Agency v. Sales

Austria-Martinez, J.
G.R. No. 162420 - 22 April 2008
FACTS:
The security guards instituted an instant labor case before the labor arbiter alleging money claims
for their services. Petitioner Jaguar filed a partial appeal on July 1, 1999 questioning the failure of public
respondent NLRC to resolve its cross-claim against Delta as the party ultimately liable for payment of the
monetary award to the security guards. On September 19, 2000, the NLRC dismissed the appeal in its
resolution, holding that it was not the proper forum to raise the issue. It ruled that Jaguar, being the direct
employer of the security guards, is principally liable to the employees. Hence, it directed petitioner to file a
separate civil action for recovery of the amount before the regular court having jurisdiction over the subject
matter, in order to prove the liability of Delta. Jaguar sought reconsideration of the dismissal, but the
Commission denied it.
ISSUE:
Whether petitioner may claim reimbursement from Delta Milling through a cross-claim filed with the
labor court
HELD:
The Regional Trial Court (RTC) has jurisdiction over the subject matter of the present case. It is
well-settled in law and jurisprudence that where no employer-employee relationship exists between the
parties and no issue is involved which may be resolved by reference to the Labor Code, other labor statutes
or any collective bargaining agreement, it is the RTC that has jurisdiction. In its complaint, private
respondent is not seeking any relief under the Labor Code but seeks payment of a sum of money and
damages on account of petitioner's alleged breach of its obligation under their Guard Service Contract. The
action is within the realm of civil law hence jurisdiction over the case belongs to the regular courts. While
the resolution of the issue involves the application of labor laws, reference to the labor code was only for
the determination of the solidary liability of the petitioner to the respondent where no employer-employee
relation exists. Article 217 of the Labor Code as amended vests upon the labor arbiters exclusive original
jurisdiction only over the following: 1. Unfair labor practices; 2. Termination disputes; 3. If accompanied with
a claim for reinstatement, those cases that workers may file involving wages, rates of pay, hours of work
and other terms and conditions of employment; 4. Claims for actual, moral exemplary and other forms of
damages arising from employer-employee relations; 5. Cases arising from any violation of Article 264 of
this Code, including questions involving legality of strikes and lockouts; and 6. Except claims for Employees
Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employer-
employee relations, including those of persons in domestic or household service, involving an amount
exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for
reinstatement. In all these cases, an employer-employee relationship is an indispensable jurisdictional
requisite; and there is none in this case.The jurisdiction of labor courts extends only to cases where an
employer-employee relationship exists.In the case at bar, there exists no employer-employee relationship
between petitioner and Delta Milling. In its cross-claim, petitioner is not seeking relief under the Labor Code
but merely reimbursement of the monetary benefits claims awarded and to be paid to the guard employees.
There is no labor dispute involved in the cross-claim against Delta Milling. Rather, the cross-claim involves
a civil dispute between petitioner and Delta Milling. Petitioner's cross-claim is within the realm of civil law,
and jurisdiction over it belongs to the regular courts. Additionally, Delta Milling’s liability to reimburse
petitioner will only arise if and when petitioner actually pays its employees the adjudged liabilities. Payment,
which means not only the delivery of money but also the performance, in any other manner, of the
obligation, is the operative fact which will entitle either of the solidary debtors to seek reimbursement for
the share which corresponds to each of the debtors. Petitioner has yet to pay the guard employees.
Atty. Mercader
ALEXANDER VINOYA vs. NATIONAL LABOR RELATIONS COMMISSION, REGENT FOOD

CORPORATION AND/OR RICKY SEE (PRESIDENT)
Kapunan, J.
G.R. No. 126586 – February 2, 2000
This petition for certiorari under Rule 65 seeks to annul and set aside the decision, promulgated
on 21 June 1996, of the National Labor Relations Commission ("NLRC") which reversed the decision of
the Labor Arbiter, rendered on 15 June 1994, ordering Regent Food Corporation ("RFC") to reinstate
Alexander Vinoya to his former position and pay him backwages.
FACTS:
2. Petitioner Alexander Vinoya, the complainant, worked with RFC as sales representative until his
services were terminated on 25 November 1991.
3. Petitioner Alexander Vinoya claims that he applied and was accepted by RFC as sales
representative on 26 May 1990. On the same date, a company identification card was issued to
him by RFC. Petitioner alleges that he reported daily to the office of RFC, in Pasig City, to take the
latter's van for the delivery of its products. According to petitioner, during his employ, he was
assigned to various supermarkets and grocery stores where he booked sales orders and collected
payments for RFC. For this task, he was required by RFC to put up a monthly bond of P200.00 as
security deposit to guarantee the performance of his obligation as sales representative.
4. He avers that on 1 July 1991, he was transferred by RFC to Peninsula Manpower Company,
Inc.("PMCI"), an agency which provides RFC with additional contractual workers pursuant to a
contract for the supply of manpower services (hereinafter referred to as the "Contract of Service").
After his transfer to PMCI, petitioner was allegedly reassigned to RFC as sales representative.
Subsequently, on 25 November 1991, he was informed by Ms. Susan Chua, personnel manager
of RFC, that his services were terminated and he was asked to surrender his ID card. Petitioner
was told that his dismissal was due to the expiration of the Contract of Service between RFC and
PMCI. Petitioner claims that he was dismissed from employment despite the absence of any notice
or investigation.
5. Private respondent Regent Food Corporation, on the other hand, maintains that no employer-
employee relationship existed between petitioner and itself. It insists that petitioner is actually an
employee of PMCI, allegedly an independent contractor, which had a Contract of Service with RFC.
To prove this fact, RFC presents an Employment Contract signed by petitioner on 1 July 1991,
wherein PMCI appears as his employer. RFC denies that petitioner was ever employed by it prior
to 1 July 1991. It avers that petitioner was issued an ID card so that its clients and customers would
recognize him as a duly authorized representative of RFC. With regard to the P200.00 pesos
monthly bond posted by petitioner, RFC asserts that it was required in order to guarantee the
turnover of his collection since he handled funds of RFC.
6. While RFC admits that it had control and supervision over petitioner, it argues that such was
exercised in coordination with PMCI. Finally, RFC contends that the termination of its relationship
with petitioner was brought about by the expiration of the Contract of Service between itself and
PMCI and not because petitioner was dismissed from employment.
7. The Labor Arbiter concluded that RFC was the true employer of petitioner for the following reasons:
(1) Petitioner was originally with RFC and was merely transferred to PMCI to be deployed as an
agency worker and then subsequently reassigned to RFC as sales representative; (2) RFC had
direct control and supervision over petitioner; (3) RFC actually paid for the wages of petitioner
although coursed through PMCI; and, (4) Petitioner was terminated per instruction of RFC.
8. RFC appealed the adverse decision of the Labor Arbiter to the NLRC. In a decision, dated 21 June
1996, the NLRC reversed the findings of the Labor Arbiter. The NLRC opined that PMCI is an
independent contractor because it has substantial capital and, as such, is the true employer of
petitioner. The NLRC, thus, held PMCI liable for the dismissal of petitioner.
Atty. Mercader
ISSUE/S:
1. Whether petitioner was an employee of RFC or PMCI; and
2. Whether petitioner was lawfully dismissed
HELD:
Based on the foregoing, PMCI can only be classified as a labor-only contractor and, as such,
cannot be considered as the employer of petitioner.
1. YES. The resolution of the first issue initially boils down to a determination of the true status
of PMCI, whether it is a labor-only contractor or an independent contractor. In the case at bar,
RFC alleges that PMCI is an independent contractor on the sole ground that the latter is
a highly capitalized venture. To buttress this allegation, RFC presents a copy of the Articles
of Incorporation and the Treasurer's Affidavit submitted by PMCI to the Securities and
Exchange Commission showing that it has an authorized capital stock of One Million Pesos
(P1,000,000.00), of which Three Hundred Thousand Pesos (P300,000.00) is subscribed and
Seventy-Five Thousand Pesos (P75,000.00) is paid-in. According to RFC, PMCI is a duly
organized corporation engaged in the business of creating and hiring a pool of temporary
personnel and, thereafter, assigning them to its clients from time to time for such duration as
said clients may require. RFC further contends that PMCI has a separate office, permit and
license and its own organization.
Labor-only contracting, a prohibited act, is an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to perform a job, work or service for
a principal. In labor-only contracting, the following elements are present:
(a) The contractor or subcontractor does not have substantial capital or investment to
actually perform the job, work or service under its own account and responsibility;
(b) The employees recruited, supplied or placed by such contractor or subcontractor
are performing activities which are directly related to the main business of the principal.
On the other hand, permissible job contracting or subcontracting refers to an
arrangement whereby a principal agrees to put out or farm out with a contractor or
subcontractor the performance or completion of a specific job, work or service within a
definite or predetermined period, regardless of whether such job, work or service is to
be performed or completed within or outside the premises of the principal. A person is
considered engaged in legitimate job contracting or subcontracting if the following conditions
concur:
(a) The contractor or subcontractor carries on a distinct and independent business and
undertakes to perform the job, work or service on its own account and under its own
responsibility according to its own manner and method, and free from the control and
direction of the principal in all matters connected with the performance of the work except
as to the results thereof;
(b) The contractor or subcontractor has substantial capital or investment; and
(c) The agreement between the principal and contractor or subcontractor assures the
contractual employees entitlement to all labor and occupational safety and health
standards, free exercise of the right to self-organization, security of tenure, and social and
welfare benefits.
It is not enough to show substantial capitalization or investment in the form of tools,
equipment, machineries and work premises, among others, to be considered as an
independent contractor. In fact, jurisprudential holdings are to the effect that in determining the
existence of an independent contractor relationship, several factors might be considered such
as, but not necessarily confined to, whether the contractor is carrying on an independent
business; the nature and extent of the work; the skill required; the term and duration of the
relationship; the right to assign the performance of specified pieces of work; the control and
supervision of the workers; the power of the employer with respect to the hiring, firing and
payment of the workers of the contractor; the control of the premises; the duty to supply
premises, tools, appliances, materials and labor; and the mode, manner and terms of payment.
Atty. Mercader
Given the above standards and the factual milieu of the case, the Court has to agree with
the conclusion of the Labor Arbiter that PMCI is engaged in labor-only contracting.
First of all, PMCI does not have substantial capitalization or investment in the form of tools,
equipment, machineries, work premises, among others, to qualify as an independent
contractor. While it has an authorized capital stock of P1,000,000.00, only P75,000.00 is
actually paid-in, which, to our mind, cannot be considered as substantial capitalization. In the
case of Neri, which was promulgated in 1993, BCC had a capital stock of P1,000,000.00 which
was fully subscribed and paid-for.
Second, PMCI did not carry on an independent business nor did it undertake the
performance of its contract according to its own manner and method, free from the control and
supervision of its principal, RFC. The evidence at hand shows that the workers assigned by
PMCI to RFC were under the control and supervision of the latter. The Contract of Service itself
provides that RFC can require the workers assigned by PMCI to render services even beyond
the regular eight (8) hour working day when deemed necessary. Furthermore, RFC undertook
to assist PMCI in making sure that the daily time records of its alleged employees faithfully
reflect the actual working hours. With regard to petitioner, RFC admitted that it exercised control
and supervision over him.
Third, PMCI was not engaged to perform a specific and special job or service, which is one
of the strong indicators that an entity is an independent contractor as explained by the Court in
the cases of Neri and Fuji. As stated in the Contract of Service, the sole undertaking of PMCI
was to provide RFC with a temporary workforce able to carry out whatever service may be
required by it. Such venture was complied with by PMCI when the required personnel were
actually assigned to RFC. Apart from that, no other particular job, work or service was required
from PMCI. Obviously, with such an arrangement, PMCI merely acted as a recruitment agency
for RFC. Since the undertaking of PMCI did not involve the performance of a specific job, but
rather the supply of manpower only, PMCI clearly conducted itself as labor-only contractor.
The fourth and most important requirement in ascertaining the presence of employer-
employee relationship is the power of control. It should be borne in mind, that the "control test"
calls merely for the existence of the right to control the manner of doing the work, and not
necessarily to the actual exercise of the right. In the case at bar, we need not belabor ourselves
in discussing whether the power of control exists. RFC already admitted that it exercised control
and supervision over petitioner.
2. NO. Since petitioner, due to his length of service, already attained the status of a regular
employee, he is entitled to the security of tenure provided under the labor laws. Hence, he may only be
validly terminated from service upon compliance with the legal requisites for dismissal.
As the employer, RFC has the burden of proving that the dismissal of petitioner was for a
cause allowed under the law and that petitioner was afforded procedural due process. Sad to
say, RFC failed to discharge this burden. Indeed, RFC never pointed to any valid or authorized
cause under the Labor Code which allowed it to terminate the services of petitioner. Its lone
allegation that the dismissal was due to the expiration or completion of contract is not even one
of the grounds for termination allowed by law. Neither did RFC show that petitioner was given
ample opportunity to contest the legality of his dismissal. In fact, no notice of such impending
termination was ever given him. Petitioner was, thus, surprised that he was already terminated
from employment without any inkling as to how and why it came about. Petitioner was definitely
denied due process. Having failed to establish compliance with the requirements on termination
of employment under the Labor Code, the dismissal of petitioner is tainted with illegality.
Atty. Mercader
Atty. Mercader
Coca-Cola Bottlers Philippines v. Agito

Chico-Nazario, J.
G.R. No. 179546 - 23 July 2009
FACTS:
Respondent, (Employees):
 On 15 April 2002, respondents filed before the NLRC two complaints against petitioner,
Interserve, Peerless Integrated Services, Inc., Better Builders, Inc., and Excellent
Partners, Inc. for reinstatement with backwages, regularization, nonpayment of 13th
month pay, and damages.
 They were salesmen assigned at the Lagro Sales Office of petitioner. They had been in
the employ of petitioner for years, but were not regularized. Their employment was
terminated on 8 April 2002 without just cause and due process.
Petitioner, (Coca-Cola):
 Petitioner is a domestic corporation duly registered with the Securities and Exchange Commission (SEC)
and engaged in manufacturing, bottling and distributing soft drink beverages and other allied products.
 Respondents were employees of Interserve who were tasked to perform contracted services in accordance
with the provisions of the Contract of Services executed between petitioner and Interserve on 23 March
2002. Said Contract between petitioner and Interserve, covering the period of 1 April 2002 to 30 September
2002, constituted legitimate job contracting, given that the latter was a bona fide independent contractor
with substantial capital or investment in the form of tools, equipment, and machinery necessary in the
conduct of its business.
 Petitioner asserted that respondents were employees of Interserve, since it was the latter which hired them,
paid their wages, and supervised their work, as proven by: (1) respondents' Personal Data Files in the
records of Interserve; (2) respondents' Contract of Temporary Employment with Interserve; and (3) the
payroll records of Interserve.
 Petitioner argues that there could not have been labor-only contracting, since respondents did not perform
activities that were indispensable to petitioner's principal business. And, even assuming that they did, such
fact alone does not establish an employer-employee relationship between petitioner and the respondents,
since respondents were unable to show that petitioner exercised the power to select and hire them, pay
their wages, dismiss them, and control their conduct.
Issue:
Whether Interserve is a legitimate job contractor.
Held: NO
 According to the foregoing provision, labor-only contracting would give rise to: (1) the creation
of an employer-employee relationship between the principal and the employees of the
contractor or sub-contractor; and (2) the solidary liability of the principal and the contractor
to the employees in the event of any violation of the Labor Code.
 The law clearly establishes an employer-employee relationship between the principal
employer and the contractor's employee upon a finding that the contractor is engaged in
"labor-only" contracting. Article 106 of the Labor Code categorically states: "There is 'labor-
only' contracting where the person supplying workers to an employee does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises,
among others, and the workers recruited and placed by such persons are performing
activities which are directly related to the principal business of such employer." Thus,
performing activities directly related to the principal business of the employer is only one of
the two indicators that "labor-only" contracting exists; the other is lack of substantial capital
or investment. The Court finds that both indicators exist in the case at bar.
 Respondents worked for petitioner as salesmen, with the exception of respondent Gil
Francisco whose job was designated as leadman. In the Delivery Agreement between
petitioner and TRMD Incorporated, it is stated that petitioner is engaged in the
manufacture, distribution and sale of softdrinks and other related products. The work of
Atty. Mercader
respondents, constituting distribution and sale of Coca-Cola products, is clearly

indispensable to the principal business of petitioner. The repeated re-hiring of some of the
respondents supports this finding. Petitioner also does not contradict respondents'
allegations that the former has Sales Departments and Sales Offices in its various offices,
plants, and warehouses; and that petitioner hires Regional Sales Supervisors and District
Sales Supervisors who supervise and control the salesmen and sales route helpers.
On Interserve’s Capital
 At the outset, the Court clarifies that although Interserve has an authorized capital stock amounting to
P2,000,000.00, only P625,000.00 thereof was paid up as of 31 December 2001. The Court does not set
an absolute figure for what it considers substantial capital for an independent job contractor, but it
measures the same against the type of work which the contractor is obligated to perform for the principal.
However, this is rendered impossible in this case since the Contract between petitioner and Interserve
does not even specify the work or the project that needs to be performed or completed by the latter's
employees, and uses the dubious phrase "tasks and activities that are considered contractible under
existing laws and regulations".
 The importance of identifying with particularity the work or task which Interserve was supposed to
accomplish for petitioner becomes even more evident, considering that the Articles of Incorporation of
Interserve states that its primary purpose is to operate, conduct, and maintain the business of janitorial
and allied services. But respondents were hired as salesmen and leadman for petitioner. The Court
cannot, under such ambiguous circumstances, make a reasonable determination if Interserve had
substantial capital or investment to undertake the job it was contracting with petitioner.
On The Right to Control
 Paragraph 3 of the Contract specified that the personnel of contractor Interserve, which included the
respondents, would comply with "CLIENT" as well as "CLIENT's policies, rules and regulations". It even
required Interserve personnel to subject themselves to on-the-spot searches by petitioner or its duly
authorized guards or security men on duty every time the said personnel entered and left the premises
of petitioner. Said paragraph explicitly established the control of petitioner over the conduct of
respondents.
 There is even no showing that Interserve had representatives who supervised respondents' work while
they were in the premises of petitioner.
 Also significant was the right of petitioner under paragraph 2 of the Contract to "request the replacement
of the CONTRACTOR'S personnel". True, this right was conveniently qualified by the phrase "if from its
judgment, the jobs or the projects being done could not be completed within the time specified or that the
quality of the desired result is not being achieved", but such qualification was rendered meaningless by
the fact that the Contract did not stipulate what work or job the personnel needed to complete, the time
for its completion, or the results desired. The said provision left a gap which could enable petitioner to
demand the removal or replacement of any employee in the guise of his or her inability to complete a
project in time or to deliver the desired result. The power to recommend penalties or dismiss workers is
the strongest indication of a company's right of control as direct employer.
 An independent job contractor, who is answerable to the principal only for the results of a certain work,
job, or service need not guarantee to said principal the daily attendance of the workers assigned to the
latter. An independent job contractor would surely have the discretion over the pace at which the work is
performed, the number of employees required to complete the same, and the work schedule which its
employees need to follow.
Other Findings
 Interserve was engaged in prohibited labor-only contracting, petitioner shall be deemed the true employer
of respondents. As regular employees of petitioner, respondents cannot be dismissed except for just or
authorized causes, none of which were alleged or proven to exist in this case.
 The certification issued by the DOLE stating that Interserve is an independent job contractor does not
sway this Court to take it at face value, since the primary purpose stated in the Articles of Incorporation of
Interserve is misleading. According to its Articles of Incorporation, the principal business of Interserve is
to provide janitorial and allied services. The delivery and distribution of Coca-Cola products, the work for
which respondents were employed and assigned to petitioner, were in no way allied to janitorial services.
Atty. Mercader
Garden of Memories v. NLRC

Mendoza, J.
GR No. 160278 – 8 February 2012
CA affirmed NLRC - NLRC agreed with LA in finding that petitioner Garden of Memories
Memorial Park and Life Plan, Inc. (Garden of Memories) was the employer of respondent Hilaria Cruz
(Cruz), and that Garden of Memories and petitioner Paulina Requio (Requio), were jointly and severally
liable for the money claims of Cruz.
FACTS:
Petitioner Garden of Memories is engaged in the business of operating a memorial park situated
at Calsadang Bago, Pateros, Metro-Manila and selling memorial Plan and services. Respondent Cruz, on
the other hand, worked at the Garden of Memories Memorial Park as a utility worker from August 1991
until her termination in February 1998. On March 13, 1998, Cruz filed a complaint for illegal dismissal.
Upon motion of Garden of Memories, Requio was impleaded as respondent on the alleged ground that
she was its service contractor and the employer of Cruz. As a utility worker, she was in charge, among
others, of the cleaning and maintenance of the ground facilities of the memorial park. Sometime in
February 1998, she had a misunderstanding with a co-worker named Adoracion Requio regarding the
use of a garden water hose. When the misunderstanding came to the knowledge of Requio, the latter
instructed them to go home and not to return anymore. LA ruled that Requio was not an independent
contractor but a labor-only contractor. The LA declared both Garden of Memories and Requio, jointly and
severally, liable for the monetary claims of Cruz. NLRC affirmed the ruling of the LA, stating that Requio
had no substantial capital or investments in the form of tools, equipment, machineries, and work
premises, among others, for her to qualify as an independent contractor. CA dismissed the petition and
affirmed the NLRC decision.
ISSUE/S:
1. W/N Paulina Requio is engaged in labor-only contracting; and
2. W/N there is [no] basis in granting the monetary awards in favor of the respondent Cruz despite
the absence of a clear pronouncement regarding the legality or illegality of her dismissal
HELD: The Court finds no merit in the petition.

In the present case, the LA, the NLRC, and the CA are one in declaring that petitioner Requio
was not a legitimate contractor. Echoing the decision of the LA and the NLRC, the CA reasoned out
that Requio was not a licensed contractor and had no substantial capital or investment in the form of
tool, equipment and work premises, among others.
There is labor-only contracting where the person supplying workers to an employer does not
have substantial capital or investment in the form of tools, equipment, machineries, work premises,
among others, and the workers recruited and placed by such persons are performing activities which
are directly related to the principal business of such employer. In such cases, the person or intermediary
shall be considered merely as an agent of the employer who shall be responsible to the workers in the
same manner and extent as if the latter were directly employed by him. [Underscoring provided]
Sec. 8. Job contracting. There is job contracting permissible under the Code if the following
conditions are met:
(1) The contractor carries on an independent business and undertakes the contract work on his own
account under his own responsibility according to his own manner and method, free from the control
and direction of his employer or principal in all matters connected with the performance of the work
except as to the results thereof; and (2) The contractor has substantial capital or investment in the
form of tools, equipment, machineries, work premises, and other materials which are necessary in the
conduct of his business.
Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to an
employer shall be deemed to be engaged in labor-only contracting where such person:(1) Does not
have substantial capital or investment in the form of tools, equipment, machineries, work premises and
other materials; and (2) The workers recruited and placed by such persons are performing activities
which are directly related to the principal business or operations of the employer in which workers are
Atty. Mercader
habitually employed.(b) Labor-only contracting as defined herein is hereby prohibited and the person
acting as contractor shall be considered merely as an agent or intermediary of the employer who shall
be responsible to the workers in the same manner and extent as if the latter were directly employed by
him.(c) For cases not falling under this Article, the Secretary of Labor shall determine through
appropriate orders whether or not the contracting out of labor is permissible in the light of the
circumstances of each case and after considering the operating needs of the employer and the rights
of the workers involved. In such case, he may prescribe conditions and restrictions to insure the
protection and welfare of the workers. On the matter of labor-only contracting, Section 5 of Rule VIII-
A of the Omnibus Rules Implementing the Labor Code, provides:
Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared

prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor
or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a
principal, and any of the following elements are present:
i) The contractor or subcontractor does not have substantial capital or investment which relates
to the job, work or service to be performed and the employees recruited, supplied or placed by such
contractor or subcontractor are performing activities related to the main business of the
principal; The contractor does not exercise the right to control over the performance of the work of
the contractual employee.
Generally, the presumption is that the contractor is a labor-only contracting unless such
contractor overcomes the burden of proving that it has the substantial capital, investment, tools and the
like. In the present case, though Garden of Memories is not the contractor, it has the burden of proving
that Requio has sufficient capital or investment since it is claiming the supposed status of Requio as
independent contractor. Garden of Memories, however, failed to adduce evidence purporting to show that
Requio had sufficient capitalization. Neither did it show that she invested in the form of tools, equipment,
machineries, work premises and other materials which are necessary in the completion of the service
contract.
The requirement of the law in determining the existence of independent contractorship is that the
contractor should undertake the work on his own account, under his own responsibility, according to his
own manner and method, free from the control and direction of the employer except as to the results
thereof. In this case, however, the Service Contract Agreement clearly indicates that Requio has no
discretion to determine the means and manner by which the work is performed. Rather, the work should
be in strict compliance with, and subject to, all requirements and standards of Garden of Memories.
Under these circumstances, there is no doubt that Requio is engaged in labor-only contracting,
and is considered merely an agent of Garden of Memories. As such, the workers she supplies should be
considered as employees of Garden of Memories. Consequently, the latter, as principal employer, is
responsible to the employees of the labor-only contractor as if such employees have been directly
employed by it.
|||
Atty. Mercader
Aliviado v. Procter & Gamble

Del Castillo, J.
G.R. No. 160506 – March 29, 2010
Labor laws expressly prohibit labor-only contracting. To prevent its circumvention, the Labor
Code establishes an employer-employee relationship between the employer and the employees of the
labor-only contractor.
FACTS:
Petitioners worked as merchandisers of P&G from various dates, allegedly starting as early as
1982 or as late as June 1991, to either May 5, 1992 or March 11, 1993.
They all individually signed employment contracts with either Promm-Gem or SAPS for periods of
more or less five (5) months at a time. They were assigned at different outlets, supermarkets and stores
where they handled all the products of P&G. They received their wages from Promm-Gem or SAPS.
SAPS and Promm-Gem imposed disciplinary measures on erring merchandisers for reasons such
as habitual absenteeism, dishonesty or changing day-off without prior notice.
P&G is principally engaged in the manufacture and production of different consumer and health
products, which it sells on a wholesale basis to various supermarkets and distributors. To enhance
consumer awareness and acceptance of the products, P&G entered into contracts with Promm-Gem and
SAPS for the promotion and merchandising of its products.
In December 1991, petitioners filed a complaint against P&G for regularization, service incentive
leave pay and other benefits with damages. The complaint was later amended to include the matter of their
subsequent dismissal.
Petitioners insist that they are employees of P&G. They claim that they were recruited by the
salesmen of P&G and were engaged to undertake merchandising chores for P&G long before the existence
of Promm-Gem and/or SAPS. They further claim that when the latter had its so-called re-alignment
program, petitioners were instructed to fill up application forms and report to the agencies which P&G
created.
Petitioners further assert that Promm-Gem and SAPS are labor-only contractors providing services
of manpower to their client. They claim that the contractors have neither substantial capital nor tools and
equipment to undertake independent labor contracting. Petitioners insist that since they had been engaged
to perform activities which are necessary or desirable in the usual business or trade of P&G, then they are
its regular employees.
On the other hand, P&G argues that there is no employment relationship between it and
petitioners. It was Promm-Gem or SAPS that (1) selected petitioners and engaged their services; (2) paid
their salaries; (3) wielded the power of dismissal; and (4) had the power of control over their conduct of
work.
P&G also contends that the Labor Code neither defines nor limits which services or activities may
be validly outsourced. Thus, an employer can farm out any of its activities to an independent contractor,
regardless of whether such activity is peripheral or core in nature. It insists that the determination of whether
to engage the services of a job contractor or to engage in direct hiring is within the ambit of management
prerogative.
Labor Arbiter: The Labor Arbiter dismissed the complaint for lack of merit and ruled that there was no
employer-employee relationship between petitioners and P&G. He found that the selection and
engagement of the petitioners, the payment of their wages, the power of dismissal and control with respect
Atty. Mercader
to the means and methods by which their work was accomplished, were all done and exercised by Promm-
Gem/SAPS. He further found that Promm-Gem and SAPS were legitimate independent job contractors.
NLRC: Petitioners’ appeal denied.
Court of Appeals: Petitioners’ petition for certiorari denied. Petitioners filed a motion for reconsideration
but the motion was also denied. Hence, this petition.
ISSUE/S:
(1) whether P&G is the employer of petitioners; and
(2) whether petitioners were illegally dismissed
HELD: The petition has merit.
(1) In order to resolve the issue of whether P&G is the employer of petitioners, it is necessary to
first determine whether Promm-Gem and SAPS are labor-only contractors or legitimate job contractors.
Clearly, the law and its implementing rules allow contracting arrangements for the performance of
specific jobs, works or services. Indeed, it is management prerogative to farm out any of its activities,
regardless of whether such activity is peripheral or core in nature. However, in order for such outsourcing
to be valid, it must be made to an independent contractor because the current labor rules expressly prohibit
labor-only contracting.
To emphasize, there is labor-only contracting when the contractor or sub-contractor merely recruits,
supplies or places workers to perform a job, work or service for a principal and any of the following elements
are present:
i) The contractor or subcontractor does not have substantial capital or investment

which relates to the job, work or service to be performed and the employees recruited,
supplied or placed by such contractor or subcontractor are performing activities which are
directly related to the main business of the principal; or
ii) The contractor does not exercise the right to control over the performance of the
work of the contractual employee.
In the instant case, the financial statements of Promm-Gem show that it has authorized capital
stock of P1 million and a paid-in capital, or capital available for operations, of P500,000.00 as of 1990. It
also has long term assets worth P432,895.28 and current assets of P719,042.32. Promm-Gem has also
proven that it maintained its own warehouse and office space with a floor area of 870 square meters. It also
had under its name three registered vehicles which were used for its promotional/merchandising
business. Promm-Gem also has other clients aside from P&G. Under the circumstances, we find that
Promm-Gem has substantial investment which relates to the work to be performed. These factors negate
the existence of the element specified in Section 5 (i) of DOLE Department Order No. 18-02.
The records also show that Promm-Gem supplied its complainant-workers with the relevant
materials, such as markers, tapes, liners and cutters, necessary for them to perform their work. Promm-
Gem also issued uniforms to them. It is also relevant to mention that Promm-Gem already considered the
complainants working under it as its regular, not merely contractual or project, employees. This
circumstance negates the existence of element (ii) as stated in Section 5 of DOLE Department Order No.
18-02, which speaks of contractual employees. This, furthermore, negates on the part of Promm-Gem bad
faith and intent to circumvent labor laws which factors have often been tipping points that lead the Court to
strike down the employment practice or agreement concerned as contrary to public policy, morals, good
customs or public order.
Atty. Mercader
Under the circumstances, Promm-Gem cannot be considered as a labor-only contractor. We find

that it is a legitimate independent contractor.
On the other hand, the Articles of Incorporation of SAPS shows that it has a paid-in capital of only
P31,250.00. There is no other evidence presented to show how much its working capital and assets
are. Furthermore, there is no showing of substantial investment in tools, equipment or other assets.
In Vinoya v. National Labor Relations Commission, the Court held that with the current economic
atmosphere in the country, the paid-in capitalization of PMCI amounting to P75,000.00 cannot be
considered as substantial capital and, as such, PMCI cannot qualify as an independent contractor. Applying
the same rationale to the present case, it is clear that SAPS having a paid-in capital of only P31,250 - has
no substantial capital. SAPS lack of substantial capital is underlined by the records which show that its
payroll for its merchandisers alone for one month would already total P44,561.00. It had 6-month contracts
with P&G. Yet SAPS failed to show that it could complete the 6-month contracts using its own capital and
investment. Its capital is not even sufficient for one months payroll. SAPS failed to show that its paid-in
capital of P31,250.00 is sufficient for the period required for it to generate its needed revenue to sustain its
operations independently. Substantial capital refers to capitalization used in the performance or
completion of the job, work or service contracted out. In the present case, SAPS has failed to show
substantial capital.
Furthermore, the petitioners have been charged with the merchandising and promotion of the
products of P&G, an activity that has already been considered by the Court as doubtlessly directly related
to the manufacturing business, which is the principal business of P&G. Considering that SAPS has no
substantial capital or investment and the workers it recruited are performing activities which are directly
related to the principal business of P&G, we find that the former is engaged in labor-only contracting.
Where labor-only contracting exists, the Labor Code itself establishes an employer-employee
relationship between the employer and the employees of the labor-only contractor. The statute establishes
this relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The contractor is
considered merely an agent of the principal employer and the latter is responsible to the employees of the
labor-only contractor as if such employees had been directly employed by the principal employer.
Consequently, the petitioners who have been recruited and supplied by SAPS — which
engaged in labor-only contracting — are considered as the employees of P&G. The petitioners who
have worked under, and been dismissed by Promm-Gem, are considered the employees of Promm-
Gem, not of P&G.
(2) While Promm-Gem had complied with the procedural aspect of due process in terminating the
employment of petitioners-employees, i.e., giving two notices and in between such notices, an opportunity
for the employees to answer and rebut the charges against them, it failed to comply with the substantive
aspect of due process as the acts complained of neither constitute serious misconduct nor breach of
trust. Hence, the dismissal is illegal.
With regard to the petitioners placed with P&G by SAPS, they were given no written notice of
dismissal. The records show that upon receipt by SAPS of P&Gs letter terminating their Merchandising
Services Contact effective March 11, 1993, they in turn verbally informed the concerned petitioners not to
report for work anymore.
It must be emphasized that the onus probandi to prove the lawfulness of the dismissal rests with
the employer. In termination cases, the burden of proof rests upon the employer to show that the dismissal
is for just and valid cause. In the instant case, P&G failed to discharge the burden of proving the legality
and validity of the dismissals of those petitioners who are considered its employees. Hence, the dismissals
necessarily were not justified and are therefore illegal.
Atty. Mercader
Manila Memorial Park Cemetery, Inc. vs Ezard Lluz, Norman Corral, Erwin Fugaban, Valdimar
Balisi, Emilio Fabon, John Mark Aplicador, Michael Curioso, Julin Espares, Gavino Farinas and
Ward Training Services
Carpio, J.
GR No. 208451 – 3 February 2016
This is a petition for review on certiorari assailing the Decision dated 21 January 2013 and the
Resolution dated 17 July 2013 of the Court of Appeals (CA) in CA-G.R. SP No. 119237.
FACTS:
Manila Memorial Park Cemetery, Inc. (Manila Memorial) entered into a Contract of Services with
Ward Trading and Services (Ward Trading). It was provided in the contract that Ward Trading will
render interment and exhumation services and other related work to Manila Memorial in order to
supplement operations at Manila Memorial Park, Parañaque City as an independent contractor. Ward
Trading assigned several individuals to perform services at the Manila Memorial Park, among those
were respondents Ezard Lluz, Norman Corral, Erwin Fugaban, Valdimar Balisi, Emilio Fabon, John
Mark Aplicador, Michael Curioso, Junlin Espares, and Gavino Farinas. They worked six days a week
for eight hours daily and received P250 per day.
On 26 June 2007, respondents filed a Complaint for regularization and Collective
Bargaining Agreement benefits against Manila Memorial; Enrique B. Lagdameo, Manila Memorial's
Executive Vice-President and Director in Charge for Overall Operations, and Ward Trading. On 6
August 2007, respondents filed an amended complaint to include illegal dismissal, underpayment of
13th month pay, and payment of attorney's fees.
Respondents alleged that they asked Manila Memorial to consider them as regular workers
within the appropriate bargaining unit established in the collective bargaining agreement by Manila
Memorial and its union, the Manila Memorial Park Free Workers Union (MMP Union). Manila Memorial
refused the request since respondents were employed by Ward Trading, an independent labor
contractor. Thereafter, respondents joined the MMP Union. The MMP Union, on behalf of
respondents, sought their regularization which Manila Memorial again declined. Respondents then
filed the complaint. Subsequently, respondents were dismissed by Manila Memorial. Thus,
respondents amended the complaint to include the prayer for their reinstatement and payment of back
wages.
Manila Memorial sought the dismissal of the complaint for lack of jurisdiction since there
was no employer-employee relationship. Manila Memorial argued that respondents were the
employees of Ward Trading.
The Labor Arbiter dismissed the complaint for failure to prove the existence of an employer-
employee relationship. An appeal was made and the NLRC reversed the decision of the Labor Arbiter.
The CA affirmed the ruling of the NLRC, Manila Memorial filed for reconsideration but the same was
denied. Hence, this petition.
ISSUE:
Whether or not an employer-employee relationship exists between Manila Memorial and respondents for
the latter to be entitled to their claim for wages and other benefits.
Yes. The presumption that Ward Trading is a labor-only contractor stands.

In the present case, Manila Memorial entered into a Contract of Services with Ward Trading, a
single proprietorship owned by Emmanuel Mayor Ward with business address in Las Piñas City on 23
February 2006. In the Contract of Services, it was provided that Ward Trading, as the contractor, had
adequate workers and substantial capital or investment in the form of tools, equipment, machinery, work
premises and other materials which were necessary in the conduct of its business.
Atty. Mercader
A closer look at the Contract of Services reveals that Ward Trading does not have substantial
capital or investment in the form of tools, equipment, machinery, work premises and other materials since
it is Manila Memorial which owns the equipment used in the performance of work needed for interment
and exhumation services. Manila Memorial did not present any evidence to show that the sale actually
pushed through or that payments were made by Ward Trading to prove an ordinary arms length
transaction. We agree with the NLRC in its findings.
Further, the records show that Manila Memorial and Enrique B. Lagdameo admitted that
respondents performed various interment services at its Sucat, Parañaque branch which were directly
related to Manila Memorial's business of developing, selling and maintaining memorial parks and
interment functions. Manila Memorial even retained the right to control the performance of the work of the
employees concerned.
For failing to register as a contractor, a presumption arises that one is engaged in labor-only
contracting unless the contractor overcomes the burden of proving that it has substantial capital,
investment, tools and the like. In this case, however, Manila Memorial failed to adduce evidence to prove
that Ward Trading had any substantial capital, investment or assets to perform the work contracted for.
Thus, the presumption that Ward Trading is a labor-only contractor stands. Consequently, Manila
Memorial is deemed the employer of respondents. As regular employees of Manila Memorial,
respondents are entitled to their claims for wages and other benefits as awarded by the NLRC and
affirmed by the CA.
Atty. Mercader
W.M. MANUFACTURING, INC. , petitioner, vs. RICHARD R. DALAG and GOLDEN ROCK
MANPOWER SERVICES, respondents.
G.R. No. 209418. December 7, 2015.
FACTS:
On January 3, 2010, petitioner, as client, and respondent Golden Rock, as contractor, executed a contract
denominated as "Service Agreement,”
In relation to the Service Agreement, Golden Rock, on April 26, 2010, engaged the services of respondent
Dalag as a factory worker to be assigned at petitioner's factory. For this purpose, respondents inked a five-
month Employment Contract for Contractual Employees (Employment Contract) that reads:
EMPLOYMENT CONTRACT FOR CONTRACTUAL EMPLOYEES Dear Mr./Ms. Richard Dalag,
[Golden Rock] hire(s) you as a contractual worker/employee to work at WM MFG under these conditions:
1) You will hold the position as (sic) Factory Worker.
2) Your employment as a CONTRACTUAL EMPLOYEE takes effect on April 26, 2010 to Sept. 26, 2010.
You will receive a salary of P328.00 per day payable weekly/15'h (sic) day monthly of the calendar month.
xxx xxx xxx
7) Your employment as a CONTRACTUAL EMPLOYEE may be terminated at any time for any cause,
which may arise due to inability to learn and undertake duties and responsibilities of the position you are
being employed for, inefficiency, violation of company rules, policies and regulations, personnel reduction
and recession business. In either event, you will be given a notice of termination during your working
hours/day.
The company undertakes to pay your compensation for the days actually worked and the company shall
not be liable for the period of the contract not run for any separation pay. aScITE
Dalag while employed for the company worked as a side seal machine operator, by using the equipment
of Petitioner.
Notwithstanding the five-month duration stipulated in the contract, respondent Dalag would allege in his
complaint for illegal dismissal that on August 7, 2010, one of WM MFG's security guards prevented him
from going to his work station and, instead, escorted him to the locker room and limited his activity to
withdrawing his belongings therefrom. Having been denied entry to his work station without so much as an
explanation from management, Dalag claimed that he was illegally dismissed, his employment having been
terminated without either notice or cause, in violation of his right to due process, both substantive and
procedural. He likewise alleged that WM MFG and Golden Rock engaged in the illegal act of labor-only
contracting based on the following circumstances: that all the equipment, machine and tools that he needed
to perform his job were furnished by WM MFG; that the jobs are to be performed at WM MFG's workplace;
and that he was under the supervision of WM MFG's team leaders and supervisors.
Petitioner answers by stating the grounds for Dalag’s dismissal: gross negligence, qualified theft, malicious
mischief, incompetence, grave misbehaviours, insubordination, dishonesty, and machine sabotage.
repeatedly failed to immediately report to management the breakdowns of the side-seal machine he was
assigned to operate; that he did not report that the machine's thermocouple wire and conveyor belt needed
repair, causing the damage on the belt to worsen and for the wire to eventually break; and that he pocketed
spare parts of petitioner's machines without company management's consent. That due to such grounds
Petitioner company delivered memos addressed to Dalag ordering him to answer the complaints against
him, which he did not receive since he allegedly turned his back on them and subsequently saying that he
will not return. Petitioner now goes to Golden Rock informing them of the situation and asks for replacement.
And that it is Golden Rock who pays for the salary of Dalag.
Issues:
1. Whether or not WM MFG and Golden Rock engaged in labor-only contracting;
2. Whether or not Dalag was illegally dismissed; and
3. What monetary award/s is Dalag entitled to, if any, and at what amount.
Held:
In finding out if a company is engaged in labor only contracting the the following provision should be
applied:
Section 5 of DO 18-02 laid down the criteria in determining whether or not labor- only contracting exists
between two parties, as follows:
Atty. Mercader
Section 5. Prohibition against labor-only contracting. — Labor-only contracting is hereby declared

prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal,
and any of the following elements are present:
i) The contractor or subcontractor does not have substantial capital or investment which relates to the job,
work or service to be performed and the employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the main business of the principal; or
ii) the contractor does not exercise the right to control over the performance of the work of the contractual
employee.
Golden Rock in attempting to prove that he is a proper contractor present his certificate of registration from
DOLE, which would entail that it passed the requirement of said agency of having sufficient capital in the
establishment of the business, giving the disputable presumption that the business conducted is legitimate.
However such claim in unconvincing as in determining if a company is a “labor-only” contractor not only the
capital is examined but also the tools and equipment for the industry engaged in. Here, the Certificate of
Registration may have prevented the presumption of labor-only contracting from arising, but the evidence
Dalag adduced was sufficient to overcome the disputable presumption that Golden Rock is an independent
contractor. To be sure, in performing his tasks, Dalag made use of the raw materials and equipment that
WM MFG supplied. He also operated the side-seal machine in the workplace of WM MFG, not of Golden
Rock. With these attendant circumstances, the Court rules that the first confirmatory element indubitably
exists.
Regarding the second element which is who exercises control over Dalag, does not require the application
of the economic test and, even more so, the four-fold test to determine whether or not the relation between
the parties is one of labor-only contracting: All it requires is that the contractor does not exercise control
over the employees it supplies, making the control test of paramount consideration. The fact that Golden
Rock pays for Dalag's wages and salaries then has no bearing in resolving the issue evidence irresistibly
suggests that it was WM MFG who actually exercised supervision over Dalag's work performance. As culled
from the records, Dalag was supervised by WM MFG's employees, controlling the manner and the means
in achieving the end goal. Therefore Petitioner and Golden Rock are engaged in labor only contracting.
As for the the validity of the dismissal the Court rules that there is just cause for the dismissal due to gross
and habitual neglect of his duty to report to his superiors and the problems he encountered with the side-
seal machine he was assigned to operate was well-documented and duly investigated by WM MFG. The
Court, therefore, holds that there was, indeed, just cause to terminate Dalag's employment under Art. 282
(2) of the Labor Code.
On the other hand the procedural aspect of the dismissal there was no evidence of such notice being
presented to Dalag, therefore the non-service of said notice goes against procedural due process.
The amount of nominal damages to be awarded is addressed to the sound discretion of the court, taking
into account the relevant circumstances. Nonetheless, JAKA laid down the following guidelines in
determining what amount could be considered proper:
(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.
In the case at bar, given that there was substantial attempt on the part of WM MFG to comply with the
procedural requirements, the Court, nevertheless, deems the amount of P30,000 as sufficient nominal
damages to be awarded to respondent Dalag.
Atty. Mercader
Diamond Farms, Inc. v Southern Philippines Federation of

Labor Workers
Jardeleza, J.
GR No. 173254 – 13 January 2016
DFI challenges the March 31, 2006 Decision and May 30, 2006 Resolution of the Court Appeals
for being contrary to law and jurisprudence. The Decision dismissed DFI's Petition for Certiorari and granted
DARBMUPCO's Petition for Certiorari. It declared DFI as the statutory employer of the respondent-workers.
FACTS: DFI owns an 800-hectare banana plantation (original plantation) in Alejal, Carmen, Davao.
Pursuant to the Comprehensive Agrarian Reform Law of 1988 (CARL), commercial farms shall be subject
to compulsory acquisition and distribution, thus the plantation was covered by the law. However, the DAR
granted DFI a deferment privilege to continue agricultural operations until 1998. Due to problems, DFI
closed some areas of operation in the plantation and laid off its employees. These employees then
petitioned for the cancellation of the privilege alleging that DFI already abandoned its area of operations.
The DAR recalled the privilege resulting in the plantation’s automatic compulsory acquisition and
distribution under the CARL. To minimize losses, DFI offered to give up its rights and interest over the
plantation in favor of the government by way a Voluntary Offer to Sell which the DAR accepted. However,
the DAR only approved the disposition of 689.99 hectares. Hence, the plantation was split into two: 689.88
hectares (awarded plantation) and the remaining hectares which were retained by DFI (managed area).
The awarded plantation was turned over to qualified agrarian reform beneficiaries (ARBs), who are
the same farmers who were working in the original plantation. They subsequently organized themselves
into a multi-purpose cooperative named DARBMUPCO, which is one of the respondents in this case. It
entered into a Banana Production and Purchase Agreement (BPPA) with DFI which provides that
DARBMUPCO and its members as owners of the awarded planation, agreed to grow and cultivate only
high grade quality exportable bananas to be sold exclusively to DFI. Furthermore, the parties executed a
SMA which state that the DFI shall take care of the labor cost arising from the packaging operation, cable
maintenance, irrigation maintenance that the workers of DARBMUPCO shall conduct for DFI’s account
under the BPPA.
From the start, DARBMUPCO was hampered by lack of manpower to undertake the operation
under the BPPA because some of its members were not willing to work. Hence, to assist DARBMUPCO,
DFI engaged the services of the respondent-contractors, who in turn recruited the respondent-workers. The
recruitment started a series of labor dispute among DARBMUPCO, DFI, and the respondent-contractors.
Southern Philippines Federation of Labor (SPFL) – a legitimate labor organization with a local
chapter in the awarded plantation – filed a petition for certification in the Office of the Med-Arbiter in Davao
City on behalf of some 400 workers jointly employed by DFI and DARBMUPCO working in the awarded
plantation. In another case, SPFL, together with more than 300 workers, filed a case for underpayment of
wages, non-payment of 13th month pay and service incentive leave pay against DFI, DARBMUPCO and
the respondent-contractors before the NLRC. In both cases, DFI and DARBMUPCO denied that they were
employers of respondent-workers and claimed that the workers are employees of respondent-contractors.
In the first case, the Secretary of Labor and Employment (SOLE) stated in a resolution that DFI is
the employer of the respondent-workers, hence, DFI elevated the case to the CA. Meanwhile, in the other
case, the LA held that the respondent-contractors are “labor-only contractors.” The LA gave credence to
the affidavits of the contractors of DFI asserting that DFI engaged their services, and supervised and paid
their laborers. The affidavits also stated that the contractors had no dealing with DARBMUPCO, except
that their work is done in the awarded plantation. The LA held that DFI is deemed as the statutory employer
of all the respondent-workers.
The Court of Appeals ruled that the DFI is the statutory employer of the respondent-workers. It
noted that the DFI hired the respondent-contractors, who in turn procured their own men to work in the land
owned by DARBMUPCO. Further, DFI admitted that the respondent-contractors worked under the direction
and supervision of DFI's managers and personnel. DFI also paid for the respondent-contractors'
services. The CA said that the fact that the respondent-workers worked in the land owned by
DARBMUPCO is immaterial. "Ownership of the land is not one of the four (4) elements generally considered
to establish employer- employee relationship." Furthermore, it ruled that DFI is the true employer because
the respondent-contractors are not independent contractors. The CA stressed that DFI revealed that
Atty. Mercader
DARBMUPCO lacks manpower to fulfill the production requirements under the BPPA. This impelled DFI to
hire contractors to supply labor enabling DARBMUPCO to meet its quota. The CA observed that while the
various agencies involved in the consolidated petitions sometimes differ as to who the statutory employer
of the respondent-workers is, they are uniform in finding that the respondent-contractors are labor-only
contractors.
ISSUE/S: Whether or not the DFI is the statutory employer of respondent-workers.

This case involves job contracting. Contracting or subcontracting is an arrangement whereby a principal
agrees to put out or farm out with a contractor or subcontractor the performance of completion of a specific
job, work or service is to be performed or completed within or outside the premises of the principal. It
involves a trilateral relationship among the principal or employer, the contractor or subcontractor, and the
workers engaged by the contractor or subcontractor. Article 106 explains the relations which may arise
between an employer, a contractor, and the contractor’s employees.
The Omnibus Rules Implementing the Labor Code distinguishes between permissible job
contracting (or independent contractorship) and labor-only contracting. Job contracting is permissible under
the Code if the following conditions are met:
a. The contractor carries on an independent business and undertakes the contract work on his own
account under his own responsibility according to his own manner and method, free from the control and
direction of his employer or principal in all matters connected with the performance of the work except as
to the results thereof; and
b. The contractor has substantial capital or investment in the form of tools, equipment, machineries,
work premises, and other materials which are necessary in the conduct of his business.
In contrast, job contracting shall be deemed as labor-only contracting, an arrangement prohibited by
law, if a person who undertakes to supply workers to an employer:
1. Does not have substantial capital or investment in the form of tools, equipment, machineries, work premises
and other materials; and
2. The workers recruited and placed by such person are performing activities which are directly related to the
principal business or operations of the employer in which workers are habitually employed.
As a general rule, a contractor is presumed to be a labor-only contractor, unless such contractor
overcomes the burden of proving that it has the substantial capital, investment, tools and the like. Based
on the conditions for permissible job contracting, the court ruled that respondent-contractors are labor-only
contractors. In this case, there is no evidence showing the respondent-contractors are independent
contractors. To support its argument that respondent-contractors are the employers of respondent-workers,
and not merely labor-only contractors, DFI should have presented proof showing that respondent-
contractors carry on an independent business and have sufficient capitalization. The record, however, is
bereft of showing of even an attempt on the part of DFI to substantiate its argument.
A finding that a contractor is a labor-only contractor is equivalent to a declaration that there is an
employer-employee relationship between the principal, and the workers of the labor-only contractor; the
labor-only contractor is deemed only as an agent of the principal. Thus, on this case, respondent-
contractors are the labor-only contractors and either DFI or DARBMUPCO is their principal.
However, the Court further ruled that DFI is the principal because under Article 106 of the Labor Code,
a principal or employer refers to the person who enters into an agreement with a job contractor, either for
the performance of a specified work or for the supply of manpower. Records show that it is DFI which hired
the respondent-contractors who in turn hired their own men to work in the awarded plantation. DFI cannot
argue that DARBMUPCO is the principal since it owns the awarded plantation. Ownership of DARBMUPCO
is immaterial. It does not change the situation of the parties.
Furthermore, this ruling is bolstered by the CA's finding that DFI exercises control over the respondent-
workers. DFI, through its manager and supervisors provides for the work assignments and performance
targets of the respondent-workers. The managers and supervisors also have the power to directly hire and
terminate the respondent-workers. Evidently, DFI wields control over the respondent-workers.
Atty. Mercader
Atty. Mercader
People vs. Panis

Cruz J.; GR No. L-58674-77 – 11 July 1986
FACTS
Four informations were filed on January 9, 1981, in the Court of First Instance of Zambales and
Olongapo City alleging that Serapio Abug, private respondent herein, "without first securing a license from
the Ministry of Labor as a holder of authority to operate a fee-charging employment agency, did then and
there wilfully, unlawfully and criminally operate a private fee-charging employment agency by charging fees
and expenses (from) and promising employment in Saudi Arabia" to four separate individuals named
therein, in violation of Article 16 in relation to Article 39 of the Labor Code. Abug filed a motion to quash on
the ground that the informations did not charge an offense because he was accused of illegally recruiting
only one person in each of the four informations. Under the proviso in Article 13(b), he claimed, there would
be illegal recruitment only "whenever two or more persons are in any manner promised or offered any
employment for a fee." Denied at first, the motion was reconsidered and finally granted in the Orders of the
trial court dated June 24 and September 17, 1981. The prosecution is now before us on certiorari. The
posture of the petitioner is that the private respondent is being prosecuted under Article 39 in relation to
Article 16 of the Labor Code; hence, Article 13(b) is not applicable. However, as the first two cited articles
penalize acts of recruitment and placement without proper authority, which is the charge embodied in the
informations, application of the definition of recruitment and placement in Article 13(b) is unavoidable. The
view of the private respondents is that to constitute recruitment and placement, all the acts mentioned in
this article should involve dealings with two or more persons as an indispensable requirement. On the other
hand, the petitioner argues that the requirement of two or more persons is imposed only where the
recruitment and placement consists of an offer or promise of employment to such persons and always in
consideration of a fee. The other acts mentioned in the body of the article may involve even only one person
and are not necessarily for profit.
ISSUE: Whether or not Article 13(b) of P.D 442 requires an illegal recruiter to recruit two or more persons
HELD: Petition is GRANTED. The four informations are reinstated. Neither interpretation is
acceptable. We fail to see why the proviso should speak only of an offer or promise of employment if the
purpose was to apply the requirement of two or more persons to all the acts mentioned in the basic rule.
As we see it, the proviso was intended neither to impose a condition on the basic rule nor to
provide an exception thereto but merely to create a presumption. The presumption is that the
individual or entity is engaged in recruitment and placement whenever he or it is dealing with two or more
persons to whom, in consideration of a fee, an offer or promise of employment is made in the course of
the "canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring (of) workers." The
number of persons dealt with is not an essential ingredient of the act of recruitment and
placement of workers. Any of the acts mentioned in the basic rule in Article 13(b) will constitute
recruitment and placement even if only one prospective worker is involved. The proviso merely lays
down a rule of evidence that where a fee is collected in consideration of a promise or offer of
employment to two or more prospective workers, the individual or entity dealing with them shall be
deemed to be engaged in the act of recruitment and placement. The words "shall be deemed" create that
presumption. In the instant case, the word "shall be deemed" should by the same token be given the
force of a disputable presumption or of prima facie evidence of engaging in recruitment and
placement. The interpretation here adopted should give more force to the campaign against illegal
recruitment and placement, which has victimized many Filipino workers seeking a better life in a foreign
land, and investing hard-earned savings or even borrowed funds in pursuit of their dream, only to be
awakened to the reality of a cynical deception at the hands of their own countrymen.
Atty. Mercader
People v. Gallo
Velasco, Jr., J.
GR No. 187730 – 29 June 2010
FACTS:
 Originally, accused-appellant Gallo and accused Fides Pacardo (Pacardo) and Pilar Manta (Manta),
together with Mardeolyn Martir (Mardeolyn) and nine (9) others, were charged with syndicated illegal
recruitment and eighteen (18) counts of estafa committed against 18 complainants, including Edgardo
V. Dela Caza (Dela Caza), Sandy Guantero (Guantero) and Danilo Sare (Sare).
 After trial, Pacardo and Manta were acquitted in four Criminal Cases for insufficiency of evidence.
Likewise, accused-appellant Gallo was similarly acquitted in a Criminal Case, the case filed by
Guantero, and another case which was filed by Sare. However, accused-appellant was found guilty
beyond reasonable doubt in two Criminal Case Nos., both filed by Dela Caza, for syndicated illegal
recruitment and estafa, respectively.
 Thus, the present appeal concerns solely accused-appellants conviction for syndicated illegal
recruitment in and for estafa.
 In Criminal Case No. 02-206293, the information charges the accused-appellant, together with the
others, of a violation of Section 6(a), (l) and (m) of Republic Act 8042, otherwise known as the Migrant
Workers and Overseas Filipino Workers Act of 1995, committed by a syndicate and in large scale
Version of the Prosecution

 Dela Caza was introduced by Eleanor Panuncio to accused-appellant Gallo, Pacardo, Manta,
Mardeolyn, Lulu Mendanes, Yeo Sin Ung and another Korean national at the office of MPM
International Recruitment and Promotion Agency (MPM Agency)
 Accused-appellant Gallo then introduced himself as a relative of Mardeolyn and informed Dela Caza
that the agency was able to send many workers abroad. Together with Pacardo and Manta, he also
told Dela Caza about the placement fee with a down payment and the balance to be paid through salary
deduction.
 Dela Caza, together with the other applicants, were briefed by Mardeolyn about the processing of their
application papers for job placement in Korea as a factory worker and their possible salary. Accused
Yeo Sin Ung also gave a briefing about the business and what to expect from the company and the
salary.
 With accused-appellants assurance that many workers have been sent abroad, as well as the presence
of the two (2) Korean nationals and upon being shown the visas procured for the deployed workers,
Dela Caza was convinced to part with his money. Thus, he paid to MPM Agency through accused-
appellant Gallo
 Two (2) weeks after paying MPM Agency, Dela Caza went back to the agency’s office only to discover
that the office had moved to a new location. He proceeded to the new address and found out that the
agency was renamed to New Filipino Manpower Development & Services, Inc. (New Filipino). At the
new office, he talked to Pacardo, Manta, Mardeolyn, Lulu Mendanes and accused-appellant Gallo.
 He was informed that the transfer was done for easy accessibility to clients and for the purpose of
changing the name of the agency.
 Dela Caza decided to withdraw his application and recover the amount he paid but Mardeolyn, Pacardo,
Manta and Lulu Mendanes talked him out from pursuing his decision. On the other hand, accused-
appellant Gallo even denied any knowledge about the money.
 After two (2) more months of waiting in vain to be deployed, Dela Caza and the other applicants decided
to take action. The first attempt was unsuccessful because the agency again moved to another place.
However, they were able to locate the new address. The agency explained that it had to move in order
to separate those who are applying as entertainers from those applying as factory workers. Accused-
appellant Gallo, together with Pacardo and Manta, were then arrested.
Version of the Defense

 Accused-appellant denied having any part in the recruitment of Dela Caza.
 He testified that he also applied with MPM Agency for deployment to Korea as a factory worker.
Atty. Mercader
 According to him, he gave his application directly with Mardeolyn because she was his town mate and
he was allowed to pay only PhP 10,000 as processing fee.
 In order to facilitate the processing of his papers, he agreed to perform some tasks for the agency, such
as taking photographs of the visa and passport of applicants, running errands and performing such
other tasks assigned to him, without salary except for some allowance. He said that he only saw Dela
Caza once or twice at the agencys office when he applied for work abroad.
 Lastly, that he was also promised deployment abroad but it never materialized.
Ruling of the Trial Court
 Convicted the accused of syndicated illegal recruitment and estafa
Ruling of the Appellate Court
 Affirmed the decision of the RTC
ISSUE: W/N the accused-appellant is guilty of illegal recruitment
HELD:
Yes. The accused-appellant is guilty of illegal recruitment
 To commit syndicated illegal recruitment, three elements must be established:
(1) the offender undertakes either any activity within the meaning of recruitment and placement defined
under Article 13(b), or any of the prohibited practices enumerated under Art. 34 of the Labor
Code;
(2) he has no valid license or authority required by law to enable one to lawfully engage in recruitment
and placement of workers; and
(3) the illegal recruitment is committed by a group of three (3) or more persons conspiring or
confederating with one another.
 When illegal recruitment is committed by a syndicate or in large scale, i.e., if it is committed against three
(3) or more persons individually or as a group, it is considered an offense involving economic
sabotage
 Under Art. 13(b) of the Labor Code, recruitment and placement refers to any act of canvassing, enlisting,
contracting, transporting, utilizing, hiring or procuring workers, and includes referrals, contract services,
promising or advertising for employment, locally or abroad, whether for profit or not.
 The evidence readily reveals that MPM Agency was never licensed by the POEA to recruit workers for
overseas employment.
 Even with a license, illegal recruitment could still be committed under Section 6 of Republic Act No. 8042
(R.A. 8042), otherwise known as the Migrants and Overseas Filipinos Act of 1995
 Accused-appellant committed the acts enumerated in Sec. 6 of R.A. 8042. Testimonial evidence shows
that, in consideration of a promise of foreign employment, accused-appellant received money from Dela
Caza.
 When accused-appellant made misrepresentations concerning the agency’s purported power and authority
to recruit for overseas employment, and in the process, collected money in the guise of placement
fees, the former clearly committed acts constitutive of illegal recruitment.
 Accused-appellant cannot argue that the trial court erred in finding that he was indeed an employee of the
recruitment agency because of his active participation in the illegal recruitment is unmistakable. The
fact that he was the one who issued and signed the official receipt belies his profession of innocence.
 The Court likewise finds the existence of a conspiracy between the accused-appellant and the other
persons in the agency who are currently at large, resulting in the commission of the crime of syndicated
illegal recruitment
 It cannot be denied that the accused-appellent together with Mardeolyn and the rest of the officers and
employees of MPM Agency participated in a network of deception.
 The active involvement of each in the recruitment scam was directed at one single purpose to divest
complainants with their money on the pretext of guaranteed employment abroad.
 The prosecution evidence shows that complainants were briefed by Mardeolyn about the
processing of their papers for a possible job opportunity in Korea, as well as their possible salary.
Likewise, Yeo Sin Ung, a Korean national, gave a briefing about the business and what to expect
from the company. Then, accused-appellant introduced himself as Mardeolyns relative and
Atty. Mercader
specifically told Dela Caza of the fact that the agency was able to send many workers abroad. Dela
Caza was even showed several workers visas who were already allegedly deployed abroad.
Accused-appellant signed and issued an official receipt acknowledging the down payment of Dela
Caza. Without a doubt, the nature and extent of the actions of accused-appellant, as well as with
the other persons in MPM Agency clearly show unity of action towards a common undertaking.
Hence, conspiracy is evidently present.
 In People v. Gamboa, the Court discussed the nature of conspiracy in the context of illegal
recruitment, viz:
Conspiracy to defraud aspiring overseas contract workers was evident from the acts of the
malefactors whose conduct before, during and after the commission of the crime clearly indicated
that they were one in purpose and united in its execution. Direct proof of previous agreement to
commit a crime is not necessary as it may be deduced from the mode and manner in which the
offense was perpetrated or inferred from the acts of the accused pointing to a joint purpose and
design, concerted action and community of interest. As such, all the accused, including accused-
appellant, are equally guilty of the crime of illegal recruitment since in a conspiracy the act of one
is the act of all.
 In establishing conspiracy, it is not essential that there be actual proof that all the conspirators took
a direct part in every act. It is sufficient that they acted in concert pursuant to the same objective.
Atty. Mercader
THE PEOPLE OF THE PHILIPPINES vs CAROL M. DELA PIEDRA,

KAPUNAN, J.
G.R. No. 121777. January 24, 2001
Facts:
January 30, 1994, in the City of Zamboanga, Philippines, and within the jurisdiction of this Honorable
Court, the above-named accused, without having previously obtained from the Philippine Overseas
Employment Administration, a license or authority to engage in recruitment and overseas placement of
workers, did then and there, wilfully, unlawfully and feloniously, offer and promise for a fee employment
abroad particularly in Singapore On January 30, 1994, at exactly 10:00 in the morning, Erlie Ramos,
Attorney II of the Philippine Overseas Employment Agency (POEA), received a telephone call from an
unidentified woman inquiring about the legitimacy of the recruitment conducted by a certain Mrs. Carol
Figueroa. On February 1, 1994, Ramos conferred with a certain Capt. Mendoza of the Criminal
Investigation Service (CIS) to organize the arrest of the alleged illegal recruiter. the group planned to
entrap the illegal recruiter the next day by having Fermindoza pose as an applicant On February 2, 1994
the raiding team, proceeded to enter the house while the rest of the team posted themselves outside to
secure the area. The CIS asked Figueroa if she had a permit to recruit. Figueroa retorted that she was not
engaged in recruitment. In the course of their investigation, the CIS discovered that Carol Figueroa had
many aliases, among them, Carol Llena and Carol dela Piedra. The accused was not able to present any
authority to recruit when asked by the investigators.A check by Ramos with the POEA revealed that the
acused was not licensed or authorized to conduct recruitment. A certification dated February 2, 1994
stating thus was executed by Renegold M. Macarulay, Officer-in-Charge of the POEA. The accused
denied in court that she was engage in recruitment. She claimed she came to Zamboanga City to visit her
friends, to whom she could confide since she and her husband were having some problems. She denied
that she brought information sheets for job placement. She also denied to collect P2,000 from alleged
applicants as processing fee
The trial court rendered a decision convicting the accused,
ISSUE : WHETHER OR NOT THE ILLEGAL RECRUITMENT WAS COMMITTED ON LARGE SCALE,
Held : Petition granted
The penalty of life imprisonment imposed upon appellant must be reduced. Because the prosecution was
able to prove that appellant committed recruitment and placement against two persons only, she cannot
be convicted of illegal recruitment in large scale, which requires that recruitment be committed against
three or more persons. Appellant can only be convicted of two counts of simple illegal recruitment, one for
that committed against Nancy Araneta, and another count for that committed against Lourdes Modesto.
Illegal recruitment is committed when two elements concur. First, the offender has no valid license or
authority required by law to enable one to lawfully engage in recruitment and placement of workers.
Second, he or she undertakes either any activity within the meaning of recruitment and placement defined
under Article 13 (b), or any prohibited practices enumerated under Article 34 of the Labor Code.In case of
illegal recruitment in large scale, a third element is added: that the accused commits said acts against
three or more persons, individually or as a group. In this case, the first element is present. The
certification of POEA Officer-in-Charge Macarulay states that appellant is not licensed or authorized to
engage in recruitment and placement.
The second element is also present. Appellant is presumed engaged in recruitment and placement under
Article 13 (b) of the Labor Code. Both Nancy Araneta and Lourdes Modesto testified that appellant
promised them employment for a fee.
The conviction for large scale illegal recruitment must be based on a finding in each case of illegal
recruitment of three or more persons whether individually or as a group.In this case, only two persons.
It is true that law does not require that at least three victims testify at the trial; nevertheless, it is necessary
that there is sufficient evidence proving that the offense was committed against three or more persons
Atty. Mercader
PEOPLE OF THE PHILIPPINES v MELISSA CHUA

CARPIO MORALES, J.
G.R. No. 184058 March 10, 2010
Melissa Chua (appellant) was indicted for Illegal Recruitment (Large Scale) and was convicted
thereof by the Regional Trial Court (RTC) of Manila. She was also indicted for five counts of Estafa but
was convicted only for three. The Court of Appeals, by Decision dated February 27, 2008, affirmed
appellant’s conviction.
FACTS: Melissa Chua (appellant) was indicted for Illegal Recruitment (Large Scale) and was convicted
thereof by the Regional Trial Court (RTC) of Manila. She was also indicted for five counts of Estafa but was
convicted only for three. The undersigned accuses JOSIE CAMPOS and MELISSA CHUA of violation of
Article 38 (a) PD 1413, amending certain provisions of Book I, PD 442, otherwise known as the New Labor
Code of the Philippines, in relation to Art. 13 (b) and (c ) of said Code, as further amended by PD Nos.
1693, 1920 and 2019 and as further amended by Sec. 6 (a), (1) and (m) of RA 8042 committed in a [sic]
large scale as follows:
That sometime during the month of September, 2002, in the City of Manila, Philippines, the said accused,
conspiring and confederating together and mutually helping each other, representing themselves to have
the capacity to contract, enlist and transport Filipino workers for employment abroad, did then and there
willfully, unlawfully and knowingly for a fee, recruit and promise employment/job placement abroad to ERIK
DE GUIA TAN, MARILYN O. MACARANAS, NAPOLEON H. YU, JR., HARRY JAMES P. KING and
ROBERTO C. ANGELES for overseas employment abroad without first having secured the required license
from the Department of Labor and Employment as required by law, and charge or accept directly from
complainants herein: x x x
For purposes of their deployment, which amounts are in excess of or greater than that specified in the
schedule of allowable fees as prescribed by the POEA, and without valid reasons and without the fault of
said complainants, failed to actually deploy them and failed to reimburse expenses incurred in connection
with their documentation and processing for purposes of their deployment. Appellant denied the charges.
Claiming having worked as a temporary cashier from January to October, 2002 at the office of Golden Gate,
owned by one Marilyn Calueng, she maintained that Golden Gate was a licensed recruitment agency and
that Josie, who is her godmother, was an agent. Admitting having received ₱80,000 each from Marilyn and
Tan, receipt of which she issued but denying receiving any amount from King, she claimed that she turned
over the money to the documentation officer, one Arlene Vega, who in turn remitted the money to Marilyn
Calueng whose present whereabouts she did not know. By Decision of April 5, 2006, Branch 36 of the
Manila RTC convicted appellant of Illegal Recruitment, CA affirmed
HELD: The term "recruitment and placement" is defined under Article 13(b) of the Labor Code of the
Philippines as follows:
(b) "Recruitment and placement" refers to any act of canvassing, enlisting, contracting, transporting,
utilizing, hiring, or procuring workers, and includes referrals, contract services, promising or advertising for
employment, locally or abroad, whether for profit or not. Provided, That any person or entity which, in any
manner, offers or promises for a fee employment to two or more persons shall be deemed engaged in
recruitment and placement.
On the other hand, Article 38, paragraph (a) of the Labor Code, as amended, under which appellant was
charged, provides:
Art. 38. Illegal Recruitment. – (a) Any recruitment activities, including the prohibited practices enumerated
under Article 34 of this Code, to be undertaken by non-licensees or non-holders of authority shall be
deemed illegal and punishable under Article 39 of this Code. The Ministry of Labor and Employment or any
law enforcement officer may initiate complaints under this Article.
(b) Illegal recruitment when committed by a syndicate or in large scale shall be considered an offense
involving economic sabotage and shall be penalized in accordance with Article 39 hereof.
Illegal recruitment is deemed committed by a syndicate if carried out by a group of three (3) or more persons
conspiring and/or confederating with one another in carrying out any unlawful or illegal transaction,
enterprise or scheme defined under the first paragraph hereof. Illegal recruitment is deemed committed in
large scale if committed against three (3) or more persons individually or as a group. (emphasis supplied)
Atty. Mercader
From the foregoing provisions, it is clear that any recruitment activities to be undertaken by non-licensee or
non-holder of contracts, or as in the present case, an agency with an expired license, shall be deemed
illegal and punishable under Article 39 of the Labor Code of the Philippines. And illegal recruitment is
deemed committed in large scale if committed against three or more persons individually or as a group.
Thus for illegal recruitment in large scale to prosper, the prosecution has to prove three essential elements,
to wit: (1) the accused undertook a recruitment activity under Article 13(b) or any prohibited practice under
Article 34 of the Labor Code; (2) the accused did not have the license or the authority to lawfully engage in
the recruitment and placement of workers; and (3) the accused committed such illegal activity against three
or more persons individually or as a group.
In the present case, Golden Gate, of which appellant admitted being a cashier from January to October
2002, was initially authorized to recruit workers for deployment abroad. Per the certification from the POEA,
Golden Gate’s license only expired on February 23, 2002 and it was delisted from the roster of licensed
agencies on April 2, 2002.
Appellant was positively pointed to as one of the persons who enticed the complainants to part with their
money upon the fraudulent representation that they would be able to secure for them employment abroad.
In the absence of any evidence that the complainants were motivated by improper motives, the trial court’s
assessment of their credibility shall not be interfered with by the Court. Even if appellant were a mere
temporary cashier of Golden Gate, that did not make her any less an employee to be held liable for illegal
recruitment as principal by direct participation, together with the employer, as it was shown that she actively
and consciously participated in the recruitment process. Assuming arguendo that appellant was unaware
of the illegal nature of the recruitment business of Golden Gate, that does not free her of liability either.
Illegal Recruitment in Large Scale penalized under Republic Act No. 8042, or "The Migrant Workers and
Overseas Filipinos Act of 1995," is a special law, a violation of which is malum prohibitum, not malum in se.
Intent is thus immaterial. And that explains why appellant was, aside from Estafa, convicted of such offense.
Illegal recruitment is malum prohibitum, while estafa is malum in se. In the first, the criminal intent of the
accused is not necessary for conviction. In the second, such an intent is imperative. Estafa under Article
315, paragraph 2, of the Revised Penal Code, is committed by any person who defrauds another by using
fictitious name, or falsely pretends to possess power, influence, qualifications, property, credit, agency,
business or imaginary transactions, or by means of similar deceits executed prior to or simultaneously with
the commission of fraud.
Atty. Mercader
David v Marquez
G.R. No. 209859
Tijam, J:
Section 15(a), Rule 110 of the Rules of Criminal Procedure: Place where action is to be instituted. - a)
Subject to existing laws, the criminal action shall be instituted and tried in the court of the municipality or
territory where the offense was committed or where any of its essential ingredients occurred.
Section 9 of Republic Act No. 8042 (RA 8042): A criminal action arising from illegal recruitment as defined
herein shall be filed with the Regional Trial Court of the province or city where the offense was committed or
where the offended party actually resides at the time of the commission of the offense xxx.
FACTS:
 Respondent Glenda Marquez alleged, among others, that she is a resident of Sampaloc, Manila
and that sometime in March 2005, petitioner (Glenda David) approached her in Kidapawan City
and represented that she could recruit her to work abroad. It was further alleged that petitioner
demanded payment of placement fees and other expenses from the respondent for the processing
of the latter's application, to which the respondent heeded. Respondent's application was,
however, denied and worse, the money that she put out therefor was never returned.
 Petitioner’s contention:
-it was physically impossible for her to have committed the said acts as she was in Canada at the
alleged time of recruitment as evidenced by the entries in her passport.
-that she was never engaged in the recruitment business.
- that the alleged amount deposited in her account was not for her but was just coursed through
her to be given to her friend in Canada who was the one processing respondent's
application, as evidenced by a certification to that effect issued by the said friend.
- petitioner argued before the Prosecutor that assuming arguendo that the allegations of
recruitment were true, the case should be filed in Kidapawan City and not in Manila;
 On December 9, 2008, two separate Informations were filed against petitioner for
Illegal Recruitment and Estafa, respectively.
 On April 15, 2009, petitioner filed a Motion to Quash the Information for the crime of Estafa, Art
315, par.2: arguing that she was deprived of her right to seek reconsideration or reinvestigation of
the public prosecutor's resolution as she was not furnished a copy thereof. Also, petitioner argued
that the City Prosecutor of Manila had no jurisdiction over the case as the alleged crime was
committed in Kidapawan City.
Initial ruling of RTC: denied petitioner's Motion to Quash (for the Estafa case), ruling that the ground relied
upon by the petitioner in the said motion is not one of those enumerated under Section 3, Rule 117 of the
Rules of Court for quashing a complaint or information. As to the jurisdictional issue, the RTC ruled that it
has jurisdiction to take cognizance of the case, citing Section 9 of Republic Act No. 8042 (RA 8042): A
criminal action arising from illegal recruitment as defined herein shall be filed with the Regional Trial Court
of the province or city where the offense was committed or where the offended party actually resides at
the time of the commission of the offense xxx.
 MR FILED BY PETITIONER:
- that the alleged crimes were committed in Kidapawan City, not in Manila as alleged in the
Informations.
- alleged that there is no showing that respondent is an actual resident of Manila but as per her
Reply-Affidavit, Manila is merely her postal address.
-petitioner again raised a jurisdictional issue in the said motion.
RTC ruling after MR: Recalled the warrants of arrest issued against petitioner due to lack of
territorial jurisdiction.
 Respondent filed a Motion for Reconsideration of the said Order by the RTC.
- averring that while it appears in the Philippine Overseas Employment Administration (POEA)
pro-forma complaint affidavit that the alleged recruitment activities took place in Kidapawan
City;
Atty. Mercader
-that she deposited certain amounts in several banks in Manila for the name and account of
petitioner as payments for employment processing and placement fees;
- Thus, part of the essential elements of Illegal Recruitment and Estafa took place in Manila;
- Section 9 of RA 8042, above-quoted, which states that an illegal recruitment case may also be
filed with the RTC of the province or city where the offended party actually resides at the
time of the commission of the crime;
CA: ruled that the RTC has jurisdiction over the cases of Illegal Recruitment and Estafa, citing Section 9 of
RA 8042, which provides that a criminal action arising from illegal recruitment may be filed in the place
where the offended party actually resides at the time of the commission of the offense. According to the
CA, it was established that herein respondent was residing in Sampaloc, Manila at the time of the
commission of the crimes. Therefore, the two (2) Informations herein were correctly filed with the RTC of
Manila, pursuant to Section 9 of RA 8042.
ISSUE: WON THE RTC OF MANILA HAVE JURISDICTION OVER THE CASES OF ILLEGAL
RECRUITMENT AND ESTAFA
SC: The RTC of Manila has jurisdiction over the cases of Illegal Recruitment and Estafa
At the risk of being repetitive, Sec. 9 of RA 8042, however, fixed an alternative venue from that provided in
Section 15(a) of the Rules of Criminal Procedure, i.e., a criminal action arising from illegal recruitment may
also be filed where the offended party actually resides at the time of the commission of the offense and that
the court where the criminal action is first filed shall acquire jurisdiction to the exclusion of other courts. The
express provision of the law is clear that the filing of criminal actions arising from illegal recruitment before
the RTC of the province or city where the offended party actually resides at the time of the commission of
the offense is allowed. It goes without saying that the dismissal of the case on a wrong ground, indeed,
deprived the prosecution, as well as the respondent as complainant, of their day in court. With regard to
the case of Estafa arising from such illegal recruitment activities, the outright dismissal thereof due to lack
of jurisdiction was not proper, considering that as per the allegations in the Information, the same was within
the jurisdiction of Manila. During the preliminary investigation of the cases, respondent even presented
evidence that some of the essential elements of the crime were committed within Manila, such as the
payment of processing and/or placement fees, considering that these were deposited in certain banks
located in Manila. Thus, it bears stressing that the trial court should have proceeded to take cognizance of
the case, and if during the trial it was proven that the offense was committed somewhere else, that is the
time that the trial court should dismiss the case for want of jurisdiction
Atty. Mercader
Atty. Mercader
Republic v. Principalia Management and Personnel Consultants

Ynares-Santiago, J.
GR No. 167639 – 19 April 2006
FACTS:
This case arose after 2 separate complaints were filed against Principalia Management and
Personnel Consultants, Incorporated by Ruth Yasmin Concha and Rafael Baldoza at the POEA. Concha
alleged that she applied for placement with Principalia as a caregiver or physical therapist at USA or
Canada to which the latter made her pay 150, 000 as placement fee. Despite the fact that she was able to
pay 20,000 which was not properly receipted, the latter failed to deploy her. On the other hand, Baldoza
alleged that Principalia assured him of an employment as a machine operator in Doha, Qatar to which his
alternative work would be a helper but he refused. However, when he arrived at the jobsite, he was made
to work as a welder to which he does not have a skill, leading to his repatriation. For the said complaints,
filed by the 2 persons, POEA ordered Principalia’s suspension of documentary processing on the ground
of violations of the 2002 POEA Rules and Regulations rendered March 15, 2004 and April 29, 2004
respectively. Principalia moved for reconsideration with the POEA which the latter granted.
However, pending the decision of the said reconsideration, Principalia filed a complaint with the
Regional Trial Court wherein it prayed for the issuance of the Writ of Preliminary Injunction, and a Writ of
Preliminary Mandatory Injunction. The RTC ruled that the issuance of the writ of preliminary mandatory
injunction has already become moot since the POEA already renewed the license of Principalia. The RTC
only granted then the writ of preliminary injunction saying that the order of suspension is warranted since
the March 15, 2004 order is pending appeal before the Office of the Secretary of Labor and Employment.
POEA then filed a petition for Certiorari with the Court of Appeals which was outright denied. The
CA, in denying said motion averred that POEA did not comply with the requirements of Section 3 of Rule
46 of the Rules of Court when it failed to attach the copies of its Memorandum as well as the transcript of
the hearings it conducted. Hence, this present petition.
ISSUES:
(1) Whether the Court of Appeals erred in dismissing the Petition for Certiorari based on purely technical
grounds; and
(2) Whether the trial court erred in issuing the writ of preliminary injunction.
HELD:
1. No. The Supreme Court held that the CA did not err in dismissing the said petition since the
POEA lacked willingness to comply with the requirements set forth by the rules and did not
submit the necessary documents which the CA needed in order for the said court to have a
proper perspective of the case.
2. No. The said writ of preliminary injunction is only proper since there is a pending appeal with
the Office of the Secretary of Labor. For if the said writ were not granted, Principalia would be
prejudiced as its reputation might be tarnished which will lead to its losses. Until such time
then that the pending appeal is resolved, Principalia has a right to operate as a recruitment
agency.
Atty. Mercader
TRANS ACTION OVERSEAS CORPORATION vs. THE HONORABLE SECRETARY OF LABOR, ET

AL.
Romero, J.:
GR Nos. 109583 – September 5, 1997
FACTS:
 Trans Action Overseas Corporation is a private fee-charging employment agency. It scoured Iloilo
City for possible recruits for alleged job vacancies in Hongkong. Private respondents sought
employment as domestic helpers through Trans Action's employees, Luzviminda Aragon, Ben Hur
Domincil and his wife Cecille. The applicants paid placement fees ranging from P1,000.00 to
P14,000.00 but petitioner failed to deploy them. Their demands for refund proved unavailing; thus,
they were constrained to institute complaints against petitioner for violation of Articles 32 and 34(a)
of the Labor Code, as amended.
 Trans Action denied having received the amounts allegedly collected from respondents, and
averred that Aragon, whose only duty was to pre-screen and interview applicants, and the spouses
Domincil were not authorized to collect fees from the applicants. Accordingly, it cannot be held
liable for the money claimed by respondents. Trans Action maintains that it even warned
respondents not to give any money to unauthorized individuals.
 POEA Regional Extension Unit Coordinator Edgar Somes testified that although he was aware that
Trans Action collected fees from respondents, the latter insisted that they be allowed to make the
payments on the assumption that it could hasten their deployment abroad. He added that Mrs.
Honorata Manliclic, Trans Action’s representative, tasked to oversee the conduct of the interviews,
told him that she was leaving behind presigned receipts to Aragon as she cannot stay in Iloilo City
for the screening of the applicants. Manliclic, however, denied this version and argued that it was
Somes who instructed her to leave the receipts behind as it was perfectly alright to collect fees.
 Labor Undersecretary: rendered a decision against Trans Action. (28 counts of violation of Art. 32
and 5 counts of violation of Art. 34; the license of respondent TRANS ACTION OVERSEAS
CORPORATION to participate in the overseas placement and recruitment of workers is hereby
ordered CANCELLED)
 Trans Action contends that the Labor Secretary acted with grave abuse of discretion in rendering
the assailed orders on alternative grounds, viz.: (1) it is the Philippine Overseas Employment
Administration (POEA) which has the exclusive and original jurisdiction to hear and decide illegal
recruitment cases, including the authority to cancel recruitment licenses, or (2) the cancellation
order based on the 1987 POEA Schedule of Penalties is not valid for non-compliance with the
Revised Administrative Code of 1987 regarding its registration with the U.P. Law Center.
ISSUE/S:
1. Whether or not the Secretary of Labor and Employment has jurisdiction to cancel or revoke the
license of a private fee charging employment agency.
2. Whether or not the non-filing of the 1987 POEA Schedule of Penalties with the UP Law Center
rendered it ineffective and hence, cannot be utilized as basis for penalizing them.
HELD: WHEREFORE, in view of the foregoing, the instant petition is hereby DISMISSED. Accordingly,
the decision of the Secretary of Labor dated April 5, 1991, is AFFIRMED. No costs.
RULING:
1. Yes. The power to suspend or cancel any license or authority to recruit employees for overseas
employment is vested upon the Secretary of Labor and Employment under Article 35 of the Labor
Code, as amended. "The penalties .of suspension and cancellation of license or authority are
prescribed for violations of the abovequoted provisions, among others. And the Secretary of Labor
has the power under Section 35 of the law to apply these sanctions, as well as the authority,
conferred by Section 36, not only to 'restrict and regulate the recruitment and placement activities
of all agencies,' but also to 'promulgate rules and regulations to carry out the objectives and
implement the provisions governing said activities. Pursuant to this rule-making power thus
granted, the Secretary of Labor gave the POEA, 'on its own initiative or upon filing of a complaint
or report or upon request for investigation by any aggrieved person, . . . (authority to) conduct the
Atty. Mercader
necessary proceedings for the suspension or cancellation of the license or authority of any agency
or entity' for certain enumerated offenses including — 1) the imposition or acceptance, directly or
indirectly, of any amount of money, goods or services, or any fee or bond in excess of what is
prescribed by the Administration, and 2) any other violation of pertinent provisions of the Labor
Code and other relevant laws, rules and regulations. The Administrator was also given the power
to 'order the dismissal of the case or the suspension of the license or authority of the respondent
agency or contractor or recommend to the Minister the cancellation thereof.”
The power to suspend or cancel any license or authority to recruit employees for overseas
employment is concurrently vested with the POEA and the Secretary of Labor.
2. No. The POEA Revised Rules on the Schedule of Penalties was issued pursuant to Article 34 of
the Labor Code, as amended. The same merely amplified and particularized the various violations of the
rules and regulations of the POEA and clarified and specified the penalties therefore. Indeed, the
questioned schedule of penalties contains only a listing of offenses. It does not prescribe additional rules
and regulations governing overseas employment but only detailed the administrative sanctions imposable
by this Office for some enumerated prohibited acts. Under the circumstances, the license of the
respondent agency was cancelled on the authority of Article 35 of the Labor Code, as amended, and not
pursuant to the 1987 POEA Revised Rules on Schedule of Penalties.”
Atty. Mercader
Stolt-Nielsen v Medequillo
Perez, J..
G.R. No. 177498 – January 18, 2012
FACTS:
On 6 March 1995, Sulpecio Madequillo (respondent) filed a complaint before the Adjudication Office of the
Philippine Overseas Employment Administration (POEA) against the petitioners for illegal dismissal under
a first contract and for failure to deploy under a second contract. In his complaint-affidavit, respondent
alleged that: On 6 November 1991(First Contract), he was hired by Stolt-Nielsen Marine Services, Inc on
behalf of its principal Chung-Gai Ship Management of Panama as Third Assistant Engineer on board the
vessel “Stolt Aspiration” for a period of nine (9) months; On 8 November 1991, he joined the vessel MV
“Stolt Aspiration”; On February 1992 or for nearly three (3) months of rendering service and while the
vessel was at Batangas, he was ordered by the ship’s master to disembark the vessel and
repatriated back to Manila for no reason or explanation; Upon his return to Manila, he immediately
proceeded to the petitioner’s office where he was transferred employment with another vessel named MV
“Stolt Pride” under the same terms and conditions of the First Contract; On 23 April 1992, the Second
Contract was noted and approved by the POEA; The POEA, without knowledge that he was not deployed
with the vessel, certified the Second Employment Contract on 18 September 1992. Despite the
commencement of the Second Contract on 21 April 1992, Stolt-Nielsen failed to deploy him with the
vessel MV “Stolt Pride”; He made a follow-up with Stolt-Nielsen but the same refused to comply with the
Second Employment Contract. On 22 December 1994, he demanded for his passport, seaman’s book and
other employment documents. However, he was only allowed to claim the said documents in exchange of
his signing a document; He was constrained to sign the document involuntarily because without these
documents, he could not seek employment from other agencies.He prayed for actual, moral and
exemplary damages as well as attorney’s fees for his illegal dismissal and in view of the Petitioners’
bad faith in not complying with the Second Contract. The case was transferred to the Labor Arbiter of
the DOLE upon the effectivity of the Migrant Workers and Overseas Filipinos Act of 1995.
LA Ruling
The Labor Arbiter found the first contract entered into by and between the complainant and the respondents
to have been novated by the execution of the second contract. In other words, respondents cannot be held
liable for the first contract but are clearly and definitely liable for the breach of the second contract. However,
he ruled that there was no substantial evidence to grant the prayer for moral and exemplary damages.
NLRC Ruling
NLRC affirmed with modification the Decision of the Labor Arbiter.
The NLRC upheld the finding of unjustified termination of contract for failure on the part of the petitioners
to present evidence that would justify their non-deployment of the respondent. It denied the claim of the
petitioners that the monetary award should be limited only to three (3) months for every year of the
unexpired term of the contract. It ruled that the factual incidents material to the case transpired within 1991-
1992 or before the effectivity of Republic Act No. 8042 or the Migrant Workers and Overseas Filipinos Act
of 1995 which provides for such limitation.
However, the NLRC upheld the reduction of the monetary award with respect to the deletion of the overtime
pay due to the non-deployment of the respondent.
CA Ruling
Court of Appeals AFFIRMED the Decision of the labor tribunal
ISSUE/S:
1. WoN the first contract was novated by the second contract?
2. WoN the penalty for Stolt is suspension?
3. WoN Medequillo is entitled to actual damages?
HELD:
1. YES
The SC quoted the CA which provides:
Guided by the foregoing legal precepts, it is evident that novation took place in this particular case.
The parties impliedly extinguished the first contract by agreeing to enter into the second contract to placate
Medequillo, Jr. who was unexpectedly dismissed and repatriated to Manila. The second contract would
Atty. Mercader
not have been necessary if the petitioners abided by the terms and conditions of Madequillo, Jr.’s
employment under the first contract. The records also reveal that the 2nd contract extinguished the first
contract by changing its object or principal. These contracts were for overseas employment aboard different
vessels. The first contract was for employment aboard the MV “Stolt Aspiration” while the second contract
involved working in another vessel, the MV “Stolt Pride.” Petitioners and Madequillo, Jr. accepted the terms
and conditions of the second contract. Contrary to petitioners’ assertion, the first contract was a “previous
valid contract” since it had not yet been terminated at the time of Medequillo, Jr.’s repatriation to Manila.
The legality of his dismissal had not yet been resolved with finality. Undoubtedly, he was still employed
under the first contract when he negotiated with petitioners on the second contract. As such, the NLRC
correctly ruled that petitioners could only be held liable under the second contract.
With the finding that respondent “was still employed under the first contract when he negotiated
with petitioners on the second contract”, novation became an unavoidable conclusion.
2. YES
The POEA Rules and Regulations Governing Overseas Employment dated 31 May 1991 provides for the
consequence and penalty against in case of non-deployment of the seafarer without any valid reason. It
reads:
“Section 4. Worker’s Deployment. — An agency shall deploy its recruits within the deployment period as
indicated below:
xxx
b. Thirty (30) calendar days from the date of processing by the administration of the employment
contracts of seafarers.
Failure of the agency to deploy a worker within the prescribed period without valid reasons shall
be a cause for suspension or cancellation of license or fine. In addition, the agency shall return all
documents at no cost to the worker.(Emphasis and underscoring supplied)”
The appellate court correctly ruled that the penalty of reprimand provided under Rule IV, Part VI of the
POEA Rules and Regulations Governing the Recruitment and Employment of Land-based Overseas
Workers is not applicable in this case. The breach of contract happened on February 1992 and the law
applicable at that time was the 1991 POEA Rules and Regulations Governing Overseas Employment.
The penalty for non-deployment as discussed is suspension or cancellation of license or fine.
3. YES
The petitioners argue that under the POEA Contract, actual deployment of the seafarer is a suspensive
condition for the commencement of the employment. We agree with petitioners on such point. However,
even without actual deployment, the perfected contract gives rise to obligations on the part of
petitioners.
The POEA Standard Employment Contract provides that employment shall commence “upon the actual
departure of the seafarer from the airport or seaport in the port of hire.” We adhere to the terms and
conditions of the contract so as to credit the valid prior stipulations of the parties before the controversy
started. Else, the obligatory force of every contract will be useless. Parties are bound not only to the
fulfillment of what has been expressly stipulated but also to all the consequences which, according to their
nature, may be in keeping with good faith, usage and law.
Thus, even if by the standard contract employment commences only “upon actual departure of the
seafarer”, this does not mean that the seafarer has no remedy in case of non-deployment without
any valid reason.
Distinction must be made between the perfection of the employment contract and the commencement of
the employer-employee relationship. The perfection of the contract, which in this case coincided with the
date of execution thereof, occurred when petitioner and respondent agreed on the object and the cause,
as well as the rest of the terms and conditions therein. The commencement of the employer-employee
relationship, as earlier discussed, would have taken place had petitioner been actually deployed
from the point of hire. Thus, even before the start of any employer-employee relationship,
contemporaneous with the perfection of the employment contract was the birth of certain rights
and obligations, the breach of which may give rise to a cause of action against the erring party.
Thus, if the reverse had happened, that is the seafarer failed or refused to be deployed as agreed upon, he
would be liable for damages.
The POEA Rules Governing the Recruitment and Employment of Seafarers do not provide for the award
of damages to be given in favor of the employees. The claim provided by the same law refers to a valid
Atty. Mercader
contractual claim for compensation or benefits arising from employer-employee relationship or for any
personal injury, illness or death at levels provided for within the terms and conditions of employment of
seafarers. However, the absence of the POEA Rules with regard to the payment of damages to the affected
seafarer does not mean that the seafarer is precluded from claiming the same. The sanctions provided
for non-deployment do not end with the suspension or cancellation of license or fine and the return
of all documents at no cost to the worker. As earlier discussed, they do not forfend a seafarer from
instituting an action for damages against the employer or agency which has failed to deploy him.
We thus decree the application of Section 10 of Republic Act No. 8042 (Migrant Workers Act) which
provides for money claims by reason of a contract involving Filipino workers for overseas deployment. The
law provides:
“Sec. 10. Money Claims. – Notwithstanding any provision of law to the contrary, the Labor Arbiters of the
National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and
decide, within ninety (90) calendar days after the filing of the complaint, the claims arising out of an
employer-employee relationship or by virtue of any law or contract involving Filipino workers for overseas
deployment including claims for actual, moral, exemplary and other forms of damages. x x x (Underscoring
supplied)”
Following the law, the claim is still cognizable by the labor arbiters of the NLRC under the second
phrase of the provision.
Applying the rules on actual damages, Article 2199 of the New Civil Code provides that one is entitled to
an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Respondent
is thus liable to pay petitioner actual damages in the form of the loss of nine (9) months’ worth of salary as
provided in the contract.38 This is but proper because of the non-deployment of respondent without just
cause.
Atty. Mercader
Estate of Nelson Dulay vs. Aboitiz Jebsen Maritime, Inc. And General Charterers, Inc.
Peralta, J.
GR No. 172642 – 13 June 2012
FACTS:
 Nelson Dulay was employed by respondent GCI, a subsidiary of Aboitiz, as an ordinary seaman and
later on as a bosun on a contractual basis. He was detailed in petitioners’ vessel, MV Kickapoo Belle.
 25 days after the completion of his employment contract, Nelson died due to acute renal failure. At
the time of his death, he was a bona fide member of the Associated Marine Officers and Seaman’s
Union of the Philippines (AMOSUP), GCI’s collective bargaining agent.
 His widow, Merridy Jane, claimed for death benefits through the grievance procedure of the CBA.
However, the grievance procedure was “declared deadlocked” as petitioners refused to grant the
benefits sought by the widow.
 Merridy Jane filed a complaint with the NLRC against GCI for death and medical benefits and
damages.
 Nelson’s brother received P20,000 from respondents pursuant to the CBA, and signed a Certification
acknowledging receipt of the amount and releasing AMOSUP from further liability.
 Merridy Jane contended that the is entitled to the aggregate sum of $90,000, and that the P20,000
received by Joven Mar should be considered advance payment of the total claim of $90,000.
 Respondents contend that NLRC had no jurisdiction over the complaint filed, on account of the
absence of employer-employee relationship between GCI and Nelson at the time of the latter’s death.
Nelson also had no claims for sick leave allowance/medical benefit by reason of the completion of his
contract with GCI. Private respondent of also not entitled to death benefits because petitioners are
only liable “in case of death of the seafarer during the term of his contract pursuant to the POEA
contract” and the cause of his death is not work-related.
 LA: Ruled in favor of private respondent by virtue of Art. 217(a), par. 6 of the Labor Code and the
existence of a reasonable causal connection between the employer-employee relationship asserted;
proximate cause of Nelson’s death was not work-related.
 NLRC: Affirmed the LA’s decision as to the grant of death benefits under the CBA, but reversed the
latter’s ruling as to the proximate cause of Nelson’s death.
 CA: special civil action for certiorari granted; case is referred to the National Conciliation and
Mediation Board for the designation of the Voluntary Arbitrator; while the suit is a money claim, the
same involves the interpretation and application of the provisions of the CBA. Thus, a voluntary
arbitrator and not the labor arbiter has jurisdiction over the matter.
 Petitioner filed a Motion for Reconsideration, but the CA also denied it.
ISSUE/S: WON the CA committed error in ruling that the Labor Arbiter has no jurisdiction over the case
HELD: PETITION IS DENIED. The Decision and Resolution of the Court of Appeals are affirmed.
No. The Court finds no error in the ruling of the CA that the voluntary arbitrator has jurisdiction
over the instant case.
 Petitioner contends that Sec. 10 of RA 8042 or the Migrant Workers and Overseas Filipinos Act of
1995 vests jurisdiction on the appropriate branches of the NLRC to entertain disputes regarding the
interpretation of a CBA involving migrant or overseas Filipino workers. Petitioner argues that the said
law amended Art. 217(c) of the Labor Code which confers jurisdiction upon voluntary arbitrators over
interpretation or implementation of CBAs and interpretation or enforcement of company personnel
policies.
 Respondents insist that Art. 217(c) as well as Art. 261 of the Labor Code remain to be the governing
provisions of the law. Under these laws, jurisdiction remains with voluntary arbitrators.
 There is no specific provision under RA 8042 which provides for jurisdiction over disputes or
unresolved grievances regarding the interpretation or implementation of a CBA. Sec. 10 simply
speaks of claims arising out of an employer-employee relationship or by virtue of any law or contract
involving Filipino workers for overseas deployment including claims for actual, moral, exemplary and
other forms of damages.
Atty. Mercader
Santiago vs. CF Sharp Crew Management Inc.

G.R. No. 162419
July 10, 2007
FACTS: Petitioner had been working as a seafarer for Smith Bell Management, Inc. (respondent) for about
five (5) years. On 3 February 1998, petitioner signed a new contract of employment with respondent, with
the duration of nine (9) months. He was assured of a monthly salary of US$515.00, overtime pay and other
benefits. The following day or on 4 February 1998, the contract was approved by the Philippine Overseas
Employment Administration (POEA). Petitioner was to be deployed on board the "MSV Seaspread" which
was scheduled to leave the port of Manila for Canada on 13 February 1998.
A week before the scheduled date of departure, Capt. Pacifico Fernandez, respondent's Vice President,
sent a facsimile message to the captain of "MSV Seaspread. On 9 February 1998, petitioner was thus told
that he would not be leaving for Canada anymore, but he was reassured that he might be considered for
deployment at some future date. Petitioner filed a complaint for illegal dismissal, damages, and attorney's
fees against respondent and its foreign principal, Cable and Wireless (Marine) Ltd. The case was raffled
to Labor Arbiter Teresita Castillon-Lora, who ruled that the employment contract remained valid but had not
commenced since petitioner was not deployed. According to her, respondent violated the rules and
regulations governing overseas employment when it did not deploy petitioner, causing petitioner to suffer
actual damages representing lost salary income for nine (9) months and fixed overtime fee, all amounting
to US$7,209.00.
The labor arbiter held respondent liable. On appeal by respondent, NLRC ruled that there is no employer-
employee relationship between petitioner and respondent because under the Standard Terms and
Conditions Governing the Employment of Filipino Seafarers on Board Ocean Going Vessels (POEA
Standard Contract), the employment contract shall commence upon actual departure of the seafarer from
the airport or seaport at the point of hire and with a POEA-approved contract. In the absence of an
employer-employee relationship between the parties, the claims for illegal dismissal, actual damages, and
attorney's fees should be dismissed.
Petitioner maintains that respondent violated the Migrant Workers Act and the POEA Rules when it failed
to deploy him within thirty (30) calendar days without a valid reason. Petitioner adds that since the contract
is deemed consummated, he should be considered an employee for all intents and purposes, and thus the
labor arbiter and/or the NLRC has jurisdiction to take cognizance of his claims.
Petitioner additionally claims that he should be considered a regular employee, having worked for five (5)
years on board the same vessel owned by the same principal and manned by the same local agent. He
argues that respondent's act of not deploying him was a scheme designed to prevent him from attaining
the status of a regular employee. On the other hand, respondent argues that the Labor Arbiter has no
jurisdiction to award petitioner's monetary claims. His employment with respondent did not commence
because his deployment was withheld for a valid reason.
ISSUE/S:
1. W/N the labor arbiter of the NLRC has jurisdiction over the dispute?
2. W/N there exists an employee-employer relationship between the parties?

1) Yes. The POEA Rules only provide sanctions which the POEA can impose on erring agencies. It does
not provide for damages and money claims recoverable by aggrieved employees because it is not the
POEA, but the NLRC, which has jurisdiction over such matters.
Despite the absence of an employer-employee relationship between petitioner and respondent, the Court
rules that the NLRC has jurisdiction over petitioner's complaint. The jurisdiction of labor arbiters is not
limited to claims arising from employer-employee relationships. (Check: Sec. 10, RA 8042)
Since the present petition involves the employment contract entered into by petitioner for overseas
employment, his claims are cognizable by the labor arbiters of the NLRC.
Article 2199 of the Civil Code provides that one is entitled to an adequate compensation only for such
pecuniary loss suffered by him as he has duly proved. Respondent is thus liable to pay petitioner actual
damages in the form of the loss of nine (9) months' worth of salary as provided in the contract. He is not,
however, entitled to overtime pay. While the contract indicated a fixed overtime pay, it is not a guarantee
that he would receive said amount regardless of whether or not he rendered overtime work. Even though
petitioner was "prevented without valid reason from rendering regular much less overtime service," the fact
Atty. Mercader
remains that there is no certainty that petitioner will perform overtime work had he been allowed to board
the vessel. The amount of US$286.00 stipulated in the contract will be paid only if and when the employee
rendered overtime work.
2) No. There is no question that the parties entered into an employment contract on 3 February 1998,
whereby petitioner was contracted by respondent to render services on board "MSV Seaspread" for the
consideration of US$515.00 per month for nine (9) months, plus overtime pay. However, respondent failed
to deploy petitioner from the port of Manila to Canada. Considering that petitioner was not able to depart
from the airport or seaport in the point of hire, the employment contract did not commence, and no
employer-employee relationship was created between the parties.
However, a distinction must be made between the perfection of the employment contract and the
commencement of the employer-employee relationship. The perfection of the contract, which in this case
coincided with the date of execution thereof, occurred when petitioner and respondent agreed on the object
and the cause, as well as the rest of the terms and conditions therein. The commencement of the employer-
employee relationship, as earlier discussed, would have taken place had petitioner been actually deployed
from the point of hire. Thus, even before the start of any employer-employee relationship, contemporaneous
with the perfection of the employment contract was the birth of certain rights and obligations, the breach of
which may give rise to a cause of action against the erring party. Thus, if the reverse had happened, that
is the seafarer failed or refused to be deployed as agreed upon, he would be liable for damages.
NOTES: A week before the scheduled date of departure, Capt. Pacifico Fernandez, respondent's Vice
President, sent a facsimile message to the captain of "MSV Seaspread," which reads:
I received a phone call today from the wife of Paul Santiago in Masbate asking me not to send her husband
to MSV Seaspread anymore. Other callers who did not reveal their identity gave me some
feedbacks that Paul Santiago this time if allowed to depart will jump ship in Canada like his brother
Christopher Santiago, O/S who jumped ship from the C.S. Nexus in Kita-kyushu, Japan last
December, 1997. CScTED
We do not want this to happen again and have the vessel penalized like the C.S. Nexus in Japan.
Forewarned is forearmed like his brother when his brother when he was applying he behaved like a Saint
but in his heart he was a serpent. If you agree with me then we will send his replacement.
Kindly advise.
To this message the captain of "MSV Seaspread" replied:
Many thanks for your advice concerning P. Santiago, A/B. Please cancel plans for him to return to
Seaspread.
Atty. Mercader
Industrial Personnel and Management Services v. De Vera,

MENDOZA, J.
G.R. No. 205703, March 07, 2016
This petition for review on certiorari seeks to reverse and set aside the January 24, 2013
Decision of the Court of Appeals (CA) in CA-G.R. SP No. 118869, which modified the November 30, 2010
Decision of the National Labor Relations Commission (NLRC) and its February 2, 2011 Resolution, in
NLRC LAC Case No. 08-000572-10/NLRC Case No. NCR 09-13563-09, a case for illegal termination of
an Overseas Filipino Worker (OFW).
FACTS: Petitioner Industrial Personnel & Management Services, Inc. (IPAMS) is a local placement
agency duly organized and existing under Philippine laws, with petitioner Angelito C. Hernandez as its
president and managing director. Petitioner SNC Lavalin Engineers & Contractors, Inc. (SNC-Lavalin) is
the principal of IPAMS, a Canadian company with business interests in several countries. On the other
hand, respondent Alberto Arriola (Arriola) is a licensed general surgeon in the Philippines.
Employee's Position
Arriola was offered by SNC-Lavalin, through its letter, dated May 1, 2008, the position of Safety Officer in
its Ambatovy Project site in Madagascar. The position offered had a rate of CA$32.00 per hour for forty
(40) hours a week with overtime pay in excess of forty (40) hours. It was for a period of nineteen (19)
months starting from June 9, 2008 to December 31, 2009.
Arriola was then hired by SNC-Lavalin, through its local manning agency, IPAMS, and his overseas
employment contract was processed with the Philippine Overseas Employment Agency (POEA) In a letter
of understanding, dated June 5, 2008, SNC-Lavalin confirmed Arriola's assignment in the Ambatovy
Project. According to Arriola, he signed the contract of employment in the Philippines. On June 9, 2008,
Arriola started working in Madagascar.
After three months, Arriola received a notice of pre-termination of employment, dated September 9, 2009,
from SNC-Lavalin. It stated that his employment would be pre-terminated effective September 11, 2009
due to diminishing workload in the area of his expertise and the unavailability of alternative assignments.
Consequently, on September 15, 2009, Arriola was repatriated. SNC-Lavalin deposited in Arriola's bank
account his pay amounting to Two Thousand Six Hundred Thirty Six Dollars and Eight Centavos
(CA$2,636.80), based on Canadian labor law.
Aggrieved, Arriola filed a complaint against the petitioners for illegal dismissal and non-payment of
overtime pay, vacation leave and sick leave pay before the Labor Arbiter (LA). He claimed that SNC-
Lavalin still owed him unpaid salaries equivalent to the three-month unexpired portion of his contract,
amounting to, more or less, One Million Sixty-Two Thousand Nine Hundred Thirty-Six Pesos
(P1,062,936.00). He asserted that SNC-Lavalin never offered any valid reason for his early termination
and that he was not given sufficient notice regarding the same. Arriola also insisted that the petitioners
must prove the applicability of Canadian law before the same could be applied to his employment
contract.
Employer's Position
The petitioners denied the charge of illegal dismissal against them. They claimed that SNC-Lavalin was
greatly affected by the global financial crises during the latter part of 2008. The economy of Madagascar,
where SNC-Lavalin had business sites, also slowed down. As proof of its looming financial standing,
SNC-Lavalin presented a copy of a news item in the Financial Post, dated March 5, 2009, showing the
decline of the value of its stocks. Thus, it had no choice but to minimize its expenditures and operational
expenses. It re-organized its Health and Safety Department at the Ambatovy Project site and Arriola was
one of those affected.
Atty. Mercader
The petitioners also invoked EDI-Staffbuilders International, Inc. v. NLRC (EDI-Staffbuilders), pointing out
that particular labor laws of a foreign country incorporated in a contract freely entered into
between an OFW and a foreign employer through the latter's agent was valid. In the present case,
as all of Arriola's employment documents were processed in Canada, not to mention that SNC-
Lavalin's office was in Ontario, the principle of lex loci celebrationis was applicable. Thus, the
petitioners insisted that Canadian laws governed the contract.
The petitioners continued that the pre-termination of Arriola's contract was valid for being consistent with
the provisions of both the Expatriate Policy and laws of Canada. The said foreign law did not require any
ground for early termination of employment, and the only requirement was the written notice of
termination. Even assuming that Philippine laws should apply, Arriola would still be validly dismissed
because domestic law recognized retrenchment and redundancy as legal grounds for termination.
In their Rejoinder, the petitioners presented a copy of the Employment Standards Act (ESA) of Ontario,
which was duly authenticated by the Canadian authorities and certified by the Philippine Embassy.
ISSUE/S:
1. Whether the Philippine laws apply even to overseas employment contracts.
2. Whether authorized cause for dismissal was proven.
HELD: PETITION DENIED
1. YES
The general rule is that Philippine laws apply even to overseas employment contracts. This rule is
rooted in the constitutional provision of Section 3, Article XIII that the State shall afford full
protection to labor, whether local or overseas. Hence, even if the OFW has his employment
abroad, it does not strip him of his rights to security of tenure, humane conditions of work and a
living wage under our Constitution.
As an exception, the parties may agree that a foreign law shall govern the employment contract. A
synthesis of the existing laws and jurisprudence reveals that this exception is subject to the
following requisites:
1. That it is expressly stipulated in the overseas employment contract that a specific
foreign law shall govern;
2. That the foreign law invoked must be proven before the courts pursuant to the
Philippine rules on evidence;
3. That the foreign law stipulated in the overseas employment contract must not be
contrary to law, morals, good customs, public order, or public policy of the
Philippines; and
4. That the overseas employment contract must be processed through the POEA.
2. NO
Article 279 of our Labor Code has construed security of tenure to mean that the employer shall not
terminate the services of an employee except for a just cause or when authorized by law. Concomitant to
the employer's right to freely select and engage an employee is the employer's right to discharge the
employee for just and/or authorized causes. To validly effect terminations of employment, the discharge
must be for a valid cause in the manner required by law. The purpose of these two-pronged qualifications
is to protect the working class from the employer's arbitrary and unreasonable exercise of its right to
dismiss.
Some of the authorized causes to terminate employment under the Labor Code would be installation of
labor-saving devices, redundancy, retrenchment to prevent losses and the closing or cessation of
operation of the establishment or undertaking. Each authorized cause has specific requisites that must be
proven by the employer with substantial evidence before a dismissal may be considered valid.
Atty. Mercader
Here, the petitioners assert that the economy of Madagascar weakened due to the global financial crisis.
Consequently, SNC-Lavalin's business also slowed down. To prove its sagging financial standing, SNC-
Lavalin presented a copy of a news item in the Financial Post, dated March 5, 2009. They insist that
SNC-Lavalin had no choice but to minimize its expenditures and operational expenses.In addition, the
petitioners argued that the government of Madagascar prioritized the employment of its citizens, and not
foreigners. Thus, Arriola was terminated because there was no more job available for him.
The Court finds that Arriola was not validly dismissed. The petitioners simply argued that they were
suffering from financial losses and Arriola had to be dismissed. It was not even clear what specific
authorized cause, whether retrenchment or redundancy, was used to justify Arriola's dismissal. Worse,
the petitioners did not even present a single credible evidence to support their claim of financial loss.
They simply offered an unreliable news article which deserves scant consideration as it is undoubtedly
hearsay. Time and again the Court has ruled that in illegal dismissal cases like the present one, the onus
of proving that the employee was dismissed and that the dismissal was not illegal rests on the employer,
and failure to discharge the same would mean that the dismissal is not justified and, therefore, illegal.
As to the amount of backpay awarded, the Court finds that the computation of the CA was valid and
proper based on the employment contract of Arriola. Also, the issue of whether the petitioners had made
partial payments on the backpay is a matter best addressed during the execution process.
Atty. Mercader
Atty. Mercader
SANTOSA B. DATUMAN V. FIRST COSMOPOLITAN MANPOWER AND PROMOTION SERVICES,

INC.
G.R. No. 156029 November 14, 2008
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as
amended, assailing the Court of Appeals (CA) Decision dated August 7, 2002, in CA-G.R. SP No. 59825,
setting aside the Decision of the National Labor Relations Commission (NLRC).
FACTS:
First Cosmopolitan Manpower & Promotion Services, Inc. recruited petitioner Santosa B. Datuman to work
in Bahrain as a Saleslady with a monthly salary of 370.00 dollars for one year under the employment of
Mohammed Sharif Hussain.
1989, She was deployed to Bahrain after paying the required placement fee. However, her employer
Mohammed Hussain took her passport when she arrived there; and instead of working as a saleslady, she
was forced to work as a domestic helper with a salary of Forty Bahrain Dinar (BD40.00), equivalent only to
One Hundred US Dollars (US$100.00). This was contrary to the agreed salary of US$370.00 indicated in
her Contract of Employment signed in the Philippines and approved by the Philippine Overseas
Employment Administration (POEA).
Her employer compelled her to sign another contract, transferring her to another employer as housemaid
with a salary of BD40.00 for the duration of two (2) years. She pleaded with him to give her a release paper
and to return her passport but her pleas were unheeded. Left with no choice, she continued working against
her will. Worse, she even worked without compensation from September 1991 to April 1993 because of her
employers continued failure and refusal to pay her salary despite demand. In May 1993, she was able to
finally return to the Philippines through the help of the Bahrain Passport and Immigration Department.
Datuman filed a complaint before the POEA Adjudication Office again. While the case was pending, she
filed the instant case before the NLRC for underpayment of salary for a period of one year and six months,
nonpayment of vacation pay and reimbursement of return airfare.
First Cosmopolitan countered that Datuman actually agreed to work in Bahrain as a housemaid for one
year because it was the only position available then. Respondent added that it was actually petitioner
herself who violated the terms of their contract when she allegedly transferred to another employer without
respondents knowledge and approval. Lastly, respondent raised the defense of prescription of cause of
action since the claim was filed beyond the three year period from the time the right accrued, reckoned from
either 1990 or 1991.
The Court grants the petition.
1. YES. Section 1 of Rule II of the POEA Rules and Regulations states that:
“...for license to operate a private employment agency or manning agency…:
xxx
(3) Shall assume joint and solidary liability with the employer for all claims and liabilities which may arise
in connection with the implementation of the contract; including but not limited to payment of wages, death
and disability compensation and repatriation.”
The above provisions are clear that the private employment agency shall assume joint and solidary liability
with the employer. This Court has, time and again, ruled that private employment agencies are held jointly
and severally liable with the foreign-based employer for any violation of the recruitment agreement or
contract of employment. This joint and solidary liability imposed by law against recruitment agencies and
foreign employers is meant to assure the aggrieved worker of immediate and sufficient payment of what is
due him. This is in line with the policy of the state to protect and alleviate the plight of the working class.
Atty. Mercader
Respondents contention that it was petitioner herself who violated their Contract of Employment when she
signed another contract in Bahrain deserves scant consideration. It is the finding of both the Labor Arbiter
and the NLRC which, significantly, the CA did not disturb that petitioner was forced to work long after the
term of her original POEA-approved contract, through the illegal acts of the foreign employer.
Hence, in the present case, the diminution in the salary of petitioner from US$370.00 to US$100 (BD 40.00)
per month is void for violating the POEA-approved contract which set the minimum standards, terms, and
conditions of her employment. Consequently, the solidary liability of respondent with petitioners foreign
employer for petitioners money claims continues although she was forced to sign another contract in
Bahrain. It is the terms of the original POEA-approved employment contract that shall govern the
relationship of petitioner with the respondent recruitment agency and the foreign employer.
Respondent cannot disclaim liability for the acts of the foreign employer which forced petitioner to remain
employed in violation of our laws and under the most oppressive conditions on the allegation that it
purportedly had no knowledge of, or participation in, the contract unwillingly signed by petitioner abroad.
NOTES:
In the light of the recruitment agencies legally mandated joint and several liability with the foreign employer
for all claims in connection with the implementation of the contract, it is the recruitment agencies
responsibility to ensure that the terms and conditions of the employment contract, as approved by the
POEA, are faithfully complied with and implemented properly by its foreign client/principal. Indeed, it is in
its best interest to do so to avoid being haled to the courts or labor tribunals and defend itself from suits for
acts of its foreign principal.
This Court reminds local recruitment agencies that it is their bounden duty to guarantee our overseas
workers that they are being recruited for bona fide jobs with bona fide employers. Local agencies should
never allow themselves to be instruments of exploitation or oppression of their compatriots at the hands of
foreign employers. Indeed, being the ones who profit most from the exodus of Filipino workers to find
greener pastures abroad, recruiters should be first to ensure the welfare of the very people that keep their
industry alive.
Atty. Mercader
Elizabeth Gagui v. Simeon Dejero

This is a Rule 45 Petition dated 30 March 2011 assailing the Decision and Resolution of the Court of
Appeals (CA) in CA-G.R. SP No. 104292, which affirmed the Decision of the National Labor Relations
Commission (NLRC) in NLRC Case No. OCW-RAB-IV-4-392-96-RI, finding petitioner Elizabeth M. Gagui
solidarily liable with the placement agency, PRO Agency Manila, Inc., to pay respondents all the money
claims awarded by virtue of their illegal dismissal.
FACTS:
Respondents Simeon Dejero and Teodoro Permejo file separate complaints for illegal dismissal,
nonpayment of salaries and overtime pay, refund of transportation expenses, damages and attorney’s fees
against PRO Agency Manila, Inc. and Abdul Rahman Al Mahwes.
The Labor Arbiter rendered a decision in favor of Dejero and Permejo, ordering placement agency,
Pro Agency Manila, Inc., and Abdul Rahman Al Mahwes to jointly and severally pay complainants their
unpaid salaries, overtime pay, refund of plane ticket or complainants and placements fees, moral and
exemplary damages, and attorney’s fees, after due proceedings on May 1997. Pursuant to this, a Writ of
Execution was issued on October 1997, but the writ was returned unsatisfied.
On October 30, 2002, respondents filed a Motion to Implead Respondent Pro Agency Manila, Inc.’s
Corporate Officers and Directors as judgment debtors. It included petitioner Elizabeth Gagui, petitioner, as
the Vice-President/Stockholder/Director of PRO Agency, Manila, Inc. After hearing, the LA issued an order
granting respondent’s motion, to wit:
WHEREFORE, the motion to implead is hereby granted insofar as Merlita G. Lapuz and Elizabeth M.
Gagui as parties-respondents and accordingly held liable to complainant jointly and solidarily with
the original party-respondent adjudged liable under the Decision of May 7, 1998. Let 2nd Alias Writ
of Execution be issued for the enforcement of the Decision consistent with the foregoing tenor. The
2nd Alis Writ of Execution was issued, which resulted in the garnishment of petitioner’s bank deposit
in the amount of P85, 430.38. However, since the judgement remained unsatisfied, respondents
sought the issuance of a third alias writ of execution.
LA granted the respondent’s motion for a 3 rd alis writ. However, when it was issued, it
resulted in the levying of the two parcels of lot owned by petitioner in San Fernando, Pampanga.
Hence, petitioner filed a Motion to Quash the 3 rd alis writ of execution. She alleged that apart from
not being made aware that she was impleaded as one of the parties to the case, the dispositive
portion of the 1997 decision did not hold her liable in any form whatsoever. LA denied the
petitioner’s motions on the following grounds: (1) records disclosed that despite having been given
sufficient notices to be able to register an opposition, petitioner refused to do so, effectively waiving
her right to be heard; and (2) under Setion 10 of RA 8042 or the Migrant Workers and Overseas
Filipinos Act of 1995, corporate officers may be held jointly and severally liable with the placement
agency for the judgment award. NLRC and CA affirmed the decision of LA, stating that “in so far
as overseas migrant workers are concerned, it is RA 8042 itself that describes the nature of liability
of the corporation and its officers and directors. xxx it is not essential that the individual officers and
directors be impleaded as party respondents to the case instituted by the worker. A finding of liability
on the part of the corporation will necessarily mean the liability of the corporate officers or directors,”
and that there was no need for petitioner to be impleaded because by express provision of the law,
she is made solidarily liable with PRO Agency Manila Inc., for any and all money claims filed by
private respondents.
ISSUE:
Whether or not petitioner may be held jointly and severally liable with PRO Agency Manila, Inc. in
accordance with Section 10 of RA 8042, despite not having been impleaded in the complaint and
named in the decision.
HELD:
No, petitioner may not be held jointly and severally liable, absent a finding that she was
remiss in directing the affairs of the agency. Petitioner argues that while it is true that RA 8042 and
the Corporation Code provide for solidary liability, this liability must be so stated in the decision
sought to be implemented. Absent this express statement, a corporate officer may not be
impleaded and made personally answer for the liability of the corporation. Thus, the 1997 decision
had already been final and executory for five years and as such, can no longer be modified. It at
all, respondents are clearly guilty of laches foe waiting for five years before taking action against
Atty. Mercader
petitioner. The CA erred when it cited Sec. 10 of RA 8042, stating that there was “no need for
petitioner to be impleaded because she is made solidarily liable by express provision of the law…”
Par. 2, Section 10 of the same law states that:
Sec. 10. MONEY CLAIMS. Xxx
The liability of the principal/employer and the recruitment/placement agency for any
and all claims under this section shall be joint and several. This provision shall
be incorporated in the contract for overseas employment and shall be a condition
precedent for its approval. The performance bond to be filed by the
recruitment/placement agency, as provided by law, shall be answerable for all
money claims or damages that may be awarded to the workers. If the
recruitment/placement agency is a juridical being, the corporate officers and
directors and partners as the case may be, shall themselves be jointly and
solidarily liable with the corporation or partnership for the aforesaid claims and
damages.
However, the Court has already held, pending adjudication of this case, that the liability of
corporate directors and officers is not automatic. To make them jointly and solidarily liable with
their company, there must be a finding that they were remiss in directing the affairs of that company,
such as sponsoring or tolerating the conduct of illegal activities. Hence, for petitioner to be found
jointly and solidarily liable, there must be a separate finding that she was remiss in directing the
affairs of the agency, resulting in the illegal dismissal of the respondents. The records show that
there was no finding of neglect on the part of the petitioner in directing the affairs of the agency. In
fact, respondents made no mention of any instance when petitioner allegedly failed to manage the
agency in accordance with law, thereby contributing to their illegal dismissal. Plus, petitioner is
correct in saying that impleading her for the purpose of execution is tantamount to modifying a
decision that had long become final and executory. By holding her liable despite not being ordained
as such by the decision, both the CA and NLRC violated the doctrine on immutability of judgments.
The 1997 decision of LA not appealed, it already became final and executory and was
therefore removed from his jurisdiction. The modification of judgment done only in 2002 was null
and void. While labor laws should be liberally construed in favor of labor, the Court must be able to
balance this with the equally important right of petitioner to due process.
Atty. Mercader
Sealanes Marine Services v. Dela Torre

G.R. No. 214132, 18 February 2015
REYES, J.:
FACTS:
The respondent was hired by Sealanes Marine Services, Inc. (Sealanes), a local manning agency,
through its President, Christopher Dumatol (Dumatol), in behalf of its foreign principal, Arklow
Shipping Netherland (petitioners), as an able seaman on board M/V Arklow Venture for a period of
nine months at a basic monthly salary of US$545.00. An overriding CBA between the respondent’s
union, Associated Marine Officers’ and Seamen’s Union of the Philippines, and the Netherlands
Maritime Employers Association, called "CBA for Filipino Ratings on Board Netherlands Flag
Vessels" (Dutch CBA), also covered his contract.
The respondent embarked on January 21, 2010. On August 1, 2010, during the crew’s rescue boat
drill at the port of Leith, Scotland, he figured in an accident and injured his lower back. An X-ray of
his lumbosacral spine was taken at a hospital at the port, but while according to his attending
physician he sustained no major injury, the pain in his back persisted and he was repatriated. On
August 4, 2010, the respondent was referred by Sealanes to the Marine Medical Services of the
Metropolitan Medical Center. On August 5, 2010, an X-ray of his lumbosacral spine showed, per the
medical report, that he sustained "lumbar spine degenerative changes with associated L1
compression fracture." The next day, a Magnetic Resonance Imaging scan of his lumbar spine
revealed an "acute compression fracture body of L1; right paracentral disc protrusion at L5-S1
causing minimal canal compromise; L4-L5 and L5-S1 disc dehydration." Again on December 16,
2010, an X-ray showed "compression deformity of L1 vertebra; L2-L1 disc space is now defined but
slightly narrowed". On January 27, 2011, his fourth X-ray still showed a "compression fracture, L1
with narrowed L2-L1 disc space; no significant neural for aminal compromise."
The respondent underwent several physical therapy sessions, and finally on March 10, 2011 the
company-designated physician assessed him with a Grade 11 disability for slight rigidity or one-third
loss of motion or lifting power of trunk. Nonetheless, he was informed of the assessment only in May
2011, or more than 240 days since the accident.
On May 20, 2011, the respondent filed a complaint for disability benefits, medical reimbursement,
underpaid sick leave, damages and attorney’s fees.
Labor Arbiter: The LA rendered judgment awarding him US$80,000.00 in disability benefits as
provided in the Dutch CBA, plus 10% as attorney’s fees. In particular, the LA held that such an award
cannot be made to depend on the company-designated physician’s disability assessment which was
issued more than 120 days after the accident, especially if despite treatment for more than 240 days
the respondent was still unable to return to his accustomed work.
On August 31, 2012, the petitioners appealed to the NLRC contending that the disability benefits
due to the respondent should be based on his Grade 11 disability assessment issued by the
company-designated physician. On September 21, 2012, the respondent also filed his appeal
assailing the denial of his medical and transportation expenses.
NLRC: In its Decision dated February 28, 2013, the NLRC affirmed the award of total disability
benefits to the respondent noting that he continued with his rehabilitation even after the company’s
Grade 11 disability rating issued on March 10, 2011, indicating that its disability rating was intended
merely to comply with the 240-day limit for the company-designated physician to either declare him
fit to work or to assess the degree of his permanent disability. The petitioners’ motion for
reconsideration was denied on April 24, 2013.
CA: In its Decision dated April 24, 2014, the CA ruled that the seafarer’s right to disability benefits is
determined not solely by the company’s assessment of his impediment but also by law, contract and
medical findings. Citing Articles 191 to 193 of the Labor Code, Section 2, Rule X of the AREC, the
POEA SEC, the parties’ CBA, and the employment contract between the parties, the appellate
concurred that the respondent was entitled to total permanent disability benefits.
Hence, this present Petition for Review.
Petitioners’ contention/s: The petitioners insist that the CA erred in disregarding the petitioners’
partial permanent disability rating of Grade 11 under the POEA SEC schedule of disability benefits,
even as they pointed out that the respondent failed to refer his assessment to a neutral third doctor
as provided in Paragraph 3, Section 20(B) of the POEA SEC.
Atty. Mercader
Respondent’s contention/s: The respondent pointed out that, at the time the said rating was
issued, he was not completely healed but had to continue with his physical therapy sessions even
beyond the maximum 240-day period allowed under the Amended Rules on Employee
Compensation (AREC), implying that the company’s disability rating on March 10, 2011 was
temporary; that since his treatment exceeded the 240 days permitted, his disability is now total and
permanent.
ISSUE/S:
1. Whether or not respondent is entitled to total permanent disability benefits.
2. Whether or not the manning agency is solidarily liable with the principal.
HELD: Petition denied.
I. YES. It is expressly provided in Article 192(c)(1) of the Labor Code that a "temporary total disability
lasting continuously for more than [120] days, except as otherwise provided in the Rules," shall be
deemed total and permanent. Section 2(b), Rule VII of the AREC, likewise provides that "a disability
is total and permanent if as a result of the injury or sickness the employee is unable to perform any
gainful occupation for a continuous period exceeding 120 days, except as otherwise provided under
Rule X of these Rules."
As to sickness allowance, Section 2(a), Rule X of the AREC, referred to in Article 192(c)(1) of the
Labor Code.
Under Section 32 of the POEA SEC, only those injuries or disabilities classified as Grade 1 are
considered total and permanent. In Kestrel Shipping Co., Inc. v. Munar, the Court read the POEA
SEC in harmony with the Labor Code and the AREC, and explained that: (a) the 120 days provided
under Section 20(B)(3) of the POEA SEC is the period given to the employer to determine fitness to
work and when the seafarer is deemed to be in a state of total and temporary disability; (b) the 120
days of total and temporary disability may be extended up to a maximum of 240 days should the
seafarer require further medical treatment; and (c) a total and temporary disability becomes
permanent when so declared by the company-designated physician within 120 or 240 days,
as the case may be, or upon the expiration of the said periods without a declaration of either
fitness to work or permanent disability and the seafarer is still unable to resume his regular
seafaring duties.
The respondent was repatriated on August 4, 2010 and immediately underwent treatment and
rehabilitation at the company-designated facility, Marine Medical Services of the Metropolitan
Medical Center. It lasted until July 20, 2011, exceeding the 240 days allowed to declare him either
fit to work or permanently disabled. Although he was given a Grade 11 disability rating on March 10,
2011, the assessment may be deemed tentative because he continued his physical therapy sessions
beyond 240 days. Yet, despite his long treatment and rehabilitation, he was eventually unable to go
back to work as a seafarer, which fact entitled him under the Dutch CBA to maximum disability
benefits.
II. YES. Concerning the joint and solidary liability of the manning agency, Sealanes, its foreign
principal, Arklow Shipping Netherland, and Sealanes’ President Dumatol, Section 10 of Republic Act
(R.A.) No. 8042, otherwise known as the "Migrant Workers and Overseas Filipinos Act of 1995", as
amended by Section 7 of R.A. No. 10022.
Thus, every applicant for license to operate a seafarers’ manning agency shall, in the case of a
corporation or partnership, submit a written application together with, among others, a verified
undertaking by officers, directors and partners that they will nambe jointly and severally liable with
the company over claims arising from employer-employee relationship. Laws are deemed
incorporated in employment contracts and the contracting parties need not repeat them. They do not
even have to be referred to. Every contract, thus, contains not only what has been explicitly
stipulated, but also the statutory provisions that have any bearing on the matter. WHEREFORE, the
petition is DENIED.
Atty. Mercader
GARGALLO vs. DOHLE MANNING AGENCIES

Perlas-Bernabe, J.
G.R. No. 215551. August 17, 2016
FACTS:
 Petitioner filed a complaint for permanent total disability benefits against respondents before the
NLRC. This stemmed from his claim that he accidentally fell on deck while lifting heavy loads of
lube oil drum, with his left arm hitting the floor first and that he remained permanently unfit for further
sea service despite major surgery and further treatments and his permanent total unfitness to work
was duly certified by his chosen physician.
 Respondents countered that the fit-to-work findings of the company-designated physicians must
prevail considering that they were the ones who continuously treated and monitored petitioner’s
medical condition and that petitioner failed to comply with the conflict-resolution procedure under
POEA-SEC. In addition, the filing of the disability claim was premature since petitioner was still
undergoing medical treatment within the allowable 240-day period at the time the complaint was
filed.
 LA and NLRC gave more credence to the medical report of petitioner’s independent doctor and
thus granted him disability claim. CA disagreed and ruled that the claim was premature the time
the complaint was filed.
 SC upheld CA’s dismissal of petitioner’s claim for permanent total disability benefits but ordered
Dohle Seafront and Dohle Manning, jointly and severally, to pay petitioner the income benefit
arising from his temporary total disability which lasted 194 days from his repatriation until his last
visit to the company-designated physician plus 10% attorney’s fees. Court finds no basis to hold
Padiz solidarily liable.
 Both parties filed their respective motions for reconsideration of the Court’s decision.
ISSUE:
Whether or not Padiz is jointly and severally liable with Dohle Seafront and Dohle Manning for the payment
of income benefit due to petitioner.
HELD: Motions for both parties were partially granted.

 Petitioner’s motion for reconsideration argues that the lapse of 120-day period from the onset of
disability rendered him permanently and totally disabled because of the extension of the medical
treatment was unjustified and that the resort to a third doctor is a mere directory, not a mandatory
requirement. The Court finds these arguments untenable. The Court holds firm on its first decision
that the complaint was prematurely filed and that the petitioner did not comply with the mandated
conflict-resolution procedure under POEA-SEC which requires joint appointment by parties of a
third doctor in case seafarer’s personal doctor disagrees with the company-designated physician’s
fit-to-work assessment. However, the Court concurs with petitioner’s asseveration that it was
erroneous to absolve Padiz from joint and several liability for the payment of income benefit in view
of Section 10 of RA 8042 (Migrant Workers and Overseas Filipino Act of 1995, as amended by RA
10022 which provides that for money claims, thee liability of the petitioner/employer and the
recruitment/placement agency for any and all claims under this section shall be joint and several.
If the recruitment/placement agency is a juridical being, the corporate officers and directors
and partners as the case may be, shall themselves be jointly and solidarily liable with the
corporation or partnership for the aforesaid claims and damages.
 Respondents’ motion for partial reconsideration consists that the award for attorney’s fees must be
deleted for it is only justified if there is sufficient showing of bad faith on the part of the latter in
refusing to pay thereby forcing the claimant to resort to litigation which is absent in this case.
Atty. Mercader
PRINCESS TALENT CENTER PRODUCTION, INC., AND/OR LUCHI SINGH MOLDES vs. DESIREE T.
MASAGCA
G.R. No. 191310 – April 11, 2018
FACTS:
1. Sometime in November 2002, respondent auditioned for a singing contest at ABC-Channel in
Novaliches, Quezon City when a talent manager approached her to discuss her show business
potential. Enticed by thoughts of a future in the entertainment industry, respondent went to the office of
petitioner PTCPI, a domestic corporation engaged in the business of training and development of
actors, singers, dancers, and musicians in the movie and entertainment industry. At the office,
respondent met petitioner Moldes, President of petitioner PTCPI, who persuaded respondent to apply
for a job as a singer/entertainer in South Korea.
2. A Model Employment Contract for Filipino Overseas Performing Artists (OPAS) to Korea (Employment
Contract) was executed on February 3, 2003 between respondent and petitioner PTCPI as the
Philippine agent of SAENCO, the Korean principal/promoter.
3. Respondent left for South Korea on September 6, 2003 and worked there as a singer for nine months,
until her repatriation to the Philippines sometime in June 2004. Believing that the termination of her
contract was unlawful and premature, respondent filed a complaint against petitioners and SAENCO
with the NLRC.
4. Respondent alleged that she was made to sign two Employment Contracts but she was not given the
chance to read any of them despite her requests. Respondent had to rely on petitioner Moldes's
representations that: (a) her visa was valid for one year with an option to renew; (b) SAENCO would
be her employer; (c) she would be singing in a group with four other Filipinas at Seaman's Seven Pub
at 82-8 Okkyo-Dong, Jung-Gu, Ulsan, South Korea; (d) her Employment Contract had a minimum term
of one year, which was extendible for two years; and (e) she would be paid a monthly salary of
US$400.00, less US$100.00 as monthly commission of petitioners. Petitioner Moldes also made
respondent sign several spurious loan documents by threatening the latter that she would not be
deployed if she refused to do so.
5. For nine months, respondent worked at Seaman's Seven Pub in Ulsan, South Korea — not at Siheung
Tourist Hotel Night Club in Siheung, South Korea as stated in her Employment Contract — without
receiving any salary from SAENCO. Respondent subsisted on the 20% commission that she received
for every lady's drink the customers purchased for her. Worse, respondent had to remit half of her
commission to petitioner Moldes for the payment of the fictitious loan.
6. Respondent further narrated that on June 13, 2004, petitioner Moldes went to South Korea and paid
the salaries of all the performers, except respondent. Petitioner Moldes personally handed respondent
a copy of the loan document for US$10,600.00 and demanded that respondent terminate the services
of her legal counsel in the Philippines. When respondent refused to do as petitioner Moldes directed,
petitioner Moldes withheld respondent's salary. On June 24, 2004, Park Sun Na (Park), President of
SAENCO, went to the club where respondent worked, dragged respondent outside, and brought
respondent to his office in Seoul where he tried to intimidate respondent into apologizing to petitioner
Moldes and dismissing her counsel in the Philippines. However, respondent did not relent.
Subsequently, Park turned respondent over to the South Korean immigration authorities for deportation
on the ground of overstaying in South Korea with an expired visa. It was only at that moment when
respondent found out that petitioner Moldes did not renew her visa.
7. Respondent filed the complaint against petitioners and SAENCO praying that a decision be rendered
declaring them guilty of illegal dismissal and ordering them to pay her unpaid salaries for one year,
inclusive of her salaries for the unexpired portion of her Employment Contract, backwages, moral and
exemplary damages, and attorney's fees.
8. Petitioners countered that respondent signed only one Employment Contract, and that respondent read
its contents before affixing her signature on the same. Respondent understood that her Employment
Contract was only for six months since she underwent the mandatory post-arrival briefing before the
Philippine Labor Office in South Korea, during which, the details of her Employment Contract were
explained to her. Respondent eventually completed the full term of her Employment Contract, which
negated her claim that she was illegally dismissed.
Atty. Mercader
9. Petitioners likewise averred that they received complaints that respondent violated the club policies of
SAENCO against wearing skimpy and revealing dresses, dancing in a provocative and immoral
manner, and going out with customers after working hours. Respondent was repatriated to the
Philippines on account of her illegal or immoral activities. Petitioners also insisted that respondent's
salaries were paid in full as evidenced by the nine cash vouchers dated October 5, 2003 to June 5,
2004.
10. Petitioners submitted as well the Sworn Statement dated November 9, 2004 of Baltazar D. Fuentes
(Baltazar), respondent's husband, to prove that respondent obtained a loan from petitioner PTCPI.
Baltazar affirmed that petitioner PTCPI lent them some money which respondent used for her job
application, training, and processing of documents so that she could work abroad. A portion of the loan
proceeds was also used to pay for their land in Lagrimas Village, Tiaong, Quezon, and respondent's
other personal expenses.
11. On May 4, 2006, Labor Arbiter Antonio R. Macam rendered a Decision dismissing respondent's
complaint.
12. Respondent appealed the Labor Arbiter's Decision before the NLRC. In a Decision dated May 22,
2008, the NLRC ruled in respondent's favor.
13. Respondent sought remedy from the Court of Appeals by filing a Petition for Certiorari, alleging that the
NLRC acted with grave abuse of discretion amounting to excess or lack of jurisdiction in reinstating the
Labor Arbiter's Decision.
14. The Motion for Reconsideration of petitioners was denied by the Court of Appeals in a Resolution dated
February 16, 2010 because the issues raised therein were already judiciously evaluated and passed
upon by the appellate court in its previous Decision, and there was no compelling reason to modify or
reverse the same.
ISSUE/S: Whether or not respondent is entitled to payment representing her salaries
HELD:
NO. Respondent's monetary claims against petitioners and SAENCO is governed by Section 10 of Republic
Act No. 8042, otherwise known as The Migrant Workers and Overseas Filipinos Act of 1995, which
provides.
The liability of the principal/employer and the recruitment/placement agency for any and all claims under
this section shall be joint and several. This provision shall be incorporated in the contract for overseas
employment and shall be a condition precedent for its approval. The performance bond to be filed by the
recruitment/placement agency, as provided by law, shall be answerable for all monetary claims or damages
that may be awarded to the workers. If the recruitment/placement agency is a juridical being, the corporate
officers and directors and partners as the case may be, shall themselves be jointly and solidarity liable with
the corporation or partnership for the aforesaid claims and damages.
Atty. Mercader
Powerhouse Staffbuilders International, Inc. v. Rey

Jardeleza, J.
G.R. No. 190203 - November 07, 2016
FACTS:
Powerhouse hired respondents Romelia Rey, Liza Cabad, Evangeline Nicmic, etc. (respondent
employees) as operators for its foreign principal, Catcher Technical Co. Ltd./(Catcher), based in Taiwan,
each with a monthly salary of NT$15,840.00 for the duration of two years commencing upon their arrival at
the jobsite. They were deployed on June 2, 2000. Sometime in February 2001, Catcher informed
respondent employees that they would be reducing their working days due to low orders and financial
difficulties. The respondent employees were repatriated to the Philippines on March 11, 2001.
On March 22, 2001, respondent employees filed separate complaints for illegal dismissal, refund
of placement fees, moral and exemplary damages, as well as attorney's fees, against Powerhouse and
Catcher before the Labor Arbiter They alleged that on March 2, 2001, Catcher informed them that they
would all be repatriated due to low orders of Catcher. Initially, they refused to be repatriated but they
eventually gave in because Catcher stopped providing them food and they had to live by the donations/dole
outs from sympathetic friends and the church.Furthermore, during their employment with Catcher, the
amount of NT$10,000.00 was unjustifiably deducted every month for eight to nine months from their
individual salaries.
On the other hand, Powerhouse maintained that respondent employees voluntarily gave up their
jobs following their rejection of Catcher's proposal to reduce their working days. It contended that before
their repatriation, each of the respondents accepted payments by way of settlement, with the assistance of
Labor Attache Romulo Salud.
Powerhouse moved to implead JEJ International Manpower Services (JEJ) as respondent on
account of the alleged transfer to the latter of Catcher's accreditation.JEJ submitted its position paper,
arguing that the supposed transfer of accreditation to it did not affect the joint and solidary liability of
Powerhouse in favor of respondent employees. It averred that any contract between JEJ and Powerhouse
could not be enforced in the case as it involved no employer-employee relationship and is therefore outside
the jurisdiction of the labor arbiter.
LA ruled in favor of the respondents, finding the respondent employees' dismissal and/or pre
termination of their employment contracts illegal. It ordered Powerhouse, William Go, Catcher, Chen Wei,
JEJ and Javier to jointly and severally pay complainants the amounts corresponding to the unexpired term
of their employment contracts or three (3) months salaries whichever is less and refund of illegally deducted
amounts in their wages. It ruled that in accordance with Section 10 of Republic Act (R.A.) No. 8042, the
amount of wages the respondent employees are entitled to by reason of the illegal dismissal/pre-termination
of their employment contracts is equivalent to the unexpired term thereof or to three months for every year
of service whichever is less.
NLRC absolved JEJ from liability, upon the NLRC's findings that it was not privy to the respondents'
deployment. It also held Powerhouse jointly and severally liable with William Go, Catcher, and Chen Wei
to reimburse to respondents their placement fee of P19,000.00 each and P17,000.00 each to other
respondents.
CA found that respondent employees were made to resign against their will as they were forced to
sign resignation letters prepared by Catcher as an act of self-preservation, since Catcher stopped providing
them food for their subsistence nine days before they were finally repatriated. It likewise ruled that JEJ's
liability for the monetary claims of respondent employees on account of the alleged transfer of accreditation
to it has not been established absent any substantial evidence to show that such transfer had in fact been
effected.
ISSUE:
1. WHETHER OR NOT THE TRANSFER OF ACCREDITATION TO ANOTHER RECRUITMENT
AND PLACEMENT AGENCY, AS WELL AS THE ASSUMPTION OF ANY LIABILITY AS A
CONSEQUENCE OF THIS TRANSFER, RELIEVED THE ORIGINAL RECRUITMENT AND
PLACEMENT AGENCY FROM ANY LIABILITY.
Atty. Mercader
NO. The original recruitment and placement agency together with the principal, Catcher, were held
jointly and severally liable to monetary claims of the respondent employees.
Respondent employees were illegally dismissed. There is no reason to overturn the factual findings
of the Labor Arbiter, the NLRC and the CA, all of which have unanimously declared that respondent
employees were made to resign against their will after the foreign principal, Catcher, stopped providing
them food for their subsistence as early as March 2, 2001, when they were informed that they would be
repatriated, until they were repatriated on March 11, 2001. The filing of complaints for illegal dismissal
immediately after repatriation belies the claim that respondent employees voluntarily chose to be separated
and repatriated.
Respondent employees are entitled to money claims and full reimbursement of their respective
placement fees. However, the award of the three-month equivalent of respondent employees' salaries
should be increased to the amount equivalent to the unexpired term of the employment contract. In Serrano
, we declared unconstitutional the clause in Section 10 of R.A. No. 8042 limiting the wages that could be
recovered by an illegally dismissed overseas worker to three months. We held that the clause "or for three
(3) months for every year of the unexpired term, whichever is less" (subject clause) is both a violation of
the due process and equal protection clauses of the Constitution.
We likewise affirm the refund to the respondent employees of the unauthorized monthly deductions
in the amount of NT$10,000.00. They were only able to make withdrawals from their Second Passbooks,
however, their foreign employer made illegal deductions from their First Passbooks. The burden of proving
monetary claims rests on the employer. The reason for this rule is that the pertinent personnel files, payrolls,
records, remittances and other similar documents are not in the possession of the worker but in the custody
and absolute control of the employer. Thus, in failing to present evidence to prove that Catcher, with whom
it shares joint and several liability with under Section 10 of R.A. No. 8042, had paid all the monetary claims
of respondent employees, Powerhouse has failed to discharge the onus probandi.
Respondent employees are likewise entitled to the payment of interest over their monetary claims.
Section 10 of R.A. No. 8042 provides that "in case of termination of overseas employment without just, valid
or authorized cause as defined by law or contract, the workers shall be entitled to the full reimbursement of
his placement fee with interest of twelve percent (12%) per annum. " However, this provision does not
provide a specific interest rate for the award of salary for the unexpired portion of the employment contract
nor for the other money claims the respondent employees are entitled to.
Circular No. 799 does not have the effect of changing the interest on awards for reimbursement of
placement fees from twelve percent (12%), as provided in Section 10 of R.A. No. 8042, to six percent (6%).
However, Circular No. 799 applies to the award of salary for the unexpired portion of the employment
contract and the other money claims of the employees since the law does not provide a specific interest
rate for these awards. The placement fees in the amount of P19,000.00 and P17,000.00 each which are to
be reimbursed to respondents shall earn interest at a rate of twelve percent (12%) per annum from finality
of this decision until full payment thereof. On the other hand, the other monetary awards, specifically
respondent employees' salaries for the unexpired term of their employment contract, the illegal deductions
which are to be refunded to them, and the award of attorney's fees in their favor, shall earn interest at the
rate of six percent (6%) per annum from finality of this decision until full payment thereof.
Powerhouse is liable for the monetary claims. We likewise agree with the CA and the NLRC that
JEJ could not be held liable for the monetary claims of respondent employees on account of the alleged
transfer of accreditation to it. Nothing in the two letters attached by Powerhouse in its motion for
reconsideration before the NLRC proved that the alleged transfer pushed through with POEA’s imprimatur.
At best, these show that Catcher intended to appoint JEJ as its new agent and Powerhouse had no
objection to such transfer. Even the Affidavit of Assumption of Responsibility submitted to the CA cannot
absolve Powerhouse of its liability. The terms of Section 10 of R.A. No. 8042 clearly states the solidary
liability of the principal and the recruitment agency to the employees and this liability shall not be affected
by any substitution, amendment or modification for the entire duration of the employment contract. The
liability of the principal/employer and the recruitment/placement agency for any and all claims under
this section shall be joint and several. If the recruitment/placement agency is a juridical being, the
corporate officers and directors and partners as the case may be, shall themselves be jointly and
Atty. Mercader
solidarily liable with the corporation or partnership for the aforesaid claims and damages. Such
liabilities shall continue during the entire period or duration of the employment contract and shall
not be affected by any substitution, amendment or modification made locally or in a foreign country
of the said contract.
Even if there was transfer of accreditation by Catcher from Powerhouse to JEJ, Powerhouse's
liability to respondent employees remained intact because respondent employees are not privy to such
contract, and in their overseas employment contract approved by POEA, Powerhouse is the recruitment
agency of Catcher. To rule otherwise and free Powerhouse of liability against respondent employees would
go against the rationale of R.A. No. 8042 to protect and safeguard the rights and interests of overseas
Filipinos and overseas Filipino workers, in particular, and run contrary to this law's intention to an additional
layer of protection to overseas workers. By providing that the liability of the foreign employer may be
"enforced to the full extent" against the local agent, the overseas worker is assured of immediate and
sufficient payment of what is due them. Corollarily, the provision on joint and several liability in R.A. No.
8042 shifts the burden of going after the foreign employer from the overseas worker to the local employment
agency. However, the local agency that is held to answer for the overseas workers money claims is not left
without remedy. The law does not preclude it from going after the foreign employer for reimbursement of
whatever payment it has made to the employee to answer for the money claims against the foreign
employer.
Atty. Mercader
Sunace International
Management Services, Inc. v. NLRC
Carpio Morales, J.
G.R. No. 161757– January 25, 2006
FACTS:
Petitioner, Sunace International Management Services (Sunace), a corporation duly organized and
existing under the laws of the Philippines, deployed to Taiwan Divina A. Montehermozo (Divina) as a
domestic helper under a 12-month contract effective February 1, 1997. The deployment was with the
assistance of a Taiwanese broker, Edmund Wang, President of Jet Crown International Co., Ltd. After her
12-month contract expired on February 1, 1998, Divina continued working for her Taiwanese employer,
Hang Rui Xiong, for two more years, after which she returned to the Philippines on February 4, 2000.
Shortly after her return or on February 14, 2000, Divina filed a complaint before the National Labor
Relations Commission (NLRC) against Sunace, one Adelaide Perez, the Taiwanese broker, and the
employer-foreign principal alleging that she was jailed for three months and that she was underpaid.
Respondent:
Divina filed her Position Paper claiming that under her original one-year contract and the 2-year
extended contract which was with the knowledge and consent of Sunace, the income tax and savings were
deducted and while the amounts deducted in 1997 were refunded to her, those deducted in 1998 and 1999
were not.
Petitioner:
Sunace, by its Proprietor/General Manager Maria Luisa Olarte, claimed that Complainant could not
anymore claim nor be entitled for the refund of her 24 months savings as she already took back her saving
already last year and the employer did not deduct any money from her salary, in accordance with a
Fascimile Message from the respondent SUNACEs employer, Jet Crown International Co. Ltd.
There is no basis for the grant of tax refund to the complainant as the she finished her one year
contract and hence, was not illegally dismissed by her employer. She could only lay claim over the tax
refund or much more be awarded of damages such as attorneys fees as said reliefs are available only when
the dismissal of a migrant worker is without just valid or lawful cause as defined by law or contract.
The rationales behind the award of tax refund and payment of attorneys fees is not to enrich the
complainant but to compensate him for actual injury suffered. Complainant did not suffer injury, hence, does
not deserve to be compensated for whatever kind of damages.
Hence, the complainant has NO cause of action against respondent SUNACE for monetary claims,
considering that she has been totally paid of all the monetary benefits due her under her Employment
Contract to her full satisfaction. Furthermore, the tax deducted from her salary is in compliance with the
Taiwanese law, which respondent SUNACE has no control and complainant has to obey and this Honorable
Office has no authority/jurisdiction to intervene because the power to tax is a sovereign power which the
Taiwanese Government is supreme in its own territory.
Alleging that Divinas 2-year extension of her contract was without its knowledge and consent,
hence, it had no liability attaching to any claim arising therefrom, and Divina in fact executed a
Waiver/Quitclaim and Release of Responsibility and an Affidavit of Desistance.
LA: Decided in favor of Divina. Rejected Sunaces claim that the extension of Divina’s contract for two
more years was without its knowledge and consent.
What Sunace should have done was to write to POEA about the extension and its objection thereto,
copy furnished the complainant herself, her foreign employer, Hang Rui Xiong and the Taiwanese broker,
Edmund Wang. And because it did not, it is presumed to have consented to the extension and should be
liable for anything that resulted thereform. The Labor Arbiter rejected too Sunaces argument that it is not
liable on account of Divinas execution of a Waiver and Quitclaim and an Affidavit of Desistance. Should the
parties arrive at any agreement as to the whole or any part of the dispute, the same shall be reduced to
writing and signed by the parties and their respective counsel, if any, before the Labor Arbiter. And because
no consideration is indicated in the documents, we strike them down as contrary to law, morals, and public
policy.
Atty. Mercader
NLRC: Affirmed LA decision.
CA: Affirmed LA and NLRC. The Court of Appeals affirmed the Labor Arbiter and NLRCs finding that
Sunace knew of and impliedly consented to the extension of Divinas 2-year contract. It went on to state that
It is undisputed that [Sunace] was continually communicating with [Divinas] foreign employer. It thus
concluded that [a]s agent of the foreign principal, petitioner cannot profess ignorance of such extension as
obviously, the act of the principal extending complainant employment contract necessarily bound it.
ISSUE/S: Whether or not Sunaces consented to the extension of Divina’s contract for two more
years
HELD: NO
Contrary to the Court of Appeals finding, the alleged continuous communication was with the
Taiwanese broker Wang, not with the foreign employer Xiong.
The February 21, 2000 telefax message from the Taiwanese broker to Sunace, the only basis of a
finding of continuous communication, reads verbatim:
“Regarding to Divina, she did not say anything about her saving in police station. As we contact
with her employer, she took back her saving already last years. And they did not deduct any money from
her salary. Or she will call back her employer to check it again. If her employer said yes! we will get it back
for her. Thank you and best regards. (sgd.)Edmund Wang, President.
The finding of the Court of Appeals solely on the basis of the above-quoted telefax message, that
Sunace continually communicated with the foreign principal and therefore was aware of and had consented
to the execution of the extension of the contract is misplaced.
The message does not provide evidence that Sunace was privy to the new contract executed
after the expiration on February 1, 1998 of the original contract. That Sunace and the Taiwanese
broker communicated regarding Divinas allegedly withheld savings does not necessarily mean that
Sunace ratified the extension of the contract.
As Sunace points out in its Reply filed before the Court of Appeals, “As can be seen from that letter
communication, it was just an information given to the petitioner that the private respondent had t[aken]
already her savings from her foreign employer and that no deduction was made on her salary. It contains
nothing about the extension or the petitioners consent thereto.”
Parenthetically, since the telefax message is dated February 21, 2000, it is safe to assume that it
was sent to enlighten Sunace who had been directed, by Summons issued on February 15, 2000, to appear
on February 28, 2000 for a mandatory conference following Divinas filing of the complaint on February 14,
2000. Respecting the Court of Appeals following dictum: “As agent of its foreign principal, [Sunace] cannot
profess ignorance of such an extension as obviously, the act of its principal extending [Divinas] employment
contract necessarily bound it”, this too is a misapplication of the theory of imputed knowledge.
The theory of imputed knowledge ascribes the knowledge of the agent, Sunace, to the
principal, employer Xiong, not the other way around. The knowledge of the principal-foreign
employer cannot, therefore, be imputed to its agent Sunace.
There being no substantial proof that Sunace knew of and consented to be bound under the 2-year
employment contract extension, it cannot be said to be privy thereto. As such, it and its owner cannot be
held solidarily liable for any of Divinas claims arising from the 2-year employment extension.
As the New Civil Code provides, Contracts take effect only between the parties, their assigns, and
heirs, except in case where the rights and obligations arising from the contract are not transmissible by
their nature, or by stipulation or by provision of law.
Furthermore, as Sunace correctly points out, there was an implied revocation of its agency
relationship with its foreign principal when, after the termination of the original employment contract, the
foreign principal directly negotiated with Divina and entered into a new and separate employment contract
in Taiwan. Article 1924 of the New Civil Code reading, “The agency is revoked if the principal directly
manages the business entrusted to the agent, dealing directly with third persons.” thus applies.
In light of the foregoing discussions, consideration of the validity of the Waiver and Affidavit of
Desistance which Divina executed in favor of Sunace is rendered unnecessary.
Atty. Mercader
Yap vs. Thenamaris Ship Management

Nachura, J.
G.R. No. 179532 May 30, 2011
FACTS:
Claudio Yap was employed on August 14, 2001 as electrician of the vessel M/T SEASCOUT by the
Intermare Maritime Agencies, Inc., in behalf of its principal, Vulture Shipping Limited for a duration of 12
months. On or about November 8, 2001, before the expiration of the contract, the vessel was sold. Yap
received his seniority bonus, vacation bonus, extra bonus along with the scrapping bonus. However, with
respect to the payment of his wage, he refused to accept the payment of one-month basic wage. He insisted
that he was entitled to the payment of the unexpired portion of his contract since he was illegally dismissed
from employment. He alleged that he opted for immediate transfer but none was made.
Petitioner filed a complaint for Illegal Dismissal with Damages and Attorneys Fees before the Labor
Arbiter. He claimed that he was entitled to the salaries corresponding to the unexpired portion of his
contract. Subsequently, he filed an amended complaint, impleading Captain Francisco Adviento of
respondents Intermare Maritime Agencies, Inc. and Thenamaris Ships Management, together with C.J.
Martionos, Interseas Trading and Financing Corporation, and Vulture Shipping Limited/Stejo Shipping
Limited.
Respondents contended that Yap was not illegally dismissed. They alleged that following the sale of the
M/T SEASCOUT, Yap signed off from the vessel on 10 November 2001 and was paid his wages
corresponding to the months he worked or until 10 November 2001 plus his seniority bonus, vacation bonus
and extra bonus. They further alleged that Yap’s employment contract was validly terminated due to the
sale of the vessel and no arrangement was made for Yaps transfer to Thenamaris other vessels.
Labor Arbiter: ruled in favor of petitioner Yap. LA found that Yap has been constructively and illegally
dismissed. Respondents acted in bad faith when they assured petitioner of re-embarkation and required
him to produce an electrician certificate during the period of his contract, but actually he was not able to
board one despite of respondents’ numerous vessels. Petitioner made several follow-ups for his re-
embarkation but respondents failed to heed his plea; thus, petitioner was forced to litigate in order to
vindicate his rights. Lastly, the LA opined that since the unexpired portion of petitioner’s contract was less
than one year, petitioner was entitled to his salaries for the unexpired portion of his contract for a
period of nine months.
NLRC: affirmed the LA’s findings that petitioner was constructively and illegally dismissed. Respondents’
bad faith was evident on their willful failure to transfer petitioner to another vessel and that the award of
attorneys fees was warranted. However, the NLRC held that instead of an award of salaries corresponding
to nine months, petitioner was only entitled to salaries for three months as provided under Section
10 of Republic Act (R.A.) No. 8042, as enunciated in the ruling in Marsaman Manning Agency, Inc.
v. National Labor Relations Commission.
CA: affirmed the findings and ruling of the LA and the NLRC that petitioner was constructively and illegally
dismissed. However, the CA ruled that the NLRC erred in sustaining the LA’s interpretation of Section 10
of R.A. No. 8042. In this regard, the CA relied on the clause or for three months for every year of the
unexpired term, whichever is less provided in the 5th paragraph of Section 10 of R.A. No. 8042
ISSUE: Whether or not Section 10 of R.A. No. 8042, to the extent that it affords an illegally dismissed
migrant worker the lesser benefit of salaries for the unexpired portion of his employment contract or for
three (3) months for every year of the unexpired term, whichever is less is constitutional.
RULING: No.
While this case was pending, the Court declared as unconstitutional the clause or for three months
for every year of the unexpired term, whichever is less provided in the 5th paragraph of Section 10
Atty. Mercader
of R.A. No. 8042 in the case of Serrano v. Gallant Maritime Services, Inc. for being violative of the
rights of Overseas Filipino Workers (OFWs) to equal protection of the laws.
The Court concludes that the subject clause contains a suspect classification in that, in the computation of
the monetary benefits of fixed-term employees who are illegally discharged, it imposes a 3-month cap on
the claim of OFWs with an unexpired portion of one year or more in their contracts, but none on the claims
of other OFWs or local workers with fixed-term employment. The subject clause singles out one
classification of OFWs and burdens it with a peculiar disadvantage.
Moreover, this Court held therein that the subject clause does not state or imply any definitive governmental
purpose; hence, the same violates not just therein petitioners right to equal protection, but also his right to
substantive due process under Section 1, Article III of the Constitution. Consequently, petitioner therein
was accorded his salaries for the entire unexpired period of nine months and 23 days of his employment
contract, pursuant to law and jurisprudence prior to the enactment of R.A. No. 8042.
Thus, the present case should not be different from Serrano. As a general rule, an unconstitutional act is
not a law; it confers no rights; it imposes no duties; it affords no protection; it creates no office; it is
inoperative as if it has not been passed at all. The general rule is supported by Article 7 of the Civil Code.
The doctrine of operative fact serves as an exception to the aforementioned general rule. Following
Serrano, we hold that this case should not be included in the aforementioned exception. After all, it was not
the fault of petitioner that he lost his job due to an act of illegal dismissal committed by respondents. To rule
otherwise would be iniquitous to petitioner and other OFWs, and would, in effect, send a wrong signal that
principals/employers and recruitment/manning agencies may violate an OFWs security of tenure which an
employment contract embodies and actually profit from such violation based on an unconstitutional
provision of law.
Atty. Mercader
SAMEER OVERSEAS PLACEMENT AGENCY, INC. v. CABILES

LEONEN, J.
GR No. 170139 – 05 August 2014
FACTS
Petitioner, Sameer Overseas Placement Agency, Inc., is a recruitment and placement
agency. Responding to an ad it published, respondent, Joy C. Cabiles, submitted her application for a
quality control job in Taiwan. Joy’s application was accepted. Joy was later asked to sign a one year
employment contract for a monthly salary of NT$15,360.00. She alleged that Sameer Overseas Agency
required her to pay a placement fee of ₱70,000.00 when she signed the employment contract. Joy was
deployed to work for TaiwanWacoal, Co. Ltd. (Wacoal) on June 26, 1997. She alleged that in her
employment contract, she agreed to work as quality control for one year. In Taiwan, she was asked to
work as a cutter.
Sameer Overseas Placement Agency claims that on July 14, 1997 (less than 1 month after), a certain
Mr. Huwang from Wacoal informed Joy, without prior notice, that she was terminated and that "she should
immediately report to their office to get her salary and passport." She was asked to "prepare for
immediate repatriation." Joy claims that she was told that from June 26 to July 14, 1997, she only earned
a total of NT$9,000. According to her, Wacoal deducted NT$3,000 to cover her plane ticket to Manila.
On October 15, 1997, Joy filed a complaint with the National Labor Relations Commission against
petitioner and Wacoal. She claimed that she was illegally dismissed. She asked for the return of her
placement fee, the withheld amount for repatriation costs, payment of her salary for 23 months as
well as moral and exemplary damages. She identified Wacoal as Sameer Overseas Placement
Agency’s foreign principal. Sameer Overseas Placement Agency alleged that respondent's termination
was due to her inefficiency, negligence in her duties, and her "failure to comply with the work
requirements of her foreign employer." The agency also claimed that it did not ask for a placement fee of
₱70,000.00. As evidence, it showed Official Receipt No. 14860 dated June 10, 1997, bearing the amount
of ₱20,360.00.
The Labor Arbiter dismissed Joy’s complaint. They ruled that her complaint was based on mere
allegations. The Labor Arbiter found unnecessary a discussion on petitioner’s transfer of obligations to
Pacific and considered the matter immaterial in view of the dismissal of respondent’s complaint.
In a resolution, the National Labor Relations Commission declared that Joy was illegally dismissed. It
reiterated the doctrine that the burden of proof to show that the dismissal was based on a just or valid
cause belongs to the employer. It found that Sameer Overseas Placement Agency failed to prove that
there were just causes for termination. There was no sufficient proof to show that respondent was
inefficient in her work and that she failed to comply with company requirements. Furthermore, procedural
due process was not observed in terminating respondent. The National Labor Relations Commission did
not rule on the issue of reimbursement of placement fees for lack of jurisdiction. The National Labor
Relations Commission awarded respondent only three (3) months worth of salary in the amount of
NT$46,080, the reimbursement of the NT$3,000 withheld from her, and attorney’s fees of
NT$300.The Commission denied the agency’s motion for reconsideration. Aggrieved by the ruling,
Sameer Overseas Placement Agency caused the filing of a petition for certiorari with the Court of
Appeals.
The Court of Appeals affirmed the decision of the National Labor Relations Commission with
respect to the finding of illegal dismissal, Joy’s entitlement to the equivalent of three months
worth of salary, reimbursement of withheld repatriation expense, and attorney’s fees. The Court of
Appeals held, thus: Although the public respondent found the dismissal of the complainant-respondent
illegal, we should point out that the NLRC merely awarded her three (3) months backwages or the
amount of NT$46,080.00, which was based upon its finding that she was dismissed without due process,
a finding that we uphold, given petitioner’s lack of worthwhile discussion upon the same in the
proceedings below or before us. Likewise we sustain NLRC’s finding in regard to the reimbursement of
her fare, which is squarely based on the law; as well as the award of attorney’s fees.We should
emphasize that as far as the decision of the NLRC on the claims of Joy Cabiles, is concerned, the same
is hereby affirmed with finality, and we hold petitioner liable thereon.
Dissatisfied, Sameer Overseas Placement Agency filed this petition
ISSUE/S:
Atty. Mercader
1. W/N Respondent was illegally dismissed

2. W/N CA erred in awarding Cabiles three months’ worth of salary, the reimbursement of the cost
ofher repatriation, and attorney’s fees
3. W/N Petitioner should assume responsibility for Wacoal’s contractual obligations to the
workers originally recruited by petitioner.

1. Yes. Sameer Overseas Placement Agency failed to show that there was just cause for
causing Joy’s dismissal. The employer, Wacoal, also failed to accord her due process of
law.
 Security of tenure for labor is guaranteed by our Constitution. Employees are not stripped
of their security of tenure when they move to work in a different jurisdiction. With respect
to the rights of overseas Filipino workers, we follow the principle of lex loci contractus (the
law of the place where the contract is made) There is no question that the contract of
employment in this case was perfected here in the Philippines. Therefore, the Labor
Code, its implementing rules and regulations, and other laws affecting labor apply in this
case. By our laws, overseas Filipino workers (OFWs) may only be terminated for a just or
authorized cause and after compliance with procedural due process requirements.
Petitioner’s allegation that respondent was inefficient in her work and negligent in her
duties may, therefore, constitute a just cause for termination under Article 282(b), but
only if petitioner was able to prove it. The burden of proving that there is just cause for
termination is on the employer. "The employer must affirmatively show rationally
adequate evidence that the dismissal was for a justifiable cause. "Failure to show that
there was valid or just cause for termination would necessarily mean that the dismissal
was illegal. In this case, petitioner merely alleged that respondent failed to comply with
her foreign employer’s work requirements and was inefficient in her work. No evidence
was shown to support such allegations. Petitioner did not even bother to specify what
requirements were not met, what efficiency standards were violated, or what particular
acts of respondent constituted inefficiency.
There was also no showing that respondent was sufficiently informed of the standards against which her
work efficiency and performance were judged. The parties’ conflict as to the position held by
respondent showed that even the matter as basic as the job title was not clear. The bare
allegations of petitioner are not sufficient to support a claim that there is just cause for
termination. There is no proof that respondent was legally terminated.
Respondent’s dismissal less than one year from hiring and her repatriation on the same day show not
only failure on the part of petitioner to comply with the requirement of the existence of just cause
for termination. They patently show that the employers did not comply with the due process
requirement. A valid dismissal requires both a valid cause and adherence to the valid procedure
of dismissal. The employer is required to give the charged employee at least two written notices
before termination.7One of the written notices must inform the employee of the particular acts that
may cause his or her dismissal. The other notice must "[inform] the employee of the employer’s
decision." Aside from the notice requirement, the employee must also be given "an opportunity to
be heard."Petitioner failed to comply with the twin notices and hearing requirements. Respondent
started working on June 26, 1997. She was told that she was terminated on July 14, 1997
effective on the same day and barely a month from her first workday. She was also repatriated on
the same day that she was informed of her termination. The abruptness of the termination
negated any finding that she was properly notified and given the opportunity to be heard. Her
constitutional right to due process of law was violated.
2. Yes. Respondent is entitled to her salary for the unexpired portion of the employment
contract that was violated together with attorney’s fees and reimbursement of amounts withheld
from her salary.
 Section 10 of Republic Act No. 8042, otherwise known as the Migrant Workers and
Overseas Filipinos Act of 1995, states that overseas workers who were terminated
Atty. Mercader
without just, valid, or authorized cause "shall be entitled to the full reimbursement of his
placement fee with interest of twelve (12%) per annum, plus his salaries for the
unexpired portion of his employment contract or for three (3) months for every year of the
unexpired term, whichever is less." Section 15 of Republic Act No. 8042 states that
"repatriation of the worker and the transport of his [or her] personal belongings shall be
the primary responsibility of the agency which recruited or deployed the worker
overseas." The exception is when "termination of employment is due solely to the fault of
the worker," The Labor Code also entitles the employee to 10% of the amount of
withheld wages as attorney’s fees when the withholding is unlawful.
3. Yes. Section 10 of the Migrant Workers and Overseas Filipinos Act of 1995 provides that
the foreign employer and the local employment agency are jointly and severally liable for money
claims including claims arising out of an employer-employee relationship and/or damages.
 This section also provides that the performance bond filed by the local agency shall be
answerable for such money claims or damages if they were awarded to the employee.
This provision is in line with the state’s policy of affording protection to labor and
alleviating workers’ plight. In overseas employment, the filing of money claims against the
foreign employer is attended by practical and legal complications.
Atty. Mercader
Maersk-Filipinas Crewing v. Avestruz

Perlas-Bernabe, J.
GR No. 207010 – 18 February 2015
FACTS:
On April 28, 2011, petitioner Maersk-Filipinas Crewing, Inc. (Maersk), on behalf of its foreign principal,
petitioner A.P. Moller Singapore Pte. Ltd. (A.P. Moller), hired Avestruz as Chief Cook on board the
vessel M/V Nedlloyd Drake for a period of six (6) months, with a basic monthly salary of
US$698.00. Avestruz boarded the vessel on May 4, 2011. On June 22, 2011, in the course of the weekly
inspection of the vessel’s galley, Captain Charles C. Woodward (Captain Woodward) noticed that the cover
of the garbage bin in the kitchen near the washing area was oily. As part of Avestruz’s job was to ensure
the cleanliness of the galley, Captain Woodward called Avestruz and asked him to stand near the garbage
bin where the former took the latter’s right hand and swiped it on the oily cover of the garbage bin, telling
Avestruz to feel it. Shocked, Avestruz remarked, “Sir if you are looking for [dirt], you can find it[;] the ship is
big. Tell us if you want to clean and we will clean it.” Captain Woodward replied by shoving Avestruz’s
chest, to which the latter complained and said, “Don’t touch me,” causing an argument to ensue between
them.
Later that afternoon, Captain Woodward summoned and required Avestruz to state in writing what
transpired in the galley that morning. Avestruz complied and submitted his written statement on that same
day. Captain Woodward likewise asked Messman Jomilyn P. Kong (Kong) to submit his own written
statement regarding the incident, to which the latter immediately complied. On the very same day, Captain
Woodward informed Avestruz that he would be dismissed from service and be disembarked in India. On
July 3, 2011, Avestruz was disembarked in Colombo, Sri Lanka and arrived in the Philippines on July 4,
2011. Subsequently, he filed a complaint for illegal dismissal, payment for the unexpired portion of his
contract, damages, and attorney’s fees against Maersk, A.P. Moller, and Jesus Agbayani (Agbayani), an
officer of Maersk. He alleged that no investigation or hearing was conducted nor was he given the chance
to defend himself before he was dismissed, and that Captain Woodward failed to observe the provisions
under Section 17 of the Philippine Overseas Employment Administration (POEA) Standard Employment
Contract (POEA-SEC) on disciplinary procedures. Also, he averred that he was not given any notice stating
the ground for his dismissal. Additionally, he claimed that the cost of his airfare in the amount of US$606.15
was deducted from his wages.
In their defense, Maersk, A.P. Moller, and Agbayani (petitioners) claimed that during his stint on the vessel,
Avestruz failed to attend to his tasks despite the reminders, specifically to maintain the cleanliness of the
galley. Thereafter, he was informed of his dismissal from service due to insubordination. Relative thereto,
Captain Woodward sent two (2) electronic mail messages (e-mails) to Maersk explaining the decision to
terminate Avestruz’s employment and requesting for Avestruz’s replacement.
ISSUE/S:
W/N there the CA erred when it reversed and set aside the ruling of the NLRC finding that
Avestruz was legally dismissed and accordingly, dismissing the complaint, albeit with payment of nominal
damages for violation of procedural due process.
 Avestruz was illegally dismissed.
It is well-settled that the burden of proving that the termination of an employee was for a just or authorized
cause lies with the employer. If the employer fails to meet this burden, the conclusion would be that the
dismissal was unjustified and, therefore, illegal. Petitioners maintain that Avestruz was dismissed on the
ground of insubordination, consisting of his “repeated failure to obey his superior’s order to maintain
cleanliness in the galley of the vessel” as well as his act of “insulting a superior officer by words or
deeds.” In support of this contention, petitioners presented as evidence the e-mails sent by Captain
Atty. Mercader
Woodward, both dated June 22, 2011, and time-stamped 10:07 a.m. and 11:40 a.m., respectively, which
they claim chronicled the relevant circumstances that eventually led to Avestruz’s dismissal. The Court,
however, finds these e-mails to be uncorroborated and self-serving, and therefore, do not satisfy the
requirement of substantial evidence as would sufficiently discharge the burden of proving that Avestruz
was legally dismissed. On the contrary, petitioners failed to prove that he committed acts of
insubordination which would warrant his dismissal.
Insubordination, as a just cause for the dismissal of an employee, necessitates the concurrence of at
least two requisites: (1) the employee’s assailed conduct must have been willful, that is, characterized by
a wrongful and perverse attitude; and (2) the order violated must have been reasonable, lawful, made
known to the employee, and must pertain to the duties which he had been engaged to discharge. In this
case, the contents of Captain Woodward’s e-mails do not establish that Avestruz’s conduct had been
willful, or characterized by a wrongful and perverse attitude. The Court concurs with the CA’s observation
that Avestruz’s statement regarding the incident in the galley deserves more credence, being
corroborated by Kong, a messman who witnessed the same. Conversely, apart from Captain Woodward’s
e-mails, no other evidence was presented by the petitioners to support their claims.
It was incumbent upon the petitioners to present other substantial evidence to bolster their claim that
Avestruz committed acts that constitute insubordination as would warrant his dismissal. At the least, they
could have offered in evidence entries in the ship’s official logbook showing the infractions or acts of
insubordination purportedly committed by Avestruz, the ship’s logbook being the official repository of the
day-to-day transactions and occurrences on board the vessel. Having failed to do so, their position that
Avestruz was lawfully dismissed cannot be sustained.
 Avestruz was not accorded procedural due process, there being no compliance with the
provisions of Section 17 of the POEA-SEC as above-cited, which requires the “two-notice
rule”.
There is dearth of evidence to show that Avestruz had been given a written notice of the charge against
him, or that he was given the opportunity to explain or defend himself. The statement given by Captain
Woodward requiring him to explain in writing the events that transpired at the galley in the morning of
June 22, 2011 hardly qualifies as a written notice of the charge against him, nor was it an opportunity for
Avestruz to explain or defend himself. While Captain Woodward claimed in his e-mail that he conducted a
“disciplinary hearing” informing Avestruz of his inefficiency, no evidence was presented to support the
same. Neither was Avestruz given a written notice of penalty and the reasons for its imposition. Instead,
Captain Woodward verbally informed him that he was dismissed from service and would be disembarked
from the vessel. It bears stressing that only in the exceptional case of clear and existing danger to the
safety of the crew or vessel that the required notices may be dispensed with, and, once again, records
are bereft of evidence showing that such was the situation when Avestruz was dismissed.
Atty. Mercader
Atty. Mercader
HILARIO RADA, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION (Second Division) and PHILNOR CONSULTANTS
AND PLANNERS, INC., respondents.
REGALADO, J.
G.R. No. 96078 January 9, 1992
Doctrine A:
Our ruling in Sandoval Shipyards, Inc. vs. National Labor Relations Commission, et al. is applicable to the
case at bar.
Thus: We hold that private respondents were project employees whose work was coterminous with the
project or which they were hired. Project employees, as distinguished from regular or non-project
employees, are mentioned in section 281 of the Labor Code as those "where the employment has been
fixed for a specific project or undertaking the completion or termination of which has been determined at
the time of the engagement of the employee."
Policy Instructions No. 20 of the Secretary of Labor, which was issued to stabilize employer-employee
relations in the construction industry, provides:”Project employees are those employed in connection with
a particular construction project. Non-project (regular) employees are those employed by a construction
company without reference to any particular project.”
Project employees are not entitled to termination pay if they are terminated as a result of the completion of
the project or any phase thereof in which they are employed, regardless of the number of projects in which
they have been employed by a particular construction company. Moreover, the company is not required to
obtain clearance from the Secretary of Labor in connection with such termination.
Doctrine B:
Anent the claim for overtime compensation, we hold that petitioner is entitled to the same. The fact that he
picks up employees of Philnor at certain specified points along EDSA in going to the project site and drops
them off at the same points on his way back from the field office going home to Marikina, Metro Manila is
not merely incidental to Rada's job as a driver. On the contrary, said transportation arrangement had been
adopted, not so much for the convenience of the employees, but primarily for the benefit of Philnor. As
embodied in Philnor’s memorandum, they allowed their drivers to bring home their transport vehicles in
order for them to provide a timely transport service and to avoid delay–not really so that the drivers could
enjoy the benefits of the company vehicles nor for them to save on fair.
Nature:
In this special civil action for certiorari, petitioner Rada seeks to annul the decision of respondent National
Labor Relations Commission (NLRC), dated November 19, 1990, reversing the decision of the labor arbiter
which ordered the reinstatement of petitioner with backwages and awarded him overtime pay.
Facts:
On July 1997, Philnor Consultants and Planners, Inc hired Hilario Rada as Driver of the MNEE
Stage 2 project for a term of about 24 months and his initial employment was under “Contract of
Employment for a Definite Period”
On June 30, 1979, Petitioner's first contract of employment expired. MNEE Stage 2 project was not yet
finished; it was extended beyond the original period of 2.3 years. Respondent needed a driver for the
extended project and since Petitioner had a satisfactory performance, the position of Driver was offered to
Petitioner, which he accepted. A second Contract of Employment for a 10-month definite period, was
executed between Petitioner and Respondent. Some of the areas or phases of the project were completed
by March 1980, but not all. Another employment in the remaining portion of the project were offered to
some project employees whose contracts of employment expired or were about to expire. Petitioner was
among those whose contract was about to expire, and since he had a satisfactory performance, respondent
renewed his contract of employment. A third contract of employment for a definite period was executed
whereby the Petitioner was again employed as Driver for 19 months. This third contract of employment was
Atty. Mercader
extended for a number of times, and the last extension being for a period of 3 months, from October 1-
December 31, 1985. The last extension of the contract was covered by an "Amendment to the Contract of
Employment with a Definite Period," and was not extended any further because Petitioner had no more
work to do in the project. In the 2nd week of December 1985, Petitioner applied for "Personnel Clearance"
and he received an amount of P3,796.20 for the conversion of his unused leave credits and financial
assistance.
Contentions of the Parties:

Through a "Release, Waiver and Quitclaim,” petitioner released Respondent from all obligations
and/or claims.
Petitioner filed before the NLRC, National Capital Region, Department of Labor and Employment, on May
20, 1987, a Complaint for non-payment of separation pay and overtime pay. On June 3, 1987, Philnor filed
its Position Paper alleging, inter alia: that petitioner was not illegally terminated since the project for which
he was hired was completed; that he was hired under three distinct contracts with a definite period, all within
the estimated period of MNEE Stage 2 Project; that his work was strictly confined to the MNEE Stage 2
Project and that he was never assigned to any other project of Philnor; that he did not render overtime
services and that there was no demand or claim for him for such overtime pay; that he signed a "Release,
Waiver and Quitclaim" releasing Philnor from all obligations and claims; that Philnor's business is to provide
engineering consultancy services, including supervision of construction services.
Petitioner filed an Amended Complaint on July 2, 1987, alleging that he was illegally dismissed and
he was not paid overtime pay although he rendered three hours overtime work from Monday to Saturday
for a period of three years.
Petitioner filed his Position Paper on July 7, 1987, claiming that he was illegally dismissed since he was a
regular employee entitled to security of tenure, contending: that he was not a project employee since Philnor
is not engaged in the construction business as to be covered by Policy Instructions No. 20; that the contract
of employment for a definite period executed between him and Philnor is against public policy; that his
position as driver was essential, necessary and desirable to the conduct of the business of Philnor; that he
rendered overtime work until 6:00 p.m. daily except Sundays and holidays and, therefore, he was entitled
to overtime pay.
In his Reply to Respondent's Position Paper, petitioner claimed that; he was a regular employee
pursuant to Article 278(c) of the Labor Code and, thus, he cannot be terminated except for a just cause
under Article 280 of the Code; and that the public respondent's ruling in Quiwa vs. Philnor Consultants and
Planners, Inc. 5 is not applicable to his case.
That the contract of employment for a definite period entered into between him and Philnor was a ploy to
defeat the intent of Article 280 of the Labor Code.
Philnor filed its Respondent's Supplemental Position Paper on July 28, 1987, alleging therein that
petitioner was not a company driver; that the office hours observed in the project were from 7:00 a.m. to
4:00 p.m. Mondays through Saturdays; that Philnor adopted the policy of allowing certain employees, to
bring home project vehicles to afford fast and free transportation to and from the project field office; that
when he was absent or on leave, another employee living in Metro Manila used the same vehicle in
transporting the same employees; that the time used by petitioner to and from his residence to the project
site for about 3 hours daily, was not overtime work as he was merely enjoying the benefit and convenience
of free transportation provided by Philnor; that in the case of Quiwa vs. Philnor Consultants and Planners,
Inc., supra, the NLRC upheld Philnor's position that Quiwa was a project employee and he was not entitled
to termination pay under Policy Instructions No. 20 since his employment was coterminous.
The MNEE Stage 2 Project employees, including petitioner asked Philnor what termination benefits
could be given to them and in the letter-reply of Philnor, they were informed that they are not entitled to
termination benefits as they are contractual/project employees.
Labor Arbiter Ruling: ordered his reinstatement with full backwages from the time of his dismissal
to his actual reinstatement; Directing the respondent company to pay the overtime pay for the three excess
hours of work performed during working days from January 1983 to December 1985; and Dismissing all
other claims for lack of merit.
NLRC Ruling: reversed the decision of LA dismissing RADA’s petition.
Issue:
Whether or not Rada is entitled to separation pay and OT pay.
Atty. Mercader
Held:
Not entitled to separation pay. We hold that private respondents were project employees whose work was
coterminous with the project or which they were hired. Project employees, as distinguished from regular or
non-project employees, are mentioned in section 281 of the Labor Code as those "where the employment
has been fixed for a specific project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee.
Policy Instructions No. 20 of the Secretary of Labor, which was issued to stabilize employer-employee
relations in the construction industry, provides:
Project employees are those employed in connection with a particular construction project. Non-project
(regular) employees are those employed by a construction company without reference to any particular
project.
Project employees are not entitled to termination pay if they are terminated as a result of the completion of
the project or any phase thereof in which they are employed, regardless of the number of projects in which
they have been employed by a particular construction company. Moreover, the company is not required to
obtain clearance from the Secretary of Labor in connection with such termination.
Rada is entitled to overtime pay. This fact is inevitably deducible from the Memorandum of respondent
company. If driving these employees to and from the project site is not really part of petitioner's job, then
there would have been no need to find a replacement driver to fetch these employees. But since the
assigned task of fetching and delivering employees is indispensable and consequently mandatory, then the
time required of and used by petitioner in going from his residence to the field office and back, that is, from
5:30 a.m. to 7:00 a.m. and from 4:00 p.m. to around 6:00 p.m., which the labor arbiter rounded off as
averaging three hours each working day, should be paid as overtime work.
Dispositive:
WHEREFORE, subject to the modification regarding the award of overtime pay to herein petitioner, the
decision appealed from is AFFIRMED in all other respects.
Atty. Mercader
UNIVERSITY OF PANGASINAN FACULTY UNION, petitioner, vs.

UNIVERSITY OF PANGASINAN and NATIONAL LABOR RELATIONS
COMMISSION, respondents.
[G.R. No. L-63122. February 20, 1984.]
FACTS:
Petitioner is a labor union composed of faculty members of the respondent University of
Pangasinan, an educational institution duly organized and existing by virtue of the laws of the Philippines.
The petitioner's members are full-time professors, instructors, and teachers of respondent University. The
teachers in the college level teach for a normal duration of ten (10) months a school year, divided into two
(2) semesters of five (5) months each, excluding the two (2) months summer vacation. These teachers are
paid their salaries on a regular monthly basis. In November and December, 1981, the petitioner's members
were fully paid their regular monthly salaries. However, from November 7 to December 5, during the
semestral break, they were not paid their ECOLA. The private respondent claims that the teachers are not
entitled thereto because the semestral break is not an integral part of the school year and there being no
actual services rendered by the teachers during said period, the principle of "No work, no pay" applies. The
various Presidential Decrees on ECOLAs to wit: PD's 1614, 1634, 1678 and 1713, provide on "Allowances
of Fulltime Employees . . ." that "Employees shall be paid in full the required monthly allowance
regardless of the number of their regular working days if they incur no absences during the month.
If they incur absences without pay, the amounts corresponding to the absences may be deducted from the
monthly allowance . . ."; and on "Leave of Absence Without Pay", that "All covered employees shall be
entitled to the allowance provided herein when they are on leave of absence with pay.”
HELD:
The Omnibus Rules Implementing the Labor Code to wit:
Sec. 4. Principles in Determining Hours Worked. — The following general principles shall govern in
determining whether the time spent by an employee is considered hours worked for purposes of
this Rule:
xxx xxx xxx
"(d) The time during which an employee is inactive by reason of interruptions in his work beyond
his control shall be considered time either if the imminence of the resumption of work
requires the employee's presence at the place of work or if the interval is too brief to be
utilized effectively and gainfully in the employee's own interest."
The semestral break scheduled is an interruption beyond petitioner's control and it cannot be
used "effectively nor gainfully in the employee's interest'. Thus, the semestral break may also be
considered as "hours worked." For this, the teachers are paid regular salaries and, for this, they
should be entitled to ECOLA. Not only do the teachers continue to work during this short recess but
much less do they cease to live for which the cost of living allowance is intended. Petitioners cannot
be considered to be on leave without pay so as not to be entitled to ECOLA, for, as earlier stated,
the petitioners were paid their wages in full for the months of November and December of 1981,
notwithstanding the intervening semestral break. Although said to be on forced leave, professors
and teachers are, nevertheless, burdened with the task of working during a period of time
supposedly available for rest and private matters.
Atty. Mercader
San Juan de Dios Hospital Employees Association v.

NLRC
FRANCISCO, J
G.R. No. 126383. November 28, 1997
Petitioners, the rank-and-file employee-union officers and members of San Juan De Dios Hospital
Employees Association,. . . requesting and pleading for the expeditious implementation and payment by
respondent" Juan De Dios Hospital "of the '40-HOURS/5-DAY WORKWEEK' with compensable weekly
two (2) days off provided for by Republic Act 5901 as clarified for enforcement by the Secretary of
Labor's Policy Instructions No. 54 dated April 12, 1988… this petition under Rule 65 of the Rules of
Court ascribing grave abuse of discretion on the part of NLRC in concluding that Policy Instructions No.
54 "proceeds from a wrong interpretation of RA 5901" 5 and Article 83 of the Labor Code
As the Court sees it, the core issue is whether Policy Instructions No. 54 issued by then Labor Secretary
(now Senator) Franklin M. Drilon is valid or not
Policy Instruction No. 54 - "The evident intention of RA 5901 is to reduce the number of hospital
personnel, considering the nature of their work and at the same time guarantee the payment to them of a
full weekly wage for seven (7) days. “
SC: We note that Policy Instruction No. 54 relies and purports to implement Republic Act No. 5901,
otherwise known as "An Act Prescribing Forty Hours A Week Of Labor For Government and Private
Hospitals Or Clinic Personnel.” Reliance on Republic Act No. 5901, however, is misplaced for the said
statute, as correctly ruled by respondent NLRC, has long been repealed with the passage of the Labor
Code on May 1, 1974, Article 302 of which explicitly provides: "All labor laws not adopted as part of this
Code either directly or by reference are hereby repealed. All provisions of existing laws, orders, decrees,
rules and regulations inconsistent herewith are likewise repealed." Accordingly, only Article 83 of the
Labor Code which appears to have substantially incorporated or reproduced the basic provisions of
Republic Act No. 5901 may support Policy Instructions No. 54 on which the latter's validity may be
gauged.
A cursory reading of Article 83 of the Labor Code betrays petitioners' position that "hospital employees"
are entitled to "a full weekly salary with paid two (2) days' off if they have completed the 40-hour/5-day
workweek". 6 What Article 83 merely provides are: (1) the regular office hour of eight hours a day, five
days per week for health personnel, and (2) where the exigencies of service require that health personnel
work for six days or fortyeight hours then such health personnel shall be entitled to an additional
compensation of at least thirty percent of their regular wage for work on the sixth day. There is nothing in
the law that supports then Secretary of Labor's assertion that "personnel in subject hospitals and clinics
are entitled to a full weekly wage for seven (7) days if they have completed the 40-hour/5-day workweek
in any given workweek". Needless to say, the Secretary of Labor exceeded his authority by including a
two days off with pay in contravention of the clear mandate of the statute. Such act the Court shall not
countenance. Administrative interpretation of the law, we reiterate, is at best merely advisory, 7 and the
Court will not hesitate to strike down an administrative interpretation that deviates from the provision of
the statute. Indeed, even if we were to subscribe with petitioners' erroneous assertion that Republic Act
No. 5901 has neither been amended nor repealed by the Labor Code, we nevertheless find Policy
Instructions No. 54 invalid. A perusal of Republic Act No. 5901 8 reveals nothing therein that gives two
days off with pay for health personnel who complete a 40-hour work or 5-day workweek…the bill's sole
purpose is to shorten the working hours of health personnel and not to dole out a two days off with pay.
Explanatory Note of House Bill No. 16630 (later passed into law as Republic Act No. 5901) :
"As compared with the other employees and laborers, these hospital and health clinic personnel
are over-worked despite the fact that their duties are more delicate in nature. If we offer them better
working conditions, it is believed that the 'brain drain', that our country suffers nowadays as far as these
personnel are concerned will be considerably lessened. The fact that these hospitals and health clinic
Atty. Mercader
personnel perform duties which are directly concerned with the health and lives of our people does not
mean that they should work for a longer period than most employees and laborers. They are also entitled
to as much rest as other workers. Making them work longer than is necessary may endanger, rather than
protect, the health of their patients. Besides, they are not receiving better pay than the other workers.
Therefore, it is just and fair that they be made to enjoy the privileges of equal working hours with
other workers except those excepted by law.
If petitioners are entitled to two days off with pay, then there appears to be no sense at all why Section 15
of the implementing rules grants additional compensation equivalent to the regular rate plus at least
twenty-five percent thereof for work performed on Sunday to health personnel, or an "additional straight-
time pay which must be equivalent at least to the regular rate" "[f]or work performed in excess of forty
hours a week . . . Policy Instructions No. 54 to our mind unduly extended the statute. The Secretary of
Labor moreover erred in invoking the "spirit and intent" of Republic Act No. 5901 and Article 83 of the
Labor Code for it is an elementary rule of statutory construction that when the language of the law is clear
and unequivocal, the law must be taken to mean exactly what it says. 9 No additions or revisions may be
permitted. Policy Instructions No. 54 being inconsistent with and repugnant to the provision of Article 83
of the Labor Code, as well as to Republic Act No. 5901, should be, as it is hereby, declared void.
WHEREFORE, the decision appealed from is AFFIRMED. No costs. SO ORDERED. Narvasa, C .J .,

Romero, Melo and Panganiban, JJ ., concur.
|||
Atty. Mercader
Atty. Mercader
PHILIPPINE GRAPHIC ARTS INC., IGMIDIO R. SILVERIO AND CARLOS CABAL v. NATIONAL
LABOR RELATIONS COMMISSION, ROSALINA M. PULPULAAN AND EMELITA SALONGA
GUTIERREZ, JR., J.:
G.R. No. L-80737 - September 29, 1988
FACTS:
In October, 1984, the petitioner corporation was forced by economic circumstances to require its
workers to go on mandatory vacation leave in batches of seven or nine for periods ranging from 15, 30, to
45 days. The workers were paid while on leave but the pay was charged against their respective earned
leaves. As a result, the private respondents filed complaints for unfair labor practice and discrimination.
The Labor Arbiter rendered a decision dismissing the complaint for unfair labor practice.
Respondent was ordered to restore and grant to all its employees the company policy regarding groceries
previously enjoyed by them.
The private respondents filed a "partial appeal" with the National Labor Relations Commission
(NLRC) questioning the Labor Arbiter’s dismissal of their complaint for unfair labor practice and the resultant
forced vacation leaves which were actually without pay.
The NLRC affirmed the arbiter’s decision with modification that a refund of the amount equivalent
to the earned leave of each of the complainants treated as their pay during their vacation is believed in
order.
ISSUES:
Whether or not the forced vacation leave without pay constitutes unfair labor practice; and if not,
Whether or not it was tainted with arbitrariness.
HELD:
The Court is convinced from the records now before it, that there was no unfair labor practice. It is
found by the NLRC, the private respondents themselves never questioned the existence of an economic
crisis but, in fact, admitted its existence.
There is basis for the petitioner’s contentions that the reduction of work schedule was temporary,
that it was taken only after notice and consultations with the workers and supervisors, that a consensus
was reached on how to deal with deteriorating economic conditions and reduced sales and that the
temporary reduction of working days was a more humane solution instead of a retrenchment and reduction
of personnel. The petitioner further points out that this is in consonance with the collective bargaining
agreement between the employer and its employees.
There is also no showing that the imposition of forced leave was exercised for the purpose of
defeating or circumventing the rights of employees under special laws or under valid agreements. As the
records show, petitioners instituted the forced leave due to economic crisis, which private respondents do
not even question.
The decision to resort to forced leaves was, under the circumstances, a management prerogative.
The workers’ claim of non-resort to the grievance machinery is negated by their failure to initiate steps for
its employment.
Private respondents contend that the petitioners should discuss said management's plan in the
grievance procedure so that the Union members thereof may well be apprised of the reason therefor. The
Court however do not agree. The petition is hereby granted. The June 19, 1987 resolution of the National
Labor Relations Commission is set aside and the April 9, 1986 decision of the Labor Arbiter is reinstated.
Atty. Mercader
Unicorn Safety Glass v Basarte

Ynares-Santiago, J.
G.R. No. 154689 – 25 November 2004
This is a Petition for Review on Certiorari seeking to set aside the Decision of the Court of Appeals dated
October 18, 2001 and its subsequent Resolution dated August 7, 2002, which reversed the decisions of
the Labor Arbiter and the National Labor Relations Commission.
FACTS:
The respondents were regular employees of petitioner Unicorn Safety Glass Incorporated, a
company engaged in the business of glass manufacturing. They normally worked six (6) times a week,
from Monday to Saturday, and were paid on a weekly basis. They were likewise officers of the organized
union in petitioner company. The general manager issued a Memorandum informing respondents that
their workdays shall be reduced due to economic considerations. A work rotation schedule was
implemented which effectively reduced respondents’ work days to merely three days a week. A copy of
the planned rotation scheme was sent to the Department of Labor and Employment. Instead of reporting
for work, respondents filed a complaint against the company with the National Labor Relations
Commission for constructive dismissal and unfair labor practice. The Labor Arbiter rendered a decision
finding that respondents were not constructively dismissed and dismissed the charge for Unfair labor
practice for lack of legal and factual basis.
The case was appealed to the NLRC. During the pendency of the appeal, however, petitioner
company filed a Motion to Dismiss alleging that respondents Basarte, Flores, Decio and Lor entered into
amicable settlements and executed a "Waiver, Release & Quitclaim. The NLRC sustained the decision of
the Labor Arbiter and granted the motion to dismiss and ordered the reinstatement of those alleged to
have signed the motion to dismiss. A motion for reconsideration was filed with and denied by the
Supreme Court, hence, this petition for certiorari.
ISSUE:
W/N the work rotation schedule implemented was a valid exercise of management prerogative.
HELD: MOTION FOR RECONSIDERATION IS DENIED, ASSAILED CA DECISION IS AFFIRMED IN

TOTO.
NO. The work rotation schedule implemented was not a valid exercise of management
prerogative.
The petitioners' unbending stance on the implementation of the rotation scheme was an
indication that the rotation plan was being implemented for reasons other than business necessity. It
appears that respondents attempted on more than one occasion to have a dialogue with petitioner Hilario
Yulo to discuss the work reduction. Good faith should have prompted Yulo to hear the side of the
respondents, to come up with a scheme amenable to both parties or attempt to convince the employees
concerned that there was no other viable option. However, petitioners ignored the letters sent by
respondents, which compelled the latter to seek redress with the Labor Arbiter. ASCTac
We are mindful that every business strives to keep afloat during these times when prevailing
economic situations turns such endeavor into a near struggle. With as much latitude as our laws would
allow, the Court has always respected a company's exercise of its prerogative to devise means to improve
its operations. Thus, we have held that management is free to regulate, according to its own discretion and
judgment, all aspects of employment, including hiring, work assignments, working methods, time, place and
manner of work, processes to be followed, supervision of workers, working regulations, transfer of
employees, work supervision, lay off of workers and discipline, dismissal and recall of workers. Further,
management retains the prerogative, whenever exigencies of the service so require, to change the working
hours of its employees.
However, the exercise of management prerogative is not absolute. By its very nature,
encompassing as it could be, management prerogative must be exercised in good faith and with due regard
to the rights of labor — verily, with the principles of fair play at heart and justice in mind. While we concede
that management would best know its operational needs, the exercise of management prerogative cannot
Atty. Mercader
be utilized as an implement to circumvent our laws and oppress employees. The prerogative accorded
management cannot defeat the very purpose for which our labor laws exist: to balance the conflicting
interests of labor and management, not to tilt the scale in favor of one over the other, but to guaranty that
labor and management stand on equal footing when bargaining in good faith with each other.
In the case at bar, the manner by which petitioners exercised their management prerogative
appears to be an underhanded circumvention of the law. Petitioners were keen on summarily implementing
the rotation plan, obviously singling out respondents who were all union officers. The management's
apparent lack of interest to hear what the respondents had to say, created an uncertain situation where
reporting for work was tantamount to an acquiescence in an unjust situation.
Petitioners argued that they "exerted diligent and massive efforts" to make respondents return
to work, highlighting the telegrams and memoranda sent to respondents. It is well established that to
constitute abandonment, two elements must concur: (1) the failure to report for work or absence without
valid or justifiable reason, and (2) a clear intention to sever the employer-employee relationship, with the
second element as the more determinative factor and being manifested by some overt acts. Abandoning
one's job means the deliberate, unjustified refusal of the employee to resume his employment and the
burden of proof is on the employer to show a clear and deliberate intent on the part of the employee to
discontinue employment.
However, petitioners' charge of abandonment of work by respondents does not hold water when
taken in light of the complaint for constructive dismissal. We have held that a charge of abandonment is
totally inconsistent with the filing of a complaint for constructive dismissal — and with reason. Respondents
cannot be said to have abandoned their jobs when precisely, the root cause of their protest is their demand
to maintain their regular work hours. What is more, respondents even prayed for reinstatement and
backwages. Clearly, these are incompatible with the proposition that respondents sought to abandon their
work.
Atty. Mercader
Linton Commercial v. Hellera

G.R. No. 163147, 10 October 2007.
FACTS:
This case originated from a labor complaint filed before the National Labor Relations Commission
(NLRC) in which herein respondents contended that petitioner Linton Commercial Company, Inc. (Linton)
had committed illegal reduction of work when it imposed a reduction of work hours thereby affecting its
employees. Linton is a domestic corporation engaged in the business of importation, wholesale, retail and
fabrication of steel and its by-products. On 17 December 1997, Linton issued a memorandum addressed
to its employees informing them of the company’s decision to suspend its operations from 18 December
1997 to 5 January 1998 due to the currency crisis that affected its business operations. Linton submitted
an establishment termination report to the Department of Labor and Employment (DOLE) regarding the
temporary closure of the establishment covering the said period. The company's operation was to resume
on 6 January 1998. On 7 January 1997, Linton issued another memorandum informing them that effective
12 January 1998, it would implement a new compressed workweek of three (3) days on a rotation basis. In
other words, each worker would be working on a rotation basis for three working days only instead for six
days a week. On the same day, Linton submitted an establishment termination report concerning the
rotation of its workers. Linton proceeded with the implementation of the new policy without waiting for its
approval by DOLE. The affected workers 68 in total filed for illegal reduction of workdays with the arbitration
branch of the NLRC, claiming that Petitioner implemented the reduction of work hours without observing
Article 283 of the Labor Code, which required submission of notice thereof to DOLE one month prior to the
implementation of reduction of personnel, since Linton filed only the establishment termination report
enacting the compressed workweek on the very date of its implementation.
Petitioners claim that the reduction of workdays was a decision of the management due to financial
losses due to the devaluation of the Philippine peso during the Asian currency crisis in 1997-1998, claiming
that the negative impact in international trade and affected their business because a majority of their raw
materials were imported, resulting to a loss of P3,569,706.57 primarily due to currency devaluation and the
slump in the market
Pending the decision on the case 21 workers decided to voluntarily submit resignation letters and
have signed quitclaim agreements. The Labor Arbiter ruled in favor of Respondents finding petitioners
guilty of illegal reduction of work hours and directing them to pay each of the workers their three (3)
days/weeks’ worth of work compensation from 12 January 1998 to 13 July 1998. Said decision was
reversed by the NLRC taking judicial notice of the Asian currency crisis and declaring the action of petitioner
valid, and that the 1-month notice in the labor code is not applicable in the case at bar since no closure
was undertaken and no reduction of employees was implemented by Linton. Upon appeal to the CA it ruled
that first the quitclaims signed are "ready documents" which did not change the fact that the 21 workers
were impelled to sign the same. The appellate court gave no credence to the said quitclaims, considering
the economic disadvantage that would be suffered by the employees, and on the main issues, the Court
of Appeals ruled that the employees were constructively dismissed because the short period of time
between the submission of the establishment termination report informing DOLE of its intention to observe
a compressed workweek and the actual implementation thereat was a manifestation of Linton's intention
to eventually retrench the employees. Petitioner now goes to the Supreme Court.
ISSUES:
1. Were the quitclaims valid?
2. Was the compressed workweek implemented by petitoner valid?
HELD
1. Yes. The issue on the validity or invalidity of the waivers and quitclaims was not raised as an issue in
the petition. Neither was it raised in the NLRC. There is no point of reference from
which one can determine whether or not the NLRC committed grave abuse of discretion in its finding
on the validity and binding effect of the waivers and quitclaims since this matter was never raised in
issue in the first place.
In addition, petitioners never had the opportunity to support or reinforce the validity of the
Atty. Mercader
waivers and quitclaims because the authenticity and binding effect thereof were never
challenged. In the interest of fair play, justice and due process, the documents should not
have been unilaterally evaluated by the Court of Appeals. Thus, the corresponding
modification of its Decision should be ordained.
2. No.
The Bureau of Working Conditions of the DOLE, moreover, released a bulletin providing for in
determining when an employer can validly reduce the regular number of working days. The said bulletin
states that a reduction of the number of regular working days is valid where the
arrangement is resorted to by the employer to prevent serious losses due to causes beyond his
control, such as when there is a substantial slump in the demand for his goods or services or when
there is lack of raw materials. Although the bulletin stands more as a set of directory guidelines than
a binding set of implementing rules, it has one main consideration, consistent with the ruling in
Philippine Graphic Arts Inc., in determining the validity of reduction of working hours — that the
company was suffering from losses.
A close examination of petitioners' financial reports for 1997-1998 shows that, while the
company suffered a loss of P3,645,422.00 in 1997, it retained a considerable amount of
earnings and operating income. Clearly then, while Linton suffered from losses for that year,
there remained enough earnings to sufficiently sustain its operations. In business, sustained
operations in the black is the ideal but being in the red is a cruel reality. However, a year of
financial losses would not warrant the immolation of the welfare of the employees, which in this
case was done through a reduced workweek that resulted in an unsettling diminution of the
periodic pay for a protracted period. Permitting reduction of work and pay at the slightest
indication of losses would be contrary to the State's policy to afford protection to labor and
provide full employment.
Companies, petitioner in this case have the prerogative to come up with measures to maximize profits
or minimize losses, provided that such actions are all done in good faith.
If the same test for determining financial losses for retrenchment and suspension of work will be made
the following elements should be present:
(1) the losses incurred are substantial and not de minimis;
(2) the losses are actual or reasonably imminent;
(3) the retrenchment is reasonably necessary and is likely to be effective in preventing the
expected losses; and
(4) the alleged losses, if already incurred, or the expected imminent losses sought to be
forestalled, are proven by sufficient and convincing evidence. Linton failed to comply with these
standards.
Atty. Mercader
Bisig Manggagawa sa Tryco v. NLRC

Nachura, J. GR No. 151309 – 15
October 2008
FACTS: Tryco Pharma Corporation (Tryco) is a manufacturer of veterinary medicines. Petitioners are its
regular employees assigned to the Production Department and are members of Bisig Mangagagawa sa
Tryco (BMT), the exclusive bargaining representative of the rank-and-file employees. Tryco and
petitioners signed separate MOA providing for a compressed workweek (CWW) schedule to be
implemented in the company. The MOA was entered into pursuant to DOLE D.O. No. 21, Series of 1990.
As provided in the MOA, 8:00 a.m. to 6:12 p.m., from Monday to Friday, shall be considered as regular
working hours, and no overtime pay shall be due and payable to the employee for work rendered during
those hours. The MOA states that the employee waives the right to claim overtime pay for work rendered
after 5:00 pm until 6:12 pm from Monday to Friday considering that the CWW schedule is adopted in lieu
of the regular workweek schedule which also consists of 46 hours. However, should an employee be
permitted or required to work beyond 6:12 pm, such employee shall be entitled to overtime pay.
Tryco recieved a letter from the Bureau of Animal Industry reminding it that its production should
be conducted in San Rafael, Bulacan, not in Caloocan City. Accordingly, Tryco issued a memorandum
which directed petitioners to report to the company’s plant site in Bulacan. Petitioners refused and BMT
opposed the transfer of its members claiming that it constitutes unfair labor practice. Petitioners filed
their complaints for illegal dismissal, underpayment of wages, nonpayment of overtime pay and service
incentive leave and ruled that the transfer order was a management prerogative not amounting to a
constructive dismissal or an unfair labor practice. And it further sustained the enforceability of the MOA,
particularly the waiver of overtime pay in light of the Supreme Court’s rulings upholding a waiver of
benefits in exchange of other valuable privileges.
ISSUE/S: Whether or not petitioners are entitled to their
money claims.
HELD: PETITION IS DENIED.
The Court disagrees with the petitioners assertion that the MOA is not enforceable as it is contrary to law.
It is enforceable and binding against the petitioners. 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. D.O.
No. 21 sanctions the waiver of overtime pay in consideration of the benefits that the employees will derive
from the adoption of a compressed workweek scheme.
D.O. No. 21 sanctions the waiver of overtime pay in consideration of the benefits that the
employees will derive from the adoption of a compressed workweek scheme. Moreover, the adoption of a
compressed workweek scheme in the company will help temper any inconvenience that will be caused
by the transfer of petitioners to a farther workplace.
Furthermore, the MOA complied with the following conditions set by the DOLE, under D.O. No.
21, to protect the interest of the employees in the implementation of a compressed workweek scheme:
(1) The employees voluntarily agree to work more than eight (8) hours a day the total in a week of
which shall
not exceed their normal weekly hours of work prior to adoption of the compressed workweek
arrangement; (2) There will not be any diminution whatsoever in the weekly or monthly take-home
pay and fringe benefits
of the employees; (3) If an employee is permitted or required to work in excess of his normal weekly
hours of work prior to the
adoption of the compressed workweek scheme, all such excess hours shall be considered overtime
work and shall be compensated in accordance with the provisions of the Labor Code or applicable
Collective Bargaining Agreement (CBA); (4) Appropriate waivers with respect to overtime premium
pay for work performed in excess of eight (8)
hours a day may be devised by the parties to the agreement. (5) The effectivity and
implementation of the new working time arrangement shall be by agreement of the
parties.
Considering that the MOA clearly states that the employee waives the payment of overtime pay in
exchange of a five-day workweek, there is no room for interpretation and its terms should be implemented
as they are written.
Atty. Mercader
Atty. Mercader
Durabuilt Recapping Plant v. NLRC

Gutierrez, Jr., J.
G.R. No. 76746 - 27 July 1987
This is a petition to review the May 16, 1986 resolution of respondent National Labor Relations
Commission (NLRC) affirming the Labor Arbiter's order in NLRC Case No. NCR-73162083. The sole issue
raised is the proper basis for the computation of backwages in favor of an illegally dismissed employee.
Backwages, in general, are granted on grounds of equity for earnings which a worker or employee
has lost due to his dismissal from work (New Manila Candy Workers Union (NACONWA-PAFLU v. CIR, 86
SCRA 37).
The general principle is that an employee is entitled to receive as backwages all the amounts he
may have lost starting from the date of his dismissal up to the time of his reinstatement (Capital Garment
Corporation v. Ople, 117 SCRA 473; New Manila Candy Workers' Union (NACONWA-PAFLU) v.
CIR, supra).
The age-old rule governing the relation between labor and capital, or management and employee
of a "fair day's wage for a fair day's labor" remains as the basic factor in determining employees' wages,
and for that matter backwages. If there is no work performed by the employee there can be no wage or pay
unless, of course, the laborer was able, willing and ready to work but was illegally locked out, or suspended
(SSS v. SSS Supervisors Union-CUGCO, 117 SCRA 746).
Where the failure of workers to work was not due to the employer's fault, the burden of economic
loss suffered by the employees should not be shifted to the employer. Each party must bear his own loss
(SSS v. SSS Supervisors' Union-CUGCO, supra; Pan-American World Airways, Inc. v. CIR, 17 SCRA 813).
FACTS:
 July 11, 1983: a complaint for illegal dismissal was filed by respondent Reynaldo Bodegas, against
petitioner Durabuilt, a tire recapping company.
 February 13, 1984: the private respondent was ordered reinstated to his former position with full
backwages, from the time he was terminated up to the time he is actually reinstated, without loss
of seniority rights and benefits accruing to him.
 July 8, 1985: the petitioners failed to file a seasonable appeal and entry of final judgment was
made.
 August 8, 1985: the Acting Chief of Research and Information and the Corporation Auditing
Examiner of the then Ministry of Labor and Employment submitted a computation of backwages,
ECOLA, 13th month pay, sick and vacation leave benefits in favor of Reynaldo Bodegas in the total
amount of P24,316.38.
 Petitioner’s contentions:
 The petitioner filed its opposition to the computation on the ground that it contemplated a
straight computation of twenty-six (26) working days in one month when the period covered
by the computation was intermittently interrupted due to frequent brownouts and machine
trouble and that respondent Bodegas had only a total of 250.75 days of attendance in 1982
due to absences.
 The petitioner argues that for days where no work was required and could be done by its
employees, no wages could have been earned and, thereafter, lost by said employees to
justify an award of backwages.
 Bodegas is entitled only to the amount of P3,834.05 broken down as follows: salaries —
P1,993.00; ECOLA — P1,433.50, and 13th month pay — P407.55.
 Dismissed by LA and NLRC, hence, this petition.
ISSUE/S:
1. Whether or not the basis for the computation of backwages in favor of the respondent is
invalid.

Atty. Mercader
1. Yes. The basis for the computation of backwages in favor of the respondent is invalid.
 From the indubitable facts on record, it appears that petitioners have valid reasons to claim that
certain days should not be considered days worked for purposes of computing private respondent's
backwages since their business was not in actual operation due to brownouts or power interruption
and the retrenchment of workers they had during the period of private respondent's dismissal.
 It cannot be denied that during the past years particularly in 1983, there was chronic electrical
power interruption resulting to disruption of business operations. To alleviate the situation, the
government thru the Ministry of Trade and Industry called on the industrial sector to resort to the
so-called Voluntary Loan Curtailment Plan (or VLCP), whereby brownouts or electrical power
interruption was scheduled by area. The program while it may have been called “voluntary" was
not so as electrical power consumers had no choice then due to the prevailing energy crisis.
 Petitioners heeding the government's call, participated in the VLCP as indicated in their statement
of conformity dated November 23, 1982. Thus, beginning March 21, 1983 and every Wednesday
thereafter, petitioner's business (which indicentally is recapping rubber tires) was not in actual
operation.
 Moreover, as early as May 1978, the Ministry of Labor and Employment, thru Policy Instruction No.
36, has said that —
2. Brownouts running for more than twenty minutes may not be treated as hours worked provided that any
of the following conditions are present;
a) The employees can leave their work place or go elsewhere whether within or without the work
premises; or
b) The employees can use the time effectively for their own interest.
It is of record that during electrical power interruptions, petitioners business was not in operation. This was never
disputed by private respondent.
 Thus, we have held that where the failure of workers to work was not due to the employer's fault,
the burden of economic loss suffered by the employees should not be shifted to the employer.
Each party must bear his own loss (SSS v. SSS Supervisors' Union-CUGCO, supra; Pan-
American World Airways, Inc. v. CIR, 17 SCRA 813).
 Indeed, it would neither be fair nor just to allow respondent to recover something he has not earned
and could not have earned and to further penalize the petitioner company over and above the
losses it had suffered due to lack of raw materials and the energy-saving programs of the
government. The private respondent cannot be allowed to enrich himself at the expense of the
petitioner company.
 The computation of backwages should be based on daily rather than on monthly pay schedules
where, as in the case at bar, such basis is more realistic and accurate. (Compania Maritima v.
United Seamen's Union of the Philippines, 65 SCRA 393).
Atty. Mercader
Atty. Mercader
Pan American World Airways System v. Pan American Employees Association

Reyes, J.B.L., J.
GR No. L-16275 – 23 February 1961, 1 SCRA 527
FACTS:
The case herein is an appeal by certiorari from the decision of the Court of Industrial Relations in
Case No. 1055 (10/10/1959) and its resolution en banc denying the motion for reconsideration filed by
petitioner herein. The appealed decision reads:
WHEREFORE, the Court orders the Chief of the Examining Division or his representative to compute the
overtime compensation due the aforesaid fourteen (14) aircraft mechanics and the two employees from the
Communication
Department, based on the time sheet of said employees from February 23 1952 up to the including July 15,
1958 and to submit his report within 30 days for further disposition by the Court; and the company shall
show to the Court Examiner such time sheets and other documents that may be necessary in the aforesaid
computation; and two (2) representatives for the company and two (2) representatives for the union shall
be chosen to help the Court Examiner in said computation.
The company is also ordered to permanently adopt the straight 8- hour shift inclusive of meal period which
is mutually beneficial to the parties.
SO ORDERED.
ISSUE/S:
1. Whether or not the Industrial Court has jurisdiction to order the payment of overtime
compensation
2. Whether or not the finding of one-hour meal period should be considered overtime work
(deducting 15 minutes as time allotted for eating) is not supported by substantial evidence
3. Whether or not the CIR had authority to delegate its judicial functions by ordering the Chief of
the Examining Division or his representative to compute the overtime pay
4. Whether or not the finding that there was no agreement to withdraw Case No. 1055 - V in
consideration of the wage increases in the Collective Bargaining Contract is not supported by
substantial evidence
5. Whether or not the CIR has authority to order the Company to adopt a straight 8-hour shift
inclusive of meal period
HELD: PETITION DISMISSED. JUDGMENT APPEALED FROM IS AFFIRMED.
1. YES. The CIR has jurisdiction over payment of overtime compensation

The Court have since definitely ruled in a number of recent decisions that the Industrial Court may
properly take cognizance of such cases if, at the time of the petition, the complainants were still in the
service of the employer, or, having been separated from such service, should ask for
reinstatement; otherwise, such claims should be brought before the regular courts.
In the instant case, there is no question that the employees claiming overtime compensation were still
in the service of the company when the case was filed, the jurisdiction of the Court of Industrial Relations
cannot be assailed.
2. YES. The finding of one-hour meal period as overtime is supported by substantial

evidence
Petitioner herein claims that the one-hour meal period should not be considered as overtime work (after
deducting 15 minutes), because the evidence showed that complainants could rest completely and were
not in any manner under the control of the company during that period.
The court below found, on the contrary, that during the so- called meal period, the mechanics
were required to stand by for emergency work; that if they happened not to be available when
called, they were reprimanded by the leadman; Where during the so-called meal period, the
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laborers are required to stand by for emergency work, or where said meals hour is not one of
complete rest, such period is considered overtime.
In the case at bar, it happened on many occasions, the mechanics had been called from their meals
or told to hurry up eating to perform work during this period. Far from being unsupported by substantial
evidence, the record clearly confirms the above factual findings of the Industrial Court.
3. YES. The CIR has authority to delegate the computation of overtime pay to the Chief of the
Examining Division or his representative
Computation of the overtime pay involves a mechanical function, at most. And the report would still
have to be submitted to the Industrial Court for its approval, by the very terms of the order itself. That there
was no specification of the amount of overtime pay in the decision did not make it incomplete, since this
matter would necessarily be made clear enough in the implementation of the decision (see Malate Taxicab
& Garage, Inc. vs. CIR, et al., L-8718, May 11, 1956).
4. YES. The finding that there is no agreement to withdraw Case NO. 1055-V is supported by
substantial evidence.
As reasoned by the CIR, such alleged agreement would have been incorporated in the contract if it
existed. The fact that the union filed a motion to dismiss without prejudice, after the Collective Bargaining
Contract had been signed, did not necessarily mean that it had agreed to withdraw the case in consideration
of the wage increases. The motion itself was expressly based on an understanding that the company would
"formulate a schedule of work which shall be in consonance with C.A. 444".
5. YES. The CIR has the authority order the company to adopt a straight 8-hour shift inclusive
of meal period
The Industrial Court's order for permanent adoption of a straight 8-hour shift including the meal
period was but a consequence of its finding that the meal hour was not one of complete rest, but was
actually a work hour, since, for its duration, the laborers had to be on ready call. If the company is able
to adopt a practice to afford the mechanics a real rest during such hour, the modification of this part of
the decision may be sought from the CIR. As things now stand, we see no warrant for altering the
decision.
Atty. Mercader
Sime Darby Pilipinas v. NLRC

Bellosillo, J.
G.R. No. 119205 April 15, 1998
FACTS:
 Sime Darby Pilipinas, Inc., petitioner, is engaged in the manufacture of automotive tires, tubes
and other rubber products.
 Sime Darby Salaried Employees Association (ALU-TUCP), private respondent, is an association
of monthly salaried employees of petitioner at its Marikina factory.
 Prior to the present controversy, all company factory workers in Marikina including members of
private respondent union worked from 7:45 a.m. to 3:45 p.m. with a 30 minute paid on call lunch
break.
 August 13. 1992: petitioner issued a memorandum to all factory-based employees advising all its
monthly salaried employees in its Marikina Tire Plant, except those in the Warehouse and Quality
Assurance Department working on shifts, a change in work schedule
 7:45AM-4:45PM (Monday to Friday)
 7:45AM-11:45PM (Saturday)
 Coffee break time will be ten minutes only anytime between:
 9:30 A.M. 10:30 A.M. and
 2:30 P.M. 3:30 P.M.
 Lunch break will be between 12:00 NN 1:00 P.M. (Monday to Friday)
 Private respondent felt aggrieved by the changes, thus, it filed on behalf of its members a
complaint with the Labor Arbiter for unfair labor practice, discrimination and evasion of liability
(pursuant to SC resolution in Sime Darby International Tire Co., Inc v NLRC)
 Labor Arbiter: dismissed the complaint:
 Change in the work schedule and the elimination of the 30-minute paid lunch break of the
factory workers constituted a valid exercise of management prerogative
 New work schedule, break time and one-hour lunch break did not have the effect of
diminishing the benefits granted to factory workers as the working time did not exceed
eight (8) hours
 Factory workers would be justly enriched if they continued to be paid during their lunch
break even if they were no longer on call or required to work during the break
 decision in the earlier Sime Darby case was not applicable to the instant case because
the former involved discrimination of certain employees who were not paid for their 30-
minute lunch break while the rest of the factory workers were paid
 NLRS: sustained the Labor Arbiter and dismissed the appeal
 Motion for Reconsideration (NLRC): reversed earlier decision and LA’s decision
 considered the decision of this Court in the Sime Darby case of 1990 as the law of the
case wherein petitioner was ordered to pay the money value of these covered employees
deprived of lunch and/or working time breaks
 new work schedule deprived the employees of the benefits of time-honored company
practice of providing its employees a 30-minute paid lunch break resulting in an unjust
diminution of company privileges prohibited by Art. 100 of the Labor Code, as amended
ISSUE:
Whether or not the management’s fixing of work schedules and elimination the paid lunch break
are tantamount to unfair labor practice
1. NO.
The right to fix the work schedules of the employees rests principally on their employer. Petitioner, as
the employer, cites as reason for the adjustment the efficient conduct of its business operations and its
improved production. It rationalizes that while the old work schedule included a 30-minute paid lunch break,
the employees could be called upon to do jobs during that period as they were on call. Even if denominated
as lunch break, this period could very well be considered as working time because the factory employees
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were required to work if necessary and were paid accordingly for working. With the new work schedule, the
employees are now given a one-hour lunch break without any interruption from their employer. For a full
one-hour undisturbed lunch break, the employees can freely and effectively use this hour not only for eating
but also for their rest and comfort which are conducive to more efficiency and better performance in their
work. Since the employees are no longer required to work during this one-hour lunch break, there is no
more need for them to be compensated for this period.
The new work schedule fully complies with the daily work period of eight (8) hours without violating the
Labor Code. Besides, the new schedule applies to all employees in the factory similarly situated whether
they are union members or not Moreover, the ruling in the Sime Darby case is not applicable here because
the issue in that case involved the matter of granting lunch breaks to certain employees while depriving the
other employees of such breaks.
The case does not pertain to any controversy involving discrimination of employees but only the issue
of whether the change of work schedule, which management deems necessary to increase
production, constitutes unfair labor practice. As shown by the records, the change effected by
management with regard to working time is made to apply to all factory employees engaged in the same
line of work whether or not they are members of private respondent union. Hence, it cannot be said that the
new scheme adopted by management prejudices the right of private respondent to self-organization.
Every business enterprise endeavors to increase its profits. In the process, it may devise means to
attain that goal. Even as the law is solicitous of the welfare of the employees, it must also protect the right
of an employer to exercise what are clearly management prerogatives. Thus, management is free to
regulate, according to its own discretion and judgment, all aspects of employment, including hiring, work
assignments, working methods, time, place and manner of work, processes to be followed, supervision of
workers, working regulations, transfer of employees, work supervision, lay off of workers and discipline,
dismissal and recall of workers. Further, management retains the prerogative, whenever exigencies of the
service so require, to change the working hours of its employees. So long as such prerogative is exercised
in good faith for the advancement of the employers interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws or under valid agreements, this Court will
uphold such exercise.
Atty. Mercader
PHILIPPINE AIRLINES, INC.vs. NATIONAL LABOR RELATIONS COMMISSION, LABOR

ARBITER ROMULUS PROTACIO and DR. HERMINIO A. FABROS,
PUNO, J
G.R. No. 132805. February 2, 1999
Petitioner Philippine Airlines, Inc. assails the decision of the National Labor Relations Commission
dismissing its appeal from the decision of Labor Arbiter Romulus S. Protacio which declared the
suspension of private respondent Dr. Herminio A. Fabros illegal and ordered petitioner to pay private
respondent the amount equivalent to all the benefits he should have received during his period of
suspension plus P500,000.00 moral damages
Facts:
Private respondent was employed as flight surgeon at petitioner company. He was assigned at the PAL
Medical Clinic at Nichols and was on duty from 4:00 in the afternoon until 12:00 midnight
February 17, 1994, at around 7:00 in the evening, private respondent left the clinic to have his dinner at
his residence, which was about five-minute drive away. A few minutes later, the clinic received an
emergency call from the PAL Cargo Services. One of its employees, Mr. Manuel Acosta, had suffered a
heart attack. The nurse on duty, Mr. Merlino Eusebio, called private respondent at home to inform him of
the emergency. The patient arrived at the clinic at 7:50 in the evening and Mr. Eusebio immediately
rushed him to the hospital. When private respondent reached the clinic at around 7:51 in the evening, Mr.
Eusebio had already left with the patient. Mr. Acosta died the following day
Upon learning about the incident, PAL Medical Director Dr. Godofredo B. Banzon ordered the Chief Flight
Surgeon to conduct an investigation. The Chief Flight Surgeon, in turn, required private respondent to
explain why no disciplinary sanction should be taken against him
Petitioner company decided to suspend private respondent for three months effective December 16, 1994
, after evaluating the charge as well as the answer of private respondent On July 16, 1996, Labor Arbiter
Romulus A. Protasio rendered a decision declaring the suspension of private respondent illegal. It also
ordered petitioner to pay private respondent the amount equivalent to all the benefits he should have
received during his period of suspension plus P500,000.00 moral damages.Petitioner appealed to the
NLRC. The NLRC, however, dismissed the appeal after finding that the decision of the Labor Arbiter is
supported by the facts on record and the law on the matter. The NLRC likewise denied petitioners motion
for reconsideration.
Issues :
1. W / N The NLRC acted without or in excess of their jurisdiction and with grave abuse of discretion in
nullifying the 3-month suspension of private respondent despite the fact that the private respondent
has committed an offense that warranted the imposition of disciplinary action.
2. W/ N The public respondents acted without or in excess of their jurisdiction and with grave abuse of
discretion in holding the petitioner liable for moral damages
Held:
The petition is PARTIALLY GRANTED
1. Yes , First, as regards the legality of private respondents suspension. The facts do not support
petitioners allegation that private respondent abandoned his post on the evening of February 17,
1994. Private respondent left the clinic that night only to have his dinner at his house, which was only
a few minutes drive away from the clinic. His whereabouts were known to the nurse on duty so that
he could be easily reached in case of emergency. Upon being informed of Mr. Acostas condition,
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private respondent immediately left his home and returned to the clinic. These facts belie petitioners
claim of abandonment
Art. 83. Normal hours of work.The normal hours of work of any employee shall not exceed eight (8)
hours a day.
Health personnel in cities and municipalities with a population of at least one million (1,000,000) or in
hospitals and clinics with a bed capacity of at least one hundred (100) shall hold regular office hours for
eight (8) hours a day, for five (5) days a week, exclusive of time for meals, except where the exigencies
of the service require that such personnel work for six (6) days or forty-eight (48) hours, in which case
they shall be entitled to an additional compensation of at least thirty per cent (30%) of their regular wage
for work on the sixth day. For purposes of this Article, health personnel shall include: resident physicians,
nurses, nutritionists, dieticians, pharmacists, social workers, laboratory technicians, paramedical
technicians, psychologists, midwives, attendants and all other hospital or clinic personnel. (emphasis
supplied)
Art. 85. Meal periods.Subject to such regulations as the Secretary of Labor may prescribe, it shall be the
duty of every employer to give his employees not less than sixty (60) minutes time-off for their regular
meals.
Thus, the eight-hour work period does not include the meal break. Nowhere in the law may it be inferred
that employees must take their meals within the company premises. Employees are not prohibited from
going out of the premises as long as they return to their posts on time. Private respondents act, therefore,
of going home to take his dinner does not constitute abandonment
2. No
Not every employee who is illegally dismissed or suspended is entitled to damages. As a rule, moral
damages are recoverable only where the dismissal or suspension of the employee was attended by bad
faith or fraud, or constituted an act oppressive to labor, or was done in a manner contrary to morals, good
customs or public policy. Bad faith does not simply mean negligence or bad judgment. It involves a state
of mind dominated by ill will or motive. It implies a conscious and intentional design to do a wrongful act
for a dishonest purpose or some moral obliquity. The person claiming moral damages must prove the
existence of bad faith by clear and convincing evidence for the law always presumes good faith In the
case at bar, there is no showing that the management of petitioner company was moved by some evil
motive in suspending private respondent. It suspended private respondent on an honest, albeit
erroneous, belief that private respondents act of leaving the company premises to take his meal at home
constituted abandonment of post which warrants the penalty of suspension. Under the circumstances, we
hold that private respondent is not entitled to moral damages
Atty. Mercader
Atty. Mercader
Arica v NLRC
Paras, J.
G.R. No. 78210 February 28, 1989
This is a petition for review on certiorari of the decision of the National Labor Relations
Commission dated December 12, 1986 in NLRC Case No. 2327 MC-XI-84 entitled Teofilo Arica et al. vs.
Standard (Phil.) Fruits Corporation (STANFILCO) which affirmed the decision of Labor Arbiter Pedro C.
Ramos, NLRC, Special Task Force, Regional Arbitration Branch No. XI, Davao City dismissing the claim
of petitioners.
FACTS: This case stemmed from a complaint filed on April 9, 1984 against private respondent Stanfilco
for assembly time, moral damages and attorney's fees, with the aforementioned Regional Arbitration
Branch No. XI, Davao City.
Petitioners contend that the preliminary activities as workers of respondents STANFILCO in the assembly
area is compensable as working time (from 5:30 to 6:00 o'clock in the morning) since these preliminary
activities are necessarily and primarily for private respondent's benefit.
These preliminary activities of the workers are as follows:
(a) First there is the roll call. This is followed by getting their individual work assignments
from the foreman.
(b) Thereafter, they are individually required to accomplish the Laborer's Daily
Accomplishment Report during which they are often made to explain about their reported
accomplishment the following day.
(c) Then they go to the stockroom to get the working materials, tools and equipment.
(d) Lastly, they travel to the field bringing with them their tools, equipment and materials.
All these activities take 30 minutes to accomplish
After the submission by the parties of their respective position papers, Labor Arbiter Pedro C. Ramos
rendered a decision dated October 9, 1985) in favor of private respondent STANFILCO, holding that:
Given these facts and circumstances, we cannot but agree with respondent that the
pronouncement in that earlier case, i.e. the thirty-minute assembly time long practiced
cannot be considered waiting time or work time and, therefore, not compensable, has
become the law of the case which can no longer be disturbed without doing violence
to the time- honored principle of res-judicata.
NLRC, First Division upheld the decision ruling that the customary functions referred to in the above-
quoted provision of the agreement includes the long-standing practice and institutionalized non
compensable assembly time. This, in effect, estopped complainants from pursuing this case.
ISSUE/S: Whether or not the 30-minute activity of the petitioners before the scheduled working time is
compensable under the Labor Code.
HELD: NO
Contrary to this contention, respondent avers that the instant complaint is not new, the very same claim
having been brought against herein respondent by the same group of rank and file employees in the case
of Associated Labor Union and Standard Fruit Corporation, NLRC Case No. 26-LS-XI-76 which was filed
way back April 27, 1976 when ALU was the bargaining agent of respondent's rank and file workers.
The thirty (30)-minute assembly time long practiced and institutionalized by mutual consent of the parties
under Article IV, Section 3, of the Collective Bargaining Agreement cannot be considered as waiting time
within the purview of Section 5, Rule I, Book III of the Rules and Regulations Implementing the Labor
Code.
Noteworthy is the decision of the Minister of Labor, on May 12, 1978 in the aforecited case (Associated
Labor Union vs. Standard (Phil.) Fruit Corporation, NLRC Case No. 26-LS-XI-76 where significant
findings of facts and conclusions had already been made on the matter.
The Minister of Labor held:
Furthermore, the thirty (30)-minute assembly is a deeply- rooted, routinary practice of the employees, and
the proceedings attendant thereto are not infected with complexities as to deprive the workers the time to
attend to other personal pursuits. They are not new employees as to require the company to deliver long
briefings regarding their respective work assignments. Their houses are situated right on the area where
the farm are located, such that after the roll call, which does not necessarily require the personal
presence, they can go back to their houses to attend to some chores. In short, they are not subject to the
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absolute control of the company during this period, otherwise, their failure to report in the assembly time
would justify the company to impose disciplinary measures. The CBA does not contain any provision to
this effect; the record is also bare of any proof on this point. This, therefore, demonstrates the indubitable
fact that the thirty (30)-minute assembly time was not primarily intended for the interests of the employer,
but ultimately for the employees to indicate their availability or non-availability for work during every
working day
As aptly observed by the Solicitor General that this petition is "clearly violative of the familiar principle
of res judicata.There will be no end to this controversy if the light of the Minister of Labor's decision dated
May 12, 1979 that had long acquired the character of finality and which already resolved that petitioners'
thirty (30)-minute assembly time is not compensable, the same issue can be re-litigated again
Moreover, as a rule, the findings of facts of quasi-judicial agencies which have acquired expertise
because their jurisdiction is confined to specific matters are accorded not only respect but at times even
finality if such findings are supported by substantial evidence
The records show that the Labor Arbiters' decision dated October 9, 1985 pointed out in detail the basis
of his findings and conclusions, and no cogent reason can be found to disturb these findings nor of those
of the National Labor Relations Commission which affirmed the same.
PETITION DISMISSED for lack of merit, and the decision of the National Labor Relations Commission is
AFFIRMED.
Atty. Mercader
Atty. Mercader
Salazar v NLRC
G.R. No. 109210. April 17, 19996
FACTS:
 On 17 April 1990 private respondent at a monthly salary of P4,500.00, employed petitioner as
construction/project engineer for the construction of the Monte de Piedad building in
Cubao, Quezon City.
 by virtue of an oral contract, petitioner would also receive a share in the profits after
completion of the project and that petitioners services in excess of eight (8) hours on regular
days and services rendered on weekends and legal holidays shall be compensable overtime
at the rate of P27.85 per hour
 16 April 1991- petitioner received a memorandum issued by priv. resp. Manager, Engr. Nestor
Delantar informing him of the termination of his services effective April 30, 1991.
 13 September 1991 petitioner filed a complaint against private respondent for illegal dismissal,
unfair labor practice, illegal deduction, non-payment of wages, overtime rendered, service incentive
leave pay, commission, allowances, profit-sharing and separation pay.
LA: Labor Arbiter ruled that petitioner was a managerial employee and therefore exempt from payment of benefits
such as overtime pay, service incentive leave pay and premium pay for holidays and rest days. Not entitled
to separation pay, since he was hired as a project employee and that his services were terminated due to
the completion of the project.
NLRC: Affirmed in toto the decision of the LA.
ISSUE: Whether or not petitioner is entitled to overtime pay, premium pay for services rendered on rest days and
holidays and service incentive leave pay, pursuant to Articles 87, 93, 94 and 95 of the Labor Code.
PETITIONER’S CLAIM BEFORE THE SC:
 claims that since he performs his duties in the project site or away from the principal place of
business of his employer (herein private respondent), he falls under the category of field personnel.
 However, petitioner accentuates that his case constitutes the exception to the exception because
his actual working hours can be determined as evidenced by the disbursement vouchers containing
payments of petitioners salaries and overtime services. Strangely, petitioner is of the view that field
personnel may include managerial employees.
 Claims that the nature of his work is supervisory-engineering.
 in his own petition and in other pleadings submitted to this Court, petitioner confirmed that his job
was to supervise the laborers in the construction project.
HELD: NO
 Although petitioner cannot strictly be classified as a managerial employee under Art. 82 of
the Labor Code, and Sec. 2(b), Rule 1, Book III of the Omnibus Rules Implementing the
Labor Code, nonetheless he is still not entitled to payment of the aforestated benefits
because he falls squarely under another exempt category - officers or members of a
managerial staff as defined under Sec. 2(c) of the abovementioned implementing rules.
 A case in point is National Sugar Refineries Corporation v. NLRC. On the issue of whether
supervisory employees, as defined in Article 212 (m), Book V of the Labor Code, should be
considered as officers or members of the managerial staff under Article 82, Book III of the same
Code and hence not entitled to overtime, rest day and holiday pay, this Court ruled:
A cursory perusal of the Job Value Contribution Statements of the union members will readily show
that these supervisory employees are under the direct supervision of their respective department
superintendents and that generally they assist the latter in planning, organizing, staffing, directing,
controlling, communicating and in making decisions in attaining the companys set goals and
objectives. These supervisory employees are likewise responsible for the effective and efficient
operation of their respective departments. x x x From the foregoing, it is apparent that the members
of respondent union discharge duties and responsibilities which ineluctably qualify them as officers
or members of the managerial staff, as defined in Section 2, Rule 1, Book III of the aforestated
Rules to Implement the Labor Code, viz.: (1) their primary duty consists of the performance of work
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directly related to management policies of their employer; (2) they customarily and regularly
exercise discretion and independent judgment; (3) they regularly and directly assist the managerial
employee whose primary duty consists of the management of a department of the establishment
in which they are employed; (4) they execute, under general supervision, work along specialized
or technical lines requiring special training, experience, or knowledge; (5) they execute, under
general supervision, special assignments and tasks; and (6) they do not devote more than 20% of
their hours worked in a work-week to activities which are not directly and clearly related to the
performance of their work hereinbefore described. Under the facts obtaining in this case, we are
constrained to agree with petitioner that the union members should be considered as officers or
members of the managerial staff and are, therefore, exempt from the coverage of Article 82.
Perforce, they are not entitled to overtime, rest day and holiday pay.
 That petitioner was paid overtime benefits does not automatically and necessarily denote that
petitioner is entitled to such benefits. Art. 82 of the Labor Code specifically delineates who are
entitled to the overtime premiums and service incentive leave pay provided under Art. 87, 93, 94
and 95 of the Labor Code and the exemptions thereto. As previously determined, petitioner falls
under the exemptions and therefore has no legal claim to the said benefits. It is well and good that
petitioner was compensated for his overtime services. However, this does not translate into a right
on the part of petitioner to demand additional payment when, under the law, petitioner is clearly
exempted therefrom.
Atty. Mercader
San Miguel Brewery vs Democratic Labor Union

Bautista, J.
GR No. L-18353– 28 July 31, 1963
FACTS: This case involves a petition for review filed by the San Miguel Brewery assailing the
decision of the Court of Industrial Relations which affirmed the decision of the court a quo. The pertinent
facts of the case are as follows: The employees of the Democratic Labor Association were sales route
helpers of the said company who after the morning roll call leave the plant of the company to go on their
respective sales routes either at 7:00 a.m. for soft drinks trucks, or 8:00 a.m. for beer trucks. These
employees receive monthly salaries and sales commission in variable amounts. The amount of
compensation they receive is uncertain depending upon their individual efforts or industry. Besides the
monthly salary, they are paid sales commission that range from P30, P40, sometimes P60, P70, to
sometimes P90, P100, and P109 a month, at the rate of P.01 to P.01 1/2 per case. Their claim is founded
upon payments for overtime, night-shift differential pay, and attorney's fees, although it was allowed to
present evidence on service rendered during Sundays and holidays, or on its claim for additional
separation pay and sick and vacation leave compensation. The Court of Industrial Relations ruled that
they should be paid such as mandated by the Eight Hour Labor Law.
ISSUE: Whether or not the employees were covered by the Eight Hour Labor Law
HELD: No. the Eight-Hour Labor Law only has application where an employee or laborer is paid
in a monthly or daily basis, or is paid a monthly or daily compensation, in which case, if he is made to
work beyond the requisite period of 8 hours, he should be paid the additional compensation prescribed by
law. This law has no application when the employee or laborer is paid on a piecework, "pakiao", or
commission basis, regardless of the time employed. The philosophy behind this exemption is that his
earnings are in the form of commission based on the gross receipts of the day. The employees in this
case, although receiving a monthly salary, were considered to be on a commission basis, hence the said
law has no application on them.
Atty. Mercader
PAL EMPLOYEES SAVINGS AND LOAN ASSOCIATION, INC. (PESALA) vs. NATIONAL LABOR
RELATIONS COMMISSION and ANGEL V. ESQUEJO
Panganiban, J.:
GR No. 105963 – August 22, 1996
FACTS:
 Angel Esquejo started working with PESALA in March 1, 1986 as a company guard and was receiving
a monthly basic salary of P1,990.00 plus an emergency allowance in the amount of P510.00. He was
required to work a twelve (12) hours a day. The Board of Directors in its board meeting approved a
salary adjustment for Esquejo increasing his monthly basic salary to P2,310.00 and an emergency
allowance of P510.00. Because of his impressive performance on his assigned job, another adjustment
was approved by the President of the association increasing his monthly basic salary to P2,880.00.
Several other adjustments was made in view of Esquejo’s outstanding performance.
 During his entire period of employment, he was required to perform overtime work without any
additional compensation from PESALA. It was also at this point it refused to give the P25.00 increase
on the minimum wage rates as provided for by law. On October 12, 1990, he was suspended for the
period of thirty seven (37) days for an offense he allegedly committed.
 PESALA’s allegation: That the position of a guard was only abolished and that Esquejo was re-
assigned to the position of a ledger custodian. Thereafter, Esquejo was administratively charged with
serious misconduct or disobedience of the lawful orders, and gross and habitual neglect of his duties
when: 1) he forwarded checks without the signature of the Treasurer and the President of PESALA;
and 2) he failed to leave or surrender the keys of the office, especially the keys to the main and back
doors when he went on a vacation. Esquejo filed a complaint for non-payment of overtime pay and non-
payment of the P25.00 statutory minimum wage increase mandated by Republic Act No. 6727.
 Labor Arbiter: ruled in favor of Esquejo and granted him an overtime pay. NLRC: affirmed LA; no
appeal to the CA
ISSUE/S:
1. Whether or not overtime pay, as stipulated in the contract of employment, included in the basic
salary already suffices to comply with the law.
2. Whether or not the failure of Esquejo to claim overtime pay since 1986 demonstrate(s) that the
agreement on his gross salary as contained in his appointment paper is conclusive on the matter
of the inclusion of overtime pay.
HELD: WHEREFORE, in view of the foregoing considerations, the Petition is DISMISSED, the temporary
restraining order issued on July 30, 1992 LIFTED, and the assailed decision of the public respondent
AFFIRMED. Costs against petitioner
RULING:
1. No. The basic salary plus emergency allowance given to private respondent did not actually include
the overtime pay claimed by private respondent. Following the computations it would appear that by
adding the legal minimum monthly salary which at the time was P1,413.00 and the legal overtime
pay P877.50, the total amount due the private respondent as basic salary should have been
P2,290.50. By adding the emergency cost of living allowance (ECOLA) of P510.00 as provided by
the employment contract, the total basic salary plus emergency allowance should have amounted
to P2,800.50. However, petitioner admitted that it actually paid private respondent P1,990.00 as
basic salary plus P510.00 emergency allowance or a total of only P2,500.00. Undoubtedly, private
respondent was shortchanged in the amount of P300.50. Petitioner's own computations thus clearly
establish that private respondent's claim for overtime pay is valid.
2. No. To ascertain the intent of the parties, the Court is bound to look at their contemporaneous and
subsequent acts. Esquejo's silence and failure to claim his overtime pay since 1986 cannot be
considered as proving the understanding on his part that the rate provided in his employment
contract covers overtime pay because contrary to the claim of PESLA, Esquejo believed that he
was not paid his overtime pay and that such pay is not covered by the rate agreed upon and stated
in his Appointment Memorandum. The subsequent act of Esquejo in filing money claims negates
the theory that there was clear agreement as to the inclusion of his overtime pay in the contracted
salary rate.
Atty. Mercader
PNB v PHILIPPINE NATIONAL BANK EMPLOYEES ASSOCIATION (PEMA)

Barredo, J.
G. R. No. L-30279 July 30, 1982
FACTS:
On May 22, 1965, PEMA filed another pleading submitting to this Court for determination certain
matters which it claims cannot be resolved by the parties,
First Cause of Action
In a Resolution No. 1162 dated September 16, 1957, the PNB Board of Directors approved a
revision of the computation of overtime pay retroactive as of July 1, 1954, and authorized a recomputation
of the regular one- hour and extra overtime already rendered by all officers and employees of the PNB. The
details of the benefits involved in said Resolution are contained in a Memorandum of the PNBdated
September 18, 1957. Since the grant of the benefits in question, the employees of PNB, represented by
PEMA, have always considered them to be a part of their salaries and/or fringe benefits; nevertheless,PNB,
in 1963, without just cause, withdrew said benefits and in spite of repeated demands refused, and still
refuses to reinstate the same up to the present.
Second Cause of Action
After the promulgation of the Decision in National Waterworks and Sewerage Authority vs. NAWASA
Consolidated Unions, et al. G.R. No. L-18938, Aug. 31, 1964, the PEMA has repeatedly requested PNB
that the cost of living allowance and longevity pay be taken into account in the computation of overtime pay,
effective as of the grant of said benefits on January 1, 1958, in accordance with the ruling in said Decision
of the Supreme Court. Until now PNB has not taken any concrete steps toward the payment of the
differential overtime and nighttime pays arising from the cost of living allowance and longevity pay.
PNB’s contention
1. the said alleged causes of action were not disputes existing between the parties,
2. the same are mere money claims and therefore not within this Court's jurisdiction, and (see notes)
3. that the parties have not so stipulated under the collective bargaining agreement between them, or
the same is premature as the pertinent collective bargaining agreement has not yet expired.
CIR Ruling
1. As to the first ground, it is well to note that this Court in its Order of January 28, 1965 has enjoined the
parties not to strike or lockout for a period of six (6) months starting from said date. In a very definite
sense the labor disputes between the parties have been given a specific period for the settlement of
their differences. The fact that thereafter the question of the manner of payment of overtime pay is
being put in issue, appears to indicate that this was a part of the labor dispute. If we are to consider
that this question, particularly the second cause of action, has in fact existed as early as 1958, shows
the necessity of resolving the same now. And the same would indeed be an existing issue considering
that the present certification came only in 1965.
2. As to the objection posed that the issues are mere money claims, there appears to be no ground
for the same. In the first place, although the same involves a claim for additional compensation it
is also a part of the labor dispute existing between the parties and subject to the compulsory
arbitration powers of the Court, pursuant to Section 10 of Rep. Act No. 875. In the second place, on
the basis of the so-called PRISCO doctrine (G.R. No. L- 13806, May 23,.1960), there is an existing and
current employer-employee relationship between the respondent and the members of petitioner union,
for whom the additional overtime compensation is claimed.
ISSUE/S:
Atty. Mercader
WON the cost of living allowance and longetivity pay are included in the computation of overtime
pay based on the ruling in NAWASA?
HELD:
NO.
The more we read the NAWASA case, the more we are convinced that the overtime computation
set therein cannot apply to the cases at bar. For to do so would lead to unjust results, inequities
between and among the employees themselves and absurd situations.
To apply the NAWASA computation would require a different formula for each and every employee,
would require reference to and continued use of individual earnings in the past, thus multiplying the
administrative difficulties of the Company. It would be cumbersome and tedious a process to compute
overtime pay and this may again cause delays in payments, which in turn could lead to serious disputes.
To apply this mode of computation would retard and stifle the growth of unions themselves as Companies
would be irresistibly drawn into denying, new and additional fringe benefits, if not those already existing, for
fear of bloating their overhead expenses through overtime which, by reason of being unfixed, becomes
instead a veritable source of irritant in labor relations. One other reason why application of the NAWASA
case should be rejected is that this Court is not prepared to accept that it can lay down a less cumbersome
formula for a company-wide overtime pay other than that which is already provided in the collective
bargaining agreement. Courts cannot make contracts for the parties themselves. Commonwealth Act 444
prescribes that overtime work shall be paid 'at the same rate as their regular wages or salary, plus at least
25% additional' (Secs. 4 & 5). The law did not define what is a 'regular wage or salary'. What the law
emphasized by way of repeated expression is that in addition to 'regular wage', there must be paid an
additional 25% of that 'regular wage' to constitute overtime rate of pay.
The parties were thus allowed to agree on what shall be mutually considered regular pay from or
upon which a 25% premium shall be based and added to make up overtime compensation. This the parties
did by agreeing and accepting for a very long period to a basic hourly rate to which a premium shall be
added for purposes of overtime.
Also significant is the fact that Commonwealth Act 444 merely sets a minimum, a least premium
rate for purposes of overtime.
In this case, the parties agreed to premium rates four (4) or even six (6) times than that fixed
by the Act. Far from being against the law, therefore, the agreement provided for rates 'commensurate
with the Company's reputation of being among the leading employers in the Philippines' (Art. 1, Sec. 2,
Coll. Barg. Agreement) at the same time that the Company is maintained in a competitive position in the
market Coll. Barg. Agreement
Since the agreed rates are way above prevailing statutory wages and premiums, fixed by
themselves bona fide through negotiations favored by law, there appears no compelling reason nor basis
for declaring the same illegal.
It behooves this Court, therefore, to help develop respect for those agreements which do not exhibit
features of illegality This is the only way to build confidence in the democratic process of collective
bargaining. Parties cannot be permitted to avoid the implications and ramifications of the agreement.
As far as longevity pay is concerned, it is beyond question that the same cannot be included in
the computation of overtime pay for the very simple reason that the contrary is expressly in the
collective bargaining agreement and, as should be the case, it is settled that the terms and conditions of
a collective bargaining agreement constitute the law between the parties.
Atty. Mercader
So also with the longevity pay; manifestly, this was not based on the daily or monthly
amount of work done or service rendered it was more of a gratuity for their loyalty, or their having
been in the bank's employment for consideration periods of time. Indeed, with particular reference to the
longevity pay, the then existing collective bargaining contract expressly provided: "... That this benefit
shall not form part of the basic salaries of the officers so affected."
PEMA may contend that the express exclusion of the longevity pay, means that the cost-of-living
allowance was not intended to be excluded. Considering, however, the contingent nature of the allowances
and their lack of relation to work done or service rendered, which in a sense may be otherwise in respect
to longevity pay PEMA's contention is untenable. The rule of exclusio unius, exclusio alterius would not
apply here, if only because in the very nature of the two benefits in question, considerations and conclusions
as to one of them could be non-sequitur as to the other.
There is nothing in CA 444 that could justify its posture that cost-of-living allowance should
be added to the regular wage in computing overtime pay. In any event, the basis of computation of
overtime pay beyond that required by CA 444 must be the collective bargaining agreement,
Doctrinally, We hold that, in the absence of any specific provision on the matter in a collective
bargaining agreement, what are decisive in determining the basis for the computation of overtime pay are
two very germane considerations, namely,
1. whether or not the additional pay is for extra work done or service rendered and
2. whether or not the same is intended to be and regular, not contingent nor temporary and given
only to remedy a situation which can change any time.
We reiterate, overtime pay is for extra effort beyond that contemplated in the employment
contract, hence when additional pay is given for any other purpose, it is illogical to include the same
in the basis for the computation of overtime pay.
Atty. Mercader
R.B. Michael Press and Annalene Reyes Escobia vs. Nicasio C. Galit
Velasco, Jr., J.
GR No. 153510 – 13 February 2008
FACTS:
 Respondent Galit was employed by petitioner RB Michael Press as an offset machine operator,
whose work schedule was from 8:00am to 5:00pm, Mondays to Saturdays, and he was paid
Php230 a day.
 Galit was tardy for a total of 190 times (6,117 minutes) and was absent without leave for a total of
nine and a half days.
 February 22, 1999: Galit was ordered to render overtime service in order to comply with a job
deadline, but he refused to do so.
 February 23, 1999: Galit reported to work but petitioner Escobia told him not to work, and to
return later that afternoon for a hearing. When he returned, a copy of an Office Memorandum was
served on him. It was a Warning For Dimissal/Notice Of Hearing, stating the offenses he
committed as just causes for termination of employment as provided by the Labor Code.
 February 24, 1999: Respondent was terminated from employment. The employer gave him his
two-day salary and a termination letter, which stated, among others, that Galit’s admission to his
offenses against the company and the testimonies from Velasquez and Reyes justified his
dismissal from the company. Galit filed a complaint for illegal dismissal and money claims before
the NLRC.
 Labor Arbiter: Galit was illegally dismissed; ordered reinstatement and payment of full backwages
 NLRC: Dismissed the appeal for lack of merit
 CA: Affirmed NLRC with modifications
 The CA found that it was not the tardiness and absences committed by Galit, but his refusal to
render overtime work which caused the termination of his employment. The time frame in which
respondent was afforded procedural due process is dubitable.
ISSUE/S:
1. WON there was just cause to terminate the employment of respondent
2. WON due process was observed in the dismissal process
HELD: DISMISSAL IS VALID AND LEGAL. Decisions of the Labor Arbiter and the NLRC are
REVERSED and SET ASIDE.
1. YES. Respondent’s tardiness cannot be considered condoned by petitioners. The charge

of insubordination is meritorious.
 Habitual tardiness is a form of neglect of duty. The mere fact that the numerous infractions of
respondent have not been immediately subjected to sanctions cannot be interpreted as
condonation of the offenses or waiver of the company to enforce company rules.
 It is incumbent upon the employee to adduce substantial evidence to demonstrate condonation or
waiver on the part of management to forego the exercise of its right to impose sanctions for
breach of company rules.
 Respondent did not adduce any evidence to show waiver or condonation on the part of
petitioners. Thus, the finding of the CA that petitioners cannot use the previous absences and
tardiness because respondent was not subjected to any penalty is bereft of legal basis.
 For willful disobedience to be a valid cause for dismissal, the following elements must concur: (1)
the employee’s assailed conduct must have been willful, that is, characterized by a wrongful and
perverse attitude; and (2) the order violated must have been reasonable, lawful, made known to
the employee, and must pertain to the duties which he had been engaged to discharge.
Petitioners’ order for respondent to render overtime service to meet a production deadline
complies with the second requisite. Art. 89 of the Labor Code empowers the employer to legally
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compel his employees to perform overtime work against their will to prevent serious loss or
damage.
 Petitioners’ business is a printing press whose production schedule is sometimes flexible and
varying. It is only reasonable that workers are sometimes asked to render overtime work in order
to meet production deadlines. The fact that respondent refused to provide overtime work despite
his knowledge that there is a production deadline that needs to be met, and that without him, the
offset machine operator, no further printing can be had, shows his wrongful and perverse mental
attitude; thus, there is willfulness.
2. NO. Although the required notices were given and a hearing was even scheduled and held,
respondent was not really given an opportunity to be heard.
 The undue haste in effecting respondent’s termination shows that the termination process was a
mere simulation. There was merely a general description of the claimed offenses of respondent.
The hearing was immediately set in the afternoon of February 23, 1999 – the day respondent
received the first notice. Termination of the respondent was railroaded in serious breach of his
right to due process.
 Reasonable opportunity 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 the receipt of the first notice. A general description of
the charge will not suffice.
Atty. Mercader
Atty. Mercader
Union of Filipro Employees (UFE) vs. Vivar

Guttierez, Jr., J.
GR No. 79256 – 20 January 1992
FACTS: On November 8, 1985, respondent Filipro, Inc. (now Nestle Philippines, Inc.) filed with the NLRC
a petition for declaratory relief seeking a ruling on its rights and obligations respecting claims of its monthly
paid employees for holiday pay. Both Filipro and the Union of Filipro Employees (UFE) agreed to submit
the case for voluntary arbitration and appointed respondent Benigno Vivar, Jr. as voluntary arbitrator.
Filipro filed a motion for clarification seeking (1) the limitation of the award to three years, (2) the exclusion
of salesmen, sales representatives, truck drivers, merchandisers and medical representatives (hereinafter
referred to as sales personnel) from the award of the holiday pay; and (3) deduction from the holiday pay
award of overpayment for overtime, night differential, vacation and sick leave benefits due to the use of 251
divisor.
Petitioner UFE answered that the award should be made effective from the date of effectivity of the Labor
Code, that their sales personnel are not field personnel and are therefore entitled to holiday pay, and that
the use of 251 as divisor is an established employee benefit which cannot be diminished.
On January 14, 1986, the respondent arbitrator issued an order declaring that the effectivity of the holiday
pay award shall retroact to November 1, 1974, the date of effectivity of the Labor Code. He adjudged,
however, that the company's sales personnel are field personnel and, as such, are not entitled to holiday
pay. He likewise ruled that with the grant of 10 days' holiday pay, the divisor should be changed from 251
to 261 and ordered the reimbursement of overpayment for overtime, night differential, vacation and sick
leave pay due to the use of 251 days as divisor.
Both Nestle and UFE filed their respective motions for partial reconsideration.
ISSUE/S:
1. W/N Nestle's sales personnel are entitled to holiday pay?
2. W/N concomitant with the award of holiday pay, the divisor should be changed from 251 to 261
days and whether or not the previous use of 251 as divisor resulted in overpayment for overtime,
night differential, vacation and sick leave pay.
HELD: ORDER OF THE V.A. IS MODIFIED.
1. NO. Under Article 82, field personnel are not entitled to holiday pay. Said article defines field
personnel as "non-agricultural employees who regularly perform their duties away from the
principal place of business or branch offi􏰁ce of the employer and whose actual hours of work in
the field cannot be determined with reasonable certainty. The controversy centers on the
interpretation of the clause "whose actual hours of work in the field cannot be determined with
reasonable certainty." These sales personnel start their field work at 8:00 a.m. after having reported
to the office and come back to the office at 4:00 p.m. or 4:30 p.m. if they are Makati-based. The
law requires that the actual hours of work in the field be reasonably ascertained. The
company has no way of determining whether or not these sales personnel, even if they report to
the office before 8:00 a.m. prior to field work and come back at 4:30 p.m., really spend the hours
in between in actual field work. Moreover, the requirement that "actual hours of work in the field
cannot be determined with reasonable certainty" must be read in conjunction with Rule IV, Book III
of the Implementing Rules. The SOD schedule adverted to by the petitioner does not in the least
signify that these sales personnel's time and performance are supervised. The purpose of this
schedule is merely to ensure that the sales personnel are out of the office not later than 8:00 a.m.
and are back in the office not earlier than 4:00 p.m. Court fails to see how the company can monitor
the number of actual hours spent in field work by an employee through the imposition of sanctions
on absenteeism contained in the company circular of March 15, 1984.
 The petitioner claims that the fact that these sales personnel are given incentive bonus every
quarter based on their performance is proof that their actual hours of work in the field can be
determined with reasonable certainty but court does not agree. The criteria for granting incentive
bonus are: (1) attaining or exceeding sales volume based on sales target; (2) good collection
performance; (3) proper compliance with good market hygiene; (4) good merchandising
work; (5) minimal market returns and (6) proper truck maintenance. The above criteria
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indicate that these sales personnel are given incentive bonuses precisely because of the difficulty
in measuring their actual hours of field work. These employees are evaluated by the result of their
work and not by the actual hours of field work which are hardly susceptible to determination.
2. NO. There is no merit in respondent Nestle's claim of overpayment of overtime and night differential
pay and sick and vacation leave benefits, the computation of which are all based on the daily rate, since
the daily rate is still the same before and after the grant of holiday pay. Following the criterion laid down in
the Chartered Bank case, the use of 251 days' divisor by respondent Filipro indicates that holiday pay is
not yet included in the employee's salary, otherwise the divisor should have been 261. It must be stressed
that the daily rate, assuming there are no intervening salary increases, is a constant 􏰁gure for the purpose
of computing overtime and night differential pay and commutation of sick and vacation leave credits.
Necessarily, the daily rate should also be the same basis for computing the 10 unpaid holidays. The
respondent arbitrator's order to change the divisor from 251 to 261 days would result in a lower daily rate
which is violative of the prohibition on non-diminution of benefits found in Article 100 of the Labor Code. To
maintain the same daily rate if the divisor is adjusted to 261 days, then the dividend, which represents the
employee's annual salary, should correspondingly be increased to incorporate the holiday pay.
 Respondent Nestle's invocation of solutio indebiti, or payment by mistake, due to its use of 251
days as divisor must fail in light of the Labor Code mandate that "all doubts in the implementation
and interpretation of this Code, including its implementing rules and regulations, shall be resolved
in favor of labor."
 It is not far-fetched that Nestle, relying on the implicit validity of the implementing rule and policy
instruction before this Court nullified them, and thinking that it was not obliged to give holiday pay
benefits to its monthly paid employees, may have been moved to grant other concessions to its
employees, especially in the collective bargaining agreement. This possibility is bolstered by the
fact that respondent Nestle's employees are among the highest paid in the industry. With this
consideration, it would be unfair to impose additional burdens on Nestle when the non-payment of
the holiday benefits up to 1984 was not in any way attributed to Nestle's fault.
 The Court thereby resolves that the grant of holiday pay be effective, not from the date of
promulgation of the Chartered Bank case nor from the date of effectivity of the Labor Code, but
from October 23, 1984, the date of promulgation of the IBAA case.
Atty. Mercader
Jose Rizal College v. NLRC and National Alliance of Teachers/Office Workers

Paras, J.
GR No. L-65482 – 1 December 1987
FACTS:
 Jose Rizal University is a non-stock, non-profit educational institution duly organized and existing
under PH laws.
 It has three groups of employees categorized as follows:
 (a) personnel on monthly basis, who receive their monthly salary uniformly throughout the
year, irrespective of the actual number of working days in a month without deduction for
holidays;
 (b) personnel on daily basis who are paid on actual days worked and they receive
unworked holiday pay;
 (c) collegiate faculty who are paid on the basis of student contract hour.
 Before the semester starts they sign contracts with the college to meet their classes as per
schedule.
 Personnel are unable to receive their corresponding holiday pay from 1975 to 1977
 Private respondent National Alliance of Teachers and Office Workers (NATOW) in behalf of the
faculty and personnel of Jose Rizal College filed with the Ministry of Labor a complaint against
the college for said alleged non-payment of holiday pay
 Parties failed to settle their differences on conciliation so the case was certified for compulsory
arbitration
 February 5, 1979: After the parties had submitted their respective position papers, the Labor
Arbiter rendered:
 The faculty and personnel who are paid their salary by the month uniformly in a school
year, irrespective of the number of working days in a month, without deduction for
holidays, are presumed to be already paid the 10 paid legal holidays and are no
longer entitled to separate payment for the said regular holidays
 The personnel who are paid their wages daily are entitled to be paid the 10
unworked regular holidays according to the pertinent provisions of the Rules and
Regulations Implementing the Labor Code
 Collegiate faculty who by contract are paid compensation per student contract hour
are not entitled to unworked regular holiday pay considering that these regular
holidays have been excluded in the programming of the student contact hours
 On appeal, respondent National Labor Relations Commission in a decision promulgated on June
2, 1982, modified the decision appealed from, in the sense that teaching personnel paid by the
hour are declared to be entitled to holiday pay
ISSUE:
1. Whether or not the school faculty who according to their contracts are paid per lecture hour are
entitled to unworked holiday pay. – NO for regular holidays. YES for special holidays,
shortened hours, extensions.
2. Whether or not petitioner was deprived of due process as it was not notified of the appeal made
to the NLRC against the decision of the labor arbiter - NO
HELD: DECISION OF NLRC IS SET ASIDE AND A NEW ONE IS RENDERED.
1. No. Petitioner is exempted from paying “hourly paid faculty members” for regular
holidays, whether the same be during the regular semesters of the school year or during
semestral, Christmas, or Holy Week vacations. HOWEVER, petitioner is ordered to pay
faculty members their regular hourly rate on days declared as special holidays, shortened
hours they are supposed to have taught, and when there are extensions of class days.
 Labor Arbiter Julio Andres, Jr. found that faculty and personnel employed by petitioner who
are paid their salaries monthly, are uniformly paid throughout the school year regardless of
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working days, hence their holiday pay are included therein while the daily paid employees are
renumerated for work performed during holidays per affidavit of petitioner's treasurer
 There appears to be no problem therefore as to the first two classes or categories of
petitioner's workers.
 The problem lies with its faculty members, who are paid on an hourly basis
 Petitioner maintains that it is not covered by Book V of the Labor Code on Labor Relations
considering that it is a non- profit institution and that its hourly paid faculty members are paid
on a "contract" basis because they are required to hold classes for a particular number of
hours.
 In the programming of these student contract hours, legal holidays are excluded and
labelled in the schedule as "no class day. "
 On the other hand, if a regular week day is declared a holiday, the school calendar is
extended to compensate for that day.
 Thus petitioner argues that the advent of any of the legal holidays within the
semester will not affect the faculty's salary because this day is not included in their
schedule while the calendar is extended to compensate for special holidays. Thus
the programmed number of lecture hours is not diminished
 The Solicitor General on the other hand, argues that under Article 94 of the Labor Code (P.D.
No. 442 as amended), holiday pay applies to all employees except those in retail and service
establishments.
 To deprive therefore employees paid at an hourly rate of unworked holiday pay is
contrary to the policy considerations underlying such presidential enactment, and its
precursor, the Blue Sunday Law (Republic Act No. 946) apart from the constitutional
mandate to grant greater rights to labor (Constitution, Article II, Section 9).
 In addition, respondent National Labor Relations Commission in its decision promulgated on
June 2, 1982, ruled that the purpose of a holiday pay is obvious; that is to prevent diminution
of the monthly income of the workers on account of work interruptions.
 In other words, although the worker is forced to take a rest, he earns what he should
earn.
 That is his holiday pay. It is no excuse therefore that the school calendar is extended
whenever holidays occur, because such happens only in cases of special holidays
 Under Art. 94 (Labor Code) and Sec. 8 (IRR), the petitioner, although a non-profit institution
is under obligation to give pay even on unworked regular holidays to hourly paid faculty
members subject to the terms and conditions provided for therein
 The aforementioned implementing rule is not justified by the provisions of the law which after
all is silent with respect to faculty members paid by the hour who because of their teaching
contracts are obliged to work and consent to be paid only for work actually done (except
when an emergency or a fortuitous event or a national need calls for the declaration of
special holidays).
 Regular holidays specified as such by law are known to both school and faculty members as
no class days.
 Personnel do not expect payment for said unworked days, and this was clearly in
their minds when they entered into the teaching contracts.
 Both the law and the Implementing Rules governing holiday pay are silent as to payment on
Special Public Holidays.
 It is readily apparent that the declared purpose of the holiday pay which is the prevention of
diminution of the monthly income of the employees on account of work interruptions is
defeated when a regular class day is cancelled on account of a special public holiday and
class hours are held on another working day to make up for time lost in the school calendar.
 Otherwise stated, the faculty member, although forced to take a rest, does not earn what he
should earn on that day.
 Be it noted that when a special public holiday is declared, the faculty member paid by the
hour is deprived of expected income, and it does not matter that the school calendar is
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extended in view of the days or hours lost, for their income that could be earned from other
sources is lost during the extended days.
 Similarly, when classes are called off or shortened on account of typhoons, floods, rallies,
and the like, these faculty members must likewise be paid, whether or not extensions are
ordered.
2. No. Petitioner’s claim of lack of due process is unfounded.

 Cardinal primary requirements of due process in administrative proceedings:
 (1) the right to a hearing which includes the right to present one's case and
submit evidence in support thereof;
 (2) the tribunal must consider the evidence presented;
 (3) the decision must have something to support itself;
 (4) the evidence must be substantial, and substantial evidence means such
evidence as a reasonable mind might accept as adequate to support a
conclusion;
 (5) the decision must be based on the evidence presented at the hearing, or at
least contained in the record and disclosed to the parties affected;
 (6) the tribunal or body of any of its judges must act on its or his own
independent consideration of the law and facts of the controversy, and not simply
accept the views of a subordinate;
 (7) the board or body should in all controversial questions, render its decisions in
such manner that the parties to the proceeding can know the various issues
involved, and the reason for the decision rendered. "
 JRC was amply heard and represented in the instant proceedings and submitted its
position paper before the Labor Arbiter and the NLRC and even filed a motion for
reconsideration of the decision of the latter, as well as an "Urgent Motion for Hearing En
Banc".”
Atty. Mercader
GRAND ASIAN SHIPPING LINES, INC. vs. GALVEZ

DEL CASTILLO, J.:
G.R. No. 178184, January 29, 2014
FACTS: Petitioner Grand Asian Shipping Lines, Inc. (GASLI) is a domestic corporation engaged in
transporting liquified petroleum gas (LPG) from Petron Corporation’s refinery in Limay, Bataan to Petron’s
Plant in Ugong, Pasig and Petron’s Depot in Rosario, Cavite. Petitioners William How and Eduardo
Francisco are its President and General Manager, respectively. Respondents, on the other hand, are
crewmembers of one of GASLI’s vessels, M/T Dorothy Uno, with the following designations: Wilfredo
Galvez (Galvez) as Captain; Joel Sales (Sales) as Chief Mate; Cristito Gruta (Gruta) as Chief Engineer;
Danilo Arguelles (Arguelles) as Radio Operator; Renato Batayola (Batayola), Patricio Fresmillo (Fresmillo)
and Jovy Noble (Noble) as Able Seamen; Emilio Dominico (Dominico) and Benny Nilmao (Nilmao) as
Oilers; and Jose Austral (Austral) as 2nd Engineer. Sometime in January 2000, one of the vessel’s Oilers,
Richard Abis (Abis), reported to GASLI’s Office and Crewing Manager, Elsa Montegrico (Montegrico), an
alleged illegal activity being committed by respondents aboard the vessel. Abis revealed that after about
four to five voyages a week, a substantial volume of fuel oil is unconsumed and stored in the vessel’s fuel
tanks. However, Gruta would misdeclare it as consumed fuel in the Engineer’s Voyage Reports. Then, the
saved fuel oil is siphoned and sold to other vessels out at sea usually at nighttime. Respondents would
then divide among themselves the proceeds of the sale. Abis added that he was hesitant at first to report
respondents’ illegal activities for fear for his life.
Proceedings before the Labor Arbiter
Respondents and the other dismissed crewmembers of M/T Deborah Uno and M/T Coral Song
(complainants) filed with the NLRC separate complaints for illegal suspension and dismissal,
underpayment/non–payment of salaries/ wages, overtime pay, premium pay for holiday and rest day,
holiday pay, service incentive leave pay, hazard pay against petitioners.
The Labor Arbiter ordered petitioners to reinstate complainants with full back wages and to pay
their money claims for unpaid salary, overtime pay, premium pay holiday for holidays and rest days,
and service incentive leave pay, as indicated in the Computation of Money Claims. Complainants were
likewise awarded damages due to the attending bad faith in effecting their termination, double indemnity
prescribed by Republic Act (RA) No. 8188 in view of violation of the Minimum Wage Law, as well as 10%
attorney’s fee.
Proceedings before the National Labor Relations Commission
NLRC found the appeal meritorious and ruled that petitioners presented sufficient evidence to show just
causes for terminating complainants’ employment and compliance with due process. Accordingly,
complainants’ dismissal was valid, with the exception of Sales. The NLRC adjudged petitioners to have
illegally dismissed Sales as there was absence of any record that the latter received any notice of
suspension, administrative hearing, or termination.
The NLRC struck down the monetary awards given by the Labor Arbiter, which, it ruled, were based
merely on the computations unilaterally prepared by the complainants. It also ruled that Galvez, a
ship captain, is considered a managerial employee not entitled to premium pay for holiday and rest
day, holiday pay and service incentive leave pay. As for the other complainants, the award for
premium pay, holiday pay, rest day pay and overtime pay had no factual basis because no proof
was adduced to show that work was performed on a given holiday or rest day or beyond the eight
hours normal work time. Even then, the NLRC opined that these claims had already been given since
complainants’ salaries were paid on a 365–day basis. Likewise, service incentive leave pay, awards for
damages and double indemnity were deleted. Further, the NLRC sustained respondents’ contention that
it is the Secretary of Labor or the Regional Director who has jurisdiction to impose the penalty of double
indemnity for violations of the Minimum Wage Laws and not the Labor Arbiter.
Proceedings before the Court of Appeals

In a Decision dated September 12, 2006, the CA set aside the NLRC’s Decision and Resolution. It held
that the NLRC’s act of entertaining the appeal is a jurisdictional error since petitioners’ failure to post
additional bond rendered the Labor Arbiter’s Decision final, executory and immutable. The CA,
nonetheless, proceeded to discuss the merits of the case insofar as the illegal dismissal charge is
concerned. The CA conformed with the Labor Arbiter’s ruling that petitioners’ evidence was inadequate to
support the charge of pilferage and justify respondents’ termination. The CA ruled that Sales was also
Atty. Mercader
illegally dismissed, stating that Sales’ active participation in the labor case against petitioners belies the
theory that he was not terminated from employment.
ISSUE/S:
1. Whether the respondents are validly terminated.
2. Whether the respondents are entitled to their money claims.
HELD: The assailed CA Decision must be vacated and set aside.
1. As specified in the termination notice, respondents were dismissed on the grounds of (i) serious
misconduct, particularly in engaging in pilferage while navigating at sea, (ii) willful breach of the trust
reposed by the company, and (iii) commission of a crime or offense against their employer. After
examination of the evidence presented, however, we find that petitioners failed to substantiate
adequately the charges of pilferage against respondents. “[T]he quantum of proof which the employer
must discharge is substantial evidence. x x x Substantial evidence is that amount of relevant evidence
as a reasonable mind might accept as adequate to support a conclusion, even if other minds, equally
reasonable, might conceivably opine otherwise.” Here, the mere filing of a formal charge, to our mind,
does not automatically make the dismissal valid. Evidence submitted to support the charge should be
evaluated to see if the degree of proof is met to justify respondents’ termination. The affidavit executed
by Montegrico simply contained the accusations of Abis that respondents committed pilferage, which
allegations remain uncorroborated. “Unsubstantiated suspicions, accusations, and conclusions of
employers do not provide for legal justification for dismissing employees.” The other bits of evidence
were also inadequate to support the charge of pilferage. The findings made by GASLI’s port captain
and internal auditor and the resulting certification executed by De la Rama merely showed an
overstatement of fuel consumption as revealed in the Engineer’s Voyage Reports. The report of Jade
Sea Land Inspection Services only declares the actual usage and amount of fuel consumed for a
particular voyage. There are no other sufficient evidence to show that respondents participated in the
commission of a serious misconduct or an offense against their employer.
As for the second ground for respondents’ termination, which is loss of trust and confidence, distinction
should be made between managerial and rank and file employees. “[W]ith respect to rank–and–file
personnel, loss of trust and confidence, as ground for valid dismissal, requires proof of
involvement in the alleged events x x x [while for] managerial employees, the mere existence of
a basis for believing that such employee has breached the trust of his employer would suffice
for his dismissal.”
In the case before us, Galvez, as the ship captain, is considered a managerial employee since his
duties involve the governance, care and management of the vessel.Gruta, as chief engineer, is
also a managerial employee for he is tasked to take complete charge of the technical operations
of the vessel. As captain and as chief engineer, Galvez and Gruta perform functions vested with
authority to execute management policies and thereby hold positions of responsibility over the activities
in the vessel. Indeed, their position requires the full trust and confidence of their employer for they are
entrusted with the custody, handling and care of company property and exercise authority over it.
Thus, we find that there is some basis for the loss of confidence reposed on Galvez and Gruta. The
certification issued by De la Rama stated that there is an overstatement of fuel consumption. Notably,
while respondents made self–serving allegations that the computation made therein is erroneous, they
never questioned the competence of De la Rama to make such certification. Neither did they question
the authenticity and validity of the certification. Thus, the fact that there was an overstatement of fuel
consumption and that there was loss of a considerable amount of diesel fuel oil remained
unrefuted. Their failure to account for this loss of company property betrays the trust reposed and
expected of them. They had violated petitioners’ trust and for which their dismissal is justified on the
ground of breach of confidence.
As for Arguelles, Batayola, Fresnillo, Noble, Dominico, Nilmao and Austral, proof of involvement in the
loss of the vessel’s fuel as well as their participation in the alleged theft is required for they are ordinary
rank and file employees. And as discussed above, no substantial evidence exists in the records that
would establish their participation in the offense charged. This renders their dismissal illegal, thus,
entitling them to reinstatement plus full backwages, inclusive of allowances and other benefits,
computed from the time of their dismissal up to the time of actual reinstatement.
Atty. Mercader
2. Galvez and Gruta, as managerial employees, are not entitled to their claims for holiday pay,
service incentive leave pay and premium pay for holiday and rest day. Article 82 of the Labor Code
specifically excludes managerial employees from the coverage of the law regarding conditions of
employment which include hours of work, weekly rest periods, holidays, service incentive leaves
and service charges.
As for Arguelles, Batayola, Fresnillo, Noble, Dominico, Nilmao and Austral, we cannot sustain the argument
that they are classified as field personnel under Article 82 of the Labor Code who are likewise
excluded. Article 82 defines field personnel as referring to “non–agricultural employees who regularly
perform their duties away from the principal place of business or branch office of the employer and whose
actual hours of work in the field cannot be determined with reasonable certainty.” They are those who
perform functions which “cannot be effectively monitored by the employer or his representative.” Here,
respondents, during the entire course of their voyage, remain on board the vessel. They are not field
personnel inasmuch as they were constantly supervised and under the effective control of the petitioners
through the vessel’s ship captain.
Nevertheless, we cannot grant them their claims for holiday pay, premium pay for holiday and
restday, overtime pay and service incentive leave pay. Respondents do not dispute petitioners’
assertion that in computing respondents’ salaries, petitioners use 365 days as divisor. In fact, this was the
same divisor respondents used in computing their money claims against petitioners. Hence, they are paid
all the days of the month, which already include the benefits they claim. As for overtime pay and premium
pay for holidays and restdays, no evidence was presented to prove that they rendered work in
excess of the regular eight working hours a day or worked during holidays and restdays. In the
absence of such proof, there could be no basis to award these benefits.
For the claim of service incentive leave pay, respondents did not specify what year they were not paid such
benefit. In addition, records show that they were paid their vacation leave benefits.Thus, in accordance
with Article 95 of the Labor Code, respondents can no longer claim service incentive leave pay.
On the other hand, for failure to effectively refute the awards for 13th month pay for the period that
respondents were illegally dismissed, unpaid salaries and salary differentials, we affirm the grant thereof
as computed by the Labor Arbiter. Petitioners’ evidence which consist of a mere tabulation of the amount
of actual benefits paid and given to respondents is self–serving as it does not bear the signatures of the
employees to prove that they had actually received the amounts stated therein
Atty. Mercader
SAN MIGUEL CORPORATION, petitioner, vs. THE HONORABLE COURT OF APPEALS

KAPUNAN, J.
G.R. No. 146775; January 30, 2002
Assailed in the petition before us are the decision, promulgated on 08 May 2000, and the resolution,
promulgated on 18 October 2000, of the Court of Appeals in CA G.R. SP-53269.
FACTS:
DOLE Iligan District Office conducted a routine inspection in the premises of San Miguel Corporation (SMC)
in Sta. Filomena, Iligan City. In the course of the inspection, it was discovered that there was underpayment
by SMC of regular Muslim holiday pay to its employees. SMC failed to submit proof that it was paying
regular Muslim holiday pay to its employees. Hence, Alan M. Macaraya, Director IV of DOLE Iligan District
Office issued a compliance order, dated 17 December 1993, directing SMC to consider Muslim holidays as
regular holidays and to pay both its Muslim and non-Muslim employees holiday pay within thirty (30) days
from the receipt of the order.
SMC went to this Court for relief via a petition for certiorari, which this Court referred to the Court of Appeals
pursuant to St. Martin Funeral Homes vs. NLRC. SMC alleged that CA erred and committed grave abuse
of discretion when they granted Muslim Holiday pay to non-Muslim employees of SMC; that they were not
accorded due process of law; that UnderSec. Trajano and UnderSec Espaol have no jurisdiction in issuing
assailed compliance and resolutions. Petitioner asserts that Article 3(3) of Presidential Decree No. 1083
provides that (t)he provisions of this Code shall be applicable only to Muslims
ISSUE/S:
1. W/N there should be distinction between Muslims and non-Muslims as regard payment of benefits
for Muslim holidays
2. W/N UnderSec has jurisdiction
HELD: The Court finds no reason to reverse the decision of the Court of Appeals.
1) There should be no distinction between Muslims and non-Muslims as regards payment of benefits for
Muslim holidays. The Court of Appeals did not err in sustaining Undersecretary Espaol who stated: “We
must remind the respondent-appellant that wages and other emoluments granted by law to the working
man are determined on the basis of the criteria laid down by laws and certainly not on the basis of the
workers faith or religion.”
At any rate, Article 3(3) of Presidential Decree No. 1083 also declares that nothing shall be construed to
operate to the prejudice of a non-Muslim.
In addition, the 1999 Handbook on Workers Statutory Benefits, approved by then DOLE Secretary
Bienvenido E. Laguesma on 14 December 1999 categorically stated: Considering that all private
corporations, offices, agencies, and entities or establishments operating within the designated Muslim
provinces and cities are required to observe Muslim holidays, both Muslim and Christians working within
the Muslim areas may not report for work on the days designated by law as Muslim holidays.
2) Regional Director Macaraya acted as the duly authorized representative of the Secretary of Labor and
Employment and it was within his power to issue the compliance order to SMC. In addition, the Court agrees
with the Solicitor General that the petitioner did not deny that it was not paying Muslim holiday pay to its
non-Muslim employees. Indeed, petitioner merely contends that its non-Muslim employees are not entitled
to Muslim holiday pay. Hence, the issue could be resolved even without documentary proofs. In any case,
there was no indication that Regional Director Macaraya failed to consider any documentary proof
presented by SMC in the course of the inspection.
Atty. Mercader
CHARTERED BANK EMPLOYEES ASSOCIATION V. OPLE

FACTS:
Chartered Bank Employees Association, represented by employees/members, instituted a
complaint with the Regional Office No. IV Department of Labor, now Ministry of Labor and Employment
against private respondent Chartered Bank, for the payment of 10 unworked legal holidays, as well as
premium and overtime differentials for worked legal holidays from November 1, 1974. Under their existing
collective bargaining agreement, said monthly paid employees are paid for overtime work as follows:
Section l. The basic work week for all employees excepting security guards who by virtue
of the nature of their work are required to be at their posts for 365 days per year, shall be
forty (40) hours based on five (5) eight (8) hours days, Monday to Friday.
Section 2. Time and a quarter hourly rate shall be paid for authorized work performed in
excess of eight (8) hours from Monday through Friday and for any hour of work performed
on Saturdays subject to Section 5 hereof.
Section 3. Time and a half hourly rate shall be paid for authorized work performed on
Sundays, legal and special holidays.
Section 5. The provisions of Section I above notwithstanding the BANK may revert to the
six (6) days work week, to include Saturday for a four (4) hour day, in the event the Central
Bank should require commercial banks to open for business on Saturday.
In computing overtime pay and premium pay for work done during regular holidays, the divisor used
in arriving at the daily rate of pay is 251 days although formerly the divisor used was 303 days and this was
when the respondent bank was still operating on a 6-day work basis. However, for purposes of computing
deductions corresponding to absences without pay, the divisor used is 365 days. All regular monthly paid
employees of respondent bank are receiving salaries way beyond the statutory or minimum rates and are
among the highest paid employees in the banking industry. The salaries of respondent bank’s monthly paid
employees suffer no deduction for holidays occurring within the month. LA and NLRC: Ruled in favor of
the petitioners ordering the respondent bank to pay its monthly paid employees, holiday pay for the 10 legal
holidays effective November 1, 1974, and to pay premium or overtime pay differentials to all employees
who rendered work during said legal holidays. Minister of Labor: Set aside the decision of NLRC and
dismissed the petitioner’s claim for lack of merit basing its decision on Sec. 2, Rule IV, Book III of the
Integrated Rules and Policy Instruction No. 9, which provides:
Sec. 2. Status of employees paid by the month. Employees who are uniformly paid by the month,
irrespective of the number of working days therein, with a salary of not less than the statutory or established
minimum wage shall be presumed to be paid for all days in the month whether worked or not.
POLICY INSTRUCTION NO. 9
TO: All Regional Directors
SUBJECT: PAID LEGAL HOLIDAYS
The rules implementing PD 850 have clarified the policy in the implementation of the ten (10) paid legal
holidays. Before PD 850, the number of working days a year in a firm was considered important in
determining entitlement to the benefit. Thus, where an employee was working for at least 313 days, he
was considered definitely already paid. If he was working for less than 313, there was no certainty
whether the ten (10) paid legal holidays were already paid to him or not.
The ten (10) paid legal holidays law, to start with, is intended to benefit principally daily employees. In
the case of monthly, only those whose monthly salary did not yet include payment for the ten (10) paid
legal holidays are entitled to the benefit.
Under the rules implementing PD 850, this policy has been fully clarified to eliminate controversies on
the entitlement of monthly paid employees. The new determining rule is this: 'If the monthly paid
employee is receiving not less than P240, the maximum monthly minimum wage, and his monthly pay
is uniform from January to December, he is presumed to be already paid the ten (10) paid legal holidays.
However, if deductions are made from his monthly salary on account of holidays in months where they
occur, then he is still entitled to the ten (10) paid legal holidays.
These new interpretations must be uniformly and consistently upheld.
This issuance shall take effect immediately.
ISSUES:
1. Whether or not the Secretary of Labor erred and acted contrary to law in promulgating Sec. 2 Rule
IV, Book III of the Integrated Rules and Policy Instruction No. 9.
Atty. Mercader
2. Whether or not the respondent Secretary of Labor in not giving due credence to the respondent
bank’s practice of paying its employees base pay of 100% and premium pay of 50% for work done
during legal holidays, acted contrary to law and abused his discretion in denying the claim of
petitioners for unworked holidays and premium and overtime pay differentials for worked holidays.
HELD:
1. YES. The court ruled that Sec. 2, Rule IV, Book III of the Integrated Rules and Policy Instruction No. 9
are contrary to the provision of the Labor Code, and therefore invalid.
In the rules of statutory construction, when a language of the law is clear and unequivocal, the law must be
taken to mean exactly what it says. In the case at bar, the provisions of the Labor Code on the entitlement
to the benefits of holiday pay are clear and explicit, it provides for both the coverage of and exclusion from
the benefit. In Policy Instruction No. 9, the then Secretary of Labor went as far as to categorically state that
the benefit is principally intended for daily paid employees, when the law clearly states that every worker
shall be paid their regular holiday pay. This is a violation of the mandatory directive of Art. 4 of the Labor
Code, “All doubts in the implementation and interpretation of the provisions of this Code, including its
implementing rules and regulations, shall be resolved in favor of labor.”
Since the private respondent premises its action on the invalidated rule and policy instruction, it is clear
that the employees belonging to the petitioner association are entitled to the payment of 10 legal
holidays under Articles 82 and 94 of the Labor Code, aside from their monthly salary. They are not
among those excluded by law.
Presidential Decree No. 850 states who are excluded from the holiday provisions of that law, as follows.
The questioned Sec. 2, Rule IV, Book III of the Integrated Rules and the Secretary’s Policy Instruction No.
9 add another excluded group, the “employees who are uniformly paid by the month. While the additional
exclusion is only in the form of a presumption that all monthly paid employees have already been paid
holiday pay, it constitutes a taking away or a deprivation which must be in the law if it is to be valid. An
administrative interpretation which diminishes the benefits of labor more than what the statutes delimits or
withholds is obviously ultra vires.
2. YES. Doubts which may arise from the conflicting or different divisors used in the computation of
overtime pay and employees’ absences are resolved by the manner in which work actually rendered on
holidays is paid. Moreover, whenever monthly paid employees work on a holiday, they are given an
additional 100% base pay on top of a premium pay of 50%. If the employees’ monthly pay already includes
their salaries for holidays, they should be paid only premium pay but not both base pay and premium pay.
The contention of the respondent that 100% base pay and 50% premium pay for work actually rendered on
holidays is given in addition to monthly salaries only because the collective bargaining agreement so
provides is itself an argument in favor of the petitioner stand. It shows that the Collective Bargaining
Agreement already contemplated a divisor of 251 days for holiday pay computations before the questioned
presumption in the Integrated Rules and the Policy Instruction was formulated. There is furthermore a
similarity between overtime pay, which is computed on the basis of 251 working days a year, and holiday
pay, which should be similarly treated notwithstanding the public respondents' issuances. In both cases
overtime work and holiday work- the employee works when he is supposed to be resting. In the absence
of an express provision of the CBA or the law to the contrary, the computation should be similarly handled.
The court is not unmindful of the fact that the respondent’s employees are among the highest paid in the
industry. It is not the intent of the court to impose any undue burdens on an employer which is already doing
its best for its personnel. However, the court have to resolve the labor dispute in the light of the parties’ own
collective bargaining agreement and the benefits given by law to all workers. When the law provides
benefits for "employees in all establishments and undertakings, whether for profit or not" and lists
specifically the employees not entitled to those benefits, the administrative agency implementing that law
cannot exclude certain employees from its coverage simply because they are paid by the month or because
they are already highly paid. The remedy lies in a clear redrafting of the collective bargaining agreement
with a statement that monthly pay already includes holiday pay or an amendment of the law to that effect
but not an administrative rule or a policy instruction.
Hence, the decision of NLRC which affirmed the resolution of the Labor Arbiter but deleted interest
payments is hereby reinstated.
Atty. Mercader
Wellington Investment v. Trajano

NARVASA, C.J.
G.R. No. 114698, 3 July 1995
FACTS:
The case arose from a routine inspection conducted by a Labor Enforcement Officer on August 6, 1991 of
the Wellington Flour Mills, an establishment owned and operated by petitioner Wellington Investment and
Manufacturing Corporation (hereafter, simply Wellington). The officer thereafter drew up a report, a copy of
which was "explained to and received by" Wellington's personnel manager, in which he set forth his finding
of "(n)on-payment of regular holidays falling on a Sunday for monthly-paid employees."
Wellington sought reconsideration of the Labor Inspector's report, by letter dated August 10, 1991. It argued
that "the monthly salary of the company's monthly-salaried employees already includes holiday pay for all
regular holidays . . . (and hence) there is no legal basis for the finding of alleged non-payment of regular
holidays falling on a Sunday." It expounded on this thesis in a position paper subsequently submitted to the
Regional Director, asserting that it pays its monthly-paid employees a fixed monthly compensation "using
the 314 factor which undeniably covers and already includes payment for all the working days in a month
as well as all the 10 unworked regular holidays within a year."
Wellington's arguments failed to persuade the Regional Director who, in an Order issued on July 28, 1992,
ruled that "when a regular holiday falls on a Sunday, an extra or additional working day is created and the
employer has the obligation to pay the employees for the extra day except the last Sunday of August since
the payment for the said holiday is already included in the 314 factor," and accordingly directed Wellington
to pay its employees compensation corresponding to four (4) extra working days.
Wellington timely filed a motion for reconsideration of this Order of August 10, 1992, pointing out that it was
in effect being compelled to "shell out an additional pay for an alleged extra working day" despite its
complete payment of all compensation lawfully due its workers, using the 314 factor. Its motion was treated
as an appeal and was acted on by respondent Undersecretary. By Order dated September 22, the latter
affirmed the challenged order of the Regional Director, holding that "the divisor being used by the
respondent (Wellington) does not reliably reflect the actual working days in a year, " and consequently
commanded Wellington to pay its employees the "six additional working days resulting from regular holidays
falling on Sundays in 1988, 1989 and 1990. Again, Wellington moved for reconsideration, 7 and again was
rebuffed.
Wellington then instituted the special civil action of certiorari at bar.
ISSUE: Whether or not a monthly-paid employee, receiving a fixed monthly compensation, is entitled to an
additional pay aside from his usual holiday pay, whenever a regular holiday falls on a Sunday. NO.
HELD: WHEREFORE, the orders complained of are NULLIFIED AND SET ASIDE, and the proceeding
against petitioner DISMISSED.
Apparently the monthly salary was fixed by Wellington to provide for compensation for every working day
of the year including the holidays specified by law — and excluding only Sundays. In fixing the salary,
Wellington used what it calls the "314 factor;" that is to say, it simply deducted 51 Sundays from the 365
days normally comprising a year and used the difference, 314, as basis for determining the monthly salary.
The monthly salary thus fixed actually covers payment for 314 days of the year, including regular and
special holidays, as well as days when no work is done by reason of fortuitous cause, as above specified,
or causes not attributable to the employees.
The Labor Officer who conducted the routine inspection of Wellington discovered that in certain years, two
or three regular holidays had fallen on Sundays. He reasoned that this had precluded the enjoyment by the
employees of a non-working day, and the employees had consequently had to work an additional day for
that month. This ratiocination received the approval of his Regional Director who opined 14 that "when a
regular holiday falls on a Sunday, an extra or additional working day is created and the employer has the
obligation to pay its employees for the extra day except the last Sunday of August since the payment for
the said holiday is already included in the 314 factor." This ingenuous theory was adopted and further
explained by respondent Labor Undersecretary, to whom the matter was appealed, as follows: 16
. . . By using said (314) factor, the respondent (Wellington) assumes that all the regular holidays fell on
ordinary days and never on a Sunday. Thus, the respondent failed to consider the circumstance that
whenever a regular holiday coincides with a Sunday, an additional working day is created and left unpaid.
In other words, while the said divisor may be utilized as proof evidencing payment of 302 working days, 2
Atty. Mercader
special days and the ten regular holidays in a calendar year, the same does not cover or include payment
of additional working days created as a result of some regular holidays falling on Sundays.
He pointed out that in 1988 there was "an increase of three (3) working days resulting from regular holidays
falling on Sundays;" hence Wellington "should pay for 317 days, instead of 314 days." By the same process
of ratiocination, respondent Undersecretary theorized that there should be additional payment by
Wellington to its monthly-paid employees for "an increment of three (3) working days" for 1989 and again,
for 1990. What he is saying is that in those years, Wellington should have used the "317 factor," not the
"314 factor." The theory loses sight of the fact that the monthly salary in Wellington — which is based on
the so-called "314 factor" — accounts for all 365 days of a year; i.e., Wellington's "314 factor" leaves no
day unaccounted for; it is paying for all the days of a year with the exception only of 51 Sundays. The
respondents' theory would make each of the years in question (1988, 1989, 1990), a year of 368
days. Pursuant to this theory, no employer opting to pay his employees by the month would have
any definite basis to determine the number of days in a year for which compensation should be
given to his work force. He would have to ascertain the number of times legal holidays would fall on
Sundays in all the years of the expected or extrapolated lifetime of his business. Alternatively, he would be
compelled to make adjustments in his employees' monthly salaries every year, depending on the number
of times that a legal holiday fell on a Sunday. There is no provision of law requiring any employer to
make such adjustments in the monthly salary rate set by him to take account of legal holidays falling
on Sundays in a given year, or, contrary to the legal provisions bearing on the point, otherwise to
reckon a year at more than 365 days. As earlier mentioned, what the law requires of employers opting to
pay by the month is to assure that "the monthly minimum wage shall not be less than the statutory minimum
wage multiplied by 365 days divided by twelve," and to pay that salary "for all days in the month whether
worked or not," and "irrespective of the number of working days therein. That salary is due and payable
regardless of the declaration of any special holiday in the entire country or a particular place therein, or any
fortuitous cause precluding work on any particular day or days (such as transportation strikes, riots, or
typhoons or other natural calamities), or cause not imputable to the worker. And as also earlier pointed out,
the legal provisions governing monthly compensation are evidently intended precisely to avoid re-
computations and alterations in salary on account of the contingencies just mentioned, which, by the way,
are routinely made between employer and employees when the wages are paid on daily basis.
Atty. Mercader
PRODUCERS BANK OF THE PHILIPPINES vs. NLRC

Gonzaga-Reyes, J.
G.R. No. 100701. March 28, 2001
FACTS:
 Present petition originated from a complaint filed by private respondent on 11 February 1988 with
the Arbitration Branch, NCR, NLRC, charging petitioner with diminution of benefits, noncompliance
with Wage Order No. 6 and non-payment of holiday pay.
 Labor Arbiter Nieves V. de Castro found private respondent's claims to be unmeritorious and
dismissed its complaint. In a complete reversal, however, the NLRC granted all of private
respondent's claims, except for damages.
 On Bonuses:
 Private respondents raised that Producers Bank of the Philippines, a banking institution,
has been providing several benefits to its employees since 1971 when it started its
operation. Among the benefits it had been regularly giving is a mid-year bonus equivalent
to an employee's one-month basic pay and a Christmas bonus. When P.D. 851, the law
granting a 13th month pay, took effect, the basic pay previously being given as part of the
Christmas bonus was applied as compliance to it (P.D. 851), the allowances remained as
Christmas bonus. In the early part of 1984, the bank was placed under conservatorship but
it still provided the traditional mid-year bonus. By virtue of an alleged Monetary Board
Resolution No. 1566, the bank only gave a one-half (1/2) month basic pay as compliance
of the 13th month pay and none for the Christmas bonus. Private respondent argues that
the mid-year and Christmas bonuses, by reason of their having been given for thirteen
consecutive years, have ripened into a vested right and, as such, can no longer be
unilaterally withdrawn by petitioner without violating Article 100 of Presidential Decree No.
442 which prohibits the diminution or elimination of benefits already being enjoyed by the
employees.
 Petitioner asserts that it cannot be compelled to pay the alleged bonus differentials due to
its depressed financial condition, as evidenced by the fact that in 1984 it was placed under
conservatorship by the Monetary Board
 On 13th Month Pay:
 NLRC adopted the position taken by private respondent and held that the conservator was
not justified in diminishing or not paying the13th month pay and that petitioner should have
instead applied for an exemption, in accordance with Section 7 of Presidential Decree No.
851 (PD 851), as amended byPresidential Decree No. 1364, but that it did not do so.
 Petitioner argues that it is not covered by PD 851 since the mid-year and Christmas
bonuses it has been giving its employees from 1984 to 1988 exceeds the basic salary for
one month (except for 1985 where a total of one month basic salary was given). Hence,
this amount should be applied towards the satisfaction of the 13th month pay, pursuant to
Section 2 of PD 851.
 On Wage Order No. 6:
 Petitioner argues that it complied with Wage Order No. 6 because the first year salary and
allowance increase provided for under the collective bargaining agreement can be credited
against the wage and allowance increase mandated by such wage order.
 Private respondent contends that the first year salary and allowance increases under the
collective bargaining agreement cannot be applied towards the satisfaction of the increases
prescribed by Wage Order No. 6 because the former were not granted within the period of
creditability provided for in such wage order.
 On Holiday Pay:
 The Labor Arbiter found that the divisor used by petitioner in arriving at the employees'
daily rate for the purpose of computing salary-related benefits is 314. This finding was not
disputed by the NLRC. However, the divisor was reduced to 303 by virtue of an inter-office
memorandum. The private respondent raised that by utilizing this formula even up to the
present, the conclusion is inescapable that the petitioner bank is not actually paying its
employees the regular holiday pay mandated by law.
Atty. Mercader
ISSUE:
Whether or not petitioner is violated provisions of labor laws particularly on diminution of benefits,
noncompliance with Wage Order No. 6 and non-payment of holiday pay.
HELD: Petition granted except for payment of damages.
 On bonuses: Under Section 28-A, the Monetary Board may place a bank under the control of a
conservator when it finds that the bank is continuously unable or unwilling to maintain a condition
of solvency or liquidity. Petitioner was not only experiencing a decline in its profits, but was reeling
from tremendous losses triggered by a bank-run which began in 1983. In such a depressed
financial condition, petitioner cannot be legally compelled to continue paying the same amount of
bonuses to its employees. Thus, the conservator was justified in reducing the mid-year and
Christmas bonuses of petitioner's employee.
 On 13th month pay: Even assuming the truth of private respondent's claims as contained in its
position paper or Memorandum regarding the payments received by its members in the form of
13th month pay, mid-year bonus and Christmas bonus, it is noted that, for each and every year
involved, the total amount given by petitioner would still exceed, or at least be equal to, one month
basic salary and thus, may be considered as an "equivalent" of the 13th month pay mandated by
PD 851. Thus, petitioner is justified in crediting the mid-year bonus and Christmas bonus as part of
the 13th month pay.
 On Wage Order No. 6: The unequivocal wording of this provision manifests the clear intent of the
parties to apply the wage and allowance increases stipulated in the collective bargaining agreement
to any statutory wage and allowance adjustments issued during the effectivity of such agreement.
 Apparently, the divisor of 314 is arrived at by subtracting all Sundays from the total number of
calendar days in a year, since Saturdays are considered paid rest days, as stated in the inter-office
memorandum. Thus, the use of 314 as a divisor leads to the inevitable conclusion that the ten legal
holidays are already included therein. We agree with the labor arbiter that the reduction of the
divisor to 303 was done for the sole purpose of increasing the employees' overtime pay, and was
not meant to exclude holiday pay from the monthly salary of petitioner's employees. In fact, it was
expressly stated in the inter-office memorandum — also referred to by private respondent in its
pleadings — that the divisor of 314 will still be used in the computation for cash conversion and in
the determination of the daily rate.
Atty. Mercader
Odango v NLRC
CARPIO, J.
G.R. No. 147420 - June 10, 2004
Before the Court is a petition for review assailing the Court of Appeals Resolutions of 27 September
2000 and 7 February 2001 in CA-G.R. SP No. 51519. The Court of Appeals upheld the Decision dated 27
November 1997 and the Resolution dated 30 April 1998 of the NLRC in Case No. V-0048-97. The NLRC
reversed the Labor Arbiters Decision of 29 November 1996, which found respondent Antique Electric
Cooperative (ANTECO) liable for petitioners wage differentials amounting to P1,017,507.73 plus attorneys
fees of 10%.
Facts:
 Petitioners are monthly-paid employees of ANTECO whose workdays are from Monday to Friday
and half of Saturday.
 After a routine inspection, the Regional Branch of DOLE found ANTECO liable for underpayment
of the monthly salaries of its employees.
 1989: DOLE directed ANTECO to pay its employees wage differentials amounting to
P1,427,412.75. ANTECO failed to pay.
 1995: 33 monthly-paid employees filed complaints with the NLRC praying for payment of wage
differentials, damages and attorneys fees. Labor Arbiter Rodolfo G. Lagoc heard the consolidated
complaints.
 1996:
o Labor Arbiter rendered a Decision in favor of petitioners granting them wage differentials
amounting to P1,017,507.73 and attorneys fees of 10% stating that:
o ANTECO appealed the Decision to the NLRC.
 1997: NLRC reversed the Labor Arbiter’s Decision.

 1998: The NLRC denied petitioners motion for reconsideration.
 2000: CA issued a Resolution dismissing the petition - explained that petitioners failed to allege the
specific instances where the NLRC abused its discretion
 2001: Appellate court denied petitioners motion for reconsideration
 Petitioner’s Argument:
 CA erred in denying their claim for wage differentials. Petitioners base their claim on
Section 2, Rule IV of Book III of the Omnibus Rules Implementing the Labor Code.
 They argue that under the said provision monthly-paid employees are considered paid for
all days of the month including un-worked days
 They should be paid for all the 365 days in a year. They argue that since in the computation
of leave credits, ANTECO uses a divisor of 304, ANTECO is not paying them 61 days every
year.
 Labor Arbiters Ruling:

o ANTECO failed to refute petitioners argument that monthly-paid employees are considered
paid for all the days in a month under Section 2, Rule IV of Book 3 of the Implementing
Rules of the Labor Code (Sec. 2) - that this includes not only the 10 legal holidays, but also
their un-worked half of Saturdays and all of Sundays
o Agreed with petitioners that ANTECOs use of 304 as divisor is an admission that it is paying
its employees for only 304 days a year instead of the 365 days as specified in Section 2.
o Concluded that ANTECO owed its employees the wages for 61 days, the difference
between 365 and 304, for every year.
 NLRC’s Ruling:
Atty. Mercader
-On appeal, the NLRC reversed the Labor Arbiters ruling that ANTECO underpaid its employees
-The lowest paid employee of ANTECO was then receiving a monthly wage of P3,788.
-Applied the formula in Section 2 [(Daily Wage Rate = (Wage x 12)/365)] to the monthly wage of
P3,788 to arrive at a daily wage rate of P124.54, an amount clearly above the minimum wage.
-Ruled that the use of 304 as a divisor in converting leave credits is more favorable to the
employees since a lower divisor yields a higher rate of pay.
ISSUES:
(1) W/N Petitioners are entitled to the the money claim
HELD: Petition is Dismissed.
(1) No, they are not entitled to money claim - Section 2 cannot serve as basis of any right or claim.
Absent any other legal basis, petitioners claim for wage differentials must fail.
 We have long ago declared void Section 2, Rule IV of Book III of the Omnibus Rules Implementing
the Labor Code.
 Insular Bank of Asia v. Inciong:
- Section 2, Rule IV, Book III of the Implementing Rules and Policy Instructions No. 9 issued by the
Secretary (then Minister) of Labor are null and void since in the guise of clarifying the Labor Codes
provisions on holiday pay, they in effect amended them by enlarging the scope of their exclusion.
- The Labor Code is clear that monthly-paid employees are not excluded from the benefits of holiday
pay. However, the implementing rules on holiday pay promulgated by the then Secretary of Labor
excludes monthly-paid employees from the said benefits by inserting, under Rule IV, Book III of the
implementing rules, Section 2 which provides that monthly-paid employees are presumed to be
paid for all days in the month whether worked or not.
 Even assuming that Section 2, Rule IV of Book III is valid, petitioners claim will still fail - The basic
rule in this jurisdiction is no work, no pay. The right to be paid for unworked days is generally limited
to the ten legal holidays in a year.
 The use of a divisor less than 365 days cannot make ANTECO automatically liable for
underpayment.
 The facts show that petitioners are required to work only from Monday to Friday and half of
Saturday. Thus, the minimum allowable divisor is 287, which is the result of 365 days, less 52
Sundays and less 26 Saturdays (or 52 half Saturdays). Any divisor below 287 days means that
ANTECOs workers are deprived of their holiday pay for some or all of the ten legal holidays. The
304 days divisor used by ANTECO is clearly above the minimum of 287 days.
Atty. Mercader
Lim v. HMR Philippines

MENDOZA, J.:
G.R. No. 201483 ; August 4, 2014
FACTS:
On February 8, 200 I, petitioner Conrado A. Lim (Lim) filed a case for illegal dismissal and money
claims against respondents, HMR Philippines, Inc. (HMR)and its officers, Teresa G. Santos-Castro, Henry
G. Bunag and Nelson S. Camiller. The Labor Arbiter (LA) dismissed the complaint for lack of merit. (NLRC)
reversed the LA and declared Lim to have been illegally dismissed. The dissipative portion reads that the
company is hereby ordered to reinstate immediately the said employee to his former position without loss
of seniority rights and other privileges. Furthermore, the respondent-appellee Company is hereby ordered
to pay the complainant-appellant his full backwages, reckoned from his dismissal on February 3, 2001 up
to the promulgation of this Decision. The CA affirmed the NLRC decision with modification by awarding
moral damages and exemplary damages to Conrado A. Lim in the amount of ₱50,000.00 and ₱20,000.00,
respectively, as well as attorney’s fees equivalent to 10% of the total amount due him. Computation and
Research Unit (CRU) of the NLRC computed the total award to amount to ₱2,020,053.46, which computed
the backwages from February 3, 2001, the date of the illegal dismissal, up to October 31, 2007, the date of
actual reinstatement. HMR opposed the computation arguing that the backwages should be computed until
April 11, 2003 only, the date of promulgation of the NLRC decision, as stated in the dispositive portion of
the NLRC decision, which provided that backwages shall be "reckoned from his dismissal on February 3,
2001 up to the promulgation of this Decision." In his Comment, Lim argued that the body of the NLRC
decision explictly stated that he was entitled to full backwages from the time he was illegally dismissed until
his actual reinstatement, which was also in accord with Article 279 of the Labor Code and all prevailing
jurisprudence. Accordingly, in computing complainant’s backwages, the following conditions must apply: 1)
that the backwages cover the period February 3, 2001 up to April 11, 2003; 2) that the base rate applicable
is his salary as of February 3, 2001 inclusive of the ten percent adjustment due at the time, or ₱12,500.00
plus ten percent (10%) or ₱13,750.00; 3) that the computation should include his 13th month pay; and 4)
15 days vacation pay in accordance with the personnel policy handbook, in lieu of 5 days service incentive
leave pay. While complainant claims that he is entitled to 15 days sick leave pay, a perusal of the personnel
policy handbook on the grant of said benefit shows that sick leave pay is availed of only upon notification
of illness and conversion thereof to cash is subject to the discretion of management. Lim insisted that his
backwages should be computed up to his actual reinstatement. The NLRC sustained the computation of
the LA, explaining that the dispositive portion was clear, and that it could not alter or amend the amount
based on the final decision of the NLRC which was affirmed by both the CA and this Court. It ruled that
when there was a conflict between the dispositive portion and the body of the decision, the former must
prevail as the dispositive portion was the final order. The CA found that although the NLRC had recognized
that petitioner was entitled to backwages until actual reinstatement, nonetheless, it expressly limited the
computation of backwages to the promulgation date of its decision.
ISSUE/S:
1. Whether or not the Court of Appeals erred in mandating the payment of backwages until the illegally
dismissed employee is actually reinstated.
2. Whether a recomputation of backwages up to the date of the actual reinstatement of Lim would violate
the principle of immutability of judgments.
HELD: PETITION PARTLY GRANTED.
1. NO. Illegally dismissed employee is entitled to backwages until actual reinstatement.
Article 279 of the Labor Code is clear in providing that an illegally dismissed employee is entitled
to his full backwages computed from the time his compensation was withheld up to the time of his actual
reinstatement. In accordance with this provision, the body of the April 11, 2003 NLRC decision expressly
recognizes that Lim is entitled to his full backwages until his actual reinstatement. Nowhere in the body of
the NLRC decision was there a discussion restricting the award of backwages. Nonetheless, the fallo of the
said decision limited the computation of the backwages up to its promulgation on April 11, 2003.
2. NO. A recomputation of backwages up to the date of the actual reinstatement of Lim would not
violate the principle of immutability of judgments.
The rule is that it is the dispositive portion that categorically states the rights and obligations of the
parties tothe dispute as against each other. Thus, it is the dispositive portion that must be enforced to
Atty. Mercader
ensure the validity of the execution. A companion to this rule is the principle of immutability of final
judgments. Save for recognized exceptions, a final judgment may no longer be altered, amended or
modified, even if the alteration, amendment or modification is meant to correct what is perceived to be an
erroneous conclusion of fact or law and regardless of what court renders it.
A case for illegal dismissal is one that relates to status, where the decision or ruling is essentially
declaratory of the status and of the rights, obligations and monetary consequences that flow from the
declared status, such as, the payment of separation pay and backwages. In execution, what is primarily
implemented is the declaratory finding on the status and the rights and obligations of the parties therein;
the arising monetary consequences from the declaration only follow as component of the parties’ rights and
obligations.
The decision consists essentially of two parts. The first is that part of the decision that cannot now
be disputed because it has been confirmed with finality. This is the finding of the illegality of the dismissal
and the awards of separation pay in lieu of reinstatement, backwages, attorney’s fees, and legal interests.
The second part is the computation of the awards made. On its face, the computation the labor arbiter made
shows that it was time-bound as can be seen from the figures used in the computation. This part, being
merely a computation of what the first part of the decision established and declared, can, by its nature, be
recomputed. We see no error in the CA decision confirming that a recomputation is necessary as it
essentially considered the labor arbiter’s original decision in accordance with its basic component parts as
we discussed above.
The CA confirmed that indeed an illegal dismissal had taken place, so that separation pay in lieu
of reinstatement and backwages should be paid. How much that separation pay would be, would ideally be
stated in the final CA decision; if not, the matter is for handling and computation by the labor arbiter of origin
as the labor official charged with the implementation of decisions before the NLRC.
No essential change is made by a re-computation as this step is a necessary consequence that
flows from the nature of the illegality of dismissal declared in that decision. y the nature of an illegal dismissal
case, the reliefs continue to add on until full satisfaction, as expressed under Article 279 of the Labor Code.
The re-computation of the consequences of illegal dismissal upon execution of the decision does not
constitute an alteration or amendment of the final decision being implemented. The illegal dismissal ruling
stands; only the computation of monetary consequences of this dismissal is affected and this is not a
violation of the principle of immutability of final judgments.
HMR never responded to the petitioner’s request, and up to the present, the latter has yet to be
reinstate. It is apparent that the petitioner cannot be deemed to have refused reinstatement or to have
abandoned his job. HMR’s offer of reinstatement appeared superficial and insincere considering that it
never replied to the petitioner’s letter. It did not make any further attempt to reinstate the petitioner either.
The recoverable backwages, thus, continue to run, and must be reckoned up until the petitioner’s actual
reinstatement.
Being a regular employee, he should be paid his unpaid 10% annual increase for the years
1998,1999 and 2000. Lim is entitled to be paid his unpaid 10% annual salary increase for the years 1998-
2000. he applicable base rate for the computation of the petitioner’s backwages from the time he was
illegally dismissed on February 3, 2001 should be ₱15,125.00. Lim cannot, however, insist that the 10%
annual salary increase be applied to his backwages past the year 2000 up to his actual reinstatement.
Salary increases cannot be interpreted as either an allowance or a benefit.
NLRC did not err in awarding the unpaid salary increase for the years 1998-2000 as such did not
constitute backwages as a consequence of the petitioner’s illegal dismissal, but was earned and owing to
the petitioner before he was illegally terminated.
Under Article 94 of the Labor Code, every worker shall be paid his regular daily wage during regular
holidays. Thus, anemployee must receive his daily wage even if he does not work on a regular holiday.
HMR does not have the absolute discretion to decide whether ornot to grant sick leave conversion. The
discretion of the general manager only pertains to what form the sick leave conversion may take, and not
to whether or not sick leave conversion will be granted at all. Petitioner was illegally dismissed, he is now
entitled to have his unused sick leaves converted to cash.
Interest of 6% per annum for obligations not constituting a loan or forbearance of money is one that
may be imposed at the discretion of the court. This form of interest is not mandatory but discretionary in
nature and therefore, not necessarily owing to the petitioner in the present case.
Atty. Mercader
Asian Transmission Corporation v. Court of Appeals,

Carpio Morales, J.
G.R. No. 144664- 15 March 2004
FACTS:
The Department of Labor and Employment (DOLE), through Undersecretary Cresenciano B.
Trajano, issued an Explanatory Bulletin dated March 11, 1993 wherein it clarified, inter alia, that employees
are entitled to 200% of their basic wage on April 9, 1993, whether unworked, which[,] apart from being
Good Friday [and, therefore, a legal holiday], is also Araw ng Kagitingan [which is also a legal holiday]. The
bulletin reads:
"On the correct payment of holiday compensation on April 9, 1993 which apart from being Good
Friday is also Araw ng Kagitingan, i.e., two regular holidays falling on the same day, this Department is of
the view that the covered employees are entitled to at least two hundred percent (200%) of their basic wage
even if said holiday is unworked. The first 100% represents the payment of holiday pay on April 9, 1993 as
Good Friday and the second 100% is the payment of holiday pay for the same date as Araw ng Kagitingan.
Said bulletin was reproduced on January 23, 1998, when April 9, 1998 was both Maundy Thursday
and Araw ng Kagitingan.
Despite the explanatory bulletin, petitioner [Asian Transmission Corporation] opted to pay
its daily paid employees only 100% of their basic pay on April 9, 1998. Respondent Bisig ng Asian
Transmission Labor Union (BATLU) protested.
Office of the Voluntary Arbitrator:

 decision directing petitioner to pay its covered employees "200% and not just 100% of their
regular daily wages for the unworked April 9, 1998 which covers two regular holidays, namely,
Araw ng Kagitignan and Maundy Thursday."
 held that Article 94 of the Labor Code provides for holiday pay for every regular holiday, the
computation of which is determined by a legal formula which is not changed by the fact that
there are two holidays falling on one day, like on April 9, 1998 when it was Araw ng Kagitingan
and at the same time was Maundy Thursday; and that that the law, as amended, enumerates
ten regular holidays for every year should not be interpreted as authorizing a reduction to nine
the number of paid regular holidays "just because April 9 (Araw ng Kagitingan) in certain years,
like 1993 and 1998, is also Holy Friday or Maundy Thursday."
CA:
 upheld the findings of the Voluntary Arbitrator, holding that the Collective Bargaining
Agreement (CBA) between petitioner and BATLU, the law governing the relations between
them, clearly recognizes their intent to consider Araw ng Kagitingan and Maundy Thursday, on
whatever date they may fall in any calendar year, as paid legal holidays during the effectivity
of the CBA and that "[t]here is no condition, qualification or exception for any variance from the
clear intent that all holidays shall be compensated."
 in the absence of an explicit provision in law which provides for [a] reduction of holiday pay if
two holidays happen to fall on the same day, any doubt in the interpretation and implementation
of the Labor Code provisions on holiday pay must be resolved in favor of labor."
ISSUE/S: Whether or not the employees are entitled to 200% of their regular daily wages for the
unworked April 9, 1998 which covers two regular holidays. YES
HELD: The petition is devoid of merit.

Holiday pay is a legislated benefit enacted as part of the Constitutional imperative that the
State shall afford protection to labor. Its purpose is not merely "to prevent diminution of the monthly
income of the workers on account of work interruptions. In other words, although the worker is forced to
take a rest, he earns what he should earn, that is, his holiday pay." It is also intended to enable the worker
to participate in the national celebrations held during the days identified as with great historical and cultural
significance.
Independence Day (June 12), Araw ng Kagitingan (April 9), National Heroes Day (last Sunday of
August), Bonifacio Day (November 30) and Rizal Day (December 30) were declared national holidays to
afford Filipinos with a recurring opportunity to commemorate the heroism of the Filipino people, promote
Atty. Mercader
national identity, and deepen the spirit of patriotism. Labor Day (May 1) is a day traditionally reserved to
celebrate the contributions of the working class to the development of the nation, while the religious holidays
designated in Executive Order No. 203 allow the worker to celebrate his faith with his family.
As reflected above, Art. 94 of the Labor Code, as amended, affords a worker the enjoyment
of ten paid regular holidays. The provision is mandatory, regardless of whether an employee is paid
on a monthly or daily basis. Unlike a bonus, which is a management prerogative, holiday pay is a statutory
benefit demandable under the law. Since a worker is entitled to the enjoyment of ten paid regular
holidays, the fact that two holidays fall on the same date should not operate to reduce to nine the
ten holiday pay benefits a worker is entitled to receive.
It is elementary, under the rules of statutory construction, that when the language of the law is clear
and unequivocal, the law must be taken to mean exactly what it says. In the case at bar, there is nothing in
the law which provides or indicates that the entitlement to ten days of holiday pay shall be reduced to nine
when two holidays fall on the same day.
Petitioner’s assertion that Wellington v. Trajano has "overruled" the DOLE March 11, 1993
Explanatory Bulletin does not lie. In Wellington, the issue was whether monthly-paid employees are entitled
to an additional day’s pay if a holiday falls on a Sunday. This Court, in answering the issue in the negative,
observed that in fixing the monthly salary of its employees, Wellington took into account "every working day
of the year including the holidays specified by law and excluding only Sunday." In the instant case, the
issue is whether daily-paid employees are entitled to be paid for two regular holidays which fall on the same
day.
In any event, Art. 4 of the Labor Code provides that all doubts in the implementation and
interpretation of its provisions, including its implementing rules and regulations, shall be resolved in favor
of labor. For the working man’s welfare should be the primordial and paramount consideration.
Moreover, Sec. 11, Rule IV, Book III of the Omnibus Rules to Implement the Labor Code provides
that "Nothing in the law or the rules shall justify an employer in withdrawing or reducing any benefits,
supplements or payments for unworked regular holidays as provided in existing individual or collective
agreement or employer practice or policy."
From the pertinent provisions of the CBA entered into by the parties, petitioner had
obligated itself to pay for the legal holidays as required by law. Thus, the 1997-1998 CBA incorporates
the following provision:
ARTICLE XIV PAID LEGAL HOLIDAYS
The following legal holidays shall be paid by the COMPANY as required by law:
1. New Year’s Day (January 1st)
2. Holy Thursday (moveable)
3. Good Friday (moveable)
4. Araw ng Kagitingan (April 9th)
5. Labor Day (May 1st)
6. Independence Day (June 12th)
7. Bonifacio Day [November 30]
8. Christmas Day (December 25th)
9. Rizal Day (December 30th)
10. General Election designated by law, if declared public non-working holiday
11. National Heroes Day (Last Sunday of Augus
Only an employee who works on the day immediately preceding or after a regular holiday shall be entitled
to the holiday pay.
A paid legal holiday occurring during the scheduled vacation leave will result in holiday payment in addition
to normal vacation pay but will not entitle the employee to another vacation leave.
Under similar circumstances, the COMPANY will give a day’s wage for November 1st and December 31st
whenever declared a holiday. When required to work on said days, the employee will be paid according to
Art. VI, Sec. 3B hereof.
Atty. Mercader
Atty. Mercader
FERNANDEZ VS. NLRC

Panganiban, J:
G.R. No. 105892, January 28, 1998
FACTS:
The Agencia Cebuana is a sole proprietorship operated by Margueritte Lhuillier. Two (2) Position Papers
were filed by petitioners. In their Position Papers, petitioners alleged that they were employed by Lhuillier
and that they were illegally dismissed. Petitioners Fernandez, Adriano, Negapatan, Tomongha, Quianola,
Campo, Villaceran, Talledo, and Gadiano further alleged that prior to and during early July 1990, they
demanded from Margueritte Lhuillier an increase in their salaries since her business was making good and
that she was evading payment of taxes by making false entries in her records of account. Lhuillier became
angry and threatened them that something would happen to their employment if they would report her to
the BIR. Thereafter, Lhuillier suspected them of stealing jewelry from the pawnshop; and verbally informed
them not to report for work as their employment had been terminated. Petitioners Lim and Canonigo alleged
that in early January 1990 and in June 1990, respectively, they demanded increases in their salaries since
they noted that Lhuillier had a very lucrative business besides evading tax payments by making false entries
in her records of account. They also informed her that they intended to join the Associated Labor Union
(ALU), which made Lhuillier angry, causing her to threaten them that should they report her to the BIR and
join the ALU something would happen to their employment. Lhuillier advised them to tender their
resignations as they were reportedly responsible for some anomalies at the Agencia Cebuana-H Lhuillier.
Lhuillier assured them that they will be given separation pay, but they were not. Lhuillier contended that it
informed Lim that an investigation will be conducted by Lhuillier because of the report received by Flora
Go, also an employee of Lhuillier, that Lim sold to a company consumer her own jewelry, in violation of the
company house rules. A Notice of Intended Termination was served upon Lim requiring her to submit a
written explanation within 48 hours from receipt. Lim did not submit a written explanation but actively
participated in the investigation where she admitted having committed the violation complained of. In view
of her admission of guilt, the company lawyer recommended to the management her demotion and transfer
without reduction of salary. In the case of Jesus Tomongha, he was found to have stolen rematado jewelries
worth P70,670.00. Instead of attending the investigation scheduled for this offense, he abandoned his job
although his application for leave of absence was not approved. In the case of the other petitioners, Gloria
Adriano was found by Flora Go to have over-declared the weights and values of certain items of jewelry
pawned to the company, as a result of which, upon investigation, the pawnshop was found to have lost the
amount of P174,850.00. A letter dated July 19, 1990 was served upon Adriano to explain within 72 hours
why she should not be terminated. On July 20, 1990, Gloria Adriano, Florida Villaceran, Emilia Negapatan,
Brenda Gadiano, Leiden Fernandez, Jesus Tomongha, Asteria Campo and Florida Talledo did not report
for work although no requests for leave of absence were filed by them.
ISSUES:
1.) Whether or not the petitioners were illegally dismissed
2.) Assuming petitioners were illegally dismissed, was the computation of the backwages, service incentive
leave pay and damages valid and correct?
HELD:
The petition is meritorious. Nine of the petitioners were illegally dismissed, but that Petitioners Lim
and Canonigo were not.
1.) Private respondents controvert the claim of illegal dismissal by maintaining that petitioners abandoned
their employment. On the other hand, petitioners maintain that on July 19, 1990, Private Respondent
Marguerite Lhuillier, the pawnshop owner, told them not to report for work because their employment had
been terminated. Thus, they did not report for work the following day, July 20, 1990. On July 23, 1990, they
filed their respective complaints before the Regional Arbitration Board of Respondent NLRC. The records
of the case reveal that petitioners did not abandon their employment; rather, they were illegally dismissed.
To succeed in pleading abandonment as a valid ground for dismissal, the employer must prove (1) the
intention of an employee to abandon his or her employment and (2) an overt act from which such intention
may be inferred; i.e., the employee showed no desire to resume his work. Mere absence is not sufficient.
The employer must prove a deliberate and unjustified refusal of the employee to resume his employment
without any intention of returning. Private respondents failed to discharge this burden. The claim of
abandonment was inconsistent with the immediate filing of petitioners’ complaint for illegal dismissal and
Atty. Mercader
prayer for reinstatement. For how can an inference be made that an employee had no intention of returning
to work, when he filed a complaint for illegal dismissal praying for reinstatement three days after the alleged
abandonment. Moreover, considering that petitioners had been with Pawnshop Lhuillier for several years -
- ranging from six (6) years to thirty three (33) years -- it is unlikely that they would simply leave their
employment. Clearly, there is no cogent basis for private respondent’s theory that said petitioners
abandoned their work. In this light, we sustain the finding of the labor arbiter that said petitioners were
illegally dismissed, with neither just cause nor due process.
The foregoing holding cannot apply to Petitioners Marilyn Lim and Joseph Canonigo, however, because
they resigned.
2.) The clear policy of the Labor Code is to grant service incentive leave pay to workers in all establishments,
subject to a few exceptions. Section 2, Rule V, Book III of the Implementing Rules and Regulations provides
that every employee who has rendered at least one year of service shall be entitled to a yearly service
incentive leave of five days with pay. Service incentive leave is a right which accrues to every employee
who has served within 12 months, whether continuous or broken reckoned from the date the employee
started working, including authorized absences and paid regular holidays unless the working days in the
establishment as a matter of practice or policy, or that provided in the employment contracts, is less than
12 months, in which case said period shall be considered as one year. It is also commutable to its money
equivalent if not used or exhausted at the end of the year. In other words, an employee who has served for
one year is entitled to it. He may use it as leave days or he may collect its monetary value. To limit the
award to three years, as the solicitor general recommends, is to unduly restrict such right. The law indeed
does not prohibit its commutation.
Moreover, the solicitor general’s recommendation is contrary to the ruling of the Court in Bustamante et al.
vs. NLRC et al. lifting the three-year restriction on the amount of backwages and other allowances that may
be awarded an illegally dismissed employee, thus:
Therefore, in accordance with R.A. No. 6715, petitioners are entitled to their full backwages, inclusive of
allowances and other benefits or their monetary equivalent, from the time their actual compensation was
withheld from them up to the time of their actual reinstatement.
Since a service incentive leave is clearly demandable after one year of service -- whether continuous or
broken -- or its equivalent period, and it is one of the benefits which would have accrued if an employee
was not otherwise illegally dismissed, it is fair and legal that its computation should be up to the date of
reinstatement as provided under Section 279 of the Labor Code, as amended. However, the Implementing
Rules clearly state that entitlement to benefit provided under this Rule shall start December 16, 1975, the
date the amendatory provision of the Labor Code took effect. Hence, petitioners, except Lim and Canonigo,
should be entitled to service incentive leave pay from December 16, 1975 up to their actual reinstatement.
Atty. Mercader
Auto Bus Transport v Bautista

Chico-Nazario, J.
GR No. 156367 – 16 May 2005
FACTS:
Since May 24 1995, Respondent Antonio Bautista has been employed by petitioner Auto Bus Transport
Systems, Inc. (Autobus), as driver-conductor with travel routes Manila-Tuguegarao via Baguio, Baguio-
Tuguegarao via Manila and Manila-Tabuk via Baguio. Respondent was paid on commission basis, seven
percent (7%) of the total gross income per travel, on a twice a month basis. On january 3 2000, While
respondent was driving Autobus No. 114 along Sta. Fe, Nueva Vizcaya, the bus he was driving
accidentally bumped the rear portion of Autobus No. 124, as the latter vehicle suddenly stopped at a
sharp curve without giving any warning. Respondent averred that the accident happened because he was
compelled by the management to go back to Roxas, Isabela, although he had not slept for almost twenty-
four (24) hours, as he had just arrived in Manila from Roxas, Isabela. Respondent further alleged that he
was not allowed to work until he fully paid the amount of P75,551.50, representing thirty percent (30%) of
the cost of repair of the damaged buses and that despite respondent’s pleas for reconsideration, the
same was ignored by management. After a month, management sent him a letter of termination.
Respondent instituted a Complaint for Illegal Dismissal with Money Claims for nonpayment of 13th month
pay and service incentive leave pay against Autobus.
Petitioner avers that in the exercise of its management prerogative, respondent’s employment was
terminated only after the latter was provided with an opportunity to explain his side regarding the
accident.
LA: DISMISSED the complaint for illegal dismissal. However, the respondent must pay to the complainant
the following:
a. his 13th month pay from the date of his hiring to the date of his dismissa.
b. his service incentive leave pay for all the years he had been in service with the respondent,
presently computed at P13,788.05.
NLRC: MODIFIED LA’s decision by deleting the award of 13 th month pay. the award of service incentive
leave pay was maintained.
MR: DENIED; CA: DISMISSED for lack of merit. Hence, the instant petition.
ISSUE/S:
1. Whether or not respondent is entitled to service incentive leave
HELD: YES
 The disposition of the first issue revolves around the proper interpretation of Article 95 of
the Labor Code vis-à-vis Section 1(D), Rule V, Book III of the Implementing Rules and
Regulations of the Labor Code. (Refer to the provisions provided above)
 According to the Implementing Rules, Service Incentive Leave shall not apply to employees
classified as "field personnel." The phrase "other employees whose performance is unsupervised
by the employer" must not be understood as a separate classification of employees to which
service incentive leave shall not be granted. Rather, it serves as an amplification of the
interpretation of the definition of field personnel under the Labor Code as those "whose actual
hours of work in the field cannot be determined with reasonable certainty."The same is true with
respect to the phrase "those who are engaged on task or contract basis, purely commission
basis." Said phrase should be related with "field personnel," applying the rule on ejusdem generis
that general and unlimited terms are restrained and limited by the particular terms that they
follow.Hence, employees engaged on task or contract basis or paid on purely commission basis
are not automatically exempted from the grant of service incentive leave, unless, they fall under
the classification of field personnel.
Therefore, petitioner’s contention that respondent is not entitled to the grant of service incentive
leave just because he was paid on purely commission basis is misplaced. What must be
ascertained in order to resolve the issue of propriety of the grant of service incentive leave
to respondent is whether or not he is a field personnel.
The definition of a ‘Field Personnel’ is elaborated in the Bureau of Working Conditions (BWC), Advisory
Opinion to Philippine Technical-Clerical Commercial Employees Association which states that: As
a general rule, [field personnel] are those whose performance of their job/service is not
supervised by the employer or his representative, the workplace being away from the
Atty. Mercader
principal office and whose hours and days of work cannot be determined with reasonable
certainty; hence, they are paid specific amount for rendering specific service or performing
specific work. If required to be at specific places at specific times, employees including drivers
cannot be said to be field personnel despite the fact that they are performing work away from the
principal office of the employee.
To this discussion by the BWC, the petitioner differs and postulates that under said advisory opinion, no
employee would ever be considered a field personnel because every employer, in one way or
another, exercises control over his employees. Petitioner further argues that the only criterion that
should be considered is the nature of work of the employee in that, if the employee’s job requires
that he works away from the principal office like that of a messenger or a bus driver, then he is
inevitably a field personnel.
We are not persuaded. At this point, it is necessary to stress that the definition of a "field personnel" is not
merely concerned with the location where the employee regularly performs his duties but also
with the fact that the employee’s performance is unsupervised by the employer. As discussed
above, field personnel are those who regularly perform their duties away from the
principal place of business of the employer and whose actual hours of work in the field
cannot be determined with reasonable certainty. Thus, in order to conclude whether an
employee is a field employee, it is also necessary to ascertain if actual hours of work in
the field can be determined with reasonable certainty by the employer. In so doing, an
inquiry must be made as to whether or not the employee’s time and performance are constantly
supervised by the employer.
As observed by the Labor Arbiter and concurred in by the Court of Appeals:
It is of judicial notice that along the routes that are plied by these bus companies, there are its inspectors
assigned at strategic places who board the bus and inspect the passengers, the punched tickets,
and the conductor’s reports. There is also the mandatory once-a-week car barn or shop day,
where the bus is regularly checked as to its mechanical, electrical, and hydraulic aspects,
whether or not there are problems thereon as reported by the driver and/or conductor. They too,
must be at specific place at a specified time, as they generally observe prompt departure and
arrival from their point of origin to their point of destination. In each and every depot, there is
always the Dispatcher whose function is precisely to see to it that the bus and its crew leave the
premises at specific times and arrive at the estimated proper time. These, are present in the case
at bar. The driver, the complainant herein, was therefore under constant supervision while in the
performance of this work. He cannot be considered a field personnel.
Therefore, as correctly concluded by the appellate court, respondent is not a field personnel but a regular
employee who performs tasks usually necessary and desirable to the usual trade of petitioner’s
business. Accordingly, respondent is entitled to the grant of service incentive leave.
Atty. Mercader
JPL Marketing v. Court of Appeals

Tinga, J.
GR No. 151966 – 8 July 2005
FACTS:
JPL Marketing and Promotions (hereinafter referred to as JPL) is a domestic corporation engaged in the
business of recruitment and placement of workers. On the other hand, private respondents Noel
Gonzales, Ramon Abesa III and Faustino Aninipot were employed by JPL as merchandisers on separate
dates and assigned at different establishments in Naga City and Daet, Camarines Norte as attendants to
the display of California Marketing Corporation (CMC), one of petitioners clients. On 13 August 1996, JPL
notified private respondents that CMC would stop its direct merchandising activity in the Bicol Region,
Isabela, and Cagayan Valley effective 15 August 1996. They were advised to wait for further notice as
they would be transferred to other clients. However, on 17 October 1996, private respondents Abesa and
Gonzales filed before the National Labor Relations Commission Regional Arbitration Branch (NLRC) Sub
V complaints for illegal dismissal, praying for separation pay, 13th month pay, service incentive leave pay
and payment for moral damages. Aninipot filed a similar case thereafter. Labor Arbiter: Dismissed the
complaint. Denied 13th month pay and service incentive leave pay. NLRC: Not illegally dismissed.
Ordered the payment of separation pay, service incentive leave pay and 13th month pay. CA: Affirmed in
toto the NLRC resolution.
ISSUE/S:
1. W/N there private respondents are entitled to separation pay, 13 th month pay and service
incentive leave; and
2. Granting that they are so entitled, what should be the reckoning point for computation of said
awards
HELD: PETITION GRANTED IN PART.
1. Under Arts. 283 and 284 of the Labor Code, separation pay is authorized only in cases of dismissals
due to any of these reasons: (a) installation of labor saving devices; (b) redundancy; (c)
retrenchment; (d) cessation of the employer's business; and (e) when the employee is suffering from
a disease and his continued employment is prohibited by law or is prejudicial to his health and to the
health of his co-employees. However, separation pay shall be allowed as a measure of social justice
in those cases where the employee is validly dismissed for causes other than serious misconduct or
those reflecting on his moral character, but only when he was illegally dismissed. In addition, Sec.
4(b), Rule I, Book VI of the Implementing Rules to Implement the Labor Code provides for the
payment of separation pay to an employee entitled to reinstatement but the establishment where he
is to be reinstated has closed or has ceased operations or his present position no longer exists at the
time of reinstatement for reasons not attributable to the employer.
The common denominator of the instances where payment of separation pay is warranted is that the
employee was dismissed by the employer. In the instant case, there was no dismissal to speak of. Private
respondents were simply not dismissed at all, whether legally or illegally. What they received from JPL
was not a notice of termination of employment, but a memo informing them of the termination of CMCs
contract with JPL. More importantly, they were advised that they were to be reassigned. At that time,
there was no severance of employment to speak of.
Furthermore, Art. 286 of the Labor Code allows the bona fide suspension of the operation of a business
or undertaking for a period not exceeding six (6) months, wherein an employee/employees are placed on
the so-called floating status. When that floating status of an employee lasts for more than six months, he
may be considered to have been illegally dismissed from the service. Thus, he is entitled to the
corresponding benefits for his separation, and this would apply to suspension either of the entire business
or of a specific component thereof. As clearly borne out by the records of this case, private respondents
sought employment from other establishments even before the expiration of the six (6)-month period
provided by law. As they admitted in their comment, all three of them applied for and were employed by
Atty. Mercader
another establishment after they received the notice from JPL. JPL did not terminate their employment;
they themselves severed their relations with JPL. Thus, they are not entitled to separation pay. The Court
is not inclined in this case to award separation pay even on the ground of compassionate justice. The
Court of Appeals relied on the cases wherein the Court awarded separation pay to legally dismissed
employees on the grounds of equity and social consideration. In addition, the doctrine enunciated in the
case of Serrano cited by private respondents has already been abandoned by our ruling in Agabon v.
National Labor Relations Commission. Private respondents are not entitled to the payment of damages
considering that there was no violation of due process in this case. Nonetheless, JPL cannot escape the
payment of 13th month pay and service incentive leave pay to private respondents. Said benefits are
mandated by law and should be given to employees as a matter of right.
On the other hand, service incentive leave, as provided in Art. 95 of the Labor Code, is a yearly leave benefit of
five (5) days with pay, enjoyed by an employee who has rendered at least one year of service. Unless specifically
excepted, all establishments are required to grant service incentive leave to their employees. The term at least
one year of service shall mean service within twelve (12) months, whether continuous or broken reckoned from
the date the employee started working. The Court has held in several instances that service incentive leave is
clearly demandable after one year of service.
Admittedly, private respondents were not given their 13th month pay and service incentive leave pay while they
were under the employ of JPL. Instead, JPL provided salaries which were over and above the minimum wage.
The Court rules that the difference between the minimum wage and the actual salary received by private
respondents cannot be deemed as their 13th month pay and service incentive leave pay as such difference is not
equivalent to or of the same import as the said benefits contemplated by law. Thus, as properly held by the Court
of Appeals and by the NLRC, private respondents are entitled to the 13th month pay and service incentive leave
pay.
2. While computation for the 13th month pay should properly begin from the first day of employment,
the service incentive leave pay should start a year after commencement of service, for it is only then that
the employee is entitled to said benefit. On the other hand, the computation for both benefits should only
be up to 15 August 1996, or the last day that private respondents worked for JPL. To extend the period to
the date of finality of the NLRC resolution would negate the absence of illegal dismissal, or to be more
precise, the want of dismissal in this case. Besides, it would be unfair to require JPL to pay private
respondents the said benefits beyond 15 August 1996 when they did not render any service to JPL
beyond that date. These benefits are given by law on the basis of the service actually rendered by the
employee, and in the particular case of the service incentive leave, is granted as a motivation for the
employee to stay longer with the employer. There is no cause for granting said incentive to one who has
already terminated his relationship with the employer.
Atty. Mercader
David v. Macasio
Brion, J.
G.R. No. 195466 - 2 July 2014
FACTS:
In January 2009, Macasio filed before the LA a complaint against petitioner Ariel L. David, doing
business under the name and style "Yiels Hog Dealer," for non-payment of overtime pay, holiday pay and
13th month pay. He also claimed payment for moral and exemplary damages and attorney’s fees. Macasio
also claimed payment for service incentive leave (SIL).
In January 2009, Macasio filed before the LA a complaint against petitioner Ariel L. David, doing
business under the name and style "Yiels Hog Dealer," for non-payment of overtime pay, holiday pay and
13th month pay. He also claimed payment for moral and exemplary damages and attorney’s fees. Macasio
also claimed payment for service incentive leave (SIL).
Macasio alleged before the LA that he had been working as a butcher for David since January 6,
1995. Macasio claimed that David exercised effective control and supervision over his work, pointing out
that David: (1) set the work day, reporting time and hogs to be chopped, as well as the manner by which
he was to perform his work; (2) daily paid his salary of ₱700.00, which was increased from ₱600.00 in 2007,
₱500.00 in 2006 and ₱400.00 in 2005; and (3) approved and disapproved his leaves. Macasio added that
David owned the hogs delivered for chopping, as well as the work tools and implements; the latter also
rented the workplace. Macasio further claimed that David employs about twenty-five (25) butchers and
delivery drivers.
David argued that he started his hog dealer business in 2005, and that he only has ten (10)
employees. He alleged that he hired Macasio as a butcher or chopper on “pakyaw” or task basis who is,
therefore, not entitled to overtime pay, holiday pay and 13th month pay. David pointed out that Macasio:
(1) usually starts his work at 10:00 p.m. and ends at 2:00 a.m. of the following day or earlier, depending on
the volume of the delivered hogs; (2) received the fixed amount of P700.00 per engagement, regardless of
the actual number of hours that he spent chopping the delivered hogs; and (3) was not engaged to report
for work and, accordingly, did not receive any fee when no hogs were delivered.
Respondent disputed petitioner’s allegations. He argued that, first, David did not start his business
only in 2005. He pointed to the Certificate of Employment that David issued in his favor which placed the
date of his employment, albeit erroneously, in January 2000. Second, he reported for work every day which
the payroll or time record could have easily proved had David submitted them in evidence. David claimed
that he issued the Certificate of Employment, upon Macasio’s request, only for overseas employment
purposes.
Issue:
1. Whether or not a worker engaged in “pakyaw” or task basis is entitled to 13th month pay
Held:
No. The governing law on 13th month pay is PD No. 851. As with holiday and SIL pay, 13th month
pay benefits generally cover all employees; an employee must be one of those expressly enumerated to
be exempted. Section 3 of the Rules and Regulations Implementing P.D. No. 851 enumerates the
exemptions from the coverage of 13th month pay benefits. Under Section 3(e), "employers of those who
are paid on xxx task basis, and those who are paid a fixed amount for performing a specific work,
irrespective of the time consumed in the performance thereof" are exempted. Note that unlike the IRR of
the Labor Code on holiday and SIL pay, Section 3(e) of the Rules and Regulations Implementing PD No.
851 exempts employees "paid on task basis" without any reference to "field personnel." This could only
mean that insofar as payment of the 13 th month pay is concerned, the law did not intend to qualify the
exemption from its coverage with the requirement that the task worker be a "field personnel" at the same
time.
Atty. Mercader
RICARDO G. PALOMA, petitioner , vs. PHILIPPINE AIRLINES, INC. and NLRC, respondents.
[G.R. No. 148415. July 14, 2008.]
FACTS:
Paloma worked with PAL from September 1957, rising from the ranks to retire, after 35 years of
continuous service, as senior vice president for finance. Nine (9) months before Paloma retired on
November 30, 1992, PAL was privatized. By way of post-employment benefits, PAL paid Paloma the total
amount of PhP5,163,325.64 which represented his separation/retirement gratuity and accrued vacation
leave pay. The leave benefits Paloma claimed being entitled to refer to his 450-day accrued sick leave
credits which PAL allegedly only paid the equivalent of 18 days. He anchored his entitlement on Executive
Order No. (E.O.) 1077. Answering Paloma's written demands for conversion to cash of his accrued sick
leave credits, PAL asserted having paid all of Paloma's commutable sick leave credits due him pursuant to
company policy. The company leave policy adverted to grants PAL's regular ground personnel a graduated
sick leave benefits, those having rendered at least 25 years of service being entitled to 20 days of sick
leave for every year of service. An employee, under the policy, may accumulate sick leaves with pay up to
230 days. Subject to defined qualifications, sick leave credits in excess of 230 days shall be commutable
to cash at the employee's option and shall be paid in lump sum on or before May 31st of the following year
they were earned. Per PAL's records, Paloma appears to have, for the period from 1990 to 1992, commuted
58 days of his sick leave credits, broken down as follows: 20 days each in 1990 and 1991 and 18 days in
1992. Paloma maintains that he comes within the coverage of E.O. 1077, the same having been issued in
1986, before he severed official relations with PAL, and at a time when the applicable constitutional
provision on the coverage of the civil service made no distinction between GOCCs with original charters
and those without, like PAL which was incorporated under the Corporation Code. Implicit in Paloma's
contention is the submission that he earned the bulk of his sick leave credits under the aegis of the 1973
Constitution when PAL, being then a government-controlled corporation, was under civil service coverage.
ISSUE:
1. Whether or not E.O. 1077, before PAL's privatization, applies to its employees;
2. Whether or not Paloma is entitled to a commutation of his accrued sick leave credits.
HELD:
PAL never ceased to be operated as a private corporation, and was not subjected to the Civil Service
Law.
The Court can allow that PAL, during the period material, was a government controlled corporation in the
sense that the GSIS owned a controlling interest over its stocks. One stubborn fact, however, remains:
Through the years, PAL functioned as a private corporation and managed as such for profit. Their personnel
were never considered government employees. Of governing application to them was the Labor Code.
Given the foregoing considerations, Paloma cannot plausibly be accorded the benefits of E.O. 1077 which,
to stress, was issued to narrow the gap between the leave privileges between the members of the judiciary,
on one hand, and other government officers and employees in the civil service, on the other.
Paloma not entitled to the benefits granted in E.O. 1077; existing company policy on the matter
applies
Accrued sick leave credits in excess of 230 days were not, if earned before 1990 when the above policy
took effect, commutable to cash; they were simply forfeited. Those earned after 1990, but still subject to
the 230-day threshold rule, were commutable to cash to the extent of 75% of the employee's current
entitlement, and payable on or before May 31st of the following year, necessarily implying that the privilege
to commute is time-bound. It appears that Paloma had, as of 1990, more than 230 days of accrued sick
leave credits. Following company policy, Paloma was deemed to have forfeited the monetary value of his
leave credits in excess of the 230-day ceiling. PAL is correct in contending that Paloma had received
whatever was due on the commutation of his accrued sick leave credits in excess of the 230 days limit,
specifically the 58 days commutation for 1990, 1991, and 1992.
No commutation of 230 days accrued sick leave credits
PAL's company policy did not provide for a commutation of the first 230 days accrued sick leave credits
employees may have upon their retirement. No law provides for commutation of unused or accrued sick
leave credits in the private sector. Commutation is allowed by way of voluntary endowment by an employer
through a company policy or by a CBA. In fine, absent any provision in the applicable company policy
authorizing the commutation of the 230 days accrued sick leave credits existing upon retirement, Paloma
may not, as a matter of enforceable right, insist on the commutation of his sick leave credits to cash.
Atty. Mercader
Sugue v. Triumph International

Leandro De Castro, J
G.R. No. 164804. January 30, 2009
 On June 1, 2000, Sugue and Valderrama filed a complaint with the NLRC against Triumph for
payment of money claims arising from allegedly unpaid vacation and sick leave credits, birthday leave
and 14th month pay for the period 1999-2000. On June 19, 2000, Sugue and Valderrama personally
attended the preliminary conference of the said case
 Personnel Manager, Ralph Funtila, issued separate memoranda to Sugue and Valderrama requiring
them to inform the office of the General Manager of their whereabouts on June 19, 2000 from 9:06
a.m. to 11:15 a.m. They replied that they attended the aforementioned preliminary conference. 7
HDTCSI On June 23, 2000, Valderrama and Sugue were directed to submit a written explanation as
to why they used company time and the company vehicle and driver in attending the preliminary
conference at the NLRC and why they left the office without advising the Managing Director. They
explained that they believed they may use company time and the company vehicle since the hearing
they attended was pursuant to a complaint that they filed as employees of the company.
 On June 28, 2000, Triumph charged the one-half day utilized by Sugue and Valderrama in attending
the NLRC hearing on June 19, 2000 to their vacation leave credits.On July 17, 2000, Valderrama
wrote the company a letter stating that he considered himself constructively dismissed due to the
unreasonable pressures and harassments he suffered the past months which prevented him from
effectively exercising his tasks as Direct Sales Manager. Subsequently, on July 28, 2000, Triumph
issued a memorandum requiring Valderrama to explain, under pain of dismissal, his continued
absences without official leave. Valderrama failed to respond, thus, on August 11, 2000, Triumph
decided to terminate Valderrama's employment for abandonment of work.
 July 25, 2000, Sugue also wrote the company stating that she considers herself constructively
dismissed. 12 From the pleadings, Sugue's charge of constructive dismissal was based on the fact
that her request for vacation leave from July 14 to 15, 2000 was subject to the condition that she first
submit a report on the company's 2001 Marketing Plan.
 On August 11, 2000, Triumph required Sugue to explain why she should not be terminated for
continued absences without official leave. 13 Sugue failed to comply, thus, on September 1, 2000,
her employment was terminated for abandonment of work.
 Labor Arbiter Salimathar Nambi rendered a decision, declaring that Sugue and Valderrama were
constructively dismissed.
 NLRC granted the appeal and reversed the ruling of Labor Arbiter Nambi.
 CA rendered its assailed decision, the dispositive portion of which reads: WHEREFORE, the petition
is partly granted.
 Triumph's subsequent motion for reconsideration as well as the motion for partial reconsideration filed
by Sugue and the heirs of Valderrama were both denied by the appellate court in its resolution dated
July 21, 2004.
 After a thorough review of the evidence on record, we find sufficient reasons to uphold Triumph's
position.
 In the case of Valderrama:
1. The half-day he spent in attending the NLRC hearing on June 19, 2000 was charged to his
vacation leave credit;
2. His application for sick leave for July 3 to 5, 2000 was disapproved; and
3. His request for executive check-up was denied.
In the case of Sugue:
1. The half-day she spent in attending the NLRC hearing on June 19, 2000 was charged to her
vacation leave credit;
2. The approval of her application for leave of absence for July 14 and 15, 2000 was made subject to
the condition that she should first submit a report on the 2001 Marketing Plan; HCITAS
3. The approval of her request for executive check-up was deferred until after the visit of the
company's regional marketing manager
According to Sugue and Valderrama, this series of discriminatory acts committed by
Triumph created an adverse working environment rendering it impossible for them to continue
Atty. Mercader
working for Triumph. Hence, their severance from the company was not of their own making and
therefore amounted to constructive dismissal which is tantamount to an illegal termination of
employment.
With respect to the first alleged discriminatory act, we can conceive of no reason to
ascribe bad faith or malice to Triumph for charging to the leave credits of Sugue and Valderrama
the half-day that they spent in attending the preliminary conference of the case they instituted
against Triumph. It is fair and reasonable for Triumph to do so considering that Sugue and
Valderrama did not perform work for one-half day on June 19, 2000.
Indeed, we find it surprising that Sugue and Valderrama would even have the temerity to
contend that the hours they spent in attending the hearing were compensable time. As the NLRC
correctly pointed out, as early as the case of J.B. Heilbronn Co. v. National Labor Union, 29 this
Court held that:
When the case of strikes, and according to the CIR even if the strike is legal, strikers may
not collect their wages during the days they did not go to work, for the same reasons if not more,
laborers who voluntarily absent themselves from work to attend the hearing of a case in
which they seek to prove and establish their demands against the company, the legality
and propriety of which demands is not yet known, should lose their pay during the period
of such absence from work. The age-old rule governing the relation between labor and
capital or management and employee is that a "fair day's wage for a fair day's labor." If
there is no work performed by the employee there can be no wage or pay, unless of course, the
laborer was able, willing and ready to work but was illegally locked out, dismissed or suspended.
It is hardly fair or just for an employee or laborer to fight or litigate against his employer on the
employer's time.
In a case where a laborer absents himself from work because of a strike or to
attend a conference or hearing in a case or incident between him and his employer, he
might seek reimbursement of his wages from his union which had declared the strike or filed the
case in the industrial court. Or, in the present case, he might have his absence from his work
charged against his vacation leave
This doctrine in Heilbronn was reiterated in Manila Trading & Supply Co. v. Manila
Trading Labor Association 30 and quoted favorably in later cases. 31 Triumph is, thus, justified in
charging Sugue and Valderrama's half-day absence to their vacation leave credits.
Corollarily, we cannot uphold the CA's approval of the Labor Arbiter's finding that the
memoranda issued by Triumph in connection with the June 19, 2000 hearing constitute undue
harassment.
Anent Sugue and Valderrama's claim that they were unjustly denied availment of their
leaves as part of a scheme on the part of Triumph to harass them, we find the same patently
without merit.
In the case of Valderrama, he applied for sick leave for the period July 3 to 5, 2000
allegedly because of persistent cough and vertigo, but this was disapproved by Triumph. The
record, however, reveals that he failed to comply with the company's requirement that an
application for sick leave for two or more days must be supported by a medical certificate which
must be verified by the company physician. He was even given twenty-four (24) hours to submit
the same but he totally ignored it. That his sick leave application was denied was mainly due to
his own fault and must not be unduly blamed on his employer. For her part, Sugue condemns
Triumph for putting a condition on the approval of her two days vacation leave for July 14 and 15,
2000, when she was required to first submit a report on the 2001 Marketing Plan. To be very
accurate, Mr. Escueta's memorandum dated July 13, 2000 advised Sugue that her application for
leave will be approved if she will commit to submit her reports in connection with the 2001
Marketing Plan by July 17, 2000, which was two days after her leave. Again, we find nothing
discriminatory in such a condition considering that she was unable to show that she was the only
employee whose leave application has been subjected to a condition.
As for the nature of the condition itself, we do not see how it can be deemed
unreasonable or in bad faith for the employer to require its employee to complete her
assignments on time or before taking a vacation leave. Being the Marketing Services Manager,
Sugue's reports were indispensable in the preparation of the 2001 Marketing Plan plus the fact
Atty. Mercader
that the company had been experiencing a significant decline in sales at that time which all the
more emphasizes the need for her to submit an updated report relative to the 2001 Initial
Marketing Plan. For sure, she failed to show that the company prevented her from availing of her
vacation leave afterwards or at some other time. Clearly then, there was no discrimination nor
harassment to speak of.
Third, both Sugue and Valderrama question the denial by Triumph of their request for
executive check-up. It should be noted that Triumph did not completely turn down their request.
Based on Sugue and Valderrama's own evidence, their request was merely deferred because the
2001 Initial Marketing Plan was due on June 26, 2000 and Triumph's regional product manager
was scheduled to visit the country on June 26 to 29, 2000. 36 As Valderrama was the Direct
Sales Manager and Sugue was the Marketing Services Manager, their presence on those dates
was undoubtedly needed. Thus, their contention that the approval of their request was indefinitely
withheld is apocryphal. In fact, there is nothing that prevented them from scheduling their
executive check-up after the visit of the regional marketing manager.
It is worth stressing that in the grant of vacation and sick leave privileges to an employee,
the employer is given leeway to impose conditions on the entitlement to the same as the grant of
vacation and sick leave is not a standard of law, but a prerogative of management. It is a mere
concession or act of grace of the employer and not a matter of right on the part of the
employee. Thus, it is well within the power and authority of an employer to deny an employee's
application for leave and the same cannot be perceived as discriminatory or harassment.
All told, Triumph did not act with discrimination, insensibility or disdain towards Sugue
and Valderrama, which foreclosed any choice on their part except to forego their continued
employment. Purely conjectural are their assertions that the disapproval of their leave
applications, the denial of their request for executive check-up and the alleged demotion, were
carried out by Triumph in retaliation to their filing of a complaint for unpaid money claims against
the company. Sugue and Valderrama offered insufficient proof to substantiate their allegations.
For this reason, their bare and selfserving charges of constructive dismissal, when unsupported
by the evidence on record, cannot be given credence.
|||
Atty. Mercader
PNCC SKYWAY TRAFFIC MANAGEMENT AND SECURITY DIVISION WORKERS ORGANIZATION

(PSTMSDWO), represented by its President, RENE SORIANO, v. PNCC SKYWAY CORPORATION
Peralta, J:
G.R. No. 171231, February 17, 2010
FACTS:
Petitioner PNCC Skyway Corporation Traffic Management and Security Division Workers'
Organization (PSTMSDWO) is a labor union duly registered with the Department of Labor and Employment
(DOLE). Respondent PNCC Skyway Corporation is a corporation duly organized and operating under and
by virtue of the laws of the Philippines. On November 15, 2002, petitioner and respondent entered into a
Collective Bargaining Agreement (CBA) incorporating the terms and conditions of their agreement which
included vacation leave and expenses for security license provisions.
Among the pertinent provisions of the CBA are the following:
ARTICLE VIII
VACATION LEAVE AND SICK LEAVE
Section 1. Vacation Leave.
[b] The company shall schedule the vacation leave of employees during the year taking into
consideration the request of preference of the employees. (emphasis supplied)
[c] Any unused vacation leave shall be converted to cash and shall be paid to the employees on the first week
of December each year.
ARTICLE XXI
Section 6. Security License All covered employees must possess a valid License [Security Guard License]
issued by the Chief, Philippine National Police or his duly authorized representative, to perform his duties
as security guard. All expenses of security guard in securing/renewing their licenses shall be for their
personal account. Guards, securing/renewing their license must apply for a leave of absence and/or a
change of schedule. Any guard who fails to renew his security guard license should be placed on forced
leave until such time that he can present a renewed security license.
Petitioner objected to the implementation of the said memorandum. It insisted that the individual
members of the union have the right to schedule their vacation leave. It opined that the unilateral scheduling
of the employees' vacation leave was done to avoid the monetization of their vacation leave in December
2004. Petitioner also demanded that the expenses for the required in-service training of its member security
guards, as a requirement for the renewal of their license, be shouldered by the respondent. However, the
respondent did not accede to petitioner's demands and stood firm on its decision to schedule all the vacation
leave of petitioner's members. Due to the disagreement between the parties, petitioner elevated the matter
to the DOLE-NCMB for preventive mediation. For failure to settle the issue amicably, the parties agreed to
submit the issue before the voluntary arbitrator. The Voluntary Arbitrator issued a Decision that the
scheduling of all vacation leaves under Article VIII, Section 6, thereof, shall be under the discretion of the
union members entitled thereto, and the management to convert them into cash all the leaves which the
management compelled them to use and to pay the expenses for the in-service-training of the company
security guards, as a requirement for renewal of licenses, shall not be their personal account but that of the
company. Respondent filed a motion for reconsideration, which the voluntary arbitrator denied. Aggrieved,
respondent filed a Petition for Certiorari with Prayer for Temporary Restraining Order and/or Writ of
Preliminary Injunction with the CA, and the CA rendered a Decision annulling and setting aside the decision
and order of the voluntary arbitrator. The CA ruled that since the provisions of the CBA were clear, the
voluntary arbitrator has no authority to interpret the same beyond what was expressly written. Petitioner
filed a motion for reconsideration, which the CA denied.
ISSUE:
Whether or not the Court of Appeals erred in holding that the management has sole discretion to
schedule the vacation leave of the petitioner
HELD:
As to the issue on vacation leaves, the petition has no merit.
The rule is that where the language of a contract is plain and unambiguous, its meaning should be
determined without reference to extrinsic facts or aids. The intention of the parties must be gathered from
Atty. Mercader
that language, and from that language alone. Stated differently, where the language of a written contract is
clear and unambiguous, the contract must be taken to mean that which, on its face, it purports to mean,
unless some good reason can be assigned to show that the words used should be understood in a different
sense. In the case at bar, the contested provision of the CBA is clear and unequivocal. Article VIII, Section
1 (b) of the CBA categorically provides that the scheduling of vacation leave shall be under the option of
the employer. The preference requested by the employees is not controlling because respondent retains
its power and prerogative to consider or to ignore said request. If the terms of a CBA are clear and leave
no doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall prevail. In
fine, the CBA must be strictly adhered to and respected if its ends have to be achieved, being the law
between the parties. Although the preferred vacation leave schedule of petitioner's members should be
given priority, they cannot demand, as a matter of right that their request be automatically granted by the
respondent. If the petitioners were given the exclusive right to schedule their vacation leave then said right
should have been incorporated in the CBA. In the absence of such right and in view of the mandatory
provision in the CBA giving respondent the right to schedule the vacation leave of its employees,
compliance therewith is mandated by law. In the grant of vacation leave privileges to an employee, the
employer is given the leeway to impose conditions on the entitlement to and commutation of the same, as
the grant of vacation leave is not a standard of law, but a prerogative of management. It is a mere
concession or act of grace of the employer and not a matter of right on the part of the employee. Thus, it is
well within the power and authority of an employer to impose certain conditions, as it deems fit, on the grant
of vacation leaves, such as having the option to schedule the same. Along that line, since the grant of
vacation leave is a prerogative of the employer, the latter can compel its employees to exhaust all their
vacation leave credits. Of course, any vacation leave credits left unscheduled by the employer, or any
scheduled vacation leave that was not enjoyed by the employee upon the employer's directive, due to
exigencies of the service, must be converted to cash, as provided in the CBA. However, it is incorrect to
award payment of the cash equivalent of vacation leaves that were already used and enjoyed by the
employees. By directing the conversion to cash of all utilized and paid vacation leaves, the voluntary
arbitrator has licensed unjust enrichment in favor of the petitioner and caused undue financial burden on
the respondent. Evidently, the Court cannot tolerate this.
It would seem that petitioner's goal in relentlessly arguing that its members preferred vacation leave
schedule should be given preference is not allowed to them to avail themselves of their respective vacation
leave credits at all but, instead, to convert these into cash.
Atty. Mercader
Atty. Mercader
Aklan Electric Cooperative vs NLRC

Gonzaga-Reyes, J.
GR No. 121439 – 25 January 2000
In his petition for certiorari and prohibition with prayer for writ of preliminary injunction and/or temporary
restraining order, petitioner assails (a) the decision dated April 20, 1995, of public respondent National
Labor Relations Commission (NLRC), Fourth (4th) Division, Cebu City, in NLRC Case No. V-0143-94
reversing the February 25, 1994 decision of Labor Arbiter Dennis D. Juanon and ordering petitioner to pay
wages in the aggregate amount of P6,485,767.90 to private respondents, and (b) the resolution dated July
28, 1995 denying petitioners motion for reconsideration, for having been issued with grave abuse of
discretion.
FACTS:
January 22, 1991 by way of a resolution of the Board of Directors of AKELCO it allowed the
temporary holding of office at Amon Theater, Kalibo, Aklan upon the recommendation of Atty. Leovigildo
Mationg, then project supervisor, on the ground that the office at Lezo, Aklan was dangerous and unsafe.
Majority of the employees including the herein complainants, continued to report for work at Lezo, Aklan
and were paid of their salaries. The complainants claimed that transfer of office from Lezo, Aklan to Kalibo,
Aklan was illegal because it failed to comply with the legal requirements under P.D. 269, thus the they
remained and continued to work at the Lezo Office until they were illegally locked out therefrom by the
respondents. Despite the illegal lock out however, complainants continued to report daily to the location of
the Lezo Office, prepared to continue in the performance of their regular duties. Complainants who
continuously reported for work at Lezo, Aklan were not paid their salaries from June 1992 up to March 18,
1993. LA dismissed the complaints. NLRC reversed and set aside the LA’s decision and RULING that
private respondents are entitled to unpaid wages. NLRC based its conclusion on the following: (a) the letter
of Leyson, Office Manager of AKELCO addressed to AKELCO’s General Manager, Atty. Mationg,
requesting for the payment of private respondents’ unpaid wages from June 16, 1992 to March18, 1993;
(b) the memorandum of said Atty. Mationg in answer to the letter request of Leyson where he made an
assurance that he will recommend such request; (c) the private respondents’ own computation of their
unpaid wages. Petitioner AKELCO claims compensable service is best shown by timecards, payslips and
other similar documents and it was an error for public respondent to consider the computation of the claims
for wages and benefits submitted merely by private respondents as substantial evidence
ISSUE:
Whether or not the refusal of private respondents to work under the lawful orders of AKELCO management
are covered by the “no work, no pay” principle and thus they are not entitled to the claim for unpaid wages
HELD:
The above bases of the NLRC does not constitute substantial evidence to support the conclusion that
private respondents are entitled to the payment of wages from June 16, 1992 to March 18, 1993. Substantial
evidence is that amount of relevant evidence which a reasonable mind might accept as adequate to justify
a conclusion. These evidences relied upon by public respondent did not establish the fact that private
respondents actually rendered services in the Kalibo office during the stated period. It has been established
that the petitioner’s business office was transferred to Kalibo and all its equipment, records and facilities
were transferred thereat and that it conducted its official business in Kalibo during the period in question. It
was incumbent upon private respondents to prove that they indeed rendered services for petitioner, which
they failed to do.
It would neither be fair nor just to allow private respondents to recover something they have not earned and
could not have earned because they did not render services at the Kalibo office during the stated period.
Atty. Mercader
PHILEX GOLD PHILIPPINES, INC., GERARDO H. BRIMO, LEONARD P. JOSEF, and JOSE B.
ANIEVAS, vs. PHILEX BULAWAN SUPERVISORS UNION
G.R. No. 149758. August 25, 2005
Facts:
Respondent Philex Bulawan Supervisors Union ("Philex Supervisors Union") is the sole and exclusive
bargaining representative of all supervisors of petitioner Philex Gold Philippines, Incorporated ("Philex
Gold"), a gold mining company with mine site at Vista Alegre, Nabulao, Sipalay, Negros Occidental. On
July 2, 1997, respondent union entered into a Collective Bargaining Agreement (CBA) with petitioner
company effective August 1, 1996 up to July 31, 2001. It appears, however, that after the signing of the
CBA, Philex Gold made the employees of Philex Mining Corporation from Padcal, Tuba, Benguet, its regular
supervisory employees effective July 1, 1997. Some of the so-called "ex-Padcal" supervisors began to work
in the Bulawan mines of Philex Mining Corporation in 1992 as ordinary rank-and-file workers. When Philex
Gold was incorporated in 1996 to exclusively handle gold mining, it took over the operations of the Bulawan
mines and absorbed some of the ex-Padcal employees. Philex Gold conveyed to Philex Supervisors Union
the status of the ex-Padcal supervisors in November 1997 upon the insistence of the union to be informed
of their standing. It turned out that the ex-Padcal supervisors were maintained under a confidential payroll,
receiving a different set of benefits and higher salaries compared to the locally hired supervisors of similar
rank and classification doing parallel duties and functions. Respondents now question the difference in
wages that they the local hires receive compared to the ex-Padcal supervisors. Petitioners explained that
the ex-Padcal supervisors were paid higher because of their longer years of service, experience, their
training and skill in the underground mining method wanting in the local supervisors, and their relocation to
Bulawan, Negros Occidental. They assert that the differential treatment of the ex-Padcal supervisors is not
arbitrary, malicious or discriminatory but justified by the circumstances of their relocation and integration in
the new mining operation in Bulawan.
Issue:
Is the higher wage given by petitioner to the ex-Padcal supervisors compared to their locally hired
supervisors valid?
Held:
Petitioners admit that the "same class of workers [are] doing the same kind of work." This means that an
ex-Padcal supervisor and a locally hired supervisor of equal rank do the same kind of work. If an employer
accords employees the same position and rank, the presumption is that these employees perform equal
work. In this case, the Court cannot agree because petitioners failed to adduce evidence to show that an
ex-Padcal supervisor and a locally hired supervisor of the same rank are initially paid the same basic salary
for doing the same kind of work. They failed to differentiate this basic salary from any kind of salary increase
or additional benefit which may have been given to the ex-Padcal supervisors due to their seniority,
experience and other factors. The records only show that an ex-Padcal supervisor is paid a higher salary
than a locally hired supervisor of the same rank. Therefore, petitioner failed to prove with satisfactory
evidence that it has not discriminated against the locally hired supervisor in view of the unequal salary.
Atty. Mercader
International School Alliance of Educators v. Quisumbing

Kapunan, J.
GR No. 128845 – 1 June 2000
FACTS:
Private respondent International School, Inc. is a domestic educational institution established primarily for
dependents of foreign diplomatic personnel and other temporary residents. It hires both foreign and local
teachers as members of its faculty classifying them as foreign-hires and local-hires. It grants foreign-hires
certain benefits as housing, transportation, shipping costs, taxes and home leave travel allowance which
are not accorded to local-hires. Foreign-hires are also paid a salary rate of 25% more than the local-hires.
The school justified the difference on two "significant economic disadvantages" foreign-hires have to
endure, namely: (a) the "dislocation factor" and (b) limited tenure. When negotiations for a new CBA were
held, petitioner ISEA as a legitimate labor union and the collective bargaining representative of all the faculty
members of the school contested the difference in salary rates between the foreign and local hires. The
DOLE assumed jurisdiction over the dispute and ruled against petitioner stating, among others, that
“…foreign hires have limited contract of employment unlike the local hires who enjoy security of tenure. To
apply parity therefore, in wages and other benefits would also require parity in other terms and conditions
of employment which include the employment contract.” The acting Secretary also stated that the Union
cannot invoke equal protection clause because a classification is reasonable if it is based on substantial
distinctions and apply to all members of the same class.
ISSUE/S: Whether or not the Union can invoke the equal protection clause to justify its claim of parity.
HELD: PETITION IS GRANTED.
Yes. The Union can invoke the equal protection clause.
In the workplace, where the relations between capital and labor are often skewed in favor of capital,
inequality and discrimination by the employer are all the more reprehensible. The Constitution specifically
provides that labor is entitled to "humane conditions of work." These conditions are not restricted to the
physical workplace — the factory, the office or the field — but include as well the manner by which
employers treat their employees. The Constitution promotes equality of employment opportunities for all
and the Labor Code provides that the State shall ensure equal work opportunities regardless of sex, race
or creed. It would be an affront to both the spirit and letter of these provisions if the State, in spite of its
primordial obligation to promote and ensure equal employment opportunities, closes its eyes to unequal
and discriminatory terms and conditions of employment. Discrimination, particularly in terms of wages, is
frowned upon by the Labor Code. Several provisions impregnable institutionalize in this jurisdiction the long
honored legal truism of "equal pay for equal work." Persons who work with substantially equal qualifications,
skill, effort and responsibility, under similar conditions, should be paid similar salaries. This rule applies to
the School, its "international character" notwithstanding.
If an employer accords employees the same position and rank, the presumption is that these
employees perform equal work. This presumption is borne by logic and human experience. If the employer
pays one employee less than the rest, it is not for that employee to explain why he receives less or why the
others receive more. That would be adding insult to injury. The employer has discriminated against that
employee; it is for the employer to explain why the employee is treated unfairly. The employer in this case
has failed to discharge this burden. There is no evidence here that foreign-hires perform 25% more
efficiently or effectively than the local-hires. Both groups have similar functions and responsibilities, which
they perform under similar working conditions.
Furthermore, the School cannot invoke the need to entice foreign-hires to leave their domicile to
rationalize the distinction in salary rates without violating the principle of equal work for equal pay. While
the Court recognize the need of the School to attract foreign-hires, salaries should not be used as an
enticement to the prejudice of local-hires. The local-hires perform the same services as foreign-hires and
they ought to be paid the same salaries as the latter. For the same reason, the "dislocation factor" and the
foreign-hires' limited tenure also cannot serve as valid bases for the distinction in salary rates. The
dislocation factor and limited tenure affecting foreign-hires are adequately compensated by certain benefits
accorded them which are not enjoyed by local-hires, such as housing, transportation, shipping costs, taxes
and home leave travel allowances.
The Court ruled that the point-of-hire classification employed by respondent School to justify the
distinction in the salary rates of foreign-hires and local-hires was an invalid classification. There is no
reasonable distinction between the services rendered by foreign- hires and local-hires.
Atty. Mercader
Atty. Mercader
C. Planas and/or Marcial Cohu v. NLRC

Austria-Martinez, J.:
G.R. No. 144619 - 11 November 2005
FACTS:
On September 14, 1993, the private respondents together with 5 others filed a complaint for
underpayment of wages, nonpayment of overtime pay, holiday pay, service incentive leave pay and
premium pay for holiday and rest day and night shift differential against petitioners with the Arbitration
Branch of the NLRC.
Private respondents’ alleged that:
 Petitioner Cohu, owner of C. Planas Commercial, is engaged in wholesale of plastic
products and fruits of different kinds with more than 24 employees;
 private respondents were hired by petitioners on January 14, 1990, May 14, 1990 and July
1, 1991, respectively, as helpers/laborers;
 they were paid below the minimum wage law for the past 3 years;
 they were required to work for more than 8 hours a day without overtime pay;
 that they never enjoyed holiday pay and did not have a rest day as they worked for 7 days
a week;
 and they were not paid service incentive leave pay although they had been working for
more than one year.
 Private respondent Ofialda asked for night shift differential as he had worked from 8 p.m.
to 8 a.m. the following day for more than one year.
Petitioners filed their comment admitting:
 that private respondents were their helpers who used to accompany the delivery trucks
and helped in the loading and unloading of merchandise being distributed to clients;
 that they usually started their work from 10 a.m. to 6 p.m.;
 that private respondents stopped working with petitioners sometime in September 1993 as
they were already working in other establishments/stalls in Divisoria;
 that they only worked for 6 days a week;
 that they were not entitled to holiday and service incentive leave pays for they were
employed in a retail and service establishment regularly employing less than ten workers.
The Labor Arbiter rendered a decision dismissing the money claims. Respondents filed an appeal
with the NLRC where it granted the money claims of Ofialda, Morente and Allaguian. Petitioners appealed
with the CA but it was denied. It said that the company having claimed of exemption of the coverage of the
minimum wage shall have the burden of proof to the claim.
Petitioners’ motion for reconsideration was denied in a Resolution dated August 15, 2000. Hence,
this petition.
ISSUE/S:
1. Whether or not the petitioner is exempted from the application of the minimum wage law.
2. Whether or not private respondents Morente and Allauigan are still entitled to monetary
awards despite the latter’s execution of release and quitclaims.
HELD: PETITION PARTLY GRANTED
1. No. Petitioner is not exempted from the application of the minimum wage law
 Petitioners insist that C. Planas Commercial is a retail establishment principally engaged in
the sale of plastic products and fruits to the customers for personal use, thus exempted
from the application of the minimum wage law; that it merely leases and occupies a stall in the
Divisoria Market and the level of its business activity requires and sustains only less than ten
employees at a time.
R.A. No. 6727 known as the Wage Rationalization Act provides for the statutory minimum wage
rate of all workers and employees in the private sector. Section 4 of the Act provides for exemption
from the coverage, thus:
Sec. 4.
Atty. Mercader
...
(c) Exempted from the provisions of this Act are household or domestic helpers and persons
employed in the personal service of another, including family drivers.
Retail/service establishments regularly employing not more than ten (10) workers may be
exempted from the applicability of this Act upon application with and as determined by the appropriate
Regional Board in accordance with the applicable rules and regulations issued by the Commission.
Whenever an application for exemption has been duly filed with the appropriate Regional Board, action
on any complaint for alleged non-compliance with this Act shall be deferred pending resolution of the
application for exemption by the appropriate Regional Board.
In the event that applications for exemptions are not granted, employees shall receive the
appropriate compensation due them as provided for by this Act plus interest of one percent (1%) per
month retroactive to the effectivity of this Act.
 Clearly, for a retail/service establishment to be exempted from the coverage of the minimum wage
law, it must be shown that the establishment is regularly employing not more than ten (10) workers
and had applied for exemptions with and as determined by the appropriate Regional Board in
accordance with the applicable rules and regulations issued by the Commission.
 Petitioners’ main defense in controverting private respondents’ claim for underpayment of wages
is that they are exempted from the application of the minimum wage law, thus the burden of proving
such exemption rests on petitioners. Petitioners, however, had not shown any evidence to show
that they had applied for such exemption and if they had applied, the same was granted.
2. No. Morente and Allauigan are no longer entitled to monetary awards because of the latter’s
execution of release and quitclaims.
 Petitioners aver that the CA erred in ruling that private respondents Morente and Allauigan are still
entitled to monetary awards despite the latter’s execution of release and quitclaims because the
settlement was not voluntarily entered into by private respondents.
 It has been held that not all quitclaims are per se invalid or against public 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. Such quitclaim and release
agreements are regarded as ineffective to bar the workers from claiming the full measure of their
legal rights.
 We find these two instances not present in private respondents Allauigan and Morente’s case. They
failed to refute petitioners’ allegation that the settlement was voluntarily made as they had not filed
any pleadings before the CA.
 It bears stressing that at the time of the execution of the release and quitclaim, the case filed by
private respondents against petitioners was already dismissed by the Labor Arbiter and it was
pending appeal before the NLRC. Private respondents could have executed the release and
quitclaim because of a possibility that their appeal with the NLRC may not be successful. Since
there was yet no decision rendered by the NLRC when the quitclaims were executed, it could not
be said that the amount of the settlement is unconscionable. In any event, no deception has been
established that would justify the annulment of private respondents quitclaims.
 In Samaniego v. NLRC: A quitclaim executed in favor of a company by an employee amounts to
a valid and binding compromise agreement between them.
 Recently, we held that in the absence of any showing that petitioner was "coerced or tricked" into
signing the Quitclaim and Release or that the consideration thereof was very low, she is bound by
the conditions thereof.
 As computed by the NLRC, private respondent Alfredo Ofialda is entitled to the payment of
₱14,934.00 as salary differential, ₱2,362.00 as legal holiday pay and ₱1,180.00 as service
incentive leave pay, all in the total amount of ₱18,476.00 and the monetary awards in favor of
private respondents Rudy Allauigan and Dioleto Morente are hereby deleted.
Atty. Mercader
Rosario Gaa v. Court of Appeals

Patajo, J.
FACTS:
Respondent Europhil Industries was formerly a tenant in Trinity Bldg at T.M Kalaw Street, Manila,
which petitioner Gaa was then the building administrator. Respondent commenced an action in the CFI of
Manila for damages against petitioner for cutting of its electricity, and removing its name from the building
directory and gate passes of its officials and employees. The court rendered a judgment in favor of
respondent, ordering petitioner to pay actual, moral and exemplary damages and costs to respondent.
The decision being final and executory, a writ of garnishment was served upon El Grande Hotel,
where petitioner was employed, garnishing her salary, commission and/or remuneration. Petitioner filed a
motion to lift said garnishment for the reason that her salaries, commission and/or remuneration are exempt
from execution under Art. 1708 of the Civil Code. It was denied by the CFI of Manila.
The CA dismissed the petition for certiorari on the ground that petitioner is not a laborer as
contemplated under Art 1708 of the Civil Code as the term ‘laborer’ does not apply to a person holding a
managerial or supervisory position but only to ‘laborers occupying the lower strata.’ And that ‘wages’ means
the pay given "as hire or reward to artisans, mechanics, domestics or menial servants, and laborers
employed in manufactories, agriculture, mines, and other manual occupation and usually employed to
distinguish the sums paid to persons hired to perform manual labor, skilled or unskilled, paid at stated times,
and measured by the day, week, month, or season."
ISSUE:
Whether or not petitioner’s salary is exempted from garnishment as provided for under Art. 1708 of the Civil
code
HELD: PETITION DISMISSED. The decision of the CA is AFFIRMED.
In its broadest sense, the word "laborer" includes everyone who performs any kind of mental or
physical labor, but as commonly and customarily used and understood, it only applies to one engaged
in some form of manual or physical labor. That is the sense in which the courts generally apply the term
as applied in exemption acts, since persons of that class usually look to the reward of a day's labor for
immediate or present support and so are more in need of the exemption than are other.
In determining whether a person is a ‘laborer,’ he must be classified not according to the arbitrary
designation given to his calling, but with refence to the character of the service required of him by his
employer. In Wildner vs. Ferguson, the Court also held that all men who earn compensation by labor or
work of any kind, whether of the head or hands, including judges, lawyers, bankers, merchants, officers of
corporations, and the like, are in some sense "laboring men." But they are not "laboring men" in the popular
sense of the term, when used to refer to a man's employment, and that is the sense in which the court must
presume, the legislature used the term.
Petitioner is not a rank and file laborer. He is occupying a position equivalent to a managerial or
supervisory position for he is responsible for matters of planning, directing, controlling, and coordinating the
activities of all housekeeping personnel in El Grande Hotel.
Article 1708 used the word "wages" and not "salary" in relation to "laborer" when it declared what
are to be exempted from attachment and execution. The term "wages" as distinguished from "salary",
applies to the compensation for manual labor, skilled or unskilled, paid at stated times, and measured by
the day, week, month, or season, while "salary" denotes a higher degree of employment, or a superior
grade of services, and implies a position of office: by contrast, the term "wages" indicates considerable pay
for a lower and less responsible character of employment, while "salary" is suggestive of a larger and more
important service. As held in the case of Bell vs. Indian, “… use and general acceptation have given to the
word 'salary' a significance somewhat different from the word 'wages' in this: that the former is understood
to relate to position of office, to be the compensation given for official or other service, as distinguished from
'wages', the compensation for labor."
We do not think that the legislature intended the exemption in Article 1708 of the New Civil Code
to operate in favor of any but those who are laboring men or women in the sense that their work is manual.
Persons belonging to this class usually look to the reward of a day's labor for immediate or present support,
and such persons are more in need of the exemption than any others.
Petitioner Rosario A. Gaa is definitely not within that class; hence, his salaries, commission and/or
remunerations are not covered by Art. 1708 of the Civil code which exempts it from execution or attachment.
Atty. Mercader
Atty. Mercader
Honda Philippines v. Samahan ng Malayang Manggagawa sa Honda

Ynares-Santiago, J.
G.R. No. 145561. June 15, 2005
This petition for review under Rule 45 seeks the reversal of the Court of Appeals decision dated
September 14, 2000 and its resolution dated October 18, 2000, in CA-G.R. SP No. 59052. The appellate
court affirmed the decision dated May 2, 2000 rendered by the Voluntary Arbitrator who ruled that
petitioner Honda Philippines, Inc.s (Honda) pro-rated payment of the 13th and 14th month pay and
financial assistance to its employees was invalid.
FACTS:
 The case stems from the Collective Bargaining Agreement (CBA) forged between petitioner Honda
and respondent union Samahan ng Malayang Manggagawa sa Honda (respondent union) which
contained the following provisions:
 Section 3. 13th Month Pay
The COMPANY shall maintain the present practice in the implementation [of] the
13th month pay.
 Section 6. 14th Month Pay
The COMPANY shall grant a 14th Month Pay, computed on the same basis as computation
of 13th Month Pay.
 Section 7.
The COMPANY agrees to continue the practice of granting, in its discretion, financial
assistance to covered employees in December of each year, of not less than 100% of
basic pay.
 This CBA is effective until year 2000
 1998: The parties started re-negotiations for the fourth and fifth years of their CBA. When the talks
between the parties bogged down, respondent union filed a Notice of Strike on the ground of
bargaining deadlock.
 Honda filed a Notice of Lockout.
 1999: DOLE Secretary Laguesma ordered the parties to cease and desist from committing acts
that would aggravate the situation. Both parties complied accordingly.
 Respondent union filed a second Notice of Strike on the ground of unfair labor practice alleging
that Honda illegally contracted out work to the detriment of the workers. Respondent union went
on strike and picketed the premises of Honda
 DOLE Acting Secretary Felicisimo Joson, Jr. certified the case to the National Labor Relations
Commission (NLRC) for compulsory arbitration. The striking employees were ordered to return to
work and the management accepted them back under the same terms prior to the strike staged.
 The management of Honda issued a memorandum announcing its new computation of the 13 th and
14th month pay to be granted to all its employees whereby the thirty-one (31)-day long strike shall
be considered unworked days for purposes of computing said benefits.
 As per the company’s new formula, the amount equivalent to 1/12 of the employees basic
salary shall be deducted from these bonuses, with a commitment however that in the event
that the strike is declared legal, Honda shall pay the amount deducted.
 Respondent union opposed the pro-rated computation of the bonuses
 Honda sought the opinion of the Bureau of Working Conditions (BWC) on the issue; the BWC
agreed with the pro-rata payment of the 13th month pay as proposed by Honda.
 Voluntary Arbitrator: invalidated Hondas computation
 Hondas Motion for Partial Reconsideration was denied in a resolution dated
 Court of Appeals: the petition was dismissed for lack of merit.
ISSUE:
1. W/N the pro-rated computation of the 13th month pay and the other bonuses in question is valid
and lawful

Atty. Mercader
1. No.
 A collective bargaining agreement refers to the negotiated contract between a legitimate labor
organization and the employer concerning wages, hours of work and all other terms and
conditions of employment in a bargaining unit.
 The parties in a CBA may establish such stipulations, clauses, terms and conditions as they may
deem convenient provided these are not contrary to law, morals, good customs, public order or
public policy. Thus, where the CBA is clear and unambiguous, it becomes the law between the
parties and compliance therewith is mandated by the express policy of the law.
 The provisions of a CBA may become contentious, as in this case.
 Honda wanted to implement a pro-rated computation of the benefits based on the no work, no pay
rule. According to the company, the phrase present practice as mentioned in the CBA refers to
the manner and requisites with respect to the payment of the bonuses, i.e., 50% to be given in
May and the other 50% in December of each year. Respondent union, however, insists that the
CBA provisions relating to the implementation of the 13 th month pay necessarily relate to the
computation of the same.
 The assailed CBA provisions are far from being unequivocal. A cursory reading of the provisions
will show that they did not state categorically whether the computation of the 13 th month
pay, 14th month pay and the financial assistance would be based on one full months basic
salary of the employees, or pro-rated based on the compensation actually received. The
arbitrator thus properly resolved the ambiguity in favor of labor as mandated by Article 1702 of
the Civil Code. The Court of Appeals affirmed the arbitrators finding and added that the
computation of the 13th month pay should be based on the length of service and not on the actual
wage earned by the worker.
 Presidential Decree No. 851, otherwise known as the 13 th Month Pay Law, which required all
employers to pay their employees a 13th month pay, was issued to protect the level of real
wages from the ravages of worldwide inflation. It was enacted on December 16, 1975 after it
was noted that there had been no increase in the minimum wage since 1970 and the
Christmas season was an opportune time for society to show its concern for the plight of
the working masses so that they may properly celebrate Christmas and New Year.
 Under the Revised Guidelines on the Implementation of the 13 th month, the salary ceiling of
P1,000.00 under P.D. No. 851 was removed. It further provided that the minimum 13 th month pay
required by law shall not be less than one-twelfth (1/12) of the total basic salary earned by
an employee within a calendar year. The guidelines pertinently provides:
 The basic salary of an employee for the purpose of computing the 13 th month pay shall
include all remunerations or earnings paid by his employer for services rendered but
does not include allowances and monetary benefits which are not considered or integrated
as part of the regular or basic salary, such as the cash equivalent of unused vacation and
sick leave credits, overtime premium, night differential and holiday pay, and cost-of-living
allowances.
 For employees receiving regular wage, the basic salary to means not the amount actually
received by an employee, but 1/12 of their standard monthly wage multiplied by their length
of service within a given calendar year. Thus, we exclude from the computation of basic salary
payments for sick, vacation and maternity leaves, night differentials, regular holiday pay and
premiums for work done on rest days and special holidays.
 In several cases[], the 13th month pay due an employee was computed based on the employees
basic monthly wage multiplied by the number of months worked in a calendar year prior to
separation from employment.
 The revised guidelines also provided for a pro-ration of this benefit only in cases of resignation or
separation from work. As the rules state, under these circumstances, an employee is entitled to
a pay in proportion to the length of time he worked during the year, reckoned from the time he
started working during the calendar year. The Court of Appeals thus held that:
 The computation of the 13th month pay should be based on the length of service and not
on the actual wage earned by the worker. In the present case, there being no gap in the
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service of the workers during the calendar year in question, the computation of the
13thmonth pay should not be pro-rated but should be given in full.
 It has not been refuted that Honda has not implemented any pro-rating of the 13th month pay before
the instant case. Honda did not adduce evidence to show that the 13 th month, 14th month and
financial assistance benefits were previously subject to deductions or pro-rating or that these were
dependent upon the company’s financial standing. As held by the Voluntary Arbitrator:
 The Company (Honda) explicitly accepted that it was the strike held that prompt[ed] them
to adopt a pro-rata computation, aside [from] being in [a] state of rehabilitation due to 227M
substantial losses in 1997, 114M in 1998 and 215M lost of sales in 1999 due to strike. This
is an implicit acceptance that prior to the strike, a full month basic pay computation was
the present practice intended to be maintained in the CBA.
 The memorandum which Honda issued shows that it was the first time a pro-rating scheme was to
be implemented in the company. It was a convenient coincidence for the company that the work
stoppage held by the employees lasted for thirty-one (31) days or exactly one month. This enabled
them to devise a formula using 11/12 of the total annual salary as base amount for computation
instead of the entire amount for a 12-month period.
 That a full month payment of the 13 th month pay is the established practice at Honda is further
bolstered by the affidavits executed by Feliteo Bautista and Edgardo Cruzada, which attested that
when they were absent from work due to motorcycle accidents, and after they have exhausted all
their leave credits and were no longer receiving their monthly salary from Honda, they still received
the full amount of their 13th month, 14th month and financial assistance pay.
 With regard to the length of time the company practice should have been exercised to constitute
voluntary employer practice which cannot be unilaterally withdrawn by the employer, we hold that
jurisprudence has not laid down any rule requiring a specific minimum number of years.
 In Davao Fruits Corporation vs. Associated Labor Unions: the company practice lasted for
six (6) years.
 In Davao Integrated Port Stevedoring Services vs. Abarquez: the employer, for three (3)
years and nine (9) months, approved the commutation to cash of the unenjoyed portion of
the sick leave with pay benefits of its intermittent workers.
 While in Tiangco vs. Leogardo, Jr.: the employer carried on the practice of giving a fixed
monthly emergency allowance from November 1976 to February 1980, or three (3) years
and four (4) months.
 In all these cases, this Court held that the grant of these benefits has ripened into
company practice or policy which cannot be peremptorily withdrawn.
 In the case at bar, petitioner Sevilla Trading kept the practice of including non-basic benefits such
as paid leaves for unused sick leave and vacation leave in the computation of their 13 th-month pay
for at least two (2) years. This, we rule likewise constitutes voluntary employer practice which
cannot be unilaterally withdrawn by the employer without violating Art. 100 of the Labor
Code.
 Lastly, the foregoing interpretation of law and jurisprudence is more in keeping with the
underlying principle for the grant of this benefit. It is primarily given to alleviate the plight of
workers and to help them cope with the exorbitant increases in the cost of living. To allow
the pro-ration of the 13th month pay in this case is to undermine the wisdom behind the law and the
mandate that the workingman’s welfare should be the primordial and paramount
consideration. What is more, the factual milieu of this case is such that to rule otherwise inevitably
results to dissuasion, if not a deterrent, for workers from the free exercise of their constitutional
rights to self-organization and to strike in accordance with law.
Atty. Mercader
Atty. Mercader
Millares et al. V NLRC and PAPER INDUSTRIES CORPORATION OF THE PHILIPPINES (PICOP)
BELLOSILLO, J
G.R. No. 122827 March 29, 1999
Facts :
Petitioners numbering one hundred sixteen (116) occupied the position of Technical Staff, Unit Manager,
Section Manager, Department Manager, Division Manager and Vice President in the mill site of
respondent Paper Industries Corporation of the Philippines (PICOP) in Bislig, Surigao del Sur. In 1992
PICOP suffered a major financial setback allegedly brought about by the joint impact of restrictive
government regulations on logging and the economic crisis. To avert further losses, it undertook a
retrenchment program and terminated the services of petitioners. Accordingly, petitioners received
separation pay computed at the rate of one (1) month basic pay for every year of service. Believing
however that the allowances they allegedly regularly received on a monthly basis during their
employment should have been included in the computation thereof they lodged a complaint for separation
pay differentials
Applying Art. 97, par. (f), of the Labor Code which defines "wage," the Executive Labor Arbiter opined that
the subject allowances, being customarily furnished by respondent PICOP and regularly received by
petitioners, formed part of the latter's wages. Resolving the controversy from another angle, on the
strength of the ruling in Santos v. NLRC and Soriano v. NLRC that in the computation of separation pay
account should be taken not just of the basic salary but also of the regular allowances that the employee
had been receiving, he concluded that the allowances should be included in petitioners' base pay. Thus
respondent PICOP was ordered on 28 April 1994 to pay petitioners Four Million Four Hundred Eighty-
One Thousand Pesos P(4,481,000.00) representing separation pay differentials plus ten per cent (10%)
thereof as attorney's fees.
The National Labor Relations Commission (NLRC) did not the view of the Executive Labor Arbiter. On 7
October 1994 it set aside the assailed decision by decreeing that the allowances did not form part of the
salary base used in computing separation pay. 5 Its ruling was based on the finding that the cases relied
upon by the Executive Labor Arbiter were inapplicable since they involved illegal dismissal where
separation pay was granted in lieu of reinstatement which was no longer feasible. Instead, what it
considered in point was Estate of the late Eugene J. Kneebone v. NLRC 6 where the Court held that
representation and transportation allowances were deemed not part of salary and should therefore be
excluded in the computation of separation benefits. Relating the present case with Art. 97, par. (f), of the
Labor Code, the NLRC likewise found that petitioners' allowances were contingency-based and thus not
included in their salaries. On 26 September 1995 reconsideration was denied
In this petition for certiorari, petitioners submit that their allowances are included in the definition of
"facilities" in Art. 97, par. (f), of the Labor Code, being necessary and indispensable for their existence
and subsistence.
Whether or not Staff/Manager's, transportation and Bislig allowances form part of allowances.
WHEREFORE, the petition is DISMISSED
The inevitable conclusion is that, as reached by the NLRC, subject allowances did not form part of
petitioners' wages.
"Customary" is founded on long-established and constant practice connoting regularity. The receipt of an
allowance on a monthly basis does not ipso facto characterize it as regular and forming part of salary
because the nature of the grant is a factor worth considering.
Although it is quite easy to comprehend "board" and "lodging," it is not so with "facilities." Thus Sec. 5,
Rule VII, Book III, of the Rules Implementing the Labor Code gives meaning to the term as including
articles or services for the benefit of the employee or his family but excluding tools of the trade or articles
or service primarily for the benefit of the employer or necessary to the conduct of the employer's
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business. The Staff/Manager's allowance may fall under "lodging" but the transportation and Bislig
allowances are not embraced in "facilities" on the main consideration that they are granted as well as the
Staff/Manager's allowance for respondent PICOP's benefit and convenience, i.e., to insure that petitioners
render quality performance. In determining whether a privilege is a facility, the criterion is not so much its
kind but its purpose. That the assailed allowances were for the benefit and convenience of respondent
company was supported by the circumstance that they were not subjected to withholding tax.
The Secretary of Labor and Employment under Sec. 6, Rule VII, Book III, of the Rules Implementing the
Labor Code may from time to time fix in appropriate issuances the "fair and reasonable value of board,
lodging and other facilities customarily furnished by an employer to his employees." Petitioners'
allowances do not represent such fair and reasonable value as determined by the proper authority simply
because the Staff/Manager's allowance and transportation allowance were amounts given by respondent
company in lieu of actual provisions for housing and transportation needs whereas the Bislig allowance
was given in consideration of being assigned to the hostile environment then prevailing in Bislig.
Note:
We correlate Art. 283 with Art. 97 of the same Code on definition of terms. "Pay" is not defined therein but
"wage." In Songco the Court explained that both words (as well as salary) generally refer to one and the
same meaning, i.e., a reward or recompense for services performed. Specifically, "wage" is defined in
letter (f) as 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.
Atty. Mercader
Mayon Hotel and Restaurant v. Adana

PUNO, J.:
G.R. No. 157634 May 16, 2005
Facts: Petitioner Mayon Hotel & Restaurant is a single proprietor business registered in the name of
petitioner Pacita O. Po, whose mother, petitioner Josefa Po Lam, manages the establishment.7 The hotel
and restaurant employed about sixteen (16) employees. Due to the expiration and non-renewal of the
lease contract for the rented space occupied by the said hotel and restaurant at Rizal Street, the hotel
operations of the business were suspended on March 31, 1997. The operation of the restaurant was
continued in its new location at Elizondo Street, Legazpi City, while waiting for the construction of a new
Mayon Hotel & Restaurant at Peñaranda Street, Legazpi City. Only nine (9) of the sixteen (16) employees
continued working in the Mayon Restaurant at its new site.On various dates of April and May 1997, the 16
employees filed complaints for underpayment of wages and other money claims against
petitioners, which includes: illegal dismissal with claims for underpayment of wages; nonpayment of cost
of living allowance (COLA) and overtime pay; premium pay for holiday and rest day; SILP; nightshift
differential pay and separation pay plus damages. On July 14, 2000, Executive Labor Arbiter Gelacio L.
Rivera, Jr. rendered a Joint Decision in favor of the employees. The Labor Arbiter awarded substantially
all of respondents' money claims. The Labor Arbiter also held that based on the evidence presented,
Josefa Po Lam is the owner/proprietor of Mayon Hotel & Restaurant and the proper respondent in these
cases. On appeal to the NLRC, the decision of the Labor Arbiter was reversed, and all the complaints
were dismissed. The CA decision reversed the NLRC Decision which had dismissed all of respondents'
complaints, and reinstated the Joint Decision of the Labor Arbiter which ruled that respondents were
illegally dismissed and entitled to their money claims.
Issue: (1) Whether or not respondents were illegally dismissed. (2) Whether or not the food and snacks
provided to respondents as facilities should have been included in reckoning the payment of respondents'
wages
Held: After careful review, we find that the reversal of the NLRC's decision was in order precisely because
it was not supported by substantial evidence.
(1) Yes, Whether respondents are still working for petitioners is a factual question. And the records are
unequivocal that since April 1997, when petitioner Mayon Hotel & Restaurant suspended its hotel
operations and transferred its restaurant operations in Elizondo Street, respondents Loveres, Macandog,
Llarena, Guades and Nicerio have not been permitted to work for petitioners. Another respondent was
also laid-off when the Elizondo Street operations closed, as were all the other respondents. Since then,
respondents have not been permitted to work nor recalled, even after the construction of the new
premises at Peñaranda Street and the reopening of the hotel operations with the restaurant in this new
site.
(2) No, Petitioners next claim that the cost of the food and snacks provided to respondents as facilities
should have been included in reckoning the payment of respondents' wages. They state that although on
the surface respondents appeared to receive minimal wages, petitioners had granted respondents other
benefits which are considered part and parcel of their wages and are allowed under existing laws. They
claim that these benefits make up for whatever inadequacies there may be in
compensation.83 Specifically, they invoked Sections 5 and 6, Rule VII-A, which allow the deduction of
facilities provided by the employer through an appropriate Facility Evaluation Order issued by the
Regional Director of the DOLE. Petitioners also aver that they give five (5) percent of the gross income
each month as incentives. As proof of compliance of payment of minimum wages, petitioners submitted
the Notice of Inspection Results issued in 1995 and 1997 by the DOLE Regional Office. The cost of
meals and snacks purportedly provided to respondents cannot be deducted as part of respondents'
minimum wage. While [petitioners] submitted Facility Evaluation Orders issued by the DOLE Regional
Office whereby the cost of meals given by [petitioners] to [respondents] were specified for purposes of
considering the same as part of their wages, We cannot consider the cost of meals in the Orders as
applicable to [respondents]. [Respondents] were not interviewed by the DOLE as to the quality and
quantity of food appearing in the applications of [petitioners] for facility evaluation prior to its approval to
determine whether or not [respondents] were indeed given such kind and quantity of food. Also, there
was no evidence that the quality and quantity of food in the Orders were voluntarily accepted by
[respondents]. Mabeza v. NLRC, the employer simply cannot deduct the value from the employee's
wages without satisfying the following: (a) proof that such facilities are customarily furnished by the trade;
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(b) the provision of deductible facilities is voluntarily accepted in writing by the employee; and (c) the
facilities are charged at fair and reasonable value. The records are clear that petitioners failed to comply
with these requirements. There was no proof of respondents' written authorization. Indeed, the Labor
Arbiter found that while the respondents admitted that they were given meals and merienda, the quality of
food served to them was not what was provided for in the Facility Evaluation Orders and it was only when
they filed the cases that they came to know of this supposed Facility Evaluation Orders. Petitioner Josefa
Po Lam herself admitted that she did not inform the respondents of the facilities she had applied for.
Considering the failure to comply with the above-mentioned legal requirements, the Labor Arbiter
therefore erred when he ruled that the cost of the meals actually provided to respondents should be
deducted as part of their salaries, on the ground that respondents have availed themselves of the food
given by petitioners. The law is clear that mere availment is not sufficient to allow deductions from
employees' wages. More important, we note the uncontroverted testimony of respondents on record that
they were required to eat in the hotel and restaurant so that they will not go home and there is no
interruption in the services of Mayon Hotel & Restaurant. As ruled in Mabeza, food or snacks or other
convenience provided by the employers are deemed as supplements if they are granted for the
convenience of the employer. The criterion in making a distinction between a supplement and a facility
does not so much lie in the kind (food, lodging) but the purpose Considering, therefore, that hotel workers
are required to work different shifts and are expected to be available at various odd hours, their ready
availability is a necessary matter in the operations of a small hotel, such as petitioners' business. The
deduction of the cost of meals from respondents' wages, therefore, should be removed. While
complainants, who were employed in the hotel, receive[d] various amounts as profit share, the same
cannot be considered as part of their wages in determining their claims for violation of labor standard
benefits. Although called profit share[,] such is in the nature of share from service charges charged by the
hotel. This is more explained by [respondents] when they testified that what they received are not fixed
amounts and the same are paid not on a monthly basis. Also, [petitioners] failed to submit evidence that
the amounts received by [respondents] as profit share are to be considered part of their wages and had
been agreed by them prior to their employment. Further, how can the amounts receive[d] by
[respondents] be considered as profit share when the same [are] based on the gross receipt of the
hotel[?] No profit can as yet be determined out of the gross receipt of an enterprise. Profits are realized
after expenses are deducted from the gross income. As for petitioners repeated invocation of serious
business losses, suffice to say that this is not a defense to payment of labor standard benefits. The
employer cannot exempt himself from liability to pay minimum wages because of poor financial condition
of the company. The payment of minimum wages is not dependent on the employer's ability to pay. Thus,
we reinstate the award of monetary claims granted by the Labor Arbiter.
Atty. Mercader
SLL International v. NLRC

G.R. No 172161. March 2, 2011
Mendoza, J.:
FACTS: private respondents Roldan Lopez (Lopez for brevity) and Danilo Caete (Caete for brevity), and
Edgardo Zuiga (Zuiga for brevity) respectively, were hired by petitioner Lagon as apprentice or trainee
cable/lineman. They were paid the full minimum wage and other benefitsthey were only trainees, they did
not report for work regularly but came in as substitutes to the regular workers or in undertakings that needed
extra workers to expedite completion of work.
1. ISLACOM PROJ in Bohol:
 For this project respondents started on March 15, 1997 until December 1997. Upon the
completion of their project, their employment was also terminated.
 Private respondents received the amount of P145.00, the minimum prescribed daily wage for
Region VII.
 July 1997- the amount of P145 was increased to P150.00 by the Regional Wage Board (RWB)
October 1997- the latter was increased to P155.00.
2. PLDT PROJ in Antipolo:
 March 1998 Zuiga and Caete were engaged again by Lagon as project employees for its PLDT
Antipolo, Rizal project, which ended on September 1998.
 Zuiga and Caete received only the wage of P145.00 daily.
 The minimum prescribed wage for Rizal at that time was P160.00.
3. RACITELCOM PROJ in Bulacan:
 November 1998, private respondents re-applied in the Racitelcom project of Lagon in
Bulacan.
For this, private respondents received the wage of P145.00.
4. PROJ WITH FURUKAWA Corp in Caloocan
 May 21, 1997-December 1999- private respondents received the wage of P145.00. At this
time, the minimum prescribed rate for Manila was P198.00.
 January to February 28- the three received the wage of P165.00. The existing rate at
that time was P213.00.
For reasons of delay on the delivery of imported materials from Furukawa Corporation, the Camarin
project was not completed on the scheduled date of completion.
Due to economic problems , petitioner was constrained to cut down the overtime work of private
respondents. Thus, when requested by private respondents on February 28, 2000 to work overtime, Lagon
refused and told private respondents that if they insist, they would have to go home at their own expense
and that they would not be given anymore time nor allowed to stay in the quarters.
Private respondent filed a complaint for llegal dismissal, non-payment of wages, holiday pay,
13th month pay for 1997 and 1998 and service incentive leave pay as well as damages and attorneys
fees.
Petitioner:
 private respondents were only project employees
 that the food allowance of P63.00 per day as well as private respondents allowance for
lodging house, transportation, electricity, water and snacks allowance should be added to
their basic pay. With these, petitioners claimed that private respondents received higher
wage rate than that prescribed in Rizal and Manila.
LABOR ARBITER’S RULING:
 With regard to the underpayment of wages, the LA found that private respondents were
underpaid. It ruled that the free board and lodging, electricity, water, and food enjoyed by
them could not be included in the computation of their wages because these were given
without their written consent.
NLRC’s Ruling: Affirmed the findings of the LA.
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CA:
 CA likewise found that the private respondents were underpaid. It ruled that the board and
lodging, electricity, water, and food enjoyed by the private respondents could not be included in the
computation of their wages because these were given without their written consent. The CA added
that the private respondents were entitled to 13 th month pay.
 Also, in computing the differentials for the period January and February 2000, the CA disagreed in
the award of differentials based on the minimum daily wage of P223.00, as the prevailing minimum
daily wage then was only P213.00.
Issue: WON the value of the facilities that the private respondents enjoyed should be included in
the computation of the wages received by them.
SC: NO
Section 1 of DOLE Memorandum Circular No. 2 provides that an employer may provide subsidized meals
and snacks to his employees provided that the subsidy shall not be less that 30% of the fair and reasonable
value of such facilities. In such cases, the employer may deduct from the wages of the employees not more
than 70% of the value of the meals and snacks enjoyed by the latter, provided that such deduction is with
the written authorization of the employees concerned. Moreover, before the value of facilities can be
deducted from the employees’ wages, the following requisites must all be attendant: first, proof must be
shown that such facilities are customarily furnished by the trade; second, the provision of deductible facilities
must be voluntarily accepted in writing by the employee; and finally, facilities must be charged at reasonable
value. Mere availment is not sufficient to allow deductions from employees’ wages. These requirements,
however, have not been met in this case. SLL failed to present any company policy or guideline showing
that provisions for meals and lodging were part of the employees’ salaries. It also failed to provide proof of
the employees’ written authorization, much less show how they arrived at their valuations. At any rate, it is
not even clear whether private respondents actually enjoyed said facilities. It is of the view that the food and
lodging, or the electricity and water allegedly consumed by private respondents in this case were not
facilities but supplements. The benefit or privilege given to the employee which constitutes an extra
remuneration above and over his basic or ordinary earning or wage is supplement; and when said benefit
or privilege is part of the laborers' basic wages, it is a facility. The distinction lies not so much in the kind of
benefit or item (food, lodging, bonus or sick leave) given, but in the purpose for which it is given. In the
case at bench, the items provided were given freely by SLL for the purpose of maintaining the
efficiency and health of its workers while they were working at their respective projects.
Atty. Mercader
Our Haus Realty Development Corporation vs. Parian

Brion, J.
GR No. 204651 – 6 August 2014
FACTS:
This case involves a petition for review on certiorari under Rule 45, assailing the decision of the Court of
Appeals which affirmed the decision of the NLRC. The NLRC reversed the finding of the Labor
Arbiter in favor of Our Haus Realty Development Corporation. The pertinent facts of the case are
as follows:
Herein petitioner Our Haus Realty Development Corporation (Our Haus for brevity), was engaged in the
construction industry. Herein respondents on the other hand were employees of Our Haus.
However, sometime in 2010, Our Haus suffered from financial distress hence it suspended some
of its construction projects and asked the affected workers to go on vacation leaves, which
included the respondents. Later, they were made to return to work but instead of returning,
respondents filed a complaint with the Labor Arbiter for underpayment of their salaries which is
below the minimum wage prescribed by law, as the petitioner Corporation deducts their board
and lodging expenses in their salaries. Respondent contends that they are paid the minimum
wage and that the said boarding and lodging expenses form part of their minimum wage.
.
ISSUE:
Whether or not the respondents were paid below their minimum wage?
HELD:
Yes. Jurisprudence dictates that there is a difference between a facility and a
supplement. Facilities are items of expense necessary for the laborer's and his family's existence
and subsistence so that by express provision of law, they form part of the wage and when
furnished by the employer are deductible therefrom, since if they are not so furnished, the laborer
would spend and pay for them just the same. On the other hand, a supplement constitutes extra
remuneration or special privileges or benefits given to or received by the laborers over and above
their ordinary earnings or wages. And the Court laid down the requisites in Mabeza in order for a
facility to be validly deducted from an employee’s basic wage, to wit: (1) Proof must be shown
that such facilities are customarily furnished by the trade; (2) The provision of deductible facilities
must be voluntarily accepted in writing by the employee; and (3) The facilities must be charged at
fair and reasonable value. However, in this case the petitioner did not meet said requisites to
warrant deductions from the respondent’s salaries. Hence, in deducting the facilities from the
respondent’s wages, the latter were paid below their minimum wage.
Atty. Mercader
Atty. Mercader
PHILIPPINE DUPLICATORS, INC. vs. NATIONAL LABOR RELATIONS COMMISSION and

PHILIPPINE DUPLICATORS EMPLOYEES UNION-TUPAS
Feliciano, J.:
GR No. 110068 – November 3, 1993
FACTS:
 Philippine Duplicators, Inc. is a domestic corporation engaged in the distribution of foreign-made
copying machines and related consumables. In its employ are salesmen who are paid a fixed or
guaranteed salary plus commissions, which commissions are computed on the selling price of the
duplicating machines sold by the respective salesmen.
 P.D. No. 851 prescribed payment of 13th month pay in the following terms:
"Sec. 1. All employers are hereby required to pay all their employees
receiving a basic salary of not more than P1,000.00 a month, regardless of the
nature of the employment, a 13th month pay not later than December 24 of every
year."
 President Corazon C. Aquino, then exercising both executive and legislative authority, issued
Memorandum Order No. 28 which provided as follows:
"Sec. 1 of Presidential Decree No. 851 is hereby modified to the extent
that all employers are hereby required to pay all rank-and-file employees a 13th
month pay not later than December 24 of every year." (Emphasis supplied)
 In connection with and in implementation of Memorandum Order No. 28, the then Ministry of Labor
and Employment issued MOLE Explanatory Bulletin No. 86-12 on 24 November 1986. Item No. 5
(a) of this issuance read:
"Employees who are paid a fixed or guaranteed wage plus commission
are also entitled to the mandated 13th month pay, based on their total earning[s]
during the calendar year, i.e., on both their fixed and guaranteed wage and
commission."
 Private respondent union, for and on behalf of its member-salesmen, asked the corporation for
payment of 13th month pay computed on the basis of the salesmen's fixed or guaranteed wages
plus commissions.
 The corporation refused the union's request, but stated it would respect an opinion from the MOLE.
Acting upon a request for opinion submitted by respondent union, Director Augusto G. Sanchez of
the Bureau of Working Conditions, MOLE, rendered an opinion to respondent union declaring
applicable the provisions of Explanatory Bulletin No. 86-12, Item No. 5 (a):
". . . [S]ince the salesmen of Philippine Duplicators are receiving a fixed
basic wage plus commission on sales and not purely on commission basis, they
are entitled to receive 13th month pay provided that they worked at least one (1)
month during the calendar year. May we add at this point that in computing such
13th month pay, the total commissions of said salesmen for the calendar year shall
be divided by twelve (12)."
 Notwithstanding Director Sanchez' opinion or ruling, the corporation refused to pay the claims of
its salesmen for 13th month pay computed on the basis of both fixed wage plus sales commissions.
 Respondent union thereupon instituted a complaint against petitioner corporation for payment of
the demand of its salesmen-members for 13th month pay. The union averred that the salesmen
received 13th month pay computed only on the basis of their fixed or guaranteed wage. Its basic
contention was that pursuant to Memorandum Order No. 28, above quoted, in relation to the
Explanatory Bulletin No. 86-12, also quoted above, the 13th month pay of salesmen receiving a
fixed salary and commissions should be computed on the basis of their total earnings for the
calendar year, i.e., on both the fixed salary and sales commissions. llcd
 Labor Arbiter: directed the corporation to pay 13th month pay to its salesmen computed in
accordance with the requirements of Explanatory Bulletin No. 86-12.
 NLRC: affirmed the award of the Labor Arbiter
ISSUE/S:
1. Whether or not sales commission form part of the compensation paid to the salesmen.
2. Whether or not the sales commission is included in the computation of the 13 th month pay.
Atty. Mercader
HELD: WHEREFORE, petitioner having failed to show any grave abuse of discretion on the part of the
National Labor Relations Commission in rendering its Decision dated 17 November 1992, the Petition for
Certiorari is hereby DISMISSED for lack of merit. Costs against petitioner.
RULING:
1. Yes. the sales commissions earned by salesmen who make or close a sale of duplicating machines
distributed by petitioner corporation, constitute part of the compensation or remuneration paid to
salesmen for serving as salesmen, and hence as part of the "wage" or "salary" of petitioner's
salesmen. Indeed, it appears that petitioner pays its salesmen a small fixed or guaranteed wage;
the greater part of the salemen's wages or salaries being composed of the sales or incentive
commissions earned on actual sales closed by them. No doubt this particular salary structure was
intended for the benefit of petitioner corporation, on the apparent assumption that thereby its
salesmen would be moved to greater enterprise and diligence and close more sales in the
expectation of increasing their sales commissions. This, however, does not detract from the
character of such commissions as part of the salary or wage paid to each of its salesmen for
rendering services to petitioner corporation.
P.D. No. 851 in defining the term "basic salary" did not exclude from the ambit thereof sales commissions which
are paid along with fixed or guaranteed wages. As pointed out above, what Section 2(b) of the Implementing
Rules and Regulations Implementing P.D. No. 851 excluded from the scope of "basic salary" were "profit-
sharing payments and all allowances and monetary benefits which are not considered or integrated as part
of the regular or basic salary of the employees . . .," which properly refer to "fringe benefits.".
2. Yes. The 13th month pay of employees paid a fixed or guaranteed wage plus sales commissions
must be equivalent to one-twelfth (1/12) of the total earnings (fixed or guaranteed wage-cum-sales
commissions) during the calendar year. Considering that petitioner has excluded from the computation of
the 13th month pay the sales commissions earned by its individual salesmen, we believe and so hold that
petitioner must be held liable to pay for the deficiency.
NOTE/S:
The Rules and Regulations Implementing P.D. No. 851, issued by the Secretary of Labor and Employment
on 22 December 1975, defined the following basic terms:
"(a) '13th month pay' shall mean one-twelfth (1/12) of the basic salary of a employee within a
calendar year;
(b) 'basic salary' shall include all remunerations or earnings paid by an employer to an employee
for services rendered, but may not include cost of living allowances granted
pursuant to President Decree No. 525 or Letter of Instructions No. 174, profit-
sharing payments, and all allowances and monetary benefits which are not
considered or integrated as part of the regular or basic salary of the employee at
the time of the promulgation of the Decree on December 16, 1975." (Emphasis
supplied)
Atty. Mercader
Philippine Duplicators v. NLRC

Feliciano J.
G.R. No. 110068, February 15, 1995
FACTS:
Phil Duplicators (a) a Motion for Leave to Admit Second Motion for Reconsideration and (b) a Second
Motion for Reconsideration. This time, petitioner invoked the decision handed down by this Court,
Boie-Takeda Chemicals, Inc. vs. de la Serna.which declared null and void the second paragraph of
Section 5 (a)1 of the Revised Guidelines issued by then Secretary of Labor Drilon. Petitioner submits
that the decision in the Duplicators case should now be considered as having been abandoned or
reversed by the Boie-Takeda decision, considering that the latter went "directly opposite and contrary
to" the conclusion reached in the former. Petitioner prays that the decision rendered in Duplicators be
set aside and another be entered directing the dismissal of the money claims of private respondent
Philippine Duplicators' Employees' Union.
Issue: WON the decision in Boie-Takeda reversed the November 11, 1993 case of Phil Duplicators?
Ruling:
NO.
The decision rendered in Boie-Takeda cannot serve as a precedent under the doctrine of stare
decisis. The Boie-Takeda decision was promulgated a month after this Court, (through its Third
Division), had rendered the decision in the instant case. Also, the petitioner's (first) Motion for
Reconsideration of the decision dated 10 November 1993 had already been denied, with finality, on
15 December 1993, i.e.; before the Boie-Takeda decision became final on 5 January 1994.
Petitioner Duplicators did not put in issue the validity of the Revised Guidelines on the
Implementary on of the 13th Month Pay Law. We do not agree with petitioner that the decision in
Boie-Takeda is "directly opposite or contrary to" the decision in the present (Philippine Duplicators).
To the contrary, the doctrines enunciated in these two (2) cases in fact co-exist one with the other.
The two (2) cases present quite different factual situations (although the same word "commissions"
was used or invoked) the legal characterizations of which must accordingly differ.
In Phil Duplicators
The sales commissions received for every duplicating machine sold constituted part of the
basic compensation or remuneration of their salesmen. The portion of the salary structure
representing commissions simply comprised an automatic increment to the monetary value initially
assigned to each unit of work rendered by a salesman. Especially significant here also is the fact that
the fixed or guaranteed portion of the wages paid to the salesmen represented only 15%-30% of an
employee's total earnings in a year.
The sales commissions were an integral part of the basic salary structure of salesmen. These
commissions are not overtime payments, nor profit-sharing payments nor any other fringe benefit.
Thus, the salesmen's commissions, comprising a pre-determined percent of the selling price of the
goods sold by each salesman, were properly included in the term "basic salary" for purposes of
computing their 13th month pay.
In Boie-Takeda
The so-called commissions "paid to or received by medical representatives of Boie-Takeda

Chemicals or by the rank and file employees of Philippine Fuji Xerox Co.," were excluded from the
term "basic salary" because these were paid to the medical representatives and rank-and-file
employees as "productivity bonuses."
Atty. Mercader
Medical representatives are not salesmen; they do not effect any sale of any article at all. In
common commercial practice, in the Philippines and elsewhere, of which we take judicial notice,
medical representatives are employees engaged in the promotion of pharmaceutical products or
medical devices manufactured by their employer.
We recognize that both productivity bonuses and sales commissions may have an incentive
effect. But there is reason to distinguish one from the other here.
Productivity bonus v. Sales Commission
Productivity bonuses are generally tied to the productivity or profit generation of the
employer corporation. Productivity bonuses are not directly dependent on the extent an individual
employee exerts himself. A productivity bonus is something extra for which no specific additional
services are rendered by any particular employee and hence not legally demandable, absent a
contractual undertaking to pay it.
Sales commissions, on the other hand, such as those paid in Duplicators, are intimately
related to or directly proportional to the extent or energy of an employee's endeavors. Commissions
are paid upon the specific results achieved by a salesman-employee. It is a percentage of the sales
closed by a salesman and operates as an integral part of such salesman's basic pay.
ACCORDINGLY, the Motions for (a) Leave to File a Second Motion for Reconsideration and the (b)
aforesaid Second Reconsideration are DENIED for lack of merit. No further pleadings will be entertained.
Atty. Mercader
Boie-Takeda Chemicals, Inc. vs. Hon. Dionisio C. De La Serna

GR No. 92174 – 10 December 1993
Philippine Fuji Xerox Corp. vs. Cresenciano B. Trajano and Philippine Fuji Xerox Employees Union
GR No. 102552 – 10 December 1993
Narvasa, C. J.
FACTS: President Corazon C. Aquino promulgated Memorandum Order No. 28, which contained a single
provision modifying PD 851 by removing the salary ceiling of P1,000 a month set by the latter. More than
a year later, Revised Guidelines on the Implementation of the 13 th Month Pay Law were promulgated
which defined with particularity what remunerative items were and were not embraced in the concept of
13th month pay, and specifically dealt with employees who are paid a fixed or guaranteed wage plus
commission.
GR No. 92174
 A routine inspection was conducted in the premises of petitioner Boie-Takeda. Finding that the latter
had not been including the commissions earned by its medical representatives in the computation of
their 13th month pay, Ramos served a Notice of Inspection Results on Boie-Takeda, requiring it within
10 calendar days from notice to effect restitution or correction of “the underpayment of 13th month
pay for the year(s) 1986-1988 of Med Rep in the total amount of P558,810.89.”
 Boie-Takeda wrote to the Labor Department contesting the inspection results, and expressing the
view that the commission paid to the medical representatives are not to be included in the
computation of the 13th month pay, since the law and its implementing rules speak of REGULAR or
BASIC salary and therefore exclude all other remunerations which are not part of the regular salary.It
pointed out that if no sale is made under the effort of a particular representative, there is no
commission during the period when no sale was transacted, so that commissions are not and cannot
be legally defined as regular in nature.Due to non-appearance of Boie-Takeda, the Regional Director
issued an Order directing Boie-Takeda to pay its medical representatives and its managers the value
of underpaid 13th month pays for the years 1986-1988 within 10 days from receipt of the Order.
 A motion for reconsideration was filed by Boie-Takeda as an appeal. Respondent Acting Labor
Secretary De La Serna affirmed the Order with modification that the sales commissions earned by the
medical representatives before August 13, 1989 (effectivity date of Memorandum Order No. 28 and
its Implementing Guidelines) shall be excluded in the computation of their 13 th month pay.
GR No. 102552
 A routine inspection was conducted in the premises of Philippine Fuji Xerox Corp. As per the Notice
of Inspection Results, Fuji Xerox underpaid the 13 th month pay of 62 employees from 1986-1988. It
was requested to effect rectification and/or restitution of the noted violation within 5 working days from
notice.
No action having been taken, the President of Philxerox Employees Union wrote then Labor Secretary
Drilon, requesting a follow-up of the inspection findings. Nicolas and Gonzales were summoned to appear
for a conciliation conference. When no amicable settlement was reached, the parties were required to
filed their position papers.
 Regional Director Piezas issued and Order odering Fuji Xerox to restitute to its salesmen the portion
of the 13th month pay which arose out of the non-implementation of the said revised guidelines, 10
days from receipt of the notice.
 Fuji Xerox appealed the Order to the Office of the Secretary of Labor which was denied for lack of
merit.
 Petitioners, through common counsel, attributed grave abuse of discretion to respondent labor
officials. They maintain that under PD 851, the 13 th month pay is based solely on basic salary.
Petitioners further contend that assuming that Secretary Drilon did not exceed the statutory authority
conferred by PD 851, still the Revised Guidelines are null and void as they violate the equal
protection of the law clause.
 Respondents, through the Office of the Solicitor General, question the propriety of petitioner’s attack
on the constitutionality of the Revised Guidelines. They aver that the petitions do not advance any
valid ground to sustain the allegation of grave abuse of discretion, and that at any rate, PD 851 has
already been amended by Memorandum Order No. 28 issued by President Aquino so that
Atty. Mercader
commissions are now imputed into the computation of 13 th month pay. They add that the Revised
Guidelines issued by then Labor Secretary Drilon merely clarified a gray area occasioned by the
silence of the law as to the nature of commissions, and worked no violation of the equal protection
clause, said guidelines being based on reasonable classification.
ISSUE/S:
 Whether or not respondent labor officials committed grave abuse of discretion amounting to
lack of jurisdiction by giving effect to Sec. 5 of the Revised Guidelines on the Implementation
of the 13th Month Pay (PD 851) and overruling petitioners’ contention that said provision
constituted a usurpation of legislative power because it is not justified by or within the
authority of the law sought to be implemented besides being violative of the equal protection
clause of the Constitution
HELD: PETITIONS ARE GRANTED. The second paragraph of Sec. 5(a) of the Revised Guidelines
on the Implementation of the 13th Month Pay Law is declared null and void as being violative of the
law said Guidelines were issued to implement.
 Memorandum Order No. 28 did not repeal, supersede or abrogate PD 851. It merely modified Sec. 1
of the decree by removing the P1,000 salary ceiling.
Thus, the interpretation given to the term “basic salary” as defined in PD 851 applies equally to “basic
salary” under Memorandum Order No. 28.
 The Court cited the case of San Miguel Corp. vs. Inciong where it held that under PD 851 and its
implementing rules, the basic salary of an employee is used as the basis in the determination of his
13th month pay. Any compensations or remunerations which are deemed not part of the basic pay is
excluded as basis in the computation of the mandatory bonus.
 Under the Implementing Rules and Regulations of PD 851, the following compensations are deemed
not part of the basic salary:
 Cost of living allowances granted pursuant to PD 525 and Letter of Instruction No. 174
 Profit-sharing payments
 All allowances and monetary benefits which are not considered or integrated as part of the
regular basic salary of the employee at the time of the promulgation of the Decree on December
16, 1975
 Under a latter set of Supplementary IRR of PD 851, overtime pay, earnings and other remunerations
are excluded as part of the basic salary and in the computation of the 13 th month pay. The exclusion
of COLA under PD 525 and Letter of Instruction No. 174 and profit-sharing payments indicate the
intention to strip basic salary of other payments which are properly considered as fringe benefits. The
term basic salary is to be understood in its common, generally-accepted meaning, i.e., as a rate of
pay for a standard work period exclusive of such additional payments as bonuses and overtime.
In including commissions in the computation of the 13 th month pay, the second paragraph of Sec. 5(a) of
the Revised Guidelines on the Implementation of the 13 th Month Pay Law unduly expanded the concept of
“basic salary” as defined in PD 851. It is a fundamental rule that implementing rules cannot add to or
detract from the provisions of the law it is designed to implement.
Atty. Mercader
Iran vs. NLRC

Romero , J.
GR No. 121927 – April 22, 1998
FACTS: Petitioner Antonio Iran is engaged in softdrinks merchandising and distribution in Mandaue City,
Cebu, employing truck drivers who double as salesmen, truck helpers, and non-􏰁field personnel in pursuit
thereof. Petitioner hired private respondents Godofredo Petralba, Moreno Cadalso, Celso Labiaga and
Fernando Colina as drivers/salesmen while private respondents Pepito Tecson, Apolinario Gimena, Jesus
Bandilao, Edwin Martin and Diosdado Gonzalgo were hired as truck helpers. Drivers/salesmen drove
petitioner's delivery trucks and promoted, sold and delivered softdrinks to various outlets in Mandaue City.
The truck helpers assisted in the delivery of softdrinks to the different outlets covered by the
driver/salesmen. As part of their compensation, the driver/salesmen and truck helpers of petitioner received
commissions per case of softdrinks sold at the following rates:
 SALESMEN: Ten Centavos (P0.10) per case of Regular softdrinks; Twelve Centavos (P0.12) per
case of Family Size softdrinks.
 TRUCK HELPERS:
 Eight Centavos (P0.08) per case of Regular softdrinks.
 Ten Centavos (P0.10) per case of Family Size softdrinks.
The Labor Arbiter ruled that private respondents were validly terminated, that petitioner did not comply with
the minimum wage requirements, and failed to pay private respondents their 13th month pay. Both parties
appealed. Petitioner submitted vouchers showing private respondents received amounts covering a ten-
day period as part of their 13th month pay. The NLRC a􏰁ffirmed the validity of private respondents'
dismissal, but found that the procedural requirements for dismissing employees were not complied with. It
denied petitioner's claim that commissions be included in determining compliance with the minimum wage
requirement. Hence, this recourse.
ISSUE/S:
1. W/N the commissions earned by private respondents in selling softdrinks constitute a part of their
wages?
HELD: REMANDED and SET ASIDE.
YES. Pursuant to Article 97 (f) of the Labor Code commissions earned by private respondents in selling
softdrinks constitute part of the compensation or remuneration paid to drivers/salesmen and truck helpers,
hence, must be considered part of the wages paid them. This definition explicitly includes commissions as
part of wages. While commissions are, indeed, incentives or forms of encouragement to inspire employees
to put a little more industry on the jobs particularly assigned to them, still these commissions are direct
remunerations for services rendered. In fact, commissions have been defined as the recompense,
compensation or reward of an agent, salesman, executor, trustee, receiver, factor, broker or bailee, when
the same is calculated as a percentage on the amount of his transactions or on the profit to the principal.
The nature of the work of a salesman and the reason for such type of remuneration for services rendered
demonstrate clearly that commissions are part of a salesman's wage or salary.
Thus, the commissions earned by private respondents in selling softdrinks constitute part of the
compensation or remuneration paid to drivers/salesmen and truck helpers for serving as such, and hence,
must be considered part of the wages paid them.
The NLRC asserts that the inclusion of commissions in the computation of wages would negate the practice
of granting commissions only after an employee has earned the minimum wage or over. While such a
practice does exist, the universality and prevalence of such a practice is questionable at best. In truth, this
Court has taken judicial notice of the fact that some salesmen do not receive any basic salary but depend
entirely on commissions and allowances or commissions alone, although an employer-employee
relationship exists. Undoubtedly, this salary structure is intended for the benefit of the corporation
establishing such, on the apparent assumption that thereby its salesmen would be moved to greater
enterprise and diligence and close more sales in the expectation of increasing their sales commissions.
This, however, does not detract from the character of such commissions as part of the salary or wage paid
to each of its salesmen for rendering services to the corporation.
Likewise, there is no law mandating that commissions be paid only after the minimum wage has been paid
to the employee. Verily, the establishment of a minimum wage only sets a floor below which an employee's
remuneration cannot fall, not that commissions are excluded from wages in determining compliance with
the minimum wage law.
Atty. Mercader
Rogelio Reyes v. NLRC and URC

Ynares-Santiago, J.
GR No. 160233 – 8 August 2007
FACTS:
 Petitioner was employed as a salesman at private respondent's Grocery Division in Davao City on
August 12, 1977.
 He was eventually appointed as unit manager of Sales Department-South Mindanao District, a
position he held until his retirement on November 30, 1997.
 Thereafter, he received a letter regarding the computation of his separation pay
 Petitioner refused the P200,322.21 check issued by private respondent because:
 He insisted that his retirement benefits and 13th month pay must be based on the average
monthly salary of P42,766.19, which consists of P10,919.22 basic salary and P31,846.97
average monthly commission
 Instead, he filed a complaint before the arbitration branch of the NLRC for retirement benefits, 13th
month pay, tax refund, earned sick and vacation leaves, financial assistance, service incentive leave
pay, damages and attorney's fees.
 On March 15, 1999, Labor Arbiter Miriam A. Libron-Barroso rendered a decision holding that sales
commission is part of the basic salary of a unit manager
 However, all the other claims are dismissed for lack of basis.
 On appeal, the NLRC modified the decision of the Labor Arbiter by excluding the overriding
commission in the computation of the retirement benefits and 13th month pay and deleted the award
of attorney's fees
ISSUE:
WHETHER OR NOT THE AVERAGE MONTHLY SALES COMMISSION OF THIRTY-ONE THOUSAND
EIGHT HUNDRED FORTY-SIX AND 97/100 (Php 31,846.97) SHOULD BE INCLUDED IN THE
COMPUTATION OF HIS RETIREMENT BENEFITS AND 13th MONTH PAY.
NO. See Article 287 and Section 5 of Rule II of the Rules Implementing the New Retirement Law.
 Petitioner filed for optional retirement upon reaching the age of 60.
 However, the basis in computing his retirement benefits is his latest salary rate of P10,919.22 as the
commissions he received are in the form of profit-sharing payments specifically excluded by Article
287 and Section 5 of Rule II.
 At bar, petitioner Rogelio J. Reyes was receiving a monthly sum of P10,919.22 as salary
corresponding to his position as Unit Manager.
 Thus, as correctly ruled by public respondent NLRC, the "overriding commissions" paid to him by
Universal Robina Corp. could not have been 'sales commissions' in the same sense that Philippine
Duplicators paid its salesmen sales commissions.
 Unit Managers are not salesmen; they do not effect any sale of article at all.
 Therefore, any commission which they receive is certainly not the basic salary which measures the
standard or amount of work of complainant as Unit Manager.
 Accordingly, the additional payments made to petitioner were not in fact sales commissions but rather
partook of the nature of profit-sharing business.
 Aside from the fact that as unit manager petitioner did not enter into actual sale transactions, but
merely supervised the salesmen under his control, the disputed commissions were not regularly
received by him.
 Only when the salesmen were able to collect from the sale transactions can petitioner receive the
commissions. Conversely, if no collections were made by the salesmen, then petitioner would receive
no commissions at all.
 In fine, the commissions which petitioner received were not part of his salary structure but were profit-
sharing payments and had no clear, direct or necessary relation to the amount of work he actually
performed.
 The collection made by the salesmen from the sale transactions was the profit of private respondent
from which petitioner had a share in the form of a commission.
Atty. Mercader
Philippine Spring Water Resources v. Court of Appeals

MENDOZA, J.
G.R. No. 205278, 11 June 2014
FACTS: Petitioner Philippine Spring Water Resources, Inc. (PSWRI), engaged in the business of
manufacturing, selling and distributing bottled mineral water, hired Mahilum as Vice-President for Sales
and Marketing for the Bulacan-South Luzon Area, for a monthly salary of P15,000.00 plus 0.25%
commission on every cash on delivery and another 0.25% on new accounts from July to August,2004.The
inauguration of PSWRI’s Bulacan plant would be celebrated at the same time with the company’s
Christmas party. Mahilum was designated as over-all chairman of the affair to be held on December 19,
2004.Mahilum called all committee chairpersons to a meeting for the program of action and budget plan.
The meeting, however, was reset to the following day as some visitors arrived without prior appointment.
Mahilum requested Ms. Vicky Evangelista, Vice-President for Administration and Finance, to take charge
of the meeting for the inauguration should he fail to come back on time.
Thereafter, meetings on the program of activities for the inauguration and Christmas party were
conducted without Mahilum’s presence. Evangelista took charge and assumed the lead role until the day
of the affair. On the inaugural day, Mahilum was not seen around to supervise the program proper as he
entertained some visitors of the company. According to him, he delegated the task to Evangelista.
Mahilum’s attention was, however, called when Lua (CEO) got furious because he was not recognized
during the program. He was not mentioned in the opening remarks or called to deliver his inaugural
speech. On the following day, Mahilum was required to explain why Lua was not recognized and made to
deliver his speech. At the same time, he was placed under preventive suspension for thirty (30) days.
Mahilum submitted his written explanation. Subsequently, an investigation was conducted.
When his 30-day suspension ended, Mahilum reported for work but was prevented from entering the
workplace. Sometime in the first week of March 2005, he received a copy of the Memorandum, dated
January 31, 2005, terminating his services effective on February 1, 2005. On February 9, 2005, a
clearance certificate was issued to Mahilum. He received the amount of P43,998.56 and was made to
execute the Release, Waiver and Quitclaim in favor of the company and Lua.
Mahilum filed a complaint for illegal dismissal with prayer for reinstatement, payment of back wages and
damages. He argued that he was illegally suspended and, thereafter, dismissed constructively from the
service. He also claimed that he was forced to sign the waiver. On April 25, 2006, the Labor
Arbiter (LA) dismissed Mahilum’s complaint for lack of merit on the ground that the quitclaim he had
executed barred his right to question his dismissal under the principle of estoppel. Aggrieved, Mahilum
appealed the decision to the National Labor Relations Commission (NLRC).
The dispositive portion of the NLRC decision reads:
WHEREFORE, premises considered, the appeal of complainant is hereby GRANTED. The Decision
dated 25 April 2006 of Executive Labor Arbiter Violeta Bantug is REVERSED and SET ASIDE. Another
one is entered declaring that the dismissal of complainant was illegal.
Respondent Philippine Spring Water Resources, Inc. is then directed to pay complainant’s separation pay
of Fifteen Thousand (P15,000.00) plus backwages, inclusive of salary and 0,25% commission on
cash on delivery from February 1, 2005 up to the finality of the Decision. In addition, respondent
should pay complainant of moral and exemplary damages in the amount of P100,000.00.
SO ORDERED.
On September 30, 2008, the CA reversed the NLRC decision. On July 23, 2010, the
CA reconsidered and issued the assailed Amended Decision after finding merit in Mahilum’s arguments.
Finding Mahilum to have been indeed illegally dismissed from employment, the CA ruled that he was
entitled to full backwages and separation pay in lieu of reinstatement, in view of the strained relations
between Mahilum and Lua. With respect to the quitclaim, the CA declared it to be void for having no
Atty. Mercader
consideration at all. All that Mahilum received by virtue of the said document amounted to what he was
legally entitled like salaries and wages, 13th month pay and commissions. These could not be considered
as reasonable and credible consideration for a quitclaim. By receiving only what he was lawfully entitled
to, there was, in effect, no consideration at all for the quitclaim, rendering it void and ineffective to bar an
action for illegal dismissal.
ISSUE/S:
1. Whether Mahilum was illegally dimissed.
2. Whether the commission on cash and delivery sales should included as part of Mahilum’s
backwages.

1. Yes, Mahilum was a regular employee who was entitled to security of tenure. Thus, he could only
be dismissed from service for causes provided in Article 282 of the Labor Code. 16 At this point, it
bears stressing that the NLRC and the CA, in their decisions, both found Mahilum to have been
illegally dismissed.
The well-entrenched rule, especially in labor cases, is that findings of fact of quasi-judicial bodies,
like the NLRC, are accorded with respect, even finality, if supported by substantial
evidence. Particularly when passed upon and upheld by the CA, they are binding and conclusive
upon the Court and will not normally be disturbed. Although this doctrine is not without
exceptions, the Court finds that none is applicable to the present case. Here, the CA affirmed the
ruling of the NLRC and adopted as its own the latter's factual findings as to Mahilum’s illegal
dismissal. Consequently, the Court finds no reason to depart from the finding that Mahilum’s
failure to effectively discharge his assignment as the over-all chairman of the festivities was due
to mere inadvertence and the mistaken belief that he had properly delegated the details of the
program to another officer.
Further, his designation as the chairman of the whole affair did not form part of his duty as a
supervisor. Mahilum was engaged to supervise the sales and marketing aspects of PSWRI’s
Bulacan Plant. Verily, the charge of loss of trust and confidence had no leg to stand on, as the act
complained of was not work-related. Simply put, the petitioners were not able to prove that
Mahilum was unfit to continue working for the company. In the words of the CA:
Even as jurisprudence has distinguished the treatment of managerial employees or employees occupying
positions of trust and confidence from that of rank-and-file personnel, insofar as the application of the
doctrine of trust and confidence is concerned, such is inapplicable to the instant case since as above-
stated, private respondent’s lapse was justified, unintentional, without deliberate intent and unrelated to
the duty for which he was engaged.
Likewise, warranting the agreement of the Court is the finding of the CA in its Amended Decision that the
quitclaim executed by Mahilum did not operate to bar a cause of action for illegal dismissal. That the
amounts received by Mahilum were only those owing to him under the law indeed bolstered the fact that
the quitclaim was executed without consideration. Suffice it to say, the subject quitclaim may not be
considered as a valid and binding undertaking.
2. No, Back wages are granted on grounds of equity to workers for earnings lost due to their illegal
dismissal from work. They are a reparation for the illegal dismissal of an employee based on earnings
which the employee would have obtained, either by virtue of a lawful decree or order, as in the case of a
wage increase under a wage order, or by rightful expectation, as in the case of one’s salary or wage. The
outstanding feature of backwages is thus the degree of assuredness to an employee that he
would have had them as earnings had he not been illegally terminated from his employment.
[Emphasissupplied]
It is well-established in jurisprudence that the determination of whether or not a commission forms part of
Atty. Mercader
the basic salary depends upon the circumstances or conditions for its payment. In Phil Duplicators, Inc. v.
NLRC, the Court held that commissions earned by salesmen form part of their basic salary. The
salesmen’s commissions, comprising a pre-determined percentage of the selling price of the goods sold
by each salesman, were properly included in the term basic salary for purposes of computing the
13thmonth pay. The salesmen’s commissions are not overtime payments, nor profit-sharing payments nor
any other fringe benefit, but a portion of the salary structure which represents an automatic increment to
the monetary value initially assigned to each unit of work rendered by a salesman. On the other hand,
in Boie-Takeda Chemicals, Inc. v. De la Serna, the so-called commissions paid to or received by medical
representatives were excluded from the term basic salary because these were paid to the medical
representatives and rank-and-file employees as productivity bonuses, which were generally tied to the
productivity, or capacity for revenue production, of a corporation and such bonuses closely resemble
profit-sharing payments and had no clear direct or necessary relation to the amount of work actually done
by each individual employee.
In Mahilum’s case, Phil. Duplicator cannot be automatically applied without considering his position as
Vice-President for sales and marketing of the PSWRI’s Bulacan-South Luzon Area. This factor constrains
the Court to hold that Mahilum’s 0.25% commission based on the monthly sales and 0.25% commission
for cash payments must be taken to come in the nature of overriding commission, not sales commission.
The latter is not properly includable in the basic salary as it must be earned by actual market transactions
attributable to the claimant. Curiously, Mahilum did not comment on the petitioners’ objection to the
award. Not being a salesman who directly effected any sale of a product, the commission embodied in
the agreement partook of the nature of profit-sharing business based on quota. In fine, the alleged
commissions were profit-sharing payments and had no clear, direct or necessary relation to the amount of
work he actually performed.
For said reason, Mahilum’s backwages must be pegged at his basic salary, excluding the commissions
mentioned by the NLRC, to be computed from the time of his dismissal up to the finality of this decision.
Nonetheless, the award of backwages shall earn legal interest at the rate of six percent (6%) per annum
in accordance with prevailing jurisprudence.
Atty. Mercader
Atty. Mercader
CENTRAL AZUCARERA DE TARLAC vs. CENTRAL AZUCARERA DE TARLAC LABOR UNION-

NLU
NACHURA, J.
G.R. No. 188949, 26 July 2010
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the
Decision May 28, 2009, and the Resolution dated July 28, 2009 of the Court of Appeals (CA) in CA-G.R.
SP No. 106657.
FACTS:
Petitioner is a domestic corporation engaged in the business of sugar manufacturing, while respondent is
a legitimate labor organization which serves as the exclusive bargaining representative of petitioner’s rank-
and-file employees. The controversy stems from the interpretation of the term basic pay, essential in the
computation of the 13th-month pay.
In compliance with Presidential Decree (P.D.) No. 851, petitioner granted its employees the mandatory
thirteenth (13th)-month pay since 1975. The formula used by petitioner in computing the 13th-month pay
was: Total Basic Annual Salary divided by twelve (12). Included in petitioner’s computation of the Total
Basic Annual Salary were the following: basic monthly salary; first eight (8) hours overtime pay on Sunday
and legal/special holiday; night premium pay; and vacation and sick leaves for each year.
Respondent union staged a strike. During the pendency of the strike, petitioner declared a temporary
cessation of operations. The suspension of operation was lifted on June 2006, but the rank-and-file
employees were allowed to report for work on a fifteen day-per-month rotation basis. December that same
year, petitioner gave the employees their 13th-month pay based on the employee’s total earnings during
the year divided by 12.
Respondent objected to this computation. It averred that petitioner did not adhere to the usual computation
of the 13th-month pay. It claimed that the divisor should have been eight (8) instead of 12, because the
employees worked for only 8 months in 2006. It likewise asserted that petitioner did not observe the
company practice of giving its employees the guaranteed amount equivalent to their one month pay, in
instances where the computed 13th- month pay was less than their basic monthly pay. Despite four
conciliatory meetings, the parties still failed to settle the dispute.
Petitioner argues that there was an error in the computation of the 13th-month pay of its employees as a
result of its mistake in implementing P.D. No. 851, an error that was discovered by the management only
when respondent raised a question concerning the computation of the employee’s 13th-month pay for 2006.
Admittedly, it was an error that was repeatedly committed for almost thirty (30) years. Petitioner insists that
the length of time during which an employer has performed a certain act beneficial to the employees, does
not prove that such an act was not done in error.
NLRC rendered a Decision reversing the Labor Arbiter where the former ordered the petitioner to to adhere
to its established practice of granting 13th[-] month pay on the basis of gross annual basic which includes
basic pay, premium pay for work in rest days and special holidays, night shift differential and paid vacation
and sick leaves for each year. CA affirmed NLRC’s decision. Hence, this petition.
ISSUE/S: W/Not CA erred in affirming NLRC’s decision
HELD: No. Petition denied.

The practice of petitioner in giving 13th-month pay based on the employees’ gross annual earnings which
included the basic monthly salary, premium pay for work on rest days and special holidays night shift
differential pay and holiday pay continued for almost thirty years and has ripened into a company policy or
practice which cannot be unilaterally withdrawn. Article 100 of the Labor Code, otherwise known as the
Non-Diminution Rule, mandates that benefits given to employees cannot be taken back or reduced
unilaterally by the employer because the benefit has become part of the employment contract, written or
Atty. Mercader
unwritten. The rule against diminution of benefits applies if it is shown that the grant of the benefit is based
on an express policy or has ripened into a practice over a long period of time and that the practice is
consistent and deliberate. Nevertheless, the rule will not apply if the practice is due to error in the
construction or application of a doubtful or difficult question of law. But even in cases of error, it should be
shown that the correction is done soon after discovery of the error.
The argument of petitioner that the grant of the benefit was not voluntary and was due to error in the
interpretation of what is included in the basic salary deserves scant consideration. No doubtful or difficult
question of law is involved in this case. The guidelines set by the law are not difficult to decipher. The
voluntariness of the grant of the benefit was manifested by the number of years the employer had paid the
benefit to its employees. Petitioner only changed the formula in the computation of the 13th-month pay after
almost 30 years and only after the dispute between the management and employees erupted. This act of
petitioner in changing the formula at this time cannot be sanctioned, as it indicates a badge of bad faith.
NOTES: The 13th-month pay mandated by Presidential Decree (P.D.) No. 851 represents an additional
income based on wage but not part of the wage. It is equivalent to one- twelfth (1/12) of the total basic
salary earned by an employee within a calendar year. All rank-and-file employees, regardless of their
designation or employment status and irrespective of the method by which their wages are paid, are entitled
to this benefit, provided that they have worked for at least one month during the calendar year. If the
employee worked for only a portion of the year, the 13th-month pay is computed pro rata.
Sec. 2. Definition of certain terms.·As used in this issuance:
(a) Thirteenth-month pay shall mean one twelfth (1/12) of the basic salary of an employee within a calendar
year;
(b) Basic salary shall include all remunerations or earnings paid by an employer to an employee for services
rendered but may not include cost-of-living allowances granted pursuant to Presidential Decree No. 525 or
Letter of Instructions No. 174, profit-sharing payments, and all allowances and monetary benefits which are
not considered or integrated as part of the regular or basic salary of the employee at the time of the
promulgation of the Decree on December 16, 1975.
Atty. Mercader
HONDA PHILS., INC v. SAMAHAN NG MALAYANG MANGGAGAWA SA HONDA

Gr. No. 145561
FACTS:
The case started from the CBA forged between petitioner Honda and respondent union which
contained the following provisions: Section 3. 13th Month Pay – The company shall maintain in the present
practice in the implementation of the 13th month pay; Section 6. 14th Month Pay – The company shall grant
a 14th month pay, computed on the same basis as computation of 13 th month pay; Section 7. The company
agrees to continue the practice of granting, in its discretion, financial assistance to covered employees in
December of each year, of not less than 100% of basic pay.
In the latter part of 1998, the parties started re-negotiations for the fourth and fifth years of their
CBA. When the negotiation between the parties bogged down, respondent union filed a Notice of Strike on
the ground of bargaining deadlock. Honda filed a Notice of Lockout thereafter. On 1999, DOLE Secretary
Laguesma assumed jurisdiction over the labor dispute and ordered the parties to cease and desist from
committing acts that would aggravate the situation. The parties complied, however it was not long enough
when the respondent union filed a second Notice of Strike on the ground of unfair labor practice alleging
that Honda illegally contracted out work to the detriment of the workers. Respondent union went on strike
and picketed the premises of Honda. DOLE Secretary Joson Jr. assumed jurisdiction of the case, and the
striking employees were ordered to return to work and the management accepted them back under the
same terms prior to the strike staged.
Subsequently, the management of Honda issued a memorandum announcing its new computation
of the 13th and 14th month pay to be granted to all its employees whereby the 31-day long strike shall be
considered unworked days for the purposes of computing said benefits. As per the company’s new formula,
the amount equivalent to 1/12 of the employees’ basic salary shall be deducted from theses bonuses, with
a commitment however that in the vent that the strike is declared legal, Honda shall pay the amount
deducted. Respondent union opposed the computation, but Honda sought the opinion of the Bureau of
Working Conditions who agreed with the pro-rata payment of the 13th and 14th month pay. It was then
submitted for voluntary arbitration, who rendered the implementation of pro-rated computation is invalid.
Honda filed a Motion for Partial Reconsideration with the CA, who later denied the motion and dismissed
the petition for lack of merit.
ISSUE: Whether or not the pro-rated computation of the 13th month pay and the other bonuses in question
is valid and lawful.
HELD: The petition lacks merit. The court agrees with the findings of the arbitrator that the assailed CBA
provisions are far from being unequivocal. A cursory reading of the provisions will show that they did not
state categorically whether the computation of the 13 th month pay, 14th month pay and the financial
assistance would be based on one full month’s basic salary of the employees., or pro-rated based on the
compensation actually received. The arbitrator thus properly resolved the ambiguity in favor of labor as
mandated by Art. 1702 of the Civil Code. The CA affirmed the arbitrator’s finding and added that the
computation of the 13th month pay should be based on the length of service and not on the actual wage
earned by the worker. PD No. 851 or the 13th Month Pay Law, which required all employers to pay their
employees a 13th month pay, was issued to protect the level of real wages from the ravages of worldwide
inflation. It was enacted on December 16, 1975 after it was noted that there had been no increase in the
minimum wage since 1970 and the Christmas season was an opportune time for society to show its concern
for the plight of the working masses so that them may properly celebrate Christmas and New Year. The
“basic salary” of an employee for the purpose of computing the 13 th month pay shall include all
remunerations or earnings paid by his employer for services rendered but does not include
allowances and monetary benefits which are not considered or integrated as part of the regular or basic
saary, such as the cash equivalent of unused vacation and sick leave credits, overtime premium, night
differential and holiday pay, and cost-of-living allowances. For employees receiving regular wage, we have
interpreted “basic salary’ to mean, not the amount actually received by an employee, but 1/12 of their
standard monthly wage multiplied by their length of service within a given calendar year. Thus, we exclude
from the computation of basic salary payments for sick, vacation and maternity leaves, night differentials,
regular holiday pay and premiums for work done on rest days and special holidays. In the present case,
there being no gap in the service of the workers during the calendar year in question, the computation of
the 13th month pay should not be pro-rated but should be given in full.
Atty. Mercader
Boie-Takeda Chemicals, Inc. v. De la Serna

NARVASA, C.J.
G.R. No. 92174, 10 December 1993.
FACTS:
(RE G.R. No. 92174) A routine inspection was conducted on May 2, 1989 in the premises of petitioner Boie-
Takeda Chemicals, Inc. by Labor and Development Officer Reynaldo B. Ramos. Finding that Boie-Takeda
had not been including the commissions earned by its medical representatives in the computation of their
13th month pay, Ramos served a Notice of Inspection Results 1 on Boie-Takeda through its president, Mr.
Benito Araneta, requiring Boie-Takeda within ten (10) calendar days from notice to effect restitution or
correction of "the underpayment of 13th month pay for the year(s) 1986, 1987 and 1988.
Boie-Takeda wrote the Labor Department contesting the Notice of Inspection Results, and expressing the
view "that the commission paid to our medical representatives are not to be included in the computation of
the 13th month pay . . . (since the) law and its implementing rules speak of REGULAR or BASIC salary and
therefore exclude all other remunerations which are not part of the REGULAR salary."
Regional Director Luna C. Piezas directed Boie-Takeda to appear before his Office on June 9 and 16, 1989.
On the appointed dates, however, and despite due notice, no one appeared for Boie-Takeda. Subsequently,
Director Piezas issued an Order 3 directing Boie-Takeda to pay its medical representatives and its
managers the amount representing underpayment of thirteenth month pay for the years 1986, 1987, 1988.
A motion for reconsideration 4 was seasonably filed by Boie-Takeda under date of August 3, 1989. Treated
as an appeal, it was resolved on January 17, 1990 by then Acting Labor Secretary Dionisio de la Serna,
who affirmed the July 24, 1989 Order.
Hence the petition docketed as G.R. No. 92174.
(RE G.R. No. 102552) A similar Routine Inspection was conducted in the premises of Philippine Fuji Xerox
Corp. on September 7, 1989. In his Notice of Inspection Results, 6 addressed to the Manager, Mr. Nicolas
O. Katigbak, Senior Labor and Employment Officer Nicanor M. Torres noted the underpayment of 13th
month pay of 62 employees for the period covering 1986, 1987 and 1988.
Subsequently, Regional Director Luna C. Piezas issued an Order directing Philippine Fuji Xerox Corp. to
restitute to its salesmen the portion of the 13th month pay which arose out of the non-implementation of the
said revised guidelines.
Philippine Fuji Xerox appealed the aforequoted Order to the Office of the Secretary of Labor. In an Order
dated October 120, 1991, Undersecretary Cresenciano B. Trajano denied the appeal for lack of merit.
Hence, the petition in G.R. No. 102552, which was ordered consolidated with G.R. No. 92174 as involving
the same issue.
Petitioners’ contention: Petitioners maintain that under P.D. 851, the 13th month pay is based solely on
basic salary. As defined by the law itself and clarified by the implementing and Supplementary Rules as
well as by the Supreme Court in a long line of decisions, remunerations which do not form part of the basic
or regular salary of an employee, such as commissions, should not be considered in the computation of the
13th month pay.
Respondents’ contention: Respondents contend that P.D. No. 851 has already been amended by
Memorandum Order No. 28 issued by President Corazon C. Aquino on August 13, 1986 so that
commissions are now imputed into the computation of the 13th Month Pay.
ISSUE: Whether or not remuneration which is not integrated in the basic salary is included in the
computation of the thirteenth month pay.
HELD: NO. We rule for the petitioners.
Contrary to respondents' contention, Memorandum Order No. 28 did not repeal, supersede or abrogate
P.D. 851 (please refer to notes below under history of thirteenth month pay law). As may be gleaned
from the language of the Memorandum Order No. 28, it merely "modified" Section 1 of the decree by
removing the P1,000.00 salary ceiling. The concept of 13th Month Pay as envisioned, defined and
implemented under P.D. 851 remained unaltered, and while entitlement to said benefit was no longer
limited to employees receiving a monthly basic salary of not more than P1,000.00, said benefit was, and
still is, to be computed on the basic salary of the employee-recipient as provided under P.D. 851. Thus, the
interpretation given to the term "basic salary" as defined in P.D. 851 applies equally to "basic salary" under
Memorandum Order No. 28.
The term "basic salary" is to be understood in its common, generally-accepted meaning, i.e., as a rate of
pay for a standard work period exclusive of such additional payments as bonuses and
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overtime. 8 This is how the term was also understood in the case of Pless v. Franks, 308 S.W. 2nd. 402,
403, 202 Tenn. 630, which held that in statutes providing that pension should not less than 50 percent of
"basic salary" at the time of retirement, the quoted words meant the salary that an employee (e.g., a
policeman) was receiving at the time he retired without taking into consideration any extra compensation
to which he might be entitled for extra work. 9
In remunerative schemes consisting of a fixed or guaranteed wage PLUS commission, the fixed or
guaranteed wage is patently the "basic salary" for this is what the employee receives for a standard work
period. Commissions are given for extra efforts exerted in consummating sales or other related
transactions. They are, as such, additional pay, which this Court has made clear do not form part
of the "basic salary."
WHEREFORE, the consolidated petitions are hereby GRANTED. The second paragraph of Section 5 (a)
of the Revised Guidelines on the Implementation of the 13th Month Pay Law issued on November 126,
1987 by then Labor Secretary Franklin M. Drilon is declared null and void as being violative of the law said
Guidelines were issued to implement, hence issued with grave abuse of discretion correctible by the writ of
prohibition and certiorari. The assailed Orders of January 17, 1990 and October 10, 1991 based thereon
are SET ASIDE.
NOTES:
History of the Thirteenth Month Pay Law:
Sections 1 and 2 of Presidential Decree No. 851, the Thirteenth Month Pay Law, read as follows:
Sec 1. All employees are hereby required to pay all their employees receiving basic salary
of not more than P1,000.00 a month, regardless of the nature of the employment, a 13th
month pay not later than December 24 of every year.
Sec. 2. Employers already paying their employees a 13th month pay or its equivalent are
not covered by this Decree.
The Rules and Regulations Implementing P.D. 851 promulgated by then Labor Minister Blas Ople on
December 22, 1975 contained the following relevant provisions relative to the concept of "thirteenth month
pay" and the employers exempted from giving it, to wit:
Sec. 2. Definition of certain terms. — . . .
a) "Thirteenth month pay" shall mean one twelfth (1/12) of the basic salary of an employee
within a calendar year;
b) "Basic Salary" shall include all remunerations or earnings paid by an employer to
an employee for services rendered but may not include cost of living allowances
granted pursuant to Presidential Decree No. 525 or Letter of Instructions No. 174,
profit sharing payments, and all allowances and monetary benefits which are not
considered or integrated as part of the regular or basic salary of the employee at the
time of the promulgation of the Decree on December 16, 1975.
On August 13, 1986, President Corazon C. Aquino promulgated Memorandum Order No. 28, which
contained a single provision modifying Presidential Decree No. 851 by removing the salary ceiling of
P1,000.00 a month set by the latter.
Slightly more than a year later, on November 16, 1987, Revised Guidelines on the Implementation of
the 13th Month Pay Law were promulgated by then Labor Secretary Franklin Drilon which, among other
things, defined with particularity what remunerative items were and were not embraced in the concept of
13th month pay, and specifically dealt with employees who are paid a fixed or guaranteed wage plus
commission. The relevant provisions read:
5. 13th Month Pay for Certain Types of Employees.
(a) Employees Paid by Results. — Employees who are paid on piece work basis are by
law entitled to the 13th month pay.
Employees who are paid a fixed or guaranteed wage plus commission are also entitled
to the mandated 13th month pay based on their total earnings during the calendar
year, i.e., on both their fixed or guaranteed wage and commission.
Atty. Mercader
PHILIPPINE DUPLICATORS, INC vs. NLRC

Feliciano, J.
G.R. Nos. 110068. February 15, 1995
FACTS:
 Petitioner Duplicators filed (a) a Motion for Leave to Admit Second Motion for Reconsideration and (b)
a Second Motion for Reconsideration. This time, petitioner invoked the decision handed down to this
Court, through its Second Division, on 10 December 1993 in the two (2) consolidated cases of Boie-
Takeda Chemicals, Inc., vs. Hon. Dionisio de la Serna and Philippine Fuji Xerox Corp. vs. Hon.
Cresenciano B. Trajano, in G.R. Nos. 92174 and 102552, respectively. Petitioner submits that the
decision in the Duplicators case should now be considered as having been abandoned or reversed by
the Boie-Takeda decision, considering that the latter went "directly opposite and contrary to" the
conclusion reached in the former.
 Petitioner prays that the decision rendered in Duplicators be set aside and another be entered directing
the dismissal of the money claims of private respondent Philippine Duplicators' Employees' Union. Third
Division of this Court referred the petitioner's Second Motion for Reconsideration, and its Motion for
Leave to Admit the Second Motion for Reconsideration, to the Court en banc en consulta.
ISSUE: Whether or not commissions paid to salesmen of Duplicators must be included as part of their basic
wage or salary which will serve as computation for 13th month pay. - YES.
 Decision rendered in Boie-Takeda cannot serve as a precedent under the doctrine of stare decisis. The
Boie-Takeda decision was promulgated a month after this Court, (through its Third Division), had
rendered the decision in the instant case.
 The Court does not agree with petitioner that the decision in Boie-Takeda is "directly opposite or
contrary to" the decision in the present.
 Sales commissions received for every duplicating machine sold constituted part of the basic
compensation or remuneration of the salesmen of Philippine Duplicators for doing their job. The portion
of the salary structure representing commissions simply comprised an automatic increment to the
monetary value initially assigned to each unit of work rendered by a salesman. he fixed or guaranteed
portion of the wages paid to the Philippine Duplicators' salesmen represented only 15%-30% of an
employee's total earnings in a year. Third Division held, correctly, that the sales commissions were an
integral part of the basic salary structure of Philippine Duplicators' employees-salesmen. These
commissions are not overtime payments, nor profit-sharing payments nor any other fringe benefit.
Thus, the salesmen's commissions, comprising a pre-determined percent of the selling price of the
goods sold by each salesman, were properly included in the term "basic salary" for purposes of
computing their 13th month pay.
 In Boie-Takeda, the so-called commissions "paid to or received by medical representatives of Boie-
Takeda Chemicals or by the rank and file employees of Philippine Fuji Xerox Co., " were excluded from
the term "basic salary" because these were paid to the medical representatives and rank-and-file
employees as "productivity bonuses."
 Citing Atok-Big Wedge Mining Co., Inc. v. Atok-Big Wedge Mutual Benefit Association, Bonus forms
part of wages depends upon the circumstances or conditions for its payment. If it is an additional
compensation which the employer promised and agreed to give without any conditions imposed for its
payment, such as success of business or greater production or output, then it is part of the wage. But
if it is paid only if profits are realized or a certain amount of productivity achieved, it cannot be
considered part of wages.In addition, In Boie-Takada, those medical representatives are not salesmen;
they are employees engaged in the promotion of pharmaceutical products or medical devices
manufactured by their employer. Thus, the additional payments made to Boie-Takeda's medical
representatives were not in fact sales commissions but rather partook of the nature of profit-sharing
bonuses. Productivity bonus is something extra for which no specific additional services are rendered
by any particular employee and hence not legally demandable, absent a contractual undertaking to pay
it. Sales commissions, on the other hand, such as those paid in Duplicators, are intimately related to or
directly proportional to the extent or energy of an employee's endeavors. Commissions are paid upon
the specific results achieved by a salesman-employee.
Atty. Mercader
KING OF KINGS TRANSPORT, INC vs. MAMAC

G.R. No. 166208 - June 29, 2007
VELASCO, JR., J.
Is a verbal appraisal of the charges against the employee a breach of the procedural due process?
This is the main issue to be resolved in this plea for review under Rule 45 of the September 16, 2004
Decision of the Court of Appeals (CA) in CA-GR SP No. 81961. Said judgment affirmed the dismissal of
bus conductor Santiago O. Mamac from petitioner King of Kings Transport, Inc. (KKTI), but ordered the bus
company to pay full backwages for violation of the twin-notice requirement and 13th-month pay. Likewise
assailed is the December 2, 2004 CA Resolution rejecting KKTI's Motion for Reconsideration.
Section 3 of the Rules Implementing Presidential Decree No. 851 provides the exceptions in the
coverage of the payment of the 13th-month benefit. The provision states:
SEC. 3. Employers covered. — The Decree shall apply to all employers except to:
xxx xxx xxx
e) Employers of those who are paid on purely commission, boundary, or task basis, and those who are paid
a fixed amount for performing a specific work, irrespective of the time consumed in the performance thereof,
except where the workers are paid on piece-rate basis in which case the employer shall be covered by this
issuance insofar as such workers are concerned.
FACTS:
1. Respondent Mamac was hired as bus conductor of Don Mariano Transit Corporation (DMTC) on
April 29, 1999. The DMTC employees including respondent formed the Damayan ng mga
Manggagawa, Tsuper at Conductor-Transport Workers Union and registered it with the Department
of Labor and Employment. Pending the holding of a certification election in DMTC, petitioner KKTI
was incorporated with the Securities and Exchange Commission which acquired new buses. Many
DMTC employees were subsequently transferred to KKTI and excluded from the election.
2. The KKTI employees later organized the Kaisahan ng mga Kawani sa King of Kings (KKKK) which
was registered with DOLE. Respondent was elected KKKK president.
3. Respondent was required to accomplish a "Conductor's Trip Report" and submit it to the company
after each trip. As a background, this report indicates the ticket opening and closing for the
particular day of duty. After submission, the company audits the reports. Once an irregularity is
discovered, the company issues an "Irregularity Report" against the employee, indicating the nature
and details of the irregularity. Thereafter, the concerned employee is asked to explain the incident
by making a written statement or counter-affidavit at the back of the same Irregularity Report. After
considering the explanation of the employee, the company then makes a determination of whether
to accept the explanation or impose upon the employee a penalty for committing an infraction. That
decision shall be stated on said Irregularity Report and will be furnished to the employee.
4. Upon audit of the October 28, 2001 Conductor's Report of respondent, KKTI noted an irregularity.
It discovered that respondent declared several sold tickets as returned tickets causing KKTI to lose
an income of eight hundred and ninety pesos. While no irregularity report was prepared on the
October 28, 2001 incident, KKTI nevertheless asked respondent to explain the discrepancy.
5. On November 26, 2001, respondent received a letter terminating his employment effective
November 29, 2001. The dismissal letter alleged that the October 28, 2001 irregularity was an act
of fraud against the company. KKTI also cited as basis for respondent's dismissal the other offenses
he allegedly committed since 1999.
6. On December 11, 2001, respondent filed a Complaint for illegal dismissal, illegal deductions,
nonpayment of 13th-month pay, service incentive leave, and separation pay. He denied committing
any infraction and alleged that his dismissal was intended to bust union activities. Moreover, he
claimed that his dismissal was effected without due process.
ISSUE/S:
1. Whether the Honorable Court of Appeals erred in awarding in favor of the complainant/private
respondent, full back wages, despite the denial of his petition for certiorari.
Atty. Mercader
2. Whether the Honorable Court of Appeals erred in ruling that KKTI did not comply with the
requirements of procedural due process before dismissing the services of the complainant/private
respondent.
3. Whether the Honorable Court of Appeals rendered an incorrect decision in that it awarded in favor
of the complaint/private respondent, 13th month pay benefits contrary to PD 851.
HELD:
WHEREFORE, the petition is PARTLY GRANTED and the September 16, 2004 Decision of the CA is
MODIFIED by deleting the award of backwages and 13th-month pay. Instead, petitioner KKTI is
ordered to indemnify respondent the amount of thirty thousand pesos (PhP30,000) as nominal
damages for failure to comply with the due process requirements in terminating the employment of
respondent.
1. Respondent was not issued a written notice charging him of committing an infraction. The law is
clear on the matter. A verbal appraisal of the charges against an employee does not comply with
the first notice requirement.
2. No hearing was conducted. Regardless of respondent's written explanation, a hearing was still
necessary in order for him to clarify and present evidence in support of his defense. Moreover,
respondent made the letter merely to explain the circumstances relating to the irregularity in his
October 28, 2001 Conductor's Trip Report. He was unaware that a dismissal proceeding was
already being effected.
3. As stated earlier, after a finding that petitioners failed to comply with the due process requirements,
the CA awarded full backwages in favor of respondent in accordance with the doctrine in Serrano
v. NLRC. However, the doctrine in Serrano had already been abandoned in Agabon v. NLRC by
ruling that if the dismissal is done without due process, the employer should indemnify the
employee with nominal damages.
4. Petitioner KKTI maintains that respondent was paid on purely commission basis; thus, the latter is
not entitled to receive the 13th-month pay benefit. However, applying the ruling in Philippine
Agricultural Commercial and Industrial Workers Union v. NLRC, the CA held that respondent is
entitled to the said benefit.
5. It was erroneous for the CA to apply the case of Philippine Agricultural Commercial and Industrial
Workers Union. Notably in the said case, it was established that the drivers and conductors praying
for 13th-month pay were not paid purely on commission. Instead, they were receiving a commission
in addition to a fixed or guaranteed wage or salary. Thus, the Court held that bus drivers and
conductors who are paid a fixed or guaranteed minimum wage in case their commission be less
than the statutory minimum, and commissions only in case where they are over and above the
statutory minimum, are entitled to a 13th-month pay equivalent to one-twelfth of their total earnings
during the calendar year.
6. On the other hand, in his Complaint, respondent admitted that he was paid on commission only.
Moreover, this fact is supported by his pay slips which indicated the varying amount of commissions
he was receiving each trip. Thus, he was excluded from receiving the 13th-month pay benefit.
Atty. Mercader
Atty. Mercader
Vergara v. Coca Cola Bottlers Philippines

PERALTA, J.:
G.R. NO. 176985 : April 1, 2013
This is a petition from the resolution Resolution of the National Labor Relations Commission
(NLRC) modifying the September 30, 2003 Decision of the Labor Arbiter (LA) by deleting the sales
management incentives in the computation of petitioner's retirement benefits. It deals with the issue of
whether the SMI should be included in the computation of petitioner's retirement benefits on the ground of
consistent company practice.
Article 4 of the Labor Code:

“All doubts in the implementation and interpretation of this Code, including its implementing rules and
regulations, shall be rendered in favor of labor."lesvirtualawlibrary
FACTS:
Petitioner Ricardo E. Vergara, Jr. was an employee of respondent Coca-Cola Bottlers Philippines,
Inc. from May 1968 until he retired as a District Sales Supervisor (DSS) for Las Piñas City, Metro Manila.
As stipulated in respondent's existing Retirement Plan Rules and Regulations at the time, the Annual
Performance Incentive Pay of RSMs, DSSs, and SSSs shall be considered in the computation of retirement
benefits, as follows:
Basic Monthly Salary + Monthly Average Performance Incentive (which is the total performance incentive
earned during the year immediately preceding 12 months) No. of Years in Service.o
Claiming his entitlement to an additional PhP474,600.00 as Sales Management Incentives (SMI)
and to the amount of PhP496,016.67 which respondent allegedly deducted illegally, representing the unpaid
accounts of two dealers within his jurisdiction, petitioner filed a complaint before the NLRC for the payment
of his "Full Retirement Benefits, Merit Increase, Commission/Incentives, Length of Service, Actual, Moral
and Exemplary Damages, and Attorney's Fees.”
The LA rendered a Decision in favor of petitioner, directing respondent to reimburse the amount
illegally deducted from petitioner's retirement package and to integrate therein his SMI privilege. Upon
appeal of respondent, however, the NLRC modified the award and deleted the payment of SMI. The parties
executed a Compromise Agreement on October 4, 2006, whereby petitioner acknowledged full payment by
respondent of the amount of PhP496,016.67 covering the amount illegally deducted.
ISSUE/S:
W/N the SMI should be included in the computation of petitioner's retirement benefits on the ground of
consistent company practice.

NO.
Generally, employees have a vested right over existing benefits voluntarily granted to them by their
employer. Thus, any benefit and supplement being enjoyed by the employees cannot be reduced,
diminished, discontinued or eliminated by the employer. The principle of non-diminution of benefits is
actually founded on the Constitutional mandate to protect the rights of workers, to promote their welfare,
and to afford them full protection. In turn, said mandate is the basis of Article 4 of the Labor Code which
states that "all doubts in the implementation and interpretation of this Code, including its implementing rules
and regulations, shall be rendered in favor of labor.”
There is diminution of benefits when the following requisites are present: (1) the grant or benefit is
founded on a policy or has ripened into a practice over a long period of time; (2) the practice is consistent
and deliberate; (3) the practice is not due to error in the construction or application of a doubtful or difficult
question of law; and (4) the diminution or discontinuance is done unilaterally by the employer.
To be considered as a regular company practice, the employee must prove by substantial evidence
that the giving of the benefit is done over a long period of time, and that it has been made consistently and
deliberately. It requires an indubitable showing that the employer agreed to continue giving the benefit
knowing fully well that the employees are not covered by any provision of the law or agreement requiring
Atty. Mercader
payment thereof. In sum, the benefit must be characterized by regularity, voluntary and deliberate intent of
the employer to grant the benefit over a considerable period of time.
There is no substantial evidence to prove that the grant of SMI to all retired DSSs regardless of
whether or not they qualify to the same had ripened into company practice. Petitioner utterly failed to adduce
proof to establish his allegation that SMI has been consistently, deliberately and voluntarily granted to all
retired DSSs without any qualification or conditions. The only two pieces of evidence that he stubbornly
presented throughout the entirety of this case are the sworn statements of Renato C. Hidalgo (Hidalgo) and
Ramon V. Velazquez (Velasquez), former DSSs of respondent who retired. As for Velazquez, Escasura
asserted that even if he (Velazquez) did not qualify for the SMI, respondent's General Manager in its
Calamba plant still granted his (Velazquez) request, along with other numerous concessions, to achieve
industrial peace in the plant which was then experiencing labor relations problems.
Respondent's isolated act of including the SMI in the retirement package of Velazquez could hardly
be classified as a company practice that may be considered an enforceable obligation. To repeat, the
principle against diminution of benefits is applicable only if the grant or benefit is founded on an express
policy or has ripened into a practice over a long period of time which is consistent and deliberate; it
presupposes that a company practice, policy and tradition favorable to the employees has been clearly
established; and that the payments made by the company pursuant to it have ripened into benefits enjoyed
by them. Certainly, a practice or custom is, as a general rule, not a source of a legally demandable or
enforceable right. Company practice, just like any other fact, habits, customs, usage or patterns of conduct,
must be proven by the offering party who must allege and establish specific, repetitive conduct that might
constitute evidence of habit or company practice. Petitioner did not meet the trade receivable qualifier. On
the contrary, the said trial balance reveals that petitioner had a large amount of uncollected overdue
accounts.
Atty. Mercader
Arco Metal Products v. SAMARM-NAFLU

Tinga, J.
G.R. No. 170734 - 14 May 2008
FACTS:
Petitioner:
 is a company engaged in the manufacture of metal products, whereas respondent is the labor union
of petitioner’s rank and file employees. Sometime in December 2003, petitioner paid the 13th month
pay, bonus, and leave encashment of three union members in amounts proportional to the service
they actually rendered in a year, which is less than a full twelve (12) months. The employees were:
1. Rante Lamadrid Sickness 27 August 2003 to 27 February 2004
2. Alberto Gamban Suspension 10 June 2003 to 1 July 2003
3. Rodelio Collantes Sickness August 2003 to February 2004
 Petitioner claims that its full payment of benefits regardless of the length of service to the
company does not constitute voluntary employer practice. It points out that the payments had
been erroneously made and they occurred in isolated cases in the years 1992, 1993, 1994, 1999,
2002 and 2003. According to petitioner, it was only in 2003 that the accounting department
discovered the error "when there were already three (3) employees involved with prolonged
absences and the error was corrected by implementing the pro-rata payment of benefits pursuant
to law and their existing CBA."
 Petitioner describes the situation as a "clear oversight" which should not be taken against it. To
further bolster its case, petitioner argues that for a grant of a benefit to be considered a practice, it
should have been practiced over a long period of time and must be shown to be consistent,
deliberate and intentional, which is not what happened in this case.
 Petitioner tries to make a case out of the fact that the CBA has not been modified to incorporate
the giving of full benefits regardless of the length of service, proof that the grant has not ripened
into company practice.
Respondent: protested the prorated scheme, claiming that on several occasions petitioner did not prorate
the payment of the same benefits to seven (7) employees who had not served for the full 12 months. The
payments were made in 1992, 1993, 1994, 1996, 1999, 2003, and 2004. According to respondent, the
prorated payment violates the rule against diminution of benefits under Article 100 of the Labor
Code. Thus, they filed a complaint before the National Conciliation and Mediation Board (NCMB). The
parties submitted the case for voluntary arbitration.
Voluntary Arbitrator, Apron M. Mangabat: ruled in favor of petitioner and found that the giving of the
contested benefits in full, irrespective of the actual service rendered within one year has not ripened into a
practice. He noted the affidavit of Joselito Baingan, manufacturing group head of petitioner, which states
that the giving in full of the benefit was a mere error. He also interpreted the phrase "for each year of
service" found in the pertinent CBA provisions to mean that an employee must have rendered one year of
service in order to be entitled to the full benefits provided in the CBA.
Court of Appeals: the CBA did not intend to foreclose the application of prorated payments of leave
benefits to covered employees. The appellate court found that petitioner, however, had an existing voluntary
practice of paying the aforesaid benefits in full to its employees, thereby rejecting the claim that petitioner
erred in paying full benefits to its seven employees. The appellate court noted that aside from the affidavit
of petitioner’s officer, it has not presented any evidence in support of its position that it has no voluntary
practice of granting the contested benefits in full and without regard to the service actually rendered within
the year. It also questioned why it took petitioner eleven (11) years before it was able to discover the alleged
error. The dispositive portion of the court’s decision reads: WHEREFORE, premises considered, the instant
petition is hereby GRANTED and the Decision of Accredited Voluntary Arbiter Apron M. Mangabat in
NCMB-NCR Case No. PM-12-345-03, dated June 18, 2004 is hereby AFFIRMED WITH MODIFICATION
in that the 13th month pay, bonus, vacation leave and sick leave conversions to cash shall be paid
to the employees in full, irrespective of the actual service rendered within a year.
Atty. Mercader
ISSUE/S: Whether or not the Court of Appeals erred when it ruled that the grant of 13th month pay,
bonus, and leave encashment in full regardless of actual service rendered constitutes voluntary
employer practice and, consequently, the prorated payment of the said benefits does not constitute
diminution of benefits under Article 100 of the Labor Code.
HELD: No. The petition is DENIED. The Decision of the Court of Appeals AFFIRMED.
First, we determine whether the intent of the CBA provisions is to grant full benefits regardless of
service actually rendered by an employee to the company. According to petitioner, there is a one-year cutoff
in the entitlement to the benefits provided in the CBA which is evident from the wording of its pertinent
provisions as well as of the existing law.
There is no doubt that in order to be entitled to the full monetization of sixteen (16) days of vacation
and sick leave, one must have rendered at least one year of service. The clear wording of the provisions
does not allow any other interpretation. Anent the 13th month pay and bonus, we agree with the findings of
Mangabat that the CBA provisions did not give any meaning different from that given by the law, thus it
should be computed at 1/12 of the total compensation which an employee receives for the whole calendar
year. The bonus is also equivalent to the amount of the 13th month pay given, or in proportion to the actual
service rendered by an employee within the year.
Any benefit and supplement being enjoyed by employees cannot be reduced, diminished,
discontinued or eliminated by the employer. The principle of non-diminution of benefits is founded
on the Constitutional mandate to "protect the rights of workers and promote their welfare," and "to
afford labor full protection."
Said mandate in turn is the basis of Article 4 of the Labor Code which states that "all doubts
in the implementation and interpretation of this Code, including its implementing rules and
regulations shall be rendered in favor of labor." Jurisprudence is replete with cases which recognize
the right of employees to benefits which were voluntarily given by the employer and which ripened
into company practice.
Thus in Davao Fruits Corporation v. Associated Labor Unions, et al. where an employer had freely
and continuously included in the computation of the 13th month pay those items that were expressly
excluded by the law, we held that the act which was favorable to the employees though not conforming to
law had thus ripened into a practice and could not be withdrawn, reduced, diminished, discontinued or
eliminated.
In Sevilla Trading Company v. Semana, we ruled that the employer’s act of including non-basic
benefits in the computation of the 13th month pay was a voluntary act and had ripened into a company
practice which cannot be peremptorily withdrawn.
Meanwhile in Davao Integrated Port Stevedoring Services v. Abarquez, the Court ordered the
payment of the cash equivalent of the unenjoyed sick leave benefits to its intermittent workers after finding
that said workers had received these benefits for almost four years until the grant was stopped due to a
different interpretation of the CBA provisions. We held that the employer cannot unilaterally withdraw the
existing privilege of commutation or conversion to cash given to said workers, and as also noted that the
employer had in fact granted and paid said cash equivalent of the unenjoyed portion of the sick leave
benefits to some intermittent workers.
In the years 1992, 1993, 1994, 1999, 2002 and 2003, petitioner had adopted a policy of freely,
voluntarily and consistently granting full benefits to its employees regardless of the length of
service rendered. True, there were only a total of seven employees who benefited from such a
practice, but it was an established practice nonetheless. Jurisprudence has not laid down any rule
specifying a minimum number of years within which a company practice must be exercised in order to
constitute voluntary company practice. Thus, it can be six (6) years, three (3) years, or even as short as
two (2) years.
Petitioner cannot shirk away from its responsibility by merely claiming that it was a mistake or an
error, supported only by an affidavit of its manufacturing group head.
Indeed, if petitioner wants to prove that it merely erred in giving full benefits, it could have easily
presented other proofs, such as the names of other employees who did not fully serve for one year and
thus were given prorated benefits. Experientially, a perfect attendance in the workplace is always the goal
but it is seldom achieved. There must have been other employees who had reported for work less than a
full year and who, as a consequence received only prorated benefits. This could have easily bolstered
petitioner’s theory of mistake/error, but sadly, no evidence to that effect was presented.
Atty. Mercader
Metropolitan Bank vs. NLRC

Leonardo-De Castro, J.
G.R. No. 152928 June 18,2009
FACTS:
Respondents Patag and Flora were employees of petitioner Metrobank. Both respondents availed of the
bank’s compulsory retirement plan in accordance with the 1995 Officers’ Benefits Memorandum. At the
time of their retirement in 1998, Patag was an Assistant Manager, while Flora was a Senior Manager. Both
of them received their respective retirement benefits computed at 185% of their gross monthly salary for
every year of service as provided under the said 1995 Memorandum. Consequently, the new 1998 CBA
was issued increasing the retirement benefits from 185% to 200%. The 1998 CBA covers employees for
year 1998-2000 provided that they should not resign before June 15, 1998. With this, the private
respondents requested to extend the benefits of the 1998 CBA to them but they were denied by the
petitioner because they had already resigned before June 15, 1998. Patag and Flora filed with the Labor
Arbiter their consolidated complaint against Metrobank for underpayment of retirement benefits and
damages, asserting that pursuant to the 1998 Officers’ Benefits Memorandum, they were entitled to
additional retirement benefits.
LA: Dismissed the complaint; NLRC: Directed Metrobank to pay Patag and Flora their unpaid beneficial
improvements under the 1998 Officers’ Benefits Memorandum.; CA: Affirmed the Resolution of NLRC.
ISSUE: Whether or not respondents can still recover higher benefits under the 1998 Officers’ Benefits
Memorandum despite the fact that they have compulsorily retired prior to the issuance of said memorandum
and did not meet the condition therein requiring them to be employed as of June 15, 1998.
RULING: Yes. Petition denied.
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. The test or rationale of this rule on
long practice requires an indubitable showing that the employer agreed to continue giving the benefits
knowing fully well that said employees are not covered by the law requiring payment thereof.
As affirmed by the CA, there is a company practice of paying improved benefits to petitioner bank’s officers
effective every January 1 of the same year the improved benefits are granted to rank and file employees in
a CBA. The record further reveals that these improved officers’ benefits were always made to retroact
effective every January 1 of the year of issuance of said memoranda and without any condition regarding
the term or date of employment. The condition that the managerial employee or bank officer must still be
employed by petitioner as of a certain date was imposed for the first time in the 1998 Officers’ Benefits
Memorandum.
For over a decade, Metrobank has consistently, deliberately and voluntarily granted improved benefits to
its officers, after the signing of each CBA with its rank and file employees, retroactive to January 1st of the
same year as the grant of improved benefits and without the condition that the officers should remain
employees as of a certain date. This undeniably indicates a unilateral and voluntary act on Metrobank’s
part, to give said benefits to its officers, knowing that such act was not required by law or the company
retirement plan.
With regard to the length of time the company practice should have been exercised to constitute voluntary
employer practice which cannot be unilaterally withdrawn by the employer, jurisprudence has not laid down
any hard and fast rule. In several cases, the Court held that the grant of these benefits has ripened into
company practice or policy which cannot be peremptorily withdrawn. The common denominator in these
cases appears to be the regularity and deliberateness of the grant of benefits over a significant period of
time.
In the case at bar, petitioner Metrobank favorably adjusted its officers’ benefits, including retirement
benefits, after the approval of each CBA with the rank and file employees, to be effective every January 1st
of the same year as the CBA’s approval, and without any condition regarding the date of employment of
the officer, from 1986 to 1997 or for about eleven (11) years. This constitutes voluntary employer practice
which cannot be unilaterally withdrawn or diminished by the employer without violating the spirit and intent
of Art. 100 of the Labor Code. The condition that an officer must still be in the service of petitioner bank as
of June 15, 1998 effectively reduced benefits of employees who retired prior to the issuance of the 1998
Officers’ Benefits Memorandum despite the fact in the past no such condition was imposed by the bank
and previous retirees presumably enjoyed the higher benefits regardless of their date of retirement as long
as they were still employees of petitioner as of the January 1st effectivity date.
Atty. Mercader
UNIVERSITY OF THE EAST v UNIVERSITY OF THE EAST EMPLOYEES' ASSOCIATION

Mendoza, J.
GR No. 179593 – 14 September 2011
The principle against diminution of benefits shall be applicable only if the grant or benefit is
founded on an express policy or has ripened into a practice over a long period of time which is consistent
and deliberate.
ART. 100 Labor Code: Prohibition against eliminatin or dimunition of benefits

Nothing in this Book shall be construed to eliminate or in any way diminish supplements, or other
employee benefits being enjoyed at the time of promulgation of this Code.
FACTS:
Prior to school year (SY) 1983-1984, a 70% incremental proceed from tuition fee increases, as mandated
by Presidential Decree No. 451 (PD No. 451) as amended, was distributed by petitioner University of the
East (UE) in proportion to the average number of academic and non-academic personnel. This
distribution scheme was the subject of an agreement signed by the management, faculty association and
respondent University of the East Employees’ Association (UEEA), being the duly registered labor union
of the rank-and-file employees of UE.
However, starting SY 1994-1995, the 70% incremental proceeds from the tuition fee increase was
distributed only to the covered employees of UE basing on a new formula of percentage of salary (UE
distributed the tuition fee increase proceeds through percentage based on salaries, thereby allegedly
reducing the shares of the rank-and-file employees, while increasing those of the management
personnel.). Respondent, through its president, questioned the validity of such manner of distribution.
In a tripartite meeting, everybody, even the UEEA officers present in the meeting agreed, that the new
distribution scheme would now be based on percentage of salary and not anymore on the average
number of personnel. However, UEEA filed a complaint against UE for non-payment/underpayment of the
rank-and-file employees’ share of the tuition fee increases, consequences under the new distribution
scheme.
ISSUE:
1. Whether or not UE’s revised employee distribution scheme for proceeds of tuition fee increase is
valid
HELD: YES
The Court agrees with petitioner UE that the change in the distribution of the 70% incremental proceeds
from tuition fee increase from equal sharing to percentage of salaries is not a diminution of benefits. Its
distribution to covered employees based on equal sharing scheme cannot be considered to have ripened
into a company practice that the respondents have a right to demand.Generally, employees have a
vested right over existing benefits voluntarily granted to them by their employer, thus, said benefits cannot
be reduced, diminished, discontinued or eliminated by the latter. This principle against diminution of
benefits, however, is applicable only if the grant or benefit is founded on an express policy or has ripened
into a practice over a long period of time which is consistent and deliberate. It does not contemplate the
continuous grant of unauthorized or irregular compensation but it presupposes that a company practice,
policy and tradition favourable to the employees has been clearly established; and that the payments
made by the company pursuant to it have ripened into benefits enjoyed by them. The test or rationale of
this rule on long practice requires an indubitable showing that the employer agreed to continue giving the
benefits knowing fully well that said employees are not covered by the law requiring payment thereof. In
sum, the benefit must be characterized by regularity, voluntary and deliberate intent of the employer to
grant the benefits over a significant period of time.
Atty. Mercader
In the case at bench, contrary to UEEA’s claim, the distribution of the 70% incremental proceeds based
on equal sharing scheme cannot be held to have ripened into a company practice that the respondents
have a right to demand. Jurisprudence is replete with the rule specifying a minimum number of years
within which a company practice must be exercised in order to constitute voluntary company
practice.Even if UE had been continuously distributing the 70% incremental proceeds based on equal
sharing scheme to all its covered employees, the same could not have ripened into a vested right
because such grant would not have been characterized by a deliberate and voluntary act on the part of
the petitioner.
As pronounced by the Court in the case of Globe Mackay Cable and Radio Corporation v. NLRC, the
grant by an employer of benefits through an erroneous application of the law due to absence of clear
administrative guidelines is not considered a voluntary act which cannot be unilaterally discontinued.
Here, no vested rights accrued to respondents. R.A. No. 6728 simply mandates that the 70% incremental
proceeds arising from tuition fee increases should go to the payment of salaries, wages, allowances, and
other benefits of the teaching and non-teaching personnel except administrators who are principal
stockholders of the school. As to the manner of its distribution, however, the law is silent. Neither can
UEEA claim that the change in the distribution scheme from equal sharing to percentage of salary was
done peremptorily. Consequently, a tripartite meeting was held on June 19, 1995. The said meeting was
attended by the representatives of the management, UEFA and UEEA. From the minutes of the meeting,
the tuition fee incremental proceeds for SY 1994-95 and the manner of its distribution based on
percentage of the salaries of the covered employees were discussed and UEEA representatives, namely,
Salvador Blancia and Miguel Teaño, did not object.
It was likewise erroneous for UEEA to rely on the October 18, 1983 Agreement because the said
agreement only pertains to the distribution of incremental proceeds for SY 1982-83. Besides, such
agreement is deemed superseded by another agreement taken up during tripartite meeting held on June
19, 1995.
Atty. Mercader
Wesleyan University v. Wesleyan University Faculty and Staff Association

Del Castillo, J.
GR No. 181806 – 12 March 2014
This Petition for Review on Certiorari under Rule 45 of the Rules of Court assails the September 25, 2007
Decision and the February 5, 2008 Resolution of the Court of Appeals (CA) in CA-G.R. SP No. 97053.
FACTS:
Petitioner Wesleyan University-Philippines is a non-stock, non-profit educational institution duly organized
and existing under the laws of the Philippines. Respondent Wesleyan University-Philippines Faculty and
Staff Association, on the other hand, is a duly registered labor organization acting as the sole and exclusive
bargaining agent of all rank-and-file faculty and staff employees of petitioner. In December 2003, the parties
signed a 5-year CBA effective June 1, 2003 until May 31, 2008. On August 16, 2005, petitioner, through
its President, Atty. Guillermo T. Maglaya (Atty. Maglaya), issued a Memorandum providing guidelines on
the implementation of vacation and sick leave credits as well as vacation leave commutation. The pertinent
portions of the Memorandum read:
1. VACATION AND SICK LEAVE CREDITS

Vacation and sick leave credits are not automatic. They have to be earned. Monthly, a qualified employee
earns an equivalent of 1.25 days credit each for VL and SL. Vacation Leave and Sick Leave credits of 15
days become complete at the cut off date of May 31 of each year. (Example, only a total of 5 days credit
will be given to an employee for each of sick leave [or] vacation leave, as of month end September, that is,
4 months from June to September multiplied by 1.25 days). An employee, therefore, who takes VL or SL
beyond his leave credits as of date will have to file leave without pay for leaves beyond his credit.
2. VACATION LEAVE COMMUTATION

Only vacation leave is commuted or monetized to cash. Vacation leave commutation is effected after the
second year of continuous service of an employee. Hence, an employee who started working June 1, 2005
will get his commutation on May 31, 2007 or thereabout.
On August 25, 2005, respondent’s President, Cynthia L. De Lara (De Lara) wrote a letter to Atty. Maglaya
informing him that respondent is not amenable to the unilateral changes made by petitioner. De Lara
questioned the guidelines for being violative of existing practices and the CBA, specifically Sections 1 and
2, Article XII of the CBA, to wit:
ARTICLE XII
VACATION LEAVE AND SICK LEAVE
SECTION 1. VACATION LEAVE - All regular and non-tenured rank-and-file faculty and staff who are
entitled to receive shall enjoy fifteen (15) days vacation leave with pay annually.
1.1 All unused vacation leave after the second year of service shall be converted into cash and be paid to
the entitled employee at the end of each school year to be given not later than August 30 of each year.
SECTION 2. SICK LEAVE - All regular and non-tenured rank-and-file faculty and staff shall enjoy fifteen
(15) days sick leave with pay annually.
On February 8, 2006, a Labor Management Committee (LMC) Meeting was held during which petitioner
advised respondent to file a grievance complaint on the implementation of the vacation and sick leave
policy. In the same meeting, petitioner announced its plan of implementing a one-retirement policy, which
was unacceptable to respondent.
Ruling of the Voluntary Arbitrator: Declared the one-retirement policy and the Memorandum dated
August 16,2005 contrary to law
Atty. Mercader
CA: It also affirmed the nullification of the one-retirement policy and the Memorandum dated August 16,
2005 on the ground that these unilaterally amended the CBA without the consent of the respondent.
ISSUE/S:
1. W/N the one-retirement policy; and
2. The Memorandum dated August 16, 2005 violated the Non-Diminution Rule
The Non-Diminution Rule found in Article 100 of the Labor Code explicitly prohibits employers from
eliminating or reducing the benefits received by their employees. This rule, however, applies only if the
benefit is based on an express policy, a written contract, or has ripened into a practice. To be considered
a practice, it must be consistently and deliberately made by the employer over a long period of time. An
exception to the rule is when "the practice is due to error in the construction or application of a doubtful or
difficult question of law." The error, however, must be corrected immediately after its discovery; otherwise,
the rule on Non-Diminution of Benefits would still apply.
1. Yes. The practice of giving two retirement benefits to petitioner’s employees is supported
by substantial evidence.
 As to petitioner’s claim that the affidavits submitted by respondent are self-serving,
such holds no water. The retired employees of petitioner have nothing to lose or gain in
this case as they have already received their retirement benefits. Thus, they have no
reason to perjure themselves. Obviously, the only reason they executed those affidavits is
to bring out the truth. As we see it then, their affidavits, corroborated by the affidavits of
incumbent employees, are more than sufficient to show that the granting of two retirement
benefits to retiring employees had already ripened into a consistent and deliberate practice.
 As to petitioner’s assertion that there is only one retirement plan as the CBA
Retirement Plan and the PERAA Plan are one and the same, such is not supported by
any evidence and negated by the following:
 There is nothing in Article XVI of the CBA to indicate or even suggest that the
"Plan" referred to in the CBA is the PERAA Plan. Besides, any doubt in the
interpretation of the provisions of the CBA should be resolved in favor of
respondent;
 The announcement it made during the LMC Meeting on February 8, 2006
regarding its plan of implementing a "one-retirement plan." For if it were true that
petitioner was already implementing a one-retirement policy, there would have
been no need for such announcement; and
 The letter-memorandum dated May 11, 2006, entitled "Suggestions on the
defenses we can introduce to justify the abolition of double retirement policy,"
prepared by the petitioner’s legal counsel.
 As to the petitioner’s contention that these were done by mere oversight or mistake
as there is no Board Resolution authorizing their release, hence, unauthorized and
illegal, no evidence was presented by petitioner to substantiate its allegations.
2. Yes. The Memorandum August 16, 2005 is contrary to the existing CBA.
Sections 1 and 2 of Article XII of the CBA provide that all covered employees are entitled to 15 days sick leave and
15 days vacation leave with pay every year and that after the second year of service, all unused vacation
leave shall be converted to cash and paid to the employee at the end of each school year, not later than
August 30 of each year. The Memorandum dated August 16, 2005, however, states that vacation and sick
leave credits are not automatic as leave credits would be earned on a month-to-month basis. This, in effect,
limits the available leave credits of an employee at the start of the school year. Considering that the
Memorandum dated August 16, 2005 imposes a limitation not agreed upon by the parties nor stated in the
CBA, we agree with the CA that it must be struck down.
Atty. Mercader
Atty. Mercader
American Wire and Cable Daily Rated Employees Union v. American Wire and Cable Co., Inc.
Chico-Nazario, J.
G.R. No. 155059 - 2005 April 2009
DOCTRINE:
A bonus is an amount granted and paid to an employee for his industry and loyalty which
contributed to the success of the employer's business and made possible the realization of profits. It is an
act of generosity granted by an enlightened employer to spur the employee to greater efforts for the success
of the business and realization of bigger profits. The granting of a bonus is a management prerogative,
something given in addition to what is ordinarily received by or strictly due the recipient. Thus, a bonus is
not a demandable and enforceable obligation, except when it is made part of the wage, salary or
compensation of the employee.
NATURE:
Before Us is a special civil action for certiorari, assailing the Decision of the Special Eighth Division
of the Court of Appeals dated 06 March 2002. Said Decision upheld the Decision and Order of Voluntary
Arbitrator Angel A. Ancheta of the National Conciliation and Mediation Board (NCMB) dated 25 September
2001 and 05 November 2001, respectively, which declared the private respondent herein not guilty of
violating Article 100 of the Labor Code, as amended. Assailed likewise, is the Resolution of the Court of
Appeals dated 12 July 2002, which denied the motion for reconsideration of the petitioner, for lack of merit.
FACTS:
The two (2) labor unions of the American Wire and Cable Company, a corporation engaged in the
manufacture of wires and cables, namely, the American Wire and Cable Monthly Rated Employees’ Union
and the American Wire and Cable Daily Rated Employees’ Union, instituted actions before the National
Conciliation and Mediation Board of the Department of Labor and Employment for voluntary arbitration
alleging that the company, without valid cause, suddenly and unilaterally withdrew and denied their: (a)
Service Award; (b) 35% premium pay of basic pay for work rendered during Holy Week and Christmas
Season; (c) Christmas Party; and (d) Promotional Increase which are benefits and entitlements they have
long enjoyed.
On 21 June 2001, a Submission Agreement was filed by the parties before the Office for Voluntary
Arbitration. Assigned as Voluntary Arbitrator was Angel A. Ancheta. On 04 July 2001, the parties
simultaneously filed their respective position papers with the Office of the Voluntary Arbitrator, NCMB, and
DOLE. The Voluntary Arbitrator ruled in favor of the company finding it not guilty of violating Article 100 of
the Labor Code. Motion for reconsideration was denied. Appeal and motion for reconsideration were
likewise dismissed by the CA.
ISSUE/S:
Whether or not private respondent is guilty of violating Article 100 of the Labor Code, as amended,
when the benefits/entitlements given to the members of petitioner union were withdrawn
HELD:
The company is not guilty of violating Art. 100 of the Labor Code.
Article 100 of the Labor Code provides:
PROHIBITION AGAINST ELIMINATION OR DIMINUTION OF BENEFITS. – Nothing in this Book

shall be construed to eliminate or in any way diminish supplements, or other employee benefits being
enjoyed at the time of promulgation of this Code.
The petitioner submits that the withdrawal of the private respondent of the 35% premium pay for
selected days during the Holy Week and Christmas season, the holding of the Christmas Party and its
incidental benefits, and the giving of service awards violated Article 100 of the Labor Code. The grant of
these benefits was a customary practice that can no longer be unilaterally withdrawn by private respondent
without the tacit consent of the petitioner. The benefits in question were given by the respondent to the
petitioner consistently, deliberately, and unconditionally since time immemorial. The benefits/entitlements
were not given to petitioner due to an error in interpretation, or a construction of a difficult question of law,
but simply, the grant has been a practice over a long period of time. As such, it cannot be withdrawn from
Atty. Mercader
the petitioner at respondent's whim and caprice, and without the consent of the former. The benefits given
by the respondent cannot be considered as a "bonus" as they are not founded on profit. Even assuming
that it can be treated as a "bonus," the grant of the same, by reason of its long and regular concession,
may be regarded as part of regular compensation. It is critical that a determination must be first made on
whether the benefits/entitlements are in the nature of a bonus or not, and assuming they are so, whether
they are demandable and enforceable obligations.
Based on the foregoing pronouncement, the benefits/entitlements subjects of the instant case are
bonuses which were given by the private respondent out of its generosity and munificence. The additional
35% premium pay for work done during selected days of the Holy Week and Christmas season, the holding
of Christmas parties with raffle, and the cash incentives given together with the service awards are all in
excess of what the law requires each employer to give its employees. Since they are above what is strictly
due to the members of petitioner-union, the granting of the same was a management prerogative, which,
whenever management sees necessary, may be withdrawn, unless they have been made a part of the
wage or salary or compensation of the employees. For a bonus to be enforceable, it must have been
promised by the employer and expressly agreed upon by the parties or it must have had a fixed amount
and had been a long and regular practice on the part of the employer. The assailed benefits were never
subjects of any agreement between the union and the company. It was never incorporated in the CBA. In
fact, the petitioner has not denied having made proposals with the private respondent for the service award
and the additional 35% premium pay to be made part of the CBA. The Christmas parties and its incidental
benefits, and the giving of cash incentive together with the service award cannot be said to have fixed
amounts. What is clear from the records is that over the years, there had been a downtrend in the amount
given as service award. There was also a downtrend with respect to the holding of the Christmas parties in
the sense that its location changed from paid venues to one which was free of charge, evidently to cut
costs. Also, the grant of these two aforementioned bonuses cannot be considered to have been the private
respondent's long and regular practice. To be considered a "regular practice," the giving of the bonus should
have been done over a long period of time, and must be shown to have been consistent and deliberate.
The downtrend in the grant of these two bonuses over the years demonstrates that there is nothing
consistent about it.
Anent the Christmas party and raffle of prizes, We agree with the Voluntary Arbitrator that the same
was merely sponsored by the respondent corporation out of generosity and that the same is dependent on
the financial performance of the company for a particular year. To hold that an employer should be forced
to distribute bonuses which it granted out of kindness is to penalize him for his past generosity.
DISPOSITIVE:
WHEREFORE, in view of all the foregoing, the assailed Decision and Resolution of the Court of
Appeals dated 06 March 2002 and 12 July 2002, respectively, which affirmed and upheld the decision of
the Voluntary Arbitrator, are hereby AFFIRMED. No pronouncement as to costs. SO ORDERED.
Atty. Mercader
ZAYBER JOHN B. PROTACIO, petitioner, vs. LAYA MANANGHAYA & CO. and/or
MARIO T. MANANGHAYA, respondents.
[G.R. No. 168654. March 25, 2009.]
Before the Court is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure,
assailing the decision and resolution of the Court of Appeals in CA-G.R. SP No. 85038. The Court of
Appeals' decision reduced the monetary award granted to petitioner by the National Labor Relations
Commission (NLRC) while the resolution denied petitioner's motion for reconsideration for lack of merit.
FACTS:
 Respondent KPMG Laya Mananghaya & Co. (respondent firm) is a general professional partnership
duly organized under the laws of the Philippines. Respondent firm hired petitioner Zayber John B.
Protacio as Tax Manager on 01 April 1996. He was subsequently promoted to the position of Senior Tax
Manager. On 01 October 1997, petitioner was again promoted to the position of Tax Principal.
 However, on 30 August 1999, petitioner tendered his resignation effective 30 September 1999. Then,
on 01 December 1999, petitioner sent a letter to respondent firm demanding the immediate payment of
his 13th month pay, the cash commutation of his leave credits and the issuance of his 1999 Certificate
of Income Tax Withheld on Compensation. Petitioner sent to respondent firm two more demand letters
for the payment of his reimbursement claims under pain of legal action. Respondent firm failed to act
upon the demand letters. Thus, on 15 December 1999, petitioner filed before the NLRC a complaint.
 According to petitioner, beginning 01 October 1998, his compensation package was revised as follows:
(a) monthly gross compensation of P95,000.00, inclusive of nontaxable allowance; (b) 13th month pay;
and (c) a lump sum amount in addition to the aggregate monthly gross compensation.
 During the pendency of the case before the Labor Arbiter, respondent firm on three occasions sent
check payments to petitioner in the following amounts: (1) P71,250.00, representing petitioner's 13th
month pay; (2) P54,824.18, as payments for the cash equivalent of petitioner's leave credits and
reimbursement claims.
 Petitioner acknowledged the receipt of the 13th month pay but disputed the computation of the cash
value of his vacation leave credits and reimbursement claims.
 The Labor Arbiter held that petitioner was not fully paid of the cash equivalent of the leave credits due
him because respondent firm had erroneously based the computation on a basic pay of P61,000.00.
NLRC lowered the same to P2,301.00. Court of Appeals further reduced the total money award to
petitioner.
PERTINENT ISSUE
WHETHER PUBLIC RESPONDENT COURT OF APPEALS WANTONLY ABUSED ITS DISCRETION IN
EMPLOYING A LARGER DIVISOR TO COMPUTE PETITIONER'S DAILY SALARY RATE
THEREBY DIMINISHING HIS BENEFITS, IN [VIOLATION] OF THE LABOR CODE.
HELD:
With regard to the computation of the cash equivalent of petitioner's leave credits, the Court of
Appeals used a base figure of P71,250.00 representing petitioner's monthly salary as opposed to
P95,000.00 used by the Labor Arbiter and NLRC. Meanwhile, respondents insist on a base figure of only
P61,000.00, which excludes the advance incentive pay of P15,000.00, transportation allowance of
P15,000.00 and representation allowance of P4,000.00, which petitioner regularly received every month.
As correctly held by the Labor Arbiter and the NLRC, the evidence on record reveals that petitioner
was receiving a monthly compensation of P95,000.00 consisting of a basic salary of P61,000.00,
advance incentive pay of P15,000.00, transportation allowance of P15,000.00 and representation
allowance of P4,000.00. These amounts totaling P95,000.00 are all deemed part of petitioner's monthly
compensation package and, therefore, should be the basis in the cash commutation of the petitioner's
leave credits. These allowances were customarily furnished by respondent firm and regularly received by
petitioner on top of the basic monthly pay of P61,000.00.
Atty. Mercader
The Court of Appeals, Labor Arbiter and NLRC used a 30-working day divisor instead of 26 days
which petitioner insists. The Court of Appeals relied on Section 2, Rule IV, Book III of the implementing
rules of the Labor Code in using the 30-working day divisor. The provision essentially states that monthly-
paid employees are presumed to be paid for all days in the month whether worked or not.
The provision has long been nullified in Insular Bank of Asia and American Employees' Union
(IBAAEU) v. Hon. Inciong, etc., et al., where the Court ruled that the provision amended the Labor Code's
provisions on holiday pay by enlarging the scope of their exclusion. In any case, the provision is
inapplicable to the instant case because it referred to the computation of holiday pay for monthly-paid
employees.
Petitioner's claim that respondent firm used a 26-working day divisor is supported by the evidence
on record. In a letter addressed to petitioner, respondents' counsel expressly admitted that respondent
used a 26-working day divisor. The Court is perplexed why the tribunals below used a 30-day divisor
when there was an express admission on respondents' part that they used a 26-day divisor in the cash
commutation of leave credits. Thus, with a monthly compensation of P95,000.00 and using a 26- working
day divisor, petitioner's daily rate is P3,653.85. Based on this rate, petitioner's cash equivalent of his
leave credits of 23.5 is P85,865.48. Since petitioner has already received the amount P46,009.67, a
balance of P39,855.80 remains payable to petitioner.
Atty. Mercader
Lepanto Ceramics v. Lepanto Ceramics Employees Association

PEREZ, J;
G.R. No. 180866. March 2, 2010
FACTS: In December 1998, petitioner gave a P3,000.00 bonus to its employees, members of the
respondent Association.
Subsequently, in September 1999, petitioner and respondent Association entered into a
Collective Bargaining Agreement (CBA) which provides for, among others, the grant of a Christmas gift
package/bonus to the members of the respondent Association. The Christmas bonus was one of the
enumerated "existing benefits, practice of traditional rights" which "shall remain in full force and effect."
The text reads:
Section 8. All other existing benefits, practice of traditional rights consisting of Christmas
Gift package/bonus, reimbursement of transportation expenses in case of breakdown of service
vehicle and
medical services and safety devices by virtue of company policies by the UNION and employees
shall remain in full force and effect.
Section 1. EFFECTIVITY. —
This agreement shall become effective on September 1, 1999 and shall remain in full force and
effect without change for a period of four (4) years or up to August 31, 2004 except as to the
representation
aspect which shall be effective for a period of 4ve (5) years. It shall bind each and every employee
in the bargaining unit including the present and future officers of the Union.
In the succeeding years, 1999, 2000 and 2001, the bonus was not in cash. Instead, petitioner
gave each of the members of respondent Association Tile Redemption Certificates equivalent to
P3,000.00. The bonus for the year 2002 is the root of the present dispute. Petitioner gave a year-end
cash bene4t of Six Hundred Pesos (P600.00) and offered a cash advance to interested employees
equivalent to one (1) month salary payable in one year. 10 The respondent Association objected to the
P600.00 cash benefit and argued that this was in violation of the CBA it executed with the petitioner. The
parties failed to amicably settle the dispute.
In support of its claim, respondent Association insisted that it has been the traditional practice of
the company to grant its members Christmas bonuses during the end of the calendar year, each in the
amount of P3,000.00 as an expression of gratitude to the employees for their participation in the
company's continued existence in the market.
Respondent Association argued that this was in violation of their CBA.
The petitioner averred that the complaint for nonpayment of the 2002 Christmas bonus had no
basis as the same was not a demandable and enforceable obligation. It argued that the giving of extra
compensation was based on the company's available resources for a given year and the workers are not
entitled to a bonus if the company does not make pro4ts. Petitioner adverted to the fact that it was debt-
ridden having incurred net losses for the years 2001 and 2002 totaling to P1.5 billion; and since 1999,
when the CBA was signed, the company's accumulated losses amounted to over P2.7 billion. Petitioner
emphasized that even if the CBA contained an unconditional obligation to grant the bonus to the
respondent Association, the present difficult economic times had already legally released it therefrom
pursuant to Article 1267 of the Civil Code.
The Voluntary Arbitrator rendered a Decision dated 2 June 2003, declaring that petitioner is
bound to grant each of its workers a Christmas bonus of P3,000.00 for the reason that the bonus was
given prior to the effectivity of the CBA between the parties and that the financial losses of the company is
not a sufficient reason to exempt it from granting the same. It stressed that the CBA is a binding contract
and constitutes the law between the parties. The Voluntary Arbitrator further expounded that since the
employees had already been given P600.00 cash bonus, the same should be deducted from the claimed
amount of P3,000.00, thus leaving a balance of P2,400.00
Atty. Mercader
ISSUE: W/N The reduction in bonus is justifiable and attributable to the financial losses Lepanto
Ceramics had suffered in the past years.
HELD: We uphold the rulings of the voluntary arbitrator and of the Court of Appeals.
By definition, a "bonus" is a gratuity or act of liberality of the giver. It is something given in addition to what
is ordinarily received by or strictly due the recipient. A bonus is granted and paid to an employee for his
industry and loyalty which contributed to the success of the employer's business and made possible the
realization of profits.
A bonus is also granted by an enlightened employer to spur the employee to greater efforts for
the success of the business and realization of bigger profits.
Generally, a bonus is not a demandable and enforceable obligation. For a bonus to be
enforceable, it must have been promised by the employer and expressly agreed upon by the parties.
Given that the bonus in this case is integrated in the CBA, the same partakes the nature of a demandable
obligation. Verily, by virtue of its incorporation in the CBA, the Christmas bonus due to respondent
Association has become more than just an act of generosity on the part of the petitioner but a contractual
obligation it has undertaken.
A reading of the provision of the CBA reveals that the same provides for the giving of a
"Christmas gift package/bonus" without qualification. Terse and clear, the said provision did not state that
the Christmas package shall be made to depend on the petitioner's financial standing. The records are
also bereft of any showing that the petitioner made it clear during CBA negotiations that the bonus was
dependent on any condition. Indeed, if the petitioner and respondent Association intended that the
P3,000.00 bonus would be dependent on the company earnings, such intention should have been
expressed in the CBA. It is noteworthy that in petitioner's 1998 and 1999 Financial Statements, it took
note that "the 1997 financial crisis in the Asian region adversely affected the Philippine economy." From
the foregoing, petitioner cannot insist on business losses as a basis for disregarding its undertaking. It is
manifestly clear that petitioner was very much aware of the imminence and possibility of business losses
owing to the 1997 financial crisis. In 1998, petitioner suffered a net loss of P14,347,548.00. Yet it gave a
P3,000.00 bonus to the members of the respondent Association. In 1999, when petitioner's very own
financial statement that "the positive developments in the economy have yet to favorably affect the
operations of the company," and reported a loss of P346,025,733.00, 27 it entered into the CBA with the
respondent Association whereby it contracted to grant a Christmas gift package/bonus to the latter.
Petitioner supposedly continued to incur losses in the years 2000 and 2001. Still and all, this did not deter
it from honoring the CBA provision on Christmas bonus as it continued to give P3,000.00 each to the
members of the respondent Association in the years 1999, 2000 and 2001. All given, business losses are
a feeble ground for petitioner to repudiate its obligation under the CBA. The rule is settled that any benefit
and supplement being enjoyed by the employees cannot be reduced, diminished, discontinued or
eliminated by the employer. The principle of non-diminution of benefits is founded on the constitutional
mandate to protect the rights of workers and to promote their welfare and to afford labor full protection.
Hence, absent any proof that petitioner's consent was vitiated by fraud, mistake or duress, it is presumed
that it entered into the CBA voluntarily and had full knowledge of the contents thereof and was aware of
its commitments under the contract.
The Court is fully aware that implementation to the letter of the subject CBA provision may further
deplete petitioner's resources. Petitioner's remedy though lies not in the Court's invalidation of the
provision but in the parties' clarification of the same in subsequent CBA negotiations. Article 253 of the
Labor Code is relevant:
Art. 253.Duty to bargain collectively when there exists a collective bargaining agreement. —
When there is a collective bargaining agreement, the duty to bargain collectively shall also mean that
neither party shall terminate nor modify such agreement during its lifetime. However, either party can
serve a written notice to terminate or modify the agreement at least sixty (60) days prior to its expiration
date. It shall be the duty of both parties to keep the status quo and to continue in full force and effect the
terms and conditions of the existing agreement during the sixty (60)-day period and/or until a new
agreement is reached by the parties.
Atty. Mercader
MEGA MAGAZINE PUBLICATIONS, INC v. MARGARET A. DEFENSOR

Bersamin, J:
G.R. No. 162021 - 16 June 2014
In labor cases, the rules on the degree of proof are enforced not as stringently as in other cases in order to
better serve the higher ends of justice. This lenity is intended to afford to the employee every opportunity
to level the playing field.
Being now assailed is the amended decision promulgated on November 19, 2003, 1 whereby the Court of
Appeals (CA) reconsidered its original disposition, and granted the petition for certiorari filed by respondent
Margaret A. Defensor (respondent) by annulling and setting aside the adverse resolutions dated July 31,
2002 and March 31, 2003 issued by the National Labor Relations Commission (NLRC).
FACTS:
Petitioner Mega Magazine Publications, Inc. (MMPI) first employed the respondent as an Associate
Publisher in 1996, and later promoted her as a Group Publisher with a monthly salary of P60, 000.00. In a
memorandum dated February 25, 1999, the respondent proposed to MMPI’s Executive Vice-President
Sarita V. Yap (Yap) year-end commissions for herself and a special incentive plan for the Sales Department.
Yap made marginal notes of her counter-proposals on her copy of the respondent’s memorandum even
crossing out some items therein dated February 25, 1999. Yap also wrote on the memorandum: “Marge, if
everything is ok w/ you, draft something for me to sign …”; “You can also announce that at 5 M net for
MMPI [acc to my computation, achievable if they only meet their month min. quota] we can declare 14th
month pay for entire company.”
Respondent sent another memorandum on April 5, 1999 setting out the 1999 advertisement sales,
target and commissions, and proposing the schedule of her outright commissions further proposing that the
special incentives be given when total revenues are reached. On August 31, 1999, the respondent sent
Yap a report on sales and sales targets. Subsequently, the respondent tendered her letter of resignation
effective at the end of December 1999. Yap accepted the resignation. Before leaving MMPI, the respondent
sent Yap another report on the sales and advertising targets for 1999.
On December 8, 1999, Yap responded with a “formalization” of her approval of the 1999 special
incentive scheme proposed by the respondent through her memorandum dated February 25, 1999.
Respondent replied to Yap, pointing out that her memorandum dated April 5, 1999 had been the result of
Yap’s own comments on the special incentive scheme she had proposed, and that she had assumed that
Yap had been amenable to the proposal when she did not receive any further reaction from the latter.
After the respondent had left the company, she filed a complaint for payment of bonus and incentive
compensation with damages, specifically demanding the payment of her sales commissions, 14th month
pay, and her share in the incentive scheme for the advertising and sales staff.
The Labor Arbiter dismissed the respondent’s complaint ruling that respondent had not presented
any evidence showing that MMPI had agreed or committed to the terms proposed in her memorandum of
April 5, 1999. The respondent appealed, but the NLRC denied the appeal for its lack of merit, with the NLRC
concurring with the LA’s ruling that there had been no agreement between the petitioners and the
respondent on the terms and conditions of the incentives reached.
Respondent then filed a motion for reconsideration and in the supplement she included a motion
to admit additional evidence (the affidavit of Lie Tabingo who had worked as a traffic clerk corroborated
respondents’ claim that it had reach its minimum quota) on the ground that such evidence had been
“unavailable during the hearing as newly discovered evidence in a motion for new trial.” NLRC denied said
motion for reconsideration.
The CA dismissed respondents’ petition for certiorari. On motion for reconsideration, CA reversed
its decision and remanded the case to NLRC for the reception of additional evidence.
ISSUES:
1. Whether or not the respondent was entitled to the commissions and the incentive bonus being claimed.
2. Whether or not the claim of MMPI’s gross revenue or the affidavit of Tabingo corroborating respondents’
memorandum to the Accounting Department must be given more weight.
Atty. Mercader
HELD:
THE APPEAL IS PARTLY MERITORIOUS.
1. Yes, respondent was entitled to the commissions and the incentive bonus based on the proposal
approved by Yap. Due to the nature of the bonus or special incentive being a gratuity or act of
liberality on the part of the giver, the respondent could not validly insist on the schedule proposed in
her memorandum of April 5, 1999 considering that the grant of the bonus or special incentive
remained a management prerogative. However, the Court agrees with the CA’s ruling that the
petitioners had already exercised the management prerogative to grant the bonus or special
incentive. At no instance did Yap flatly refuse or reject the respondent’s request for commissions
and the bonus or incentive. This is plain from the fact that Yap even “bargained” with the respondent
on the schedule of the rates and the revenues on which the bonus or incentive would be pegged.
What remained contested was only the schedule of the rates and the revenues.
2. The affidavit of Tabingo corroborating respondents’ memorandum to the Accounting Department

admitted as additional evidence by the respondent must be given more weight. The degree of proof required
in labor cases is not as stringent as in other types of cases. This liberal approach affords to the employee
every opportunity to level the playing field in which her employer is pitted against her. Only substantial
evidence – that amount of relevant evidence which a reasonable mind might accept as adequate to justify
a conclusion was required in labor adjudication. Moreover, whenever the evidence presented by the
employer and that by the employee are in equipoise, the scales of justice must tilt in favor of the latter.
For purposes of determining whether or not the petitioners’ gross revenue reached the minimum target of
P35 million, therefore, Tabingo’s memorandum and affidavit sufficed to positively establish that it did,
particularly considering that Tabingo’s memorandum was made in the course of the performance of her
official tasks as a traffic clerk of MMPI. In her affidavit, too, Tabingo asserted that her issuance of the
memorandum was pursuant to MMPI’s year-end procedures, an assertion that the petitioners did not refute.
Accordingly, the Court concludes that the respondent was entitled to her 0.05% outright commissions and
to the special incentive bonus of P8, 500.00 based on MMPI having reached the minimum target of P35
million in gross revenues paid in “bartered goods and cash in direct proportion to percentage of cash and
bartered goods revenue for the year,” as provided in Yap’s memorandum of December 8, 1999.
Atty. Mercader
TSPIC Corporation vs TSPIC Employees Union

Gonzaga-Reyes, J.
GR No. 163419 – 13 February 2008
FACTS:
TSPIC is engaged in the business of designing, manufacturing, and marketing integrated circuits to serve
the communication, automotive, data processing, and aerospace industries. Respondent TSPIC
Employees Union the other hand, is the registered bargaining agent of the rank-and-file employees of
TSPIC of which the respondents are members.
In 1999, TSPIC and the Union entered into a Collective Bargaining Agreement (CBA) for the years 2000
to 2004. The CBA included a provision on yearly salary increases starting January 2000 until January 2002.
The wage salary increase of the first year of this Agreement shall be over and above the wage/salary
increase, including the wage distortion adjustment, granted by the COMPANY on November 1, 1999 as per
Wage Order No. NCR-07. The wage/salary increases for the years 2001 and 2002 shall be deemed
inclusive of the mandated minimum wage increases under future Wage Orders, that may be issued after
Wage Order No. NCR-07, and shall be considered as correction of any wage distortion that may have been
brought about by the said future Wage Orders. Thus the wage/salary increases in 2001 and 2002 shall be
deemed as compliance to future wage orders issued after Wage Order NCR-07.
Consequently, on January 1, 2000, all the regular rank-and-file employees of TSPIC received a 10%
increase in their salary. Accordingly, the following nine (9) respondents (first group) who were already
regular employees received the said increase in their salary. The CBA also provided that employees who
acquire regular employment status within the year but after the effectivity of a particular salary increase
shall receive a proportionate part of the increase upon attainment of their regular status.
Thus, a daily paid employee who becomes a regular employee covered by this Agreement only on May
1, 2000, i.e., during the second quarter and subsequent to the January 1, 2000 wage increase under this
Agreement, will be entitled to a wage increase equivalent to seventy-five percent (75%) of ten percent
(10%) of his basic pay. In the same manner, an employee who acquires regular status on December 1,
2000 will be entitled to a salary increase equivalent to twenty-five percent (25%) of ten percent (10%) of his
last basic pay. On the other hand, any monthly-paid employee who acquires regular status within the term
of the Agreement shall be granted regularization increase equivalent to 10% of his regular basic salary. On
October 6, 2000, the Regional Tripartite Wage and Productivity Board, National Capital Region, issued
Wage Order No. NCR-08 (WO No. 8) which raised the daily minimum wage from PhP223.50 to PhP250
effective November 1, 2000. Conformably, the wages of 17 probationary employees were increased to
PhP250.00 effective November 1, 2000.
On various dates during the last quarter of 2000, the above named 17 employees attained regular
employment and received 25% of 10% of their salaries as granted under the provision on regularization
increase under the CBA. In January 2001, TSPIC implemented the new wage rates as mandated by the
CBA. As a result, the employees who were senior to the above-listed recently regularized employees,
received less wages.
A few weeks after the salary increase for the year 2001 became effective, TSPIC's Human Resources
Department notified 24 employees that due to an error in the automated payroll system, they were overpaid
and the overpayment would be deducted from their salaries in a staggered basis, starting February 2001.
TSPIC explained that the correction of the erroneous computation was based on the crediting provision of
the CBA.
On the other hand, the union asserted that there was no error and the deduction of the alleged
overpayment from employees constituted diminution of pay. The issue was brought to the grievance
machinery however no settlement was reached. The case was submitted for voluntary arbitration to
determine whether or not the acts of the management in making deductions from the salaries of the
affected employees constituted diminution of pay. Arbitrator Jimenez ruled that the unilateral deduction
violated Article 100 of the Labor Code, the claim for exemplary damages was denied for want of factual
basis. TSPIC filed a Motion for Reconsideration but was denied by the Voluntary Arbitrator and CA.
Hence, this petition.
Atty. Mercader
ISSUE:
Whether or not the alleged overpayment constitutes a diminution of pay which violates Article
100 of the Labor Code.
HELD:
YES. It is familiar and fundamental doctrine in labor law that the CBA is the law between the
parties and they are obliged to comply with its provisions.
if the terms of a contract, as in a CBA, are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of their stipulations shall control. However, sometimes, as in this
case, though the provisions of the CBA seem clear and unambiguous, the parties sometimes arrive at
conflicting interpretations.
As a general rule, in the interpretation of a contract, the intention of the parties is to be pursued. Littera
necat spiritus vivificat. An instrument must be interpreted according to the intention of the parties. It is
the duty of the courts to place a practical and realistic construction upon it, giving due consideration to
the context in which it is negotiated and the purpose which it is intended to serve. Absurd and illogical
interpretations should also be avoided. Considering that the parties have unequivocally agreed to
substitute the benefits granted under the CBA with those granted under wage orders, the agreement
must prevail and be given full effect.
Diminution of benefits is the unilateral withdrawal by the employer of benefits already enjoyed by the
employees. There is diminution of benefits when it is shown that: (1) the grant or benefit is founded on a
policy or has ripened into a practice over a long period; (2) the practice is consistent and deliberate; (3)
the practice is not due to error in the construction or application of a doubtful or difficult question of law;
and (4) the diminution or discontinuance is done unilaterally by the employer.
As correctly pointed out by TSPIC, the overpayment of its employees was a result of an error. This
error was immediately rectified by TSPIC upon its discovery. We have ruled before that an erroneously
granted benefit may be withdrawn without violating the prohibition against non-diminution of benefits.
Atty. Mercader
EASTERN TELECOMMUNICATIONS PHILIPPINES, INC., vs. EASTERN TELECOMS EMPLOYEES

UNION
G.R. No. 185665. February 8, 2012
Facts:
Eastern Telecommunications Phils., Inc. (ETPI) is a corporation engaged in the business of providing
telecommunications facilities, particularly leasing international date lines or circuits, regular landlines,
internet and data services, employing approximately 400 employees.
Eastern Telecoms Employees Union (ETEU) is the certified exclusive bargaining agent of the company's
rank and file employees with a strong following of 147 regular members. It has an existing collective
bargaining agreement with the company to expire in the year 2004 with a Side Agreement signed on
September 3, 2001.
In essence, the labor dispute was a spin-off of the company's plan to defer payment of the 2003 14th,
15th and 16th month bonuses sometime in April 2004. The company's main ground in postponing the
payment of bonuses is due to allege continuing deterioration of company's financial position which started
in the year 2000. However, ETPI while postponing payment of bonuses sometime in April 2004, such
payment would also be subject to availability of funds.
Invoking the Side Agreement of the existing Collective Bargaining Agreement for the period 2001-2004
between ETPI and ETEU which stated as follows:
"4. Employment Related Bonuses. The Company confirms that the 14th, 15th and 16th month bonuses
(other than 13th month pay) are granted."
ETPI then argues that even if it is contractually bound to distribute the subject bonuses to ETEU
members under the Side Agreements, its current financial difficulties should have released it from the
obligatory force of said contract invoking Article 1267 of the Civil Code. Said provision declares:
Article 1267. When the service has become so difficult as to be manifestly beyond the contemplation of
the parties, the obligor may also be released therefrom, in whole or in part.
Issues:
May the Petitioner company refuse in granting the bonuses?
Held:
The parties to the contract must be presumed to have assumed the risks of unfavorable developments. It
is, therefore, only in absolutely exceptional changes of circumstances that equity demands assistance for
the debtor. In the case at bench, the Court determines that ETPI's claimed depressed financial state will
not release it from the binding effect of the 2001-2004 CBA Side Agreement.
ETPI appears to be well aware of its deteriorating financial condition when it entered into the 2001-2004
CBA Side Agreement with ETEU and obliged itself to pay bonuses to the members of ETEU. Considering
that ETPI had been continuously suffering huge losses from 2000 to 2002, its business losses in the year
2003 were not exactly unforeseen or unexpected. Consequently, it cannot be said that the di culty in
complying with its obligation under the Side Agreement was "manifestly beyond the contemplation of the
parties."
The provision for the grant of bonuses reveals that the same provides for the giving of 4th, 15th and 16th
month bonuses without qualification. The wording of the provision does not allow any other interpretation.
There were no conditions specified in the CBA Side Agreements for the grant of the benefits contrary to
the claim of ETPI that the same is justified only when there are profits earned by the company.
The records are also bereft of any showing that the ETPI made it clear before or during the execution of
the Side Agreements that the bonuses shall be subject to any condition. Indeed, if ETPI and ETEU
intended that the subject bonuses would be dependent on the company earnings, such intention should
have been expressly declared in the Side Agreements or the bonus provision should have been deleted
altogether
Interestingly, ETPI never presented countervailing evidence to refute ETEU's claim that the company has
been continuously paying bonuses since 1975 up to 2002 regardless of its financial state. Its failure to
controvert the allegation, when it had the opportunity and resources to do so, works in favor of ETEU.
Time and again, it has been held that should doubts exist between the evidence presented by the
employer and the employee, the scales of justice must be tilted in favor of the latter.
Atty. Mercader
Atty. Mercader
Rosario Gaa v Court of Appeals

Patajo, J.
This is a petition for review on certiorari of the decision of the Court of Appeals promulgated on
March 30, 1976, affirming the decision of the Court of First Instance of Manila.
Article 1708, NCC:
The laborer's wage shall not be subject to execution or attachment, except for debts incurred for food,
shelter, clothing and medical attendance.
FACTS:
Europhil Industries Corporation was formerly one of the tenants in Trinity Building while Gaa was then the
building administrator. On December 12, 1973, Europhil Industries commenced an action for damages
against Gaa "for having perpetrated certain acts that Europhil Industries considered a trespass upon its
rights, namely, cutting of its electricity, and removing its name from the building directory and gate passes
of its officials and employees". The court then rendered judgment in favor of Europhil. After the decision
became final and executory, a writ of garnishment was issued pursuant to which Deputy Sheriff Roxas
served a Notice of Garnishment upon El Grande Hotel, where Gaa was then employed, garnishing her
salary, commission, and/or remuneration. Gaa then filed with the CFI of Manila a motion to lift said
garnishment on the ground that her salaries, commission and/or remuneration are exempted from
execution under Art. 1708 of the NCC. This motion was denied by the CFI and later, the CA dismissed
the petition for certiorari. The CA held that petitioner is not a mere laborer as contemplated under Article
1708 as the term laborer does not apply to one who holds a managerial or supervisory position like that of
petitioner, but only to those "laborers occupying the lower strata." It also held that the term "wages"
means the pay given "as hire or reward to artisans, mechanics, domestics or menial servants, and
laborers employed in manufactories, agriculture, mines, and other manual occupation and usually
employed to distinguish the sums paid to persons hired to perform manual labor, skilled or unskilled, paid
at stated times, and measured by the day, week, month, or season," which is the ordinary acceptation of
the said term, and that “wage” in Spanish is “jornal” and one who receives a wage is a “jornalero.”
ISSUE/S:
Whether or not the CA erred in the interpretation of the CA of Art. 1708 of the New Civil Code.

Article 1708 used the word "wages" and not "salary" in relation to "laborer" when it declared what
are to be exempted from attachment and execution. The term "wages" as distinguished from "salary",
applies to the compensation for manual labor, skilled or unskilled, paid at stated times, and measured by
the day, week, month, or season, while "salary" denotes a higher degree of employment, or a superior
grade of services, and implies a position of office: by contrast, the term "wages" indicates considerable
pay for a lower and less responsible character of employment, while "salary" is suggestive of a larger and
more important service. In the case of Bell v Indian Livestock Co., it was said that “’Wages’ are the
compensation given to a hired person for service, and the same is true of 'salary'. The words seem to be
synonymous, convertible terms, though we believe that use and general acceptation have given to the
word 'salary' a significance somewhat different from the word 'wages' in this: that the former is understood
to relate to position of office, to be the compensation given for official or other service, as distinguished
from 'wages', the compensation for labor."
The Court thinks that the legislature intended the exemption in Article 1708 of the New Civil Code
to operate in favor of any but those who are laboring men or women in the sense that their work is
manual. Persons belonging to this class usually look to the reward of a day's labor for immediate or
present support, and such persons are more in need of the exemption than any others. Gaa is definitely
not within that class. Hence, the CA did nor err in denying the motion of Gaa since salaries, commission
and other remuneration due her from the El Grande Hotel do not constitute wages due a laborer which,
under Article 1708 of the Civil Code, are not subject to execution or attachment.
Atty. Mercader
Five J Taxi v. NLRC

Regalado, J.:
G.R. No. 111474 – 22 August 2004
Petitioners Five J Taxi and/or Juan S. Armamento filed this special civil action for certiorari to annul
the decision of respondent National Labor Relations Commission (NLRC) ordering petitioners to pay
1
private respondents Domingo Maldigan and Gilberto Sabsalon their accumulated deposits and car wash
payments, plus interest thereon at the legal rate from the date of promulgation of judgment to the date of
actual payment, and 10% of the total amount as and for attorney's fees.
Article 114 of the Labor Code provides as follows:

Art. 114. Deposits for loss or damage. — No employer shall require his worker to make deposits from which
deductions shall be made for the reimbursement of loss of or damage to tools, materials, or equipment
supplied by the employer, except when the employer is engaged in such trades, occupations or business
where the practice of making deposits is a recognized one, or is necessary or desirable as determined by
the Secretary of Labor in appropriate rules and regulations.
FACTS:
Private respondents Domingo Maldigan and Gilberto Sabsalon were hired by the petitioners as taxi
drivers and worked for 4 days weekly on a 24-hour shifting schedule. They were required to pay daily
boundary of P700.00 for air-conditioned taxi or P450.00 for a non air-conditioned taxi. They were also
required to pay P20.00 for car washing, and to further make a P15.00 deposit to answer for any deficiency
in their "boundary," for every actual working day.
Maldigan was hired as an extra driver by the petitioners, he already failed to report for work for
unknown reasons in less than 4 months and the petitioners later on discovered that he was working for
"Mine of Gold" Taxi Company.
September 6, 1983: With respect to Sabsalon, while driving a taxicab of petitioners, he was held
up by his armed passenger who took all his money and thereafter stabbed him. He was hospitalized and
after his discharge, he went to his home province to recuperate.
September 22, 1991: Sabsalon failed to remit his "boundary" of P700.00 for the previous day,
abandoned his taxicab in Makati without refilling it. He refused to report for work despite repeated demands,
the petitioner later on discovered that he was driving a taxi for "Bulaklak Company."
Sometime in 1989: Maldigan requested petitioners for the reimbursement of his daily cash
deposits for 2 years, but herein petitioners told him that not a single centavo was left of his deposits as
these were not even enough to cover the amount spent for the repairs of the taxi he was driving. When
Maldigan insisted on the refund of his deposit, petitioners terminated his services. Sabsalon, on his part,
claimed that his termination from employment was effected when he refused to pay for the washing of his
taxi seat covers.
November 27, 1991: private respondents filed a complaint with the Manila Arbitration Office of the
National Labor Relations Commission charging petitioners with illegal dismissal and illegal deductions.
Labor Arbiter: Dismissed the complaint holding that it took private respondents two years to file
the same and such unreasonable delay was not consistent with the natural reaction of a person who claimed
to be unjustly treated, hence the filing of the case could be interpreted as a mere afterthought.
NLRC: Affirmed the LA. The private respondents were not illegally terminated, but ordered the
petitioners to pay private respondents Domingo Maldigan and Gilberto Sabsalon their accumulated
deposits and car wash payments, plus interest thereon at the legal rate from the date of promulgation of
judgment to the date of actual payment, and 10% of the total amount as and for attorney's fees.
ISSUE/S:
1. Whether or not the daily deposits made by respondents to defray any shortage in their
"boundary" is covered by the general prohibition in Article 114 of the Labor Code against
requiring employees to make deposits.
Atty. Mercader
HELD:
1. Yes. The daily deposits made by respondents to defray any shortage in their "boundary" is
covered by the general prohibition in Article 114 of the Labor Code.
Article 114 of the Labor Code provides as follows:

Art. 114. Deposits for loss or damage. — No employer shall require his worker to make
deposits from which deductions shall be made for the reimbursement of loss of or damage to tools,
materials, or equipment supplied by the employer, except when the employer is engaged in such
trades, occupations or business where the practice of making deposits is a recognized one, or is
necessary or desirable as determined by the Secretary of Labor in appropriate rules and
regulations.
 Clearly, the same does not apply to or permit deposits to defray any deficiency which the taxi driver
may incur in the remittance of his "boundary."
 Also, when private respondents stopped working for petitioners, the alleged purpose for which
petitioners required such unauthorized deposits no longer existed. In other case, any balance due
to private respondents after proper accounting must be returned to them with legal interest.
 However, the unrebutted evidence with regard to the claim of Sabsalon is as follows:
YEAR DEPOSITS SHORTAGES VALES
1987 P 1,403.00 P 567.00 P 1,000.00
1988 720.00 760.00 200.00
1989 686.00 130.00 1,500.00
1990 605.00 570.00
1991 165.00 2,300.00
———— ———— ————
P 3,579.00 P 4,327.00 P 2,700.00
 The foregoing accounting shows that from 1987-1991, Sabsalon was able to withdraw his deposits
through vales or he incurred shortages, such that he is even indebted to petitioners in the amount
of P3,448.00.
 With respect to Maldigan's deposits, nothing was mentioned questioning the same even in the
present petition. The Court accordingly agrees with the recommendation of the Solicitor General
that since the evidence shows that he had not withdrawn the same, he should be reimbursed the
amount of his accumulated cash deposits.
Atty. Mercader
Niña Jewelry v. Montecillo

Reyes, J.
GR No. 188169 – 28 November 2011
The Labor Code of the Philippines provides:
ART. 113. Wage Deduction. — No employer, in his own behalf or in behalf of any person, shall make any deduction
from the wages of his employees, except:
(a) In cases where the worker is insured with his consent by the employer, and the deduction is to recompense the
employer for the amount paid by him as premium on the insurance;
(b) For union dues, in cases where the right of the worker or his union to check-off has been recognized by the
employer or authorized in writing by the individual worker concerned; and
(c) In cases where the employer is authorized by law or regulations issued by the Secretary of Labor.
Article 114. Deposits for loss or damage. — No employer shall require his worker to make deposits from which
deductions shall be made for the reimbursement of loss of or damage to tools, materials, or equipment
supplied by the employer, except when the employer is engaged in such trades, occupations or business
where the practice of making deposits is a recognized one, or is necessary or desirable as determined by
the Secretary of Labor in appropriate rules and regulations.
FACTS:
Madeline Montecillo and Liza Trinidad (respondents) were goldsmiths of petitioner in the year 1996
and 1994, respectively. There were incidents of theft involving goldsmiths in petitioner’s employ. On August
13, 2004, petitioner imposed a policy for goldsmiths requiring them to post cash bonds/deposits which shall
not exceed 15% of their salaries per week; the purpose of which was to answer for any loss or damage
which petitioner may sustain by reason of the goldsmith’s fault or negligence in handling the gold entrusted
to them. The deposit shall be returned upon completion of the goldsmith’s work and after an accounting of
the gold received. Petitioner allegedly gave the goldsmiths the option not to post deposits but in lieu thereof,
to sign authorizations allowing petitioner to deduct from the goldsmith’s salaries amounts not exceeding
15% of their take home pay should they lose the gold entrusted them. Respondents argue that they were
constructively dismissed as their continued employment were made dependent upon their compliance with
the required deposit. Petitioner on the other hand argue that respondents abandoned their work.
Respondents filed a case for illegal dismissal. The LA and the NLRC dismissed the case for lack
of merit, finding the policy a management prerogative in order to protect petitioner from incurring losses
and respondents were not dismissed but rather, they refused to work when required to comply with the
policy.
The CA rendered the assailed decision herein, reversing the findings of LA and NLRC. It reasoned,
in reversing the former decisions, that pursuant to Articles 113 and 114 of the Labor code, petitioner did not
comply with the relevant provisions of law for failure to prove that there is an existing law or regulation
authorizing it to impose such burden on its employees and in case of deposit, that it is engaged in a trade,
occupation or business where such requirement is a recognized practice. It found respondents
constructively dismissed because petitioner refused to give assignments to respondents for failure to give
the required case deposits or agree to the salary deduction.
ISSUE/S:
1. Whether or not respondents were constructively dismissed
2. Whether or not petitioners may require its employees to make a deposit
HELD: The petitioner is PARTIALLY GRANTED. Respondents are not constructively dismissed.
The ruling of the CA that petitioner’s imposition of the policy is without legal basis, stands.
Atty. Mercader
1. Constructive dismissal occurs when there is cessation of work because continued employment is
rendered impossible, unreasonable or unlikely; when there is a demotion in rank or diminution in pay or
both; or when a clear discrimination, insensibility, or disdain by an employer becomes unbearable to the
employee.
In the case at bar, respondents were not constructively dismissed. The new policy was not
arbitrarily imposed upon respondents but upon all goldsmiths. The Joint Affidavit executed by other
goldsmiths in the employ of petitioner showed that respondents were not terminated from employment and
that they were convened and informed of the reason behind the imposition of the new policy. It was
respondents who, instead of airing out their concerns about the new policy, promptly stopped from reporting
for work.
While the new policy do impose a burden upon respondents, it does not intend to result to their
demotion nor diminution in pay for as long as the goldsmiths observe due diligence in the performance of
their tasks, they will still be paid in full. The imposition of the new policy was to curb the incidences of gold
theft in the work place, it can hardly be said to be disdainful or insensible to workers as to render their
continued employment unreasonable, unlikely or impossible.
2. In relation to Articles 113 and 114 of the Labor Code, the petitioners point out that Section 14, Book III,
Rule VIII of the Omnibus Rules does not define the circumstances when the making of deposits is deemed
recognized, necessary or desirable. The petitioners then argue that the intention of the law is for the courts
to determine on a case to case basis what should be regarded as recognized, necessary or desirable and
to test an employer's policy of requiring deposits on the bases of its reasonableness and necessity.
We are not persuaded.
Articles 113 and 114 of the Labor Code are clear as to what are the exceptions to the general
prohibition against requiring deposits and effecting deductions from the employees' salaries. Hence, a
statutory construction of the aforecited provisions is not called for.
While the petitioners are not absolutely precluded from imposing the new policy, they can only do
so upon compliance with the requirements of the law. In other words, the petitioners should first establish
that the making of deductions from the salaries is authorized by law, or regulations issued by the Secretary
of Labor. Further, the posting of cash bonds should be proven as a recognized practice in the jewelry
manufacturing business, or alternatively, the petitioners should seek for the determination by the Secretary
of Labor through the issuance of appropriate rules and regulations that the policy the former seeks to
implement is necessary or desirable in the conduct of business. The petitioners failed in this respect. It
bears stressing that without proofs that requiring deposits and effecting deductions are recognized
practices, or without securing the Secretary of Labor's determination of the necessity or desirability of the
same, the imposition of new policies relative to deductions and deposits can be made subject to abuse by
the employers. This is not what the law intends.
Atty. Mercader
Special Steel Products v. Villareal,

Sandoval-Gutierrez, J.
G.R. No. 143304. 8 July 2004
At bar is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as
amended, assailing the Decision dated October 29, 1999 and Resolution dated May 8, 2000 of the Court
of Appeals in CA-G.R. SP No. 50957, entitled Special Steel Products, Inc. vs. National Labor Relations
Commission, Lutgardo Villareal and Frederick So.
Article 116 of the Labor Code, as amended, provides:

ART. 116. Withholding of wages and kickbacks prohibited. It shall be unlawful for any person, directly or
indirectly, to withhold any amount from the wages (and benefits) of a worker or induce him to give up any
part of his wages by force, stealth, intimidation, threat or by any other means whatsoever without the
workers consent.
FACTS:
 Special Steel Products, Inc., petitioner, is a domestic corporation engaged in the principal business
of importation, sale, and marketing of BOHLER steel products. Lutgardo C. Villareal and Frederick
G. So, respondents, worked for petitioner as assistant sales manager and salesman, respectively.
 May 1993: Respondent Villareal obtained a car loan from the Bank of Commerce, with petitioner
as surety, as shown by a continuing suretyship agreement and promissory note wherein they jointly
and severally agreed to pay the bank P786,611.60 in 72 monthly installments.
 January 1997: Respondent Villareal resigned and thereafter joined Hi-Grade Industrial and
Technical Products, Inc. as executive vice-president.
 August 1994: petitioner sponsored respondent Frederick So to attend a training course
in Kapfenberg, Austria conducted by BOHLER, petitioners principal company. This training was a
reward for respondent Sos outstanding sales performance. When respondent returned nine months
thereafter, petitioner directed him to sign a memorandum providing that BOHLER requires trainees
from Kapfenberg to continue working with petitioner for a period of three (3) years after the
training. Otherwise, each trainee shall refund to BOHLER $6,000.00 (US dollars) by way of set-off
or compensation. On January 16, 1997 or 2 years and 4 months after attending the training,
respondent resigned from petitioner.
 Petitioner ordered respondents to render an accounting of its various Christmas giveaways they
received. These were intended for distribution to petitioners customers.
 In protest, respondents demanded from petitioner payment of their separation benefits,
commissions, vacation and sick leave benefits, and proportionate 13 month pay. But petitioner
th
refused and instead, withheld their 13 month pay and other benefits.
th
 April 1997: Respondents filed with the Labor Arbiter a complaint for payment of their monetary
benefits against petitioner and its president, Augusto Pardo.
 The Labor Arbiter: ordered the respondents, Special Steel Products, Inc. and Mr. Augusto Pardo
to pay, jointly and severally, complainants Frederick G. So and Lutgardo C. Villareal their
commissions, retirement benefit (for Villareal), proportionate 13 month, earned vacation and sick
th
leave benefits, and attorneys fees.

 NLRC: affirmed with modification the Arbiters Decision in the sense that Pardo, petitioners
president, was exempted from any liability.
 Petitioner filed a motion for reconsideration but was denied.
 Petitioner filed with the Court of Appeals a petition for certiorari; dismissed the petition and affirming
the assailed NLRC Decision
 Petitioner filed a motion for reconsideration but was denied by the Appellate Court in a Resolution
ISSUE:
1. W/N an employer may withhold its employees wages and benefits as lien to protect its interest as
a surety in the latters car loan and for expenses incurred in a training abroad
Atty. Mercader
1. No.
 Petitioner contends that as a guarantor, it could legally withhold respondent Villareals monetary
benefits as a preliminary remedy pursuant to Article 2071 of the Civil Code, as amended. As to
respondent So, petitioner, citing Article 113 of the Labor Code, as amended, in relation to Article 1706
of the Civil Code, as amended, maintains that it could withhold his monetary benefits being authorized
by the memorandum he signed.
 Article 113 is clear and needs no further elucidation. Indeed, petitioner has no legal authority to
withhold respondents 13 month pay and other benefits. What an employee has worked for, his
th
employer must pay. Thus, an employer cannot simply refuse to pay the wages or benefits of its
employee because he has either defaulted in paying a loan guaranteed by his employer; or violated
their memorandum of agreement; or failed to render an accounting of his employers property.
 As to the petitioner relying on Article 2071 (earlier cited) whcich contends that the right to demand
security and obtain release from the guaranty it executed in favor of respondent Villareal may be
exercised even without initiating a separate and distinct action, there is no guaranty involved herein
and, therefore, the provision of Article 2071 does not apply.
 A guaranty is distinguished from a surety in that a guarantor is the insurer of the solvency of the debtor
and thus binds himself to pay if the principal is unable to pay, while a surety is the insurer of the debt,
and he obligates himself to pay if the principal does not pay. Based on the distinction, it appears that
the contract executed by petitioner and respondent Villareal (in favor of the Bank of Commerce) is
a contract of surety. In fact, it is denominated as a continuing suretyship agreement. Hence, petitioner
could not just unilaterally withhold respondents wages or benefits as a preliminary remedy under Article
2071. It must file an action against respondent Villareal. Thus, the Appellate Court aptly ruled that
petitioner may only protect its right as surety by instituting an action to demand a security.
 As to respondent So, petitioner maintains that there can be a set-off or legal compensation between
them. Consequently, it can withhold his 13 month pay and other benefits.
th
 In the present case, set-off or legal compensation cannot take place between petitioner and
respondent So because they are not mutually creditor and debtor of each other.
 A careful reading of the Memorandum reveals that the lump sum compensation of not less than US
$6,000.00 will have to be refunded by each trainee to BOHLER, not to petitioner.
 Petitioner has no legal right to withhold respondents 13 month pay and other benefits to recompense
th
for whatever amount it paid as security for respondent Villareals car loan; and for the expenses
incurred by respondent So in his training abroad.
Atty. Mercader
EMER MILAN, RANDY MASANGKAY, WILFREDO JAVIER, RONALDO DAVID, BONIFACIO

MATUNDAN, NORA MENDOZA, ET AL. vs. NATIONAL LABOR RELATIONS COMMISSION, SOLID
MILLS, INC., AND/OR PHILIP ANG,
LEONEN, J
G.R. No. 202961, February 04, 2015
Facts:
An employer is allowed to withhold terminal pay and benefits pending the employee’s return of its
properties.
Petitioners are respondent Solid Mills, Inc.’s (Solid Mills) employees. They are represented by the National
Federation of Labor Unions (NAFLU), their collective bargaining agent.
As Solid Mills’ employees, petitioners and their families were allowed to occupy SMI Village, a property
owned by Solid Mills. According to Solid Mills, this was “out of liberality and for the convenience of its
employees . . . [and] on the condition that the employees . . . would vacate the premises anytime the
Company deems fit.”chanroblsvirtuallawlibrary
In September 2003, petitioners were informed that effective October 10, 2003, Solid Mills would cease its
operations due to serious business losses. NAFLU recognized Solid Mills’ closure due to serious business
losses in the memorandum of agreement dated September 1, 2003.
Later, Solid Mills, through Alfredo Jingco, sent to petitioners individual notices to vacate SMI Village.
Petitioners were no longer allowed to report for work by October 10, 2003. They were required to sign a
memorandum of agreement with release and quitclaim before their vacation and sick leave benefits, 13th
month pay, and separation pay would be released. Employees who signed the memorandum of agreement
were considered to have agreed to vacate SMI Village, and to the demolition of the constructed houses
inside as condition for the release of their termination benefits and separation pay. Petitioners refused to
sign the documents and demanded to be paid their benefits and separation pay.
Hence, petitioners filed complaints before the Labor Arbiter for alleged non-payment of separation pay,
accrued sick and vacation leaves, and 13th month pay. They argued that their accrued benefits and
separation pay should not be withheld because their payment is based on company policy and practice.
On the other hand, Solid Mills argued that petitioners’ complaint was premature because they had not
vacated its property.
The Labor Arbiter ruled in favor of petitioners. According to the Labor Arbiter, Solid Mills illegally withheld
petitioners’ benefits and separation pay. Petitioners’ right to the payment of their benefits and separation
pay was vested by law and contract.
The National Labor Relations Commission partially affirmed and reversed of the Labor Arbiter’s dispositive
portion
The National Labor Relations Commission ruled that because of petitioners’ failure to vacate Solid Mills’
property, Solid Mills was justified in withholding their benefits and separation pay. Solid Mills granted the
petitioners the privilege to occupy its property on account of petitioners’ employment. It had the prerogative
to terminate such privilege. The termination of Solid Mills and petitioners’ employer-employee relationship
made it incumbent upon petitioners to turn over the property to Solid Mills.
Petitioners, thus, filed a petition for certiorari before the Court of Appeals to assail the National Labor
Relations Commission decision of August 31, 2010 and resolution of November 30, 2010.
Atty. Mercader
The petition was dismissed
Issue:WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE

ERROR WHEN IT RULED THAT PAYMENT OF THE MONETARY CLAIMS OF PETITIONERS SHOULD
BE HELD IN ABEYANCE PENDING COMPLIANCE OF THEIR ACCOUNTABILITIES TO RESPONDENT
SOLID MILLS BY TURNING OVER THE SUBJECT LOTS THEY RESPECTIVELY OCCUPY AT SMI
VILLAGE, SUCAT, MUNTINLUPA CITY
Held: No
The petition is DENIED. The Court of Appeals’ decision is AFFIRMED
Requiring clearance before the release of last payments to the employee is a standard procedure among
employers, whether public or private. Clearance procedures are instituted to ensure that the properties,
real or personal, belonging to the employer but are in the possession of the separated employee, are
returned to the employer before the employee’s departure.
As a general rule, employers are prohibited from withholding wages from employees, the Labor Code also
prohibits the elimination or diminution of benefits.
However, our law supports the employers’ institution of clearance procedures before the release of
wages. As an exception to the general rule that wages may not be withheld and benefits may not be
diminished.The Civil Code provides that the employer is authorized to withhold wages for debts due.
More importantly, respondent Solid Mills and NAFLU, the union representing petitioners, agreed that the
release of petitioners’ benefits shall be “less accountabilities.
Accountabilities of employees are personal. They need not be uniform among all employees in order to be
included in accountabilities incurred by virtue of an employer-employee relationship.
Petitioners do not categorically deny respondent Solid Mills’ ownership of the property, and they do not
claim superior right to it. What can be gathered from the findings of the Labor Arbiter, National Labor
Relations Commission, and the Court of Appeals is that respondent Solid Mills allowed the use of its
property for the benefit of petitioners as its employees. Petitioners were merely allowed to possess and
use it out of respondent Solid Mills’ liberality. The employer may, therefore, demand the property at will.
The return of the property’s possession became an obligation or liability on the part of the employees when
the employer-employee relationship ceased. Thus, respondent Solid Mills has the right to withhold
petitioners’ wages and benefits because of this existing debt or liability.
The law does not sanction a situation where employees who do not even assert any claim over the
employer’s property are allowed to take all the benefits out of their employment while they simultaneously
withhold possession of their employer’s property for no rightful reason. Withholding of payment by the
employer does not mean that the employer may renege on its obligation to pay employees their wages,
termination payments, and due benefits. The employees’ benefits are also not being reduced. It is only
subjected to the condition that the employees return properties properly belonging to the employer. This is
only consistent with the equitable principle that “no one shall be unjustly enriched or benefited at the
expense of another.” For these reasons, we cannot hold that petitioners are entitled to interest of their
withheld separation benefits. These benefits were properly withheld by respondent Solid Mills because of
their refusal to return its property
Clearly, in this case, it is for the workers to return their housing in exchange for the release of their
benefits. This is what they agreed upon. It is what is fair in the premises.
Atty. Mercader
Atty. Mercader
NORKIS FREE AND INDEPENDENT WORKERS UNION, vs. NORKIS TRADING COMPANY, INC.
PANGANIBAN, J.:
G.R. No. 157098 June 30, 2005
Wage Order No. ROVII-06, issued by the Regional Tripartite Wages and Productivity Board (RTWPB),
merely fixed a new minimum wage rate for private sector employees in Region VII; hence, respondent
cannot be compelled to grant an across-the-board increase to its employees who, at the time of the
promulgation of the Wage Order, were already being paid more than the existing minimum wage.
Facts: Prior to said issuance, herein parties entered into a Collective Bargaining Agreement (CBA)
effective from August 1, 1994 to July 31, 1999.
On January 27, 1998, a re-negotiation of the CBA was terminated and pursuant to which a Memorandum
of Agreement was forged between the parties. It was therein stated that petitioner shall grant a salary
increase to all regular and permanent employees as follows:
‘Ten (10) pesos per day increase effective August 1, 1997; Ten (10) pesos per day increase
effective August 1, 1998.’
"Pursuant to said Memorandum of Agreement, the employees received wage increases of ₱10.00 per
day effective August 1, 1997 and ₱10.00 per day effective August 1, 1998. As a result, the agreed ₱10.00
re-negotiated salary increase effectively raised the daily wage of the employees to ₱165.00 retroactive
August 1, 1997; and another increase of ₱10.00, effective August 1, 1998, raising the employees[’] daily
wage to ₱175.00.
"On March 10, 1998, the Regional Tripartite Wage Productivity Board (RTWPB) of Region VII issued
Wage Order ROVII-06 which established the minimum wage of ₱165.00, by mandating a wage increase
of five (₱5.00) pesos per day beginning April 1, 1998, thereby raising the daily minimum wage to ₱160.00
and another increase of five (₱5.00) pesos per day beginning October 1, 1998, thereby raising the daily
minimum wage to ₱165.00 per day.
"In accordance with the Wage Order and Section 2, Article XII of the CBA, [petitioner] demanded an
across-the-board increase. [Respondent], however, refused to implement the Wage Order, insisting that
since it has been paying its workers the new minimum wage of ₱165.00 even before the issuance of the
Wage Order, it cannot be made to comply with said Wage Order.
"Thus, [respondent] argued that long before the passage of Wage Order ROVII-06 on March 10, 1998,
and by virtue of the Memorandum of Agreement it entered with herein [petitioner], [respondent] was
already paying its employees a daily wage of ₱165.00 per day retroactive on August 1, 1997, while the
minimum wage at that time was still ₱155.00 per day. On August 1, 1998, [respondent] again granted an
increase from ₱165.00 per day to ₱175.00, so that at the time of the effectivity of Wage Order No. 06 on
October 1, 1998 prescribing the new minimum wage of ₱165.00 per day, [respondent’s] employees were
already receiving ₱175.00 per day.
Submitted for arbitral resolution , public respondent arbitrator found herein [respondent] not to have
complied with the wage order,
Respondent elevated the case to the CA via a Petition for Certiorari and Prohibition under Rule 65 of the
Rules of Court.
The CA noted that the grant of an across-the-board increase, provided under Section 2 of Article XII of
the CBA, was qualified by the phrase "according to the provisions of the law." It thus stressed the
necessity of determining the import of Wage Order No. ROVII-06, the law involved in the present
controversy. Taking into consideration the opinion of the RTWPB, Region VII, the appellate court held
that respondent had sufficiently complied with Wage Order No. ROVII-06. The Board had opined that
"since adjustments granted are only to raise the minimum wage or the floor wage as a matter of policy, x
x x wages granted over the above amount set by this Board is deemed a compliance." Finally, the CA
sustained respondent’explanation that the across-the-board increases provided in the CBA was required
only when a minimum wage law caused a distortion in the wage structure.
Issue: Whether respondent violated the CBA in its refusal to grant its employees an across-the-board
increase as a result of the passage of Wage Order No. ROVII-06.
Held: No, Petitioner insists that respondent should have granted to the employees the increase stated in
Wage Order No. ROVII-06. In addition to the increases both parties had mutually agreed upon, the CBA
supposedly imposed upon respondent the obligation to implement the increases mandated by law without
any condition or qualification. To support its claim, petitioner repeatedly invokes Section 2 of Article XII of
the CBA, which reads:
Atty. Mercader
"SECTION 2. Minimum Wage Law Amendment. In the event that a law is enacted increasing minimum
wage, an across-the-board increase shall be granted by the Company according to the provisions of the
law."
Interestingly, petitioner disregards altogether in its argument the qualifying phrase "according to the
provisions of the law" and merely focuses its attention on the "across-the-board increase" clause. Given
the entire sentence, it is clear that the above-quoted CBA provision does not support the unyielding view
of petitioner that the issuance of Wage Order No. ROVII-06 entitles its members to an across-the-board
increase, absolutely and without any condition.
The CA correctly observed that the import of Wage Order No. ROVII-06 should be considered in the
implementation of the government-decreed increase.
We hold that the issue here is not about creditability, but the applicability of Wage Order No. ROVII-06 to
respondent’s employees. The Wage Order was intended to fix a new minimum wage only, not to grant
across-the-board wage increases to all employees in Region VII. The intent of the Order is indicated in its
title, "Establishing New Minimum Wage Rates," as well as in its preamble: the purpose, reason or
justification for its enactment was "to adjust the minimum wage of workers to cushion the impact brought
about by the latest economic crisis not only in the Philippines but also in the Asian region."
Parenthetically, there are two methods of adjusting the minimum wage. These were identified as the
"floor wage" and the "salary-ceiling" methods. The "floor wage" method involves the fixing of a
determinate amount to be added to the prevailing statutory minimum wage rates. On the other hand, in
the "salary-ceiling" method, the wage adjustment was to be applied to employees receiving a certain
denominated salary ceiling. In other words, workers already being paid more than the existing minimum
wage (up to a certain amount stated in the Wage Order) are also to be given a wage increase.
A cursory reading of the subject Wage Order convinces us that the intention of the Regional Board of
Region VII was to prescribe a minimum or "floor wage"; not to determine a "salary ceiling." Had the latter
been its intention, the Board would have expressly provided accordingly.
These provisions show that the prescribed minimum wage after full implementation of the ₱10 increase in
the Wage Order is ₱165 for Class A private non-agriculture sectors. It would be reasonable and logical,
therefore, to infer that those employers already paying their employees more than ₱165 at the time of the
issuance of the Order are sufficiently complying with the Order.
Further supporting this construction of Wage Order No. ROVII-06 is the opinion of its drafter, the RTWPB
Region VII. In its letter-opinion answering respondent’s queries, the Board gave a similar interpretation of
the essence of the Wage Order: to fix a new floor wage or to upgrade the wages of the employees
receiving lower than the minimum wage set by the Order.
At the risk of being repetitive, we stress that the employees are not entitled to the claimed salary
increase, simply because they are not within the coverage of the Wage Order, as they were already
receiving salaries greater than the minimum wage fixed by the Order. Concededly, there is an increase
necessarily resulting from raising the minimum wage level, but not across-the-board. Indeed, a "double
burden" cannot be imposed upon an employer except by clear provision of law.
Atty. Mercader
Prubankers Association v. Prudential Bank

G.R. No. 131247. January 25, 1999.
Panganiban, J.:
Wage distortion presupposes an increase in the compensation of the lower ranks in an office hierarchy
without a corresponding raise for higher-tiered employees in the same region of the country, resulting in
the elimination or the severe diminution of the distinction between the two groups. Such distortion does not
arise when a wage order gives employees in one branch of a bank higher compensation than that given to
their counterparts in other regions occupying the same pay scale, who are not covered by said wage
order. In short, the implementation of wage orders in one region but not in others does not in itself
necessarily result in wage distortion.
FACTS:
November 18, 1993 the Regional Tripartite Wages and Productivity Board of Region V issued Wage Order
No. RB 05-03 which provided for a Cost of Living Allowance (COLA) to workers in the private sector who
had rendered service for at least three (3) months before its effectivity, and for the same period thereafter:
 SEVENTEEN PESOS AND FIFTY CENTAVOS (P17.50) in the cities of Naga and Legaspi;
 FIFTEEN PESOS AND FIFTY CENTAVOS (P15.50) in the municipalities of Tabaco, Daraga, Pili
and the city of Iriga; and
 TEN PESOS (P10.00) for all other areas in the Bicol Region.
November 23, 1993 the Regional Tripartite Wages and Productivity Board of Region VII issued Wage
Order No. RB VII-03, which directed the integration of the COLA mandated pursuant to Wage Order No.
RO VII-02-A into the basic pay of all workers.
It also established an increase in the minimum wage rates for all workers and employees in the private
sector as follows:
 Ten Pesos (P10.00) in the cities of Cebu, Mandaue and Lapu-Lapu;
 Five Pesos (P5.00) in the municipalities of Compostela, Liloan, Consolacion, Cordova, Talisay,
Minglanilla, Naga and the cities of Davao, Toledo, Dumaguete, Bais, Canlaon, and Tagbilaran.
Pudential Bank then granted a COLA of P17.50 to its employees at its Naga Branch, the only branch
covered by Wage Order No. RB 5-03, and integrated the P150.00 per month COLA into the basic pay of
its rank-and-file employees at its Cebu, Mabolo and P. del Rosario branches, the branches covered by
Wage Order No. RB VII-03
Prubankers Association wrote the petitioner requesting that the Labor Management Committee be
immediately convened to discuss and resolve the alleged wage distortion created in the salary structure
upon the implementation of the said wage orders.
That Pudential Bank extend the application of the wage orders to its employees outside Regions V
and VII, claiming that the regional implementation of the said orders created a wage distortion in
the wage rates of petitioners employees nationwide.
ISSUE: WON the bank’s separate and regional implementation of Wage Order No. 5-03 at its Naga
Branch and Wage Order No. VII-03 at its Cebu, Mabolo and P. del Rosario branches, created a wage
distortion in the bank nationwide.
CA: NO
In ruling that there was no wage distortion, the Court of Appeals held that the variance in the salary
rates of employees in different regions of the country was justified by RA 6727. It noted that the underlying
considerations in issuing the wage orders are diverse, based on the distinctive situations and needs existing
in each region. Hence, there is no basis to apply the salary increases imposed by Wage Order No. VII-03
to employees outside of Region VII. Furthermore, the Court of Appeals ruled that the distinctions between
each employee group in the region are maintained, as all employees were granted an increase in minimum
wage rate.
Atty. Mercader
SC: NO.
The statutory definition of wage distortion is found in Article 124 of the Labor Code, as amended by Republic
Act No. 6727, which reads:
Article 124. Standards/Criteria for Minimum Wage Fixing – xxx As used herein, a wage distortion shall
mean a situation where an increase in prescribed wage results in the elimination or severe contraction of
intentional quantitative differences in wage or salary rates between and among employee groups in an
establishment as to effectively obliterate the distinctions embodied in such wage structure based on skills,
length of service, or other logical bases of differentiation.
Wage distortion presupposes a classification of positions and ranking of these positions at various
levels. One visualizes a hierarchy of positions with corresponding ranks basically in terms of wages and
other emoluments. Where a significant change occurs at the lowest level of positions in terms of basic wage
without a corresponding change in the other level in the hierarchy of positions, negating as a result thereof
the distinction between one level of position from the next higher level, and resulting in a parity between
the lowest level and the next higher level or rank, between new entrants and old hires, there exists a wage
distortion. xxx. The concept of wage distortion assumes an existing grouping or classification of employees
which establishes distinctions among such employees on some relevant or legitimate basis. This
classification is reflected in a differing wage rate for each of the existing classes of employees.
Wage distortion involves four elements:
1. An existing hierarchy of positions with corresponding salary rates
2. A significant change in the salary rate of a lower pay class without a concomitant increase in the
salary rate of a higher one
3. The elimination of the distinction between the two levels
4. The existence of the distortion in the same region of the country.
In the present case, it is clear that no wage distortion resulted when respondent implemented the subject
Wage Orders in the covered branches. In the said branches, there was an increase in the salary rates
of all pay classes. Furthermore, the hierarchy of positions based on skills, length of service and other logical
bases of differentiation was preserved. In other words, the quantitative difference in compensation between
different pay classes remained the same in all branches in the affected region. Put differently, the distinction
between Pay Class 1 and Pay Class 2, for example, was not eliminated as a result of the implementation
of the two Wage Orders in the said region. Hence, it cannot be said that there was a wage distortion.
Petitioner argues that a wage distortion exists because the implementation of the two Wage Orders has
resulted in the discrepancy in the compensation of employees of similar pay classification
in different regions. Hence, petitioner maintains that, as a result of the two Wage Orders, the employees in
the affected regions have higher compensation than their counterparts of the same level in other
regions. Several tables are presented by petitioner to illustrate that the employees in the regions covered
by the Wage Orders are receiving more than their counterparts in the same pay scale in other regions.
The Court is not persuaded. A wage parity between employees in different rungs is not at issue here, but
a wage disparity between employees in the same rung but located in different regions of the country.
Contrary to petitioner’s postulation, a disparity in wages between employees holding similar positions but
in different regions does not constitute wage distortion as contemplated by law. As previously enunciated,
it is the hierarchy of positions and the disparity of their corresponding wages and other emoluments that
are sought to be preserved by the concept of wage distortion. Put differently, a wage distortion arises when
a wage order engenders wage parity between employees in different rungs of the organizational ladder of
the same establishment. It bears emphasis that wage distortion involves a parity in the salary rates
of different pay classes which, as a result, eliminates the distinction between the different ranks in the same
region.
Atty. Mercader
Employers Confederation of the Philippines vs. National Wages and Productivity

Commission
Sarmiento, J.
GR No. 96169 – 24 September 1991
FACTS:
Pursuant to RA 6727, the Regional Board of the National Capital Region issued Wage
Order No.NCR-01 increasing the minimum wage by P17.00 daily in the National Capital Region.
Subsequently, the Board issued Wage Order No. NCR01-A, amending Wage Order No. NCR-01.
The said order provides that all workers and employees in the private sector in the National
Capital Region already receiving wages above the statutory minimum wage rates up to one
hundred and twenty five pesos (P125.00) per day shall also receive an increase of seventeen
pesos (P17.00) per day. The Employers Confederation of the Philippines (ECOP) assails said
order. It contends that wage-fixing is a legislative function, and Republic Act No. 6727 delegated
to the regional boards no more "than the power to grant minimum wage adjustments" and "in the
absence of clear statutory authority," the boards may no more than adjust "floor wages."
ISSUE:
Whether or not such issuance is improper?
HELD:
No. The Court is not convinced that the Regional Board of the National Capital Region, in
decreeing an across-the-board hike, performed an unlawful act of legislation. It is true that wage-
fixing, like rate-fixing, constitutes an act of Congress; it is also true, however, that Congress may
delegate the power to fix rates provided that, as in all delegations cases, Congress leaves
sufficient standards. In this case, the Court finds that the standards provided for in Article 124 of
RA 6727 are sufficient. Hence such issuance is proper.
***NOTE:
ART. 124. Standards/Criteria for Minimum Wage Fixing — The regional minimum wages to be
established by the Regional Board shall be as nearly adequate as is economically feasible to maintain the
minimum standards of living necessary for the health, efficiency and general well-being of the employees
within the framework of the national economic and social development program. In the determination of
such regional minimum wages, the Regional Board shall, among other relevant factors, consider the
following:
(a) The demand for living wages;
(b) Wage adjustment vis-a-vis the consumer price index;
(c) The cost of living and changes or increases therein;
(d) The needs of workers and their families;
(e) The need to induce industries to invest in the countryside;
(f) Improvements in standards of living;
(g) The prevailing wage levels;
(h) Fair return of the capital invested and capacity to pay of employers;
(i) Effects of employment generation and family income; and
(j) The equitable distribution of income and wealth along the imperatives of economic and social
development."
Atty. Mercader
METROPOLITAN BANK & TRUST COMPANY EMPLOYEES UNION-ALU-TUCP and ANTONIO V.

BALINANG vs. NATIONAL LABOR RELATIONS COMMISSION (2nd Division) and METROPOLITAN
BANK & TRUST COMPANY
Vitug, J.:
GR No. 102636 – September 10, 1993
FACTS:
 Metropolitan Bank & rust Co. entered into a collective bargaining agreement with the MBTCEU,
granting a monthly P900 wage increase effective 01 January 1989, P600 wage increase effective
01 January 1990, and P200 wage increase effective 01 January 1991. The MBTCEU had also
bargained for the inclusion of probationary employees in the list of employees who would benefit
from the first P900 increase but the bank had adamantly refused to accede thereto. Consequently,
only regular employees as of 01 January 1989 were given the increase to the exclusion of
probationary employees.
 Barely a month later, or on 01 July 1989, Republic Act 6727, "an act to rationalize wage policy
determination by establishing the mechanism and proper standards therefor, . . . fixing new wage
rates, providing wage incentives for industrial dispersal to the countryside, and for other purposes,"
took effect. Pursuant thereto, the bank gave the P25 increase per day, or P750 a month, to its
probationary employees and to those who had been promoted to regular or permanent status
before 01 July 1989 but whose daily rate was P100 and below. The bank refused to give the same
increase to its regular employees who were receiving more than P100 per day and recipients of
the P900 CBA increase.
 Contending that the bank's implementation of Republic Act 6727 resulted in the categorization of
the employees into (a) the probationary employees as of 30 June 1989 and regular employees
receiving P100 or less a day who had been promoted to permanent or regular status before 01 July
1989, and (b) the regular employees as of 01 January 1989, whose pay was over P100 a day, and
that, between the two groups, there emerged a substantially reduced salary gap, the MBTCEU
sought from the bank the correction of the alleged distortion in pay.
 In order to avert an impending strike, the bank petitioned the Secretary of Labor to assume
jurisdiction over the case or to certify the same to the National Labor Relations Commission (NLRC)
under Article 263 (g) of the Labor Code. The parties ultimately agreed to refer the issue for
compulsory arbitration to the NLRC.
 Labor Arbiter: ruled in favor of the union as there was a wage distortion.
 NLRC: reversed the LA; a wage distortion can arise only in a situation where the salary structure
is characterized by intentional quantitative differences among employee groups determined or fixed
on the basis of skills, length of service, or other logical basis of differentiation and such differences
or distinctions are obliterated or contracted by subsequent wage increases. As applied in this case,
We noted that in the new wage salary structure, the wage gaps between Levels 6 and 7 levels 5
and 6, and level 6 and 7 (sic) were maintained. While there is a noticeable decrease in the wage
gap between Levels 2 and 3, Levels 3 and 4, and Levels 4 and 5, the reduction in the wage gaps
between said levels is not significant as to obliterate or result in severe contraction of the intentional
quantitative differences in salary rates between the employee groups. For this reason, the basic
requirement for a wage distortion to exist does not appear in this case. Moreover, there is nothing
in the law which would justify an across-the-board adjustment of P750.00 as ordered by the Labor
Arbiter.
ISSUE/S:
1. Whether or not there was a wage distortion.
HELD: WHEREFORE, finding merit in the instant petition for certiorari, the same is GRANTED DUE
COURSE, the questioned NLRC decision is hereby SET ASIDE and the decision of the labor arbiter is
REINSTATED subject to the MODIFICATION that the wage distortion in question be corrected in
accordance with the formula expressed in the dissenting opinion of Presiding Commissioner Edna Bonto-
Perez. This decision is immediately executory.
Atty. Mercader
RULING:
1. Yes. In this case, the majority of the members of the NLRC, as well as its dissenting member, agree
that there is a wage distortion arising from the bank's implementation of the P25 wage increase;
they do differ, however, on the extent of the distortion that can warrant the adoption of corrective
measures required by the law. The "intentional quantitative differences" in wage among employees
of the bank has been set by the CBA to about P900 per month as of 01 January 1989. It is intentional
as it has been arrived at through the collective bargaining process to which the parties are thereby
concluded. The Solicitor General, in recommending the grant of due course to the petition, has
correctly emphasized that the intention of the parties, whether the benefits under a collective
bargaining agreement should be equated with those granted by law or not, unless there are
compelling reasons otherwise, must prevail and be given effect. In keeping then with the intendment
of the law and the agreement of the parties themselves, along with the often repeated rule that all
doubts in the interpretation and implementation of labor laws should be resolved in favor of labor,
we must approximate an acceptable quantitative difference between and among the CBA agreed
work levels.
NOTE/S:
WAGE DISTORTION; DEFINED

The term "wage distortion", under the Rules Implementing Republic Act 6727, is defined, thus:
"(p)Wage Distortion means a situation where an increase in prescribed wage rates results in the
elimination or severe contraction of intentional quantitative differences in wage or salary rates
between and among employee groups in an establishment as to effectively obliterate the
distinctions embodied in such wage structure based on skills, length of service, or other logical
bases of differentiation."
FORMULA
As opined by Presiding Commissioner Edna Bonto-Perez the formula offered and incorporated in Wage
Order No. IV-02 issued on 21 May 1991 by the Regional Tripartite Wages and Productivity Commission
for correction of pay scale structures in cases of wage distortion as in the case at bar which is:
Minimum Wage = % xPrescribed =Distortion Actual SalaryIncreaseAdjustment.
would be the most equitable and fair under the circumstances obtaining in this case.
Atty. Mercader
Metro Transport v. NLRC

Feliciano J.
FACTS:
Petitioner Metro is the operator and manager of the Light Railway Transit System (LRT) in Metro Manila. It
employs close to 1,000 rank-and-file and over 200 supervisory employees. Private respondent SEAM is a
union composed of supervisory employees of petitioner Metro.
On 1 December 1989, the first collective bargaining agreement between petitioner Metro and private
respondent SEAM took effect. Prior to December 1989, Metro had a CBA only with its rank-and-file
employees. During the period when no CBA governed the terms and conditions of employment between
Metro and its supervisory employees, whenever rank-and-file employees were paid a statutorily mandated
salary increase, supervisory employees were, as a matter of practice, also paid the same amount plus
P50.00.
On 17 April 1989, Metro paid its rank-and-file employees a salary increase of P500.00 per month in
accordance with the terms of their CBA. Metro, however, did not extend a corresponding salary increase
to its supervisory employees.
On 1 December 1989, Metro, in compliance with its CBA with SEAM, paid its supervisory employees a
salary increase of P800.00 per month.
On 17 April 1990, Metro paid its rank-and-file and supervisory employees a P600.00 monthly increase. The
payment thus made to rank-and-file employees was in compliance with the second year salary increase
provided in their CBA.
On the other hand, the P600.00 per month paid to supervisory employees was advanced from their second
year salary increase, provided in their CBA, of P1,000.00 per month effective 1 December 1990. On 1
December 1990, Metro paid its supervisory employees the remaining balance of P400.00 per month in
addition to the P600.00 a month it had earlier started to pay.
The third year salary increases due rank-and-file and supervisory employees were paid on 17 April and 1
December 1991, respectively, as scheduled in their corresponding CBAs.
On 24 March 1992, private respondent SEAM filed a Notice of Strike before the National Conciliation and
Mediation Board ("NCMB") charging petitioner Metro with
a. discrimination in terms of wages;
b. underpayment of salary increase per CBA for 1990 and/or adjustment of salaries for correction of
disparity/inequity in pay with rank-and-file employees and
c. harassment and demotion of union officers.
ISSUE/S:
a. whether or not a wage distortion existed in respect of the salaries of the rank-and-file and
supervisory employees of petitioner Metro; and
b. assuming a wage distortion existed, whether or not it has been corrected by petitioner Metro in
accordance with law.
HELD:
a. YES.
Atty. Mercader
In respect of the issue of existence of a wage distortion, the Court finds and so holds that a wage distortion
did occur when the salaries of rank-and-file employees were increased by P500.00 per month on 17 April
1989 as stipulated in their CBA and no corresponding increase was paid to the supervisory employees.
This fact was admitted by Atty. Virgilio C. Abejo, counsel for petitioner Metro, during the oral hearing and
Metro is bound by that admission.
In addition, Atty. Abejo explained that his client, as a matter of practice, granted its supervisory employees
a salary increase (and a premium) whenever it paid its rank-and-file employees a salary increase.
The defense of management prerogative or discretion invoked by petitioner Metro in asserting that it is not
obligated to grant supervisory employees a salary increase whenever rank-and-file employee are granted
an increase is, in this case, unavailing.
Basically, Metro's argument is that such increase was merely a bonus given to supervisory employees. A
"bonus" is an amount granted and paid to an employee for his industry and loyalty which contributed to the
success of the employer's business and made possible the realization of profits. It is something given in
addition to what is ordinarily received by or strictly due to the recipient.
In the case at bar, the increase of P550.00 sought by private respondent SEAM was neither an inducement
nor was it contingent on (a) the success of the business of petitioner Metro; or (b) the increased production
or work output of the company or (c) the realization of profits.
The demand for this increase was based on a company practice, admitted by Metro, of granting a salary
increase (and a premium) to supervisory employees whenever rank-and-file employees were granted a
salary increase. That those increases were precisely designed to correct or minimize the wage distortion
effects of increases given to rank-and-file employees (under their CBA or under Wage Orders), highlights
the fact that those increases were part of the wage structure of supervisory employees.
The demanded increase therefore is not a bonus that is generally not demandable as a matter of right. The
demanded increase, in this instance, is an enforceable obligation so far as the supervisory employees of
Metro are concerned.
b. YES
We consider the difference of P1,500.00 per month a significant differential that clearly distinguishes, on
the basis of pay scales, a rank-and-file employee from a supervisory employee.
Applying the above increases to the actual salaries being received by rank-and-file and supervisory
employees of Metro, we find that indeed the distortion caused by the CBA-stipulated wage increase granted
rank-and-file employees on 17 April 1989 was rectified by 1 December 1991.
The record before us does not include the actual amounts of the rank-and-file and supervisory employees'
salaries. In its position paper before the NCMB, however, private respondent SEAM stated:
The highest salary of some rank-and-file employees at present (before adding the CBA increase)
is P4,790.00 which is higher that some supervisors with [a] salary of P3,980.00.
Taking the above SEAM figures and adding to them the respective CBA-stipulated increases to the salary
of the highest paid rank-and-file employee and to the lowest paid supervisory employee, plus the P550.00
in wage already held due to all supervisory employees as of 17 April 1989, we find that the salary of the
lowest paid supervisory employee was, by 1 December 1991, P690.00 more than the salary of the highest
paid rank-and-file employee. In the instant case, the CBA-stipulated increase of P800.00 a month was
intended as the countervailing increase for supervisory employees, the rank-and-file employees having
already received their own increase approximately eight (8) months earlier. In other words, the wage
distortion in the present case arose not because of a government-decreed increase in minimum wages or
because Metro simply refused to treat its supervisory employees, differently from its rank-and-file workers,
but rather because of a failure to synchronize the CBA-stipulated increases for rank-and-file and for
supervisory employees.
Atty. Mercader
Bankard Employees Union - Workers Alliance Trade Unions vs. National Labor Relations
Commission and Bankard Inc.
GR No. 140689 – 17 February 2004
Carpio-Morales, J.
FACTS:
 Bankard classifies is employees by levels. Its Board of Directors approved a “New Salary Scale”
made retroactive to April 1, 1993, for the purpose of making its hiring rate competitive in the industry’s
labor market. The New Salary Scale increased the hiring rates of new employees, to wit” Levels I and
V by P1,000 and Levels II, III and IV by P900. The salaries of employees who fell below the new
minimum rates were also adjusted to reach such rates under their levels.
 Petitioner Bankard Union petitioned for increase in the salary of its old, regular employees.
 Bankard took the position that there was no obligation on the part of the management to grant to all
its employees the same increase in an across-the-board manner.
 Bankard Union filed a Notice of Strike on the ground of discrimination and other acts of unfair labor
practice, as their request for the increase in the wages and salaries of the regular employees
remained unheeded.
 A director of the National Conciliation and Mediation Board treated the Notice of Strike as a
Preventive Mediation Case based on a finding that the issues therein were not strikeable. Thus,
Bankard Union filed another Notice of Strike on the grounds of refusal to bargain, discrimination and
other acts on unfair labor practice – union busting. The strike was averted when the dispute was
certified by the Secretary of Labor and employment for compulsory arbitration.
 NLRC: Finding that there is no wage distortion, it dismissed the case for lack of merit.
 Petitioner’s motion for reconsideration of the dismissal of the case was denied.
 Bankard Union filed a petition for certiorari before the Supreme Court, which was referred to the Court
of Appeals, and was denied for lack of merit.
 Petitioner maintains that for purposes of wage distortion, the classification is not one based on
“levels” or “ranks” but on two groups of employees, the newly hired and the old, in each and every
level, and not between and among the different levels or ranks in the salary structure.
ISSUE/S:
 Whether or not the unilateral adoption by an employer of an upgraded salary scale that
increased the hiring rates of new employees without increasing the salary rates of old
employees resulted in wage distortion within the contemplation of Art. 124 of the Labor
Code
 There is no hierarchy of positions between the newly hired and regular employees of Bankard.
Hence, the first element of wage distortion is wanting.
 For purposes of determining the existence of wage distortion, employees cannot create their own
independent classification and use it as a basis to demand an across-the-board increase in salary.
 Formulation of a wage structure through the classification of employees is a matter of management
judgement and discretion. Petitioner cannot obligate Bankard to correct the alleged wage distortion as
the increase in the wages and salaries of the newly-hired was not due to a prescribed law or wage
order.
 Art. 124 of LC should be construed and correlated in relation to minimum wage fixing, the intention of
the law being that in the event of an increase in minimum wage, the distinctions embodied in the
wage structure based on skills, length of service, or other logical bases of differentiation will be
preserved.
 Wage distortion is a factual and economic condition that may be brought about by different causes.
The mere factual existence of wage distortion does not, however, ipso facto result to an obligation to
rectify it, absent a law or other source of obligation which requires its rectification.
 Bankard’s right to increase its hiring rate, establish minimum salaries for specific jobs, and to adjust
the rates of employees affected thereby is embodied under the parties’ Collective Bargaining
Agreement. Absent any indication that the voluntary increase of salary rates by an employer was
done arbitrarily and illegally for the purpose other than to discriminate against the regular employees,
the Court will not interfere with the management prerogative.
Atty. Mercader
Philippine Geothermal, Inc. Employees Union (PGIEU), vs. Chevron Geothermal Phils. Holdings,
Inc.,
Reyes, Jr., J.
GR No. 207252 – January 24, 2018
This is a Petition for Review on Certiorari pursuant to Rule 45 of the Rules of Court, as amended,
seeking to reverse and set aside the Decision dated November 5, 2012 of the Court of Appeals (CA) in CA-
G.R. SP. No. 115796, dismissing the Petition for Review entitled "Philippine Geothermal, Inc. Employees
Union (PGIEU) vs. Chevron Geothermal Phils. Holdings, Inc." as well as the Resolution dated May 17,
2013 denying Philippine Geothermal, Inc. Employees Union's (petitioner) Motion for Reconsideration dated
November 27, 2012.
Article 124. Standards/Criteria for Minimum Wage Fixing. xxx xxx xxx
Where the application of any prescribed wage increase by virtue of a law or Wage Order issued by any
Regional Board results in distortions of the wage structure within an establishment, the employer and union
shall negotiate to correct the distortions. Any dispute arising from the wage distortions shall be resolved
through the grievance procedure under their collective bargaining agreement and, if it remains unresolved,
through voluntary arbitration.
FACTS: Petitioner is a legitimate labor organization and the certified bargaining agent of the rank-and-file
employees of respondent. On July 31, 2008, the petitioner and respondent formally executed a Collective
Bargaining Agreement (CBA) which was made effective for the period from November 1, 2007 until October
31, 2012. Under Article VII, Section 1 thereof, there is a stipulation governing salary increases of the
respondent's rank-and-file employees, as follows:
Petitioner claims that Lanao and Cordovales having been regularized only on January 1, 2010 and April
16, 2010, respectively, are not covered by the P260,000.00 lump sum and the initial P1500.00 wage
increase effective on Nov. 1, 2008. It appears, however, that based on the actual pay slips of union
members, Lanao and Cordovales both received wage increase in the amount of P1500.00 effective Nov.
1, 2008 and that such increase was immediately granted to them at the time of their hiring which resulted
to the increase of their salaries to P36,500.00 per month.
It is further stressed by petitioner that the increase granted by respondent to Lanao and Cordovales are
violative of the terms of the CBA, specifically Section 1, Article VII and Annex D, for the reason that these
employees have not yet attained "Regular" status at the time they were granted a wage increase and thus
resulting to a salary/wage distortion. Respondent, for its part, claims that the alleged "increase" in the wages
of these employees was not due to application of the provisions of Article VII and Annex D of the CBA,
rather it was brought about by the increase in the hiring rates at the time these employees were hired. As
a matter of fact, a careful scrutiny of the records reveals that respondent have complied with the
terms agreed upon in the CBA. Clearly then, the increase in the salaries of Lanao and Cordovales was
not pursuant to the wage increase agreed upon in CBA 2007-2012 rather it was the result of the increase
Atty. Mercader
in hiring rates at the time they were hired. At the time of Mr. Gawat's hiring, the hiring rate for Pay Grade
12 was P31,800.00. On the other hand, when Mr. Lanao was hired on July 9, 2009, the hiring rate at the
time for employees falling under Pay Grade 12 was already P35,000.00, having been adjusted by the
company in accordance with market and industry practice.
ISSUE/S:
1. W/N the increase in the salaries of Lanao and Cordovales led to wage distortion among other
regular employees of the company?
1. NO. Upon the enactment of Republic Act (R.A.) No. 6727 (Wage Rationalization Act, mending
among others, Article 124 of the Labor Code) on June 9, 1989, the term "Wage Distortion"
was explicitly defined as "a situation where an increase in prescribed wage rates results in the
elimination or severe contraction of intentional quantitative differences in wage or salary rate
between and among employee groups an establishment as to effectively obliterate the distinctions
embodied in such wage structure based on skills, length of service or other logical bases of
differentiation."
Prubankers Association v. Prudential Bank and Trust Company laid down the four elements of wage
distortion, to wit: (1) an existing hierarchy of positions with corresponding salary rates; (2) a significant
change in the salary rate of a lower pay class without a concomitant increase in the salary rate of a higher
one; (3) the elimination of the distinction between the two levels; and (4) the existence of the distortion in
the same region of the country.
The apparent increase in Lanao and Cordovales' salaries as compared to the other company workers who
also have the same salary/pay grade with them should not be interpreted to mean that they were given a
premature increase for November 1, 2008, thus resulting to a wage distortion. The alleged increase in their
salaries was not a result of the erroneous application of Article VII and Annex D of the CBA, rather, it was
because when they were hired by respondent in 2009, when the hiring rates were relatively higher as
compared to those of the previous years. Verily, the setting and implementation of such various
engagement rates were purely an exercise of the respondent's business prerogative in order to attract or
lure the best possible applicants in the market and which We will not interfere with, absent any showing
that it was exercised in bad faith. Not all increases in salary which obliterate the salary differences of certain
employees should be perceived as wage distortion.
Atty. Mercader
Atty. Mercader
Filipinas Golf & Country Club Inc. v. NLRC, PTGWO, and Local Chapter No. 424
Ynares-Santiago, J.
GR No. L-62918 – 23 August 1989
FACTS:
 The question they present concerns the effect of an employer's compliance with laws prescribing
wage increases on the obligation to grant similar increases assumed by him under a collective
bargaining agreement.
 Petitioner’s Contention:
 Giving of wage increases prescribed by laws produced the effect of compliance pro
tanto with provisions for a similar increase in a collective bargaining agreement with its
employees, leaving it bound only to make up the difference in amount, if any, between
the increases legislated and that fixed by the agreement.
 Respondent’s Contention:
 Assert that said obligations the statutory and the contractual are cumulative and both
independently eligible and submit that petitioner may not set up the performance of either
in avoidance or offset of the other.
 February 20, 1980: Presidential Decree No. 1678 was issued, granting non-agricultural workers
receiving less than P1,500.00 a month a two-peso (P 2.00) per day increase in living allowance
effective February 21, 1980.
 March 25, 1981: Wage Order No. 1 was promulgated, granting an additional two-peso (P2.00)
per day increase in emergency living allowance to non-agricultural workers, effective March 22,
1981.
 Filipinas Golf and Country Club, Inc. has duly complied with both laws, giving its employees
covered thereby the prescribed increases.
 January 30, 1981: Executive Labor Arbiter rendered a decision, resolving a collective bargaining
agreement deadlock between Filipinas Golf and its employees' union, Local Chapter No. 424 of
the Philippine Transport and General Workers Organization (PTGWO) The decision granted the
employees a three-stage wage increase totaling P5.00 a day, as follows:
 P2.00, effective February 25,1980
 P2.00, effective February 25,1981
 P1.00, effective February 25,1982,
 The decision having become final and executory, at the instance of the union execution issued on
April 13, 1981 ordering the sheriff to collect from Filipinas Golf the sum of P91,560.00
representing the increases decreed, and was followed by an order of garnishment for said
amount against firms of Filipinas Golf on deposit with Prudential Bank and Trust Company.
 May 11, 1981: Filipinas Golf executed with the union the arbiter-mandated collective bargaining
agreement prescribing the three-stage wage increase and incorporating the following
condition:
 This provision shall be subject to application provision of decrees and/or legislation
promulgated/approved during the effectivity or lifetime of the CBA.
 At the same time, it moved for reconsideration of the order of garnishment, impugning the
correctness of the computation of the wage increases payable for not taking into account the
increases it had given under PD 1678 and Wage Order No. 1.
 The Labor Arbiter found no merit in the motion and denied it, opining that the increase prescribed
by the collective bargaining agreement should be given in addition to the legislated increases
because:
 (1) the former proceeded from an award made by the labor department of the
Government in the exercise of its compulsory arbitration powers, not from a unilateral act
of the employer; and
 (2) recent Supreme Court decisions had set the rule that benefits under a collective
bargaining agreement are "entirely separate and distinct from that which the law grants.
Atty. Mercader
 Filipinas Golf appealed to the National Labor Relations Commission which sustained the Labor
Arbiter
ISSUE:
WHETHER OR NOT THE INCREASE PRESCRIBED BY THE COLLECTIVE BARGAINING

AGREEMENT SHOULD BE GIVEN IN ADDITION TO LEGISLATED INCREASES
HELD: DECISION OF THE NLRC REVERSED AND SET ASIDE
NO. The manifest will and intent of the parties to treat the legislated increases as equivalent pro tanto to
those stipulated in their collective bargaining agreement must be respected and given effect.
 The cited provisions of PD 1678 and Wage Order No. 1 are clear and unambiguous.
 In prescribing that increases granted during the periods therein specified, whether
unilaterally or by collective agreement, are creditable to the increases mandated thereby,
they create an equivalence between those legal and contractual obligations to grant
increases, rendering both susceptible of performance by compliance with either, subject
only to the condition that where the increases given under agreement fall short in amount
of those fixed by law, the difference must be made up by the employer.
 The cited provisions of PD 1678 and Wage Order No. 1, refer to collective bargaining agreements
without qualification.
 They make no distinction between unarbitrated agreements and those brought about
through and only after compulsory arbitration.
 The correct interpretation of the cited provisions: that an increase given under the agreement, if at
least equal to those fixed by said laws, be deemed a compliance with the latter or, if less, creates
only the obligation to pay the difference which is but to say that the employer is not to be made to
pay twice the concurrent amount of increases independently imposed by law and by agreement.
 There is nothing contrary to law, customs, public order or public policy in a stipulation
subordinating, as does the aforesaid provision in the collective bargaining agreement, contractual
wage increases to those imposed or prescribed by law.
 Filipinas Golf and the respondents were therefore perfectly free to agree thereon, and
having thus agreed, are bound by such stipulation as constituting the law between them.
 That PD 1678 and Wage Order No. 1 both antedated the collective bargaining agreement does
not argue against the creditability of the increase granted by the agreement, since said increase
least, in its first two stages or installments-was made retroactive to dates falling within the
"creditability periods" provided in the Decree and the Wage Order
 The fact that cannot be escaped is that in making the wage increase retroactive, the
parties to all intents and purposes dated the existence of their collective bargaining
agreement back to the effective date of the increase.
 It is not to be assumed that they did not have this retroactive effect in mind when they
expressly subjected the wage increase provision to legislation passed or adopted in the
agreement.
 Nor may it be presumed that the agreement was meant to be retroactive only in respect
of the wage increase provision, but prospective in all its other clauses.
 On the contrary, the private respondents themselves maintain that the entire agreement
was intended to be retroactive in effect, asserting that: ...(i)t was made retroactive to
February 25, 1980 for the simple reason that the previous CBA between the parties
expired on February 24, 1980
 Jurisprudence does not support the Labor Arbiter's decision that benefits granted by law may be
claimed separately from and in addition to those granted by collective bargaining agreements
under any and all circumstances.
 On the contrary, to be the common thrust of applicable rulings is that the intention of the
parties whether or not to equate benefits under a collective bargaining agreement with
those granted by law must prevail and be given effect.
Atty. Mercader
NOTES:
 Presidential Decree No. 1678 and its implementing rules made creditable to the increase thereby
granted increases in wages or allowances given by employers on or after February 8, 1980,
providing:
 Section 5. Employers who have given increases in wages and/ or allowances of at least
P 2.00 a day for non-agricultural workers on or after February 8, 1980, whether granted
unilaterally or by collective agreement, shall be deemed to have complied with this
Decree. Those who have given less than P 2.00 ... a day shall pay the difference.
 Wage Order No. 1 contained a similar provision, viz.:
 Section 6. All increase in wages granted unilaterally or by collective bargaining
agreements shall be credited in compliance with this Wage Order provided such increase
were granted between 1 January and 22 March 1981. Where the increase is less than
the amount provided in this Wage Order, the employer shall pay the difference.
Philippine Apparel Workers Union vs. NLRC, the employees of the respondent employer were held
entitled to the full amounts of both a wage increase under a collective bargaining agreement and an
increase in living allowance prescribed by law during the period when both increases were concurrently
effective, for want of an agreement between the parties to treat the increase in living allowance as
applicable to the wage increase.
Marcopper Mining Corp. vs. Ople, it had been ruled that the 13th month pay under Presidential Decree
851 was required on top of other bonuses agreed upon between employer and employee. That ruling,
however, was reversed in National Federation of Sugar Workers vs. Central Azucarera de la
Carlota which held that employees are no longer entitled to an additional Christmas bonus or other
Christmas benefits if they are already entitled to 13th month pay.
United CMC Textile Workers Union vs. Labor Arbiter, where execution of the decision based on the
Marcopper ruling was overtaken by the decision in La Carlota, and Universal Comment Products vs.
NLRC, hewed to essentially the same principle: that the intention of the parties to a collective bargaining
determines how to deal with benefits of similar character concurrently granted by both the agreement and
the law.
Atty. Mercader
PHILIPPINE TELEGRAPH AND TELEPHONE CORPORATION

vs.
NATIONAL LABOR RELATIONS COMMISSION and PT&T EMPLOYEE'S UNION-ALU
VITUG, J.:
G.R. No. 99858 June 19, 1995
FACTS: Private respondent PT&T Union-ALU initiated this case via a complaint, filed on 25 November
1986, charging petitioner Philippine Telegraph and Telephone Corporation ("PT&T") with unfair labor
practice acts and underpayment of statutory and contractual benefits claimed to be due pursuant to Wage
Orders No. 3, 4, 5 and 6, and also under Sections 2 and 3, Article IX, of the 1984 Collective Bargaining
Agreement ("CBA") and Section 2, Article XII, of the 1986 CBA. Petitioner denied the charges.
On 27 April 1989, the Labor Arbiter, following the respective submissions made by the parties, rendered
judgment thusly:
WHEREFORE, premises considered, respondent Philippine Telegraph and Telephone Corporation (PT&T) with
main office and postal address at SSC Bldg., 106 Alvarez St., Legaspi Village, Makati, Metro Manila, is
hereby ORDERED, to pay the individual complainants-members of PT&T Employees Union-ALU their
corresponding salary differentials in accordance with Wage Order Nos. 3 to 6; and/or Sections 2 and 3,
Article IX of the 1984 CBA and Section 2, of Article XII of the 1986 CBA.
Petitioner interposed an appeal to the National Labor Relations Commission ("NLRC") and assailed the
arbiter's decision on the following grounds: That —
1. The Honorable Labor Arbiter committed serious errors in finding that the failure of respondent-appellant to
present payrolls for the period of at least two (2) months prior to and after November 1, 1983 leads to the
conclusion that there was indeed a violation of the Wage Orders, which would cause grave or irreparable
damage or injury to the appellants.
2. The Honorable Labor Arbiter committed serious errors in the interpretation of the Wage Orders that
respondent-appellant committed a violation thereto.
In a resolution, dated 31 October 1989, the NLRC dismissed the appeal for lack of merit. Petitioner
moved for reconsideration stressing that only the higher remuneration from either the statutorily
mandated increase or the CBA should be given and paid to the employees. This motion, as well as the
supplement thereto, was denied by public respondent.
ISSUE/S:
1. Whether the NLRC has committed grave abuse of discretion, amounting to lack of jurisdiction, in
finding petitioner to have failed in its compliance with the increases mandated by Wage Orders
No. 3, 4, 5 and 6, as well as the 1984 and 1986 CBAs.
2. Whether the petitioner be obligated to pay both the CBA and statutory, wage increases
HELD: We grant, in part, the petition.

1. No, we need not belabor the first of the two grounds raised by petitioner corporation. We see no
merit at all in the contention that the NLRC has committed grave abuse of discretion, amounting
to lack of jurisdiction, in finding petitioner to have failed in its compliance with the increases
mandated by Wage Orders No. 3, 4, 5 and 6, as well as the 1984 and 1986 CBAs. That this
factual finding is not without basis should be fairly evident from the statement of the Labor Arbiter,
adopted by the respondent Commission, thusly:
As regards the issue of underpayment, respondent PT&T miserably failed to substantiate their
stand of compliance with Wage Order Nos. 3 to 6 and the provisions of the 1984 and 1986 CBAs.
All that was submitted by the respondent PT&T were sample payrolls for the period January and
February 1985, purportedly to show that complainants were allegedly paid in accordance with
Wage Order No. 6, without presenting however, the payrolls for the period of at least two (2)
months prior to and after November 1, 1983, when Wage Order No. 3, took effect, in order to
determine whether there was compliance or not starting with Wage
No. 3. . . .
Atty. Mercader
2. No, Petitioner's position, however, on the second issue is well taken. The Solicitor General
likewise agrees that petitioner cannot, given the circumstances here obtaining, be obligated to pay both
the CBA and statutory, wage increases. The common provisions of Wage Orders No. 3, 5, and 6, state
that:
All increases in wages and/or allowances granted or paid by employers . . . shall be
credited as compliance with the minimum wage and allowance adjustments prescribed
herein, provided that where the increases are less than the applicable amount provided in
this Order, the employer shall pay the difference. Such increases shall not include
anniversary wage increases provided in collective bargaining agreements unless the
agreements expressly provide otherwise . . . .
Petitioner company and private respondent union, in the 1984 and 1986 CBAs, in turn, have
stipulated that:
The parties agree that in the event of additional wage increases, bonuses or allowances
which may during the life of this agreement being made mandatory as a matter of law,
such that the minimum wage including bonuses and allowances shall be greater than the
wage provided therein, then such wages shall ipso facto become the total remunerations
under such agreement in lieu of all other remunerations and increases herein provided.
The foregoing CBA provisions reveal quite sufficiently the parties' intention to consider salary
increases provided in the CBA to be creditable to wage increases that are or may be mandated
within the applicable period by law. There is nothing sinister in this stipulation. In Filipinas Golf
and Country Club, Inc., vs. National Labor Relations Commission, 176 SCRA 625, we have said
that such agreements merely create an equivalence between legal and contractual imperatives,
rendering both obligations susceptible performance by compliance with either, subject only to the
condition that where the increases given under agreement fall short in amount of those fixed by
law, the difference must be made up by the employer.
Atty. Mercader
Atty. Mercader
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ISABEL P. ORTIGUERRA, and
LABOR ALLIANCE FOR NATIONAL DEVELOPMENT, respondents.
MELENCIO-HERRERA, J.
G.R. No. 82763, March 19, 1990
This Petition for Certiorari addresses itself to the 12 February 1986 Order of the National Labor
Relations Commission directing petitioner Development Bank of the Philippines (DBP) to remit the sum of
P6,292,380.00 "out of proceeds of the foreclosed properties of Lirag Textile Mills Inc., sold at public auction
in order to satisfy the judgment" in NLRC Cases.
FACTS:
The complainants were employees of Lirag Textiles, and LIRAG was the mortgagor of DBP. Around
September 1981, Private respondent Labor Alliance for National Development (LAND, for brevity) was the
bargaining representative of the more or less 800 former rank and file employees of LIRAG. LIRAG started
terminating the services of its employees on the ground of retrenchment. By December of the said year
there were already 180 regular employees separated from the service. LIRAG has since ceased operations
presumably due to financial reverses.
In 1982, Albay, one of the dismissed employees filed a case of illegal dismissal against LIRAG. That same
year, LAND also filed a Complaint against LIRAG seeking separation pay, 13th month pay, gratuity pay,
sick leave and vacation leave pay and emergency allowance. These two cases were consolidated and
jointly heard by NLRC.
LA Ruling: ordered LIRAG to pay the individual complainants.
NLRC: Affirmed LA ruling and judgment became final and executory.
A Writ of Execution was issued. DBP extrajudicially foreclosed the mortgaged properties for failure of LIRAG
to pay its mortgage obligation. As the only bidder at the foreclosure sale, DBP acquired said mortgaged
properties for P31,346,462.90. Since DBP was the sole mortgagee, no actual payment was made, the
amount of the bid having been merely credited in partial satisfaction of LIRAG's indebtedness. By reason
of said foreclosure, the Writ of Execution issued in favor of the complainants remained unsatisfied. A Notice
of Levy on Execution on the properties of LIRAG was then entered. Labor Arbiter Sevilla granted the Writ
of Garnishment and directed DBP to remit to the NLRC the sum of P6,292,380.00 out of the proceeds of
the foreclosed properties of LIRAG sold at public auction in order to satisfy the judgment previously
rendered. DBP sought reconsideration of the above Order on the grounds of NLRC's lack of jurisdiction
over it since it was not a party to the case, and that it was deprived of its property without due process of
law. Asset Privatization Trust (APT) became the transferee of the DBP foreclosed assets of LIRAG.
It appears that on 21 December 1987, a partial Compromise Agreement was entered into between APT
and LAND (Litex Chapter) whereby APT paid the complainants-employees, ex gratia, the sum of
P750,000.00 "in full settlement of their claims, past and present, with respect to all assets of LITEX
transferred by DBP to APT." That amount was received by LAND's local President.
NLRC (First Division) affirmed the appealed Order and dismissed the DBP appeal.
ISSUE/S:
1. W/N the NLRC gravely abused its discretion in affirming the Order of the Labor Arbiter granting the
Writ of Garnishment out of the proceeds of LIRAG's properties foreclosed by DBP to satisfy the
judgment in these cases
Atty. Mercader
HELD: Certiorari is GRANTED, and the assailed Decision of public respondent, the National Labor
Relations Commission (NLRC),is hereby SET ASIDE.
The amendment of Art. 110 of the Labor Code by RA. 6715 expands worker preference to cover not only
unpaid wages but also other monetary claims to which even claims of the Government must be deemed
subordinate. (see notes for provisions)
Section 10, Rule III, Book III of the Omnibus Rules Implementing the Labor Code has also been amended
by Section 1 of the Rules and Regulations Implementing RA 6715 as approved by the then Secretary of
Labor and Employment on 24 May 1989, and now provides:
Sec. 10. Payment of wages and other monetary claims in case of bankruptcy. — In case of bankruptcy or
liquidation of the employer's business, the unpaid wages and other monetary claims of the employees shall
be given first preference and shall be paid in full before the claims of government and other creditors may
be paid.
Notably, the terms "declaration" of bankruptcy or "judicial" liquidation have been eliminated. Although, this
does not mean that liquidation proceedings have been done away with. This if for the ff reasons:
1)Article 110 of the Labor Code, in determining the reach of its terms, cannot be viewed in isolation. Rather,
Article 110 must be read in relation to the provisions of the Civil Code concerning the classification,
concurrence and preference of credits, which provisions find particular application in insolvency
proceedings where the claims of all creditors, preferred or non-preferred, may be adjudicated in a binding
manner.
2) In the event of insolvency, a principal objective should be to effect an equitable distribution of the
insolvent's property among his creditors. To accomplish this there must first be some proceeding where
notice to all of the insolvents's creditors may be given and where the claims of preferred creditors may be
bindingly adjudicated.
3) The right of first preference as regards unpaid wages recognized by Article 110 does not constitute a
lien on the property of the insolvent debtor in favor of workers. It is but a preference of credit in their favor,
a preference in application. It is a method adopted to determine and specify the order in which credits
should be paid in the final distribution of the proceeds of the insolvent's assets. It is a right to a first
preference in the discharge of the funds of the judgment debtor.
Regarding DBP: The DBP anchors its claim on a mortgage credit. A mortgage directly and immediately
subjects the property upon which it is imposed, whoever the possessor may be, to the fulfillment of the
obligation for whose security it was constituted (Article 2176, Civil Code). It creates a real right which is
enforceable against the whole world. It is a lien on an identified immovable property, which a preference is
not. A recorded mortgage credit is a special preferred credit under Article 2242 (5) of the Civil Code on
classification of credits. The preference given by Article 110, when not falling within Article 2241 (6) and
Article 2242 (3) of the Civil Code and not attached to any specific property, is an ordinary preferred credit
although its impact is to move it from second priority to first priority in the order of preference established
by Article 2244 of the Civil Code.
In fine, the right to preference given to workers under Article 110 of the Labor Code cannot exist in any
effective way prior to the time of its presentation in distribution proceedings. It will find application when, in
proceedings such as insolvency, such unpaid wages shall be paid in full before the "claims of the
Government and other creditors" may be paid. But, for an orderly settlement of a debtor's assets, all
creditors must be convened, their claims ascertained and inventoried, and thereafter the preferences
determined in the course of judicial proceedings which have for their object the subjection of the property
of the debtor to the payment of his debts or other lawful obligations.
Atty. Mercader
DEVELOPMENT BANK OF THE PHILIPPINES V. NLRC and MALAYANG SAMAHAN NG MGA

MANGGAGAWA SA ATLAS TEXTILE DEVELOPMENT CORPORATION
GR No. 86227
FACTS:
The private respondents were employees of ATLAS, a textile firm, which hypothecated its certain
assets to DBP. After ATLAS defaulted in its obligations, DBP foreclosed on the mortgage in March 1985.
The latter acquired the mortgaged assets by virtue of the foreclosure sale. Private respondents filed their
aforementioned claim against both ATLAS and DBP. The LA ruled for the private respondents, which was
sustained by the NLRC. Hence, the instant petition. The petitioner contends that it is error on the part of
the public respondent to consider the workers’ preference under Article 110 of the Labor Code over that of
DBP’s mortgage lien. The issue has been put to fore in a number of cases brought to and decided by the
Court, such as in the case of Republic vs. Peralta, where it was ruled that:
Art. 110 of the Labor Code does not purport to create a lien in favor of workers or employees
for unpaid wages either upon all of the properties or upon any particular property owned by
their employer. Claims for unpaid wages does not therefore fall at all within the category of
specially preferred claims established under Articles 2241 and 2242 of the Civil Code,
except to the extent that such claims for unpaid wages are already covered by Art. 2241,
number 6: “claims for laborers’ wages, on the goods manufactured or the work done.”
ISSUE: Whether or not petitioner is liable for monetary claims of private respondents.
HELD: NO.
In the case DBP v. NLRC, 183 SCRA 328, the court considered that because of its impact
on the entire system of credit, Art. 110 of the Labor Code cannot be viewed in isolation but must
be read in relation to the Civil Code scheme on classification and preference of credits. In the
same way that the Civil Code provisions on classifications of credits and the Insolvency Law have
been brought into harmony, so also must the kindered provisions of the Labor Law be made to
harmonize those laws. In the event of insolvency, a principal objective should be to effect an
equitable distribution of the insolvent’s property among his creditors. A distinction should be made
between a preference of credit and a lien. A preference applies only to claims which do not attach
to specific properties. A lien creates a charge on a particular property. The right of first preference
as regards upon wages recognized by Art. 110 does not constitute a lien on the property of the
insolvent debtor in favor of workers. It is but a preference of credit in their favor, a preference
application. It is a method adopted to determine and specify the order in which credits should be
paid in the final distribution of the proceeds of the insolvent’s assets. It is a right to a first
preference in the discharge of the funds of the judgment debtor.
In fine, the right preference given to workers under Art. 110 of the Labor Code cannot
exist in any effective way prior to the time of its presentation in distribution proceedings. It will
find application when, in proceedings such as insolvency, such unpaid wages shall be paid in full
before the “claims of the Government and other creditors” may be paid. But, for an orderly
settlement of a debtor’s assets, all creditors must be convened, their claims ascertained and
inventoried, and thereafter the preferences determined in the course of judicial proceedings
which have for their object the subjection of the property of the debtor of the payment of his debts
and other lawful obligations. Therefore, an orderly determination of preference of creditors’ claims
is assure, the adjudication made will be binding on all parties-in-interest, since those proceedings
are proceeding in rem, and the legal scheme of classification, concurrence and preference of
credits in the Civil Code, the Insolvency Law, and the Labor Code is preserved in harmony.
In the case before us concerns monetary claims of workers that are not involved in
judicial proceedings in rem in adjudication of claims of creditors, vis-à-vis the assets of the debtor,
nor have such claims accrued after the effectivity of RA 6715. Art. 110 of the Labor Code, as
amended, must be viewed and read in conjunction with the provisions of the Civil Code on
concurrence and preference of credits. It also requires judicial proceedings in rem in adjudication
of creditors’ claims against the debtor’s assets to become operative.
Thus, RA 6715 has the effect of expanding the “worker preference” to cover not only
unpaid wages but also other monetary claims of laborers, to which even claims of the
Government must be deemed subordinate, and the amendatory provisions of the law which took
effect on March 21, 1989 should only be given prospective application.
Atty. Mercader
Atty. Mercader
Philippine Telegraph and Telephone Co. v. NLRC

REGALADO, J.
G.R. No. 118978, May 23, 1997.
Seeking relief through the extraordinary writ of certiorari, petitioner Philippine Telegraph and Telephone
Company (hereafter, PT & T) invokes the alleged concealment of civil status and defalcation of company
funds as grounds to terminate the services of an employee. That employee, herein private respondent
Grace de Guzman, contrarily argues that what really motivated PT & T to terminate her services was her
having contracted marriage during her employment, which is prohibited by petitioner in its company policies.
She thus claims that she was discriminated against in gross violation of law, such a proscription by an
employer being outlawed by Article 136 of the Labor Code.
FACTS:
Grace de Guzman was initially hired by petitioner as a reliever, specifically as a "Supernumerary Project
Worker," for a fixed period from November 21, 1990 until April 20, 1991 vice one C.F. Tenorio who went on
maternity leave.Under the Reliever Agreement which she signed with petitioner company, her employment
was to be immediately terminated upon expiration of the agreed period. Thereafter, from June 10, 1991 to
July 1, 1991, and from July 19, 1991 to August 8, 1991, private respondent's services as reliever were
again engaged by petitioner, this time in replacement of one Erlinda F. Dizon who went on leave during
both periods. After August 8, 1991, and pursuant to their Reliever Agreement, her services were
terminated.
On September 2, 1991, private respondent was once more asked to join petitioner company as a
probationary employee, the probationary period to cover 150 days. In the job application form that was
furnished her to be filled up for the purpose, she indicated in the portion for civil status therein that she was
single although she had contracted marriage a few months earlier, that is, on May 26, 1991.
It now appears that private respondent had made the same representation in the two successive reliever
agreements which she signed on June 10, 1991 and July 8, 1991. When petitioner supposedly learned
about the same later, its branch supervisor in Baguio City, Delia M. Oficial, sent to private respondent a
memorandum dated January 15, 1992 requiring her to explain the discrepancy. In that memorandum, she
was reminded about the company's policy of not accepting married women for employment. 4
In her reply letter dated January 17, 1992, private respondent stated that she was not aware of PT&T's
policy regarding married women at the time, and that all along she had not deliberately hidden her true civil
status. Petitioner nonetheless remained unconvinced by her explanations. Private respondent was
dismissed from the company effective January 29, 1992, which she readily contested by initiating a
complaint for illegal dismissal, coupled with a claim for non-payment of cost of living allowances (COLA),
before the Regional Arbitration Branch of the National Labor Relations Commission in Baguio City.
On November 23, 1993, Labor Arbiter Irenarco R. Rimando handed down a decision declaring that private
respondent, who had already gained the status of a regular employee, was illegally dismissed by petitioner.
Her reinstatement, plus payment of the corresponding back wages and COLA, was correspondingly
ordered, the labor arbiter being of the firmly expressed view that the ground relied upon by petitioner in
dismissing private respondent was clearly insufficient, and that it was apparent that she had been
discriminated against on account of her having contracted marriage in violation of company rules.
On appeal to the National Labor Relations Commission (NLRC), said public respondent upheld the labor
arbiter and, in its decision dated April 29, 1994, it ruled that private respondent had indeed been the subject
of an unjust and unlawful discrimination by her employer, PT & T. However, the decision of the labor arbiter
was modified with the qualification that Grace de Guzman deserved to be suspended for three months in
view of the dishonest nature of her acts which should not be condoned.
The subsequent motion for reconsideration filed by petitioner was rebuffed by respondent NLRC, hence
this special civil action.
ISSUE/S: Whether or not private respondent was illegally dismissed on the basis of concealment of her
civil status.
HELD: YES.
In the Labor Code, provisions governing the rights of women workers are found in Articles 130 to 138
thereof. Article 130 involves the right against particular kinds of night work while Article 132 ensures the
right of women to be provided with facilities and standards which the Secretary of Labor may establish to
ensure their health and safety. For purposes of labor and social legislation, a woman working in a nightclub,
cocktail lounge, massage clinic, bar or other similar establishments shall be considered as an employee
Atty. Mercader
under Article 138. Article 135, on the other hand, recognizes a woman's right against discrimination with
respect to terms and conditions of employment on account simply of sex. Finally, and this brings us to
the issue at hand, Article 136 explicitly prohibits discrimination merely by reason of the marriage
of a female employee.
In the case at bar, petitioner's policy of not accepting or considering as disqualified from work any
woman worker who contracts marriage runs afoul of the test of, and the right against,
discrimination, afforded all women workers by our labor laws and by no less than the Constitution.
Contrary to petitioner's assertion that it dismissed private respondent from employment on account of her
dishonesty, the record discloses clearly that her ties with the company were dissolved principally because
of the company's policy that married women are not qualified for employment in PT & T, and not merely
because of her supposed acts of dishonesty.
That it was so can easily be seen from the memorandum sent to private respondent by Delia M. Oficial, the
branch supervisor of the company, with the reminder, in the words of the latter, that "you're fully aware that
the company is not accepting married women employee (sic), as it was verbally instructed to you." Again,
in the termination notice sent to her by the same branch supervisor, private respondent was made to
understand that her severance from the service was not only by reason of her concealment of her married
status but, over and on top of that, was her violation of the company's policy against marriage ("and even
told you that married women employees are not applicable [sic] or accepted in our
company.") Parenthetically, this seems to be the curious reason why it was made to appear in the initiatory
pleadings that petitioner was represented in this case only by its said supervisor and not by its highest
ranking officers who would otherwise be solidarily liable with the corporation.
Verily, private respondent's act of concealing the true nature of her status from PT & T could not be properly
characterized as willful or in bad faith as she was moved to act the way she did mainly because she wanted
to retain a permanent job in a stable company. In other words, she was practically forced by that very same
illegal company policy into misrepresenting her civil status for fear of being disqualified from work. While
loss of confidence is a just cause for termination of employment, it should not be simulated. It must
rest on an actual breach of duty committed by the employee and not on the employer's
caprices. Furthermore, it should never be used as a subterfuge for causes which are improper, illegal, or
unjustified.
Atty. Mercader
LAKPUE DRUG INC. v. BELGA

Ynares-Satiago, J.
G.R. No. 166379. October 20, 2005
FACTS:
 Petitioner Tropical Biological Phils., Inc. (Tropical), a subsidiary of Lakpue Group of Companies, hired
on March 1, 1995 respondent Ma. Lourdes Belga (Belga) as bookkeeper and subsequently promoted
as assistant cashier.
 On March 19, 2001, Belga brought her daughter to the Philippine General Hospital (PGH) for treatment
of broncho-pneumonia. On her way to the hospital, Belga dropped by the house of Marylinda O.
Vegafria, Technical Manager of Tropical, to hand over the documents she worked on over the weekend
and to give notice of her emergency leave. While at the PGH, Belga who was pregnant experienced
labor pains and gave birth on the same day.
 On March 22, 2001, or two days after giving birth, Tropical summoned Belga to report for work but the
latter replied that she could not comply because of her situation.
 On March 30, 2001, Tropical sent Belga another memorandum ordering her to report for work and also
informing her of the clarificatory conference scheduled on April 2, 2001. Belga requested that the
conference be moved to April 4, 2001 as her newborn was scheduled for check-up on April 2, 2001.
When Belga attended the clarificatory conference on April 4, 2001, she was informed of her dismissal
effective that day.
 Tropical also alleged that Belga concealed her pregnancy from the company. She did not apply for
leave and her absence disrupted Tropical's financial transactions. Tropical claimed that Belga
refused to receive the second memorandum and did not attend the conference. She reported for work
only on April 4, 2001 where she was given a chance to explain.
 Tropical terminated Belga on the following grounds: (1) Absence without official leave for 16 days;
(2) Dishonesty, for deliberately concealing her pregnancy; (3) Insubordination, for her deliberate
refusal to heed and comply with the memoranda sent by the Personnel Department
ISSUE/S: Whether of not the Belga was illegally dismissed due to her concealment of her pregnancy.
Yes. Tropical's ground for terminating Belga is her alleged concealment of pregnancy. It argues
that such non-disclosure is tantamount to dishonesty and impresses upon this Court the importance of
Belga's position and the gravity of the disruption her unexpected absence brought to the company. Tropical
also charges Belga with insubordination for refusing to comply with its directives to report for work and to
explain her absence. In the instant case, the alleged misconduct of Belga barely falls within the situation
contemplated by the law. Her absence for 16 days was justified considering that she had just delivered a
child, which can hardly be considered a forbidden act, a dereliction of duty; much less does it imply wrongful
intent on the part of Belga. Tropical harps on the alleged concealment by Belga of her pregnancy. This
argument, however, begs the question as to how one can conceal a full-term pregnancy. We agree with
respondent's position that it can hardly escape notice how she grows bigger each day. Belga's failure to
formally inform Tropical of her pregnancy cannot be considered as grave misconduct directly connected to
her work as to constitute just cause for her separation. The charge of disobedience for Belga's failure to
comply with the memoranda must likewise fail. Disobedience, as a just cause for termination, must be willful
or intentional. In the instant case, the memoranda were given to Belga two days after she had given birth.
It was thus physically impossible for Belga to report for work and explain her absence. In order to constitute
a just cause for dismissal, the act complained of must be "work-related" such as would show the employee
concerned to be unfit to continue working for the employer. More importantly, the loss of trust and
confidence must be based on the willful breach of the trust reposed in the employee by his employer. Belga
was an assistant cashier whose primary function was to assist the cashier in such duties as preparation of
deposit slips, provisional receipts, post-dated checks, etc. As correctly observed by the Court of Appeals,
these functions are essentially clerical. Belga simply prepares the documents as instructed by her
superiors subject to the latter's verification or approval. Hence, her position cannot be considered as one
of responsibility or imbued with trust and confidence. The penalty of dismissal was too harsh in light
of the circumstances obtaining in this case. Even assuming that there was just cause for
terminating Belga, her dismissal is nonetheless invalid for failure of Tropical to observe the twin-
notice requirement.
Atty. Mercader
Del Monte v. Velasco

AUSTRIA-MARTINE, J.
GR No. 153477 – March 6, 2007
FACTS:
1. Lolita M. Velasco (respondent) started working with Del Monte Philippines (petitioner) on October 21,
1976 as a seasonal employee and was regularized on May 1, 1977. Her latest assignment was as Field
Laborer.
2. On June 16, 1987, respondent was warned in writing due to her absences. On May 4, 1991,
respondent, thru a letter, was again warned in writing by petitioner about her absences without permission
and a forfeiture of her vacation leave entitlement for the year 1990-1991 was imposed against her.
3. On September 14, 1992, another warning letter was sent to respondent regarding her absences
without permission during the year 1991-1992. Her vacation entitlement for the said employment year
affected was consequently forfeited.
4. In view of the said alleged absences without permission, on September 17, 1994, a notice of
hearing was sent to respondent notifying her of the charges filed against her for violating the Absence
Without Official Leave rule: that is for excessive absence without permission on August 15-18, 29-31 and
September 1-10, 1994. The hearing was set on September 23, 1994.
5. Respondent having failed to appear on September 23, 1994 hearing, another notice of hearing was
sent to her resetting the investigation on September 30, 1994. It was again reset to October 5, 1994.
6. On January 10, 1995, after hearing, the petitioner terminated the services of respondent effective
January 16, 1994 due to excessive absences without permission.
7. Feeling aggrieved, respondent filed a case for illegal dismissal against petitioner asserting that her
dismissal was illegal because she was on the family way suffering from urinary tract infection, a pregnancy-
borne, at the time she committed the alleged absences. She explained that for her absence from work on
August 15, 16, 17 & 18, 1994 she had sent an application for leave to her supervisor, Prima Ybañez.
Thereafter, she went to the company hospital for check-up and was advised accordingly to rest in quarters
for four (4) days or on August 27 to 30, 1994. Still not feeling well, she failed to work on September 1, 1994
and was again advised two days of rest in quarters on September 2-3, 1994. Unable to recover, she went
to see an outside doctor, Dr. Marilyn Casino, and the latter ordered her to rest for another five (5)
consecutive days, or from September 5 to 9, 1994. She declared she did not file the adequate leave of
absence because a medical certificate was already sufficient per company policy. On September 10, 1994
she failed to report to work but sent an application for leave of absence to her supervisor, Prima Ybañez,
which was not anymore accepted.
ISSUE/S:
1. The essential question is whether the employment of respondent had been validly terminated on
the ground of excessive absences without permission. Corollary to this is the question of whether
the petitioner discharged the respondent on account of pregnancy, a prohibited act.
HELD:
The Court is convinced that the petitioner terminated the services of respondent on
account of her pregnancy which justified her absences and, thus, committed a prohibited act
rendering the dismissal illegal.
The Court agrees with the CA in concluding that respondent's sickness was pregnancy-
related and, therefore, the petitioner cannot terminate respondent's services because in doing so,
petitioner will, in effect, be violating the Labor Code which prohibits an employer to discharge an
employee on account of the latter's pregnancy.
Atty. Mercader
In this jurisdiction tardiness and absenteeism, like abandonment, are recognized forms of neglect
of duties, the existence of which justify the dismissal of the erring employee. Respondent's rule penalizing
with discharge any employee who has incurred six (6) or more absences without permission or subsequent
justification is admittedly within the purview of the foregoing standard.
However, while it is not disputed that complainant incurred absences exceeding six (6) days as she
actually failed to report for work from August 15-18, 23-26, 29-31, September 1-3, 5-10, 12-17, 21-24, 26-
30, and October 1-3, 1994, her being pregnant at the time these absences were incurred is not questioned
and is even admitted by respondent. It thus puzzles us why respondent asserts complainant failed to explain
satisfactorily her absences on August 15-18, 29-31, September 1-3 and 5-10, 1994, yet reconsidered the
rest of her absences for being covered with "rest-in-quarters" (RIQ) advice from its hospital personnel when
this advice was unquestionably issued in consideration of the physiological and emotional changes
complainant, a conceiving mother, naturally developed.
Medical and health reports abundantly disclose that during the first trimester of pregnancy,
expectant mothers are plagued with morning sickness, frequent urination, vomiting and fatigue all of which
complainant was similarly plagued with. Union official IBB Lesna's observation on complainant being [sic]
apparently not feeling well during the investigation conducted by respondent on October 5, 1994 even
remains in the records of said proceedings. For respondent to isolate the absences of complainant in
August and mid-September, 1994 from the absences she incurred later in said month without submitting
any evidence that these were due to causes not in manner associated with her condition renders its
justification of complainant's dismissal clearly not convincing under the circumstances.
Despite contrary declaration, the records bear the admission of respondent's P/A North Supervisor,
PB Ybanez, of her receipt of the hospital record showing complainant's RIQ advice for August 19-20, 1994
which could already serve as respondent's reference in resolving the latter's absences on August 15 to 18,
1994. Respondent further admitted complainant was under RIQ advice on September 2-3, 1994, yet,
insisted in including these dates among her purported unexplained absences justifying termination of her
employment.
The petitioner stresses that many women go through pregnancy and yet manage to submit prior
notices to their employer, especially if "there is no evidence on record indicating a condition of such gravity
as to preclude efforts at notifying petitioner of her absence from work in series." But it must be emphasized
that under petitioner's company rules, absences may be subsequently justified. The Court finds no cogent
reason to disturb the findings of the NLRC and the CA that the respondent was able to subsequently justify
her absences in accordance with company rules and policy; that the respondent was pregnant at the time
she incurred the absences; that this fact of pregnancy and its related illnesses had been duly proven through
substantial evidence; that the respondent attempted to file leaves of absence but the petitioner's supervisor
refused to receive them; that she could not have filed prior leaves due to her continuing condition; and that
the petitioner, in the last analysis, dismissed the respondent on account of her pregnancy, a prohibited act.
Petitioner's reliance on the jurisprudential rule that the totality of the infractions of an employee may
be taken into account to justify the dismissal, is tenuous considering the particular circumstances obtaining
in the present case. Petitioner puts much emphasis on respondent's "long history" of unauthorized
absences committed several years beforehand. However, petitioner cannot use these previous infractions
to lay down a pattern of absenteeism or habitual disregard of company rules to justify the dismissal of
respondent. The undeniable fact is that during her complained absences in 1994, respondent was pregnant
and suffered related illnesses. Again, it must be stressed that respondent's discharge by reason of
absences caused by her pregnancy is covered by the prohibition under the Labor Code. Since her last
string of absences is justifiable and had been subsequently explained, the petitioner had no legal basis in
considering these absences together with her prior infractions as gross and habitual neglect.
Atty. Mercader
tar Paper Corp. v. Simbol

Puno, J.
G.R. No. 164774, April 12, 2006
FACTS:
Petitioner Star Paper Corporation (the company) is a corporation engaged in trading – principally
of paper products. Josephine Ongsitco is its Manager of the Personnel and Administration Department
while Sebastian Chua is its Managing Director. Simbol was employed by the company on October 27, 1993.
He met Alma Dayrit, also an employee of the company, whom he married. Prior to the marriage, Ongsitco
advised the couple that should they decide to get married, one of them should resign pursuant to a company
policy:
1. New applicants will not be allowed to be hired if in case he/she has relative, up to 3rd degree of
relationship, already employed by the company.
2. In case of two of our employees (both singles, one male and another female) developed a friendly
relationship during the course of their employment and then decided to get married, one of them should
resign to preserve the policy stated above.
Simbol resigned on June 20, 1998 pursuant to the company policy.
Comia was hired by the company on February 5, 1997. She met Howard Comia, a co-employee,
whom she married. Ongsitco likewise reminded them that pursuant to company policy, one must resign
should they decide to get married. Comia resigned.
Estrella was hired on July 29, 1994. She met Luisito Zuñiga, also a co-worker. Petitioners stated
that Zuñiga, a married man, got Estrella pregnant. The company allegedly could have terminated her
services due to immorality but she opted to resign.
Simbol and Comia allege that they did not resign voluntarily; they were compelled to resign in view
of an illegal company policy. As to respondent Estrella, she alleges that she had a relationship with co-
worker Zuñiga who misrepresented himself as a married but separated man. After he got her pregnant, she
discovered that he was not separated. Thus, she severed her relationship with him to avoid dismissal due
to the company policy. Due to her urgent need for money, she later submitted a letter of resignation in
exchange for her thirteenth month pay. They averred that the aforementioned company policy is illegal and
contravenes Article 136 of the Labor Code.
The labor Arbiter dismissed the complaint for lack of merit stating that the company policy was
decreed pursuant to what the respondent corporation perceived as management prerogative.
Petitioners contend that the Court of Appeals erred in holding that the subject 1995 policy/regulation
is violative of the constitutional rights towards marriage and the family of employees and of Article 136 of
the Labor Code and the respondents’ resignations were far from voluntary.
ISSUE/S:
W/N the policy of the employer banning spouses from working in the same company violates the rights of
the employee under the Constitution and the Labor Code.
Yes. The policy of the employer banning spouses from working in the same company is
violative of the rights of the employee under the Constitution and the Labor Code.
The 1987 Constitutionstates our policy towards the protection of labor under the following provisions:
Article II, Section 18. The State affirms labor as a primary social economic force. It shall protect the rights
of workers and promote their welfare.
Article XIII, Sec. 3. The State shall afford full protection to labor, local and overseas, organized and
unorganized, and promote full employment and equality of employment opportunities for all. It shall
Atty. Mercader
guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful
concerted activities, including the right to strike in accordance with law. They shall be entitled to security of
tenure, humane conditions of work, and a living wage. They shall also participate in policy and decision-
making processes affecting their rights and benefits as may be provided by law.
The State shall promote the principle of shared responsibility between workers and employers,
recognizing the right of labor to its just share in the fruits of production and the right of enterprises to
reasonable returns on investments, and to expansion and growth.
The Civil Code likewise protects labor with the following provisions:
Art. 1700. The relation between capital and labor are not merely contractual. They are so impressed with
public interest that labor contracts must yield to the common good. Therefore, such contracts are subject
to the special laws on labor unions, collective bargaining, strikes and lockouts, closed shop, wages, working
conditions, hours of labor and similar subjects.
Art. 1702. In case of doubt, all labor legislation and all labor contracts shall be construed in favor of the
safety and decent living for the laborer.
The case at bar involves Article 136 of the Labor Code which provides:
Art. 136. It shall be unlawful for an employer to require as a condition of employment or continuation of
employment that a woman employee shall not get married, or to stipulate expressly or tacitly that upon
getting married a woman employee shall be deemed resigned or separated, or to actually dismiss,
discharge, discriminate or otherwise prejudice a woman employee merely by reason of her marriage.
There are two types of employment policies involve spouses: policies banning only spouses from
working in the same company (no-spouse employment policies) , and those banning all immediate family
members, including spouses, from working in the same company (anti-nepotism employment policies)
.Unlike in our jurisdiction where there is no express prohibition on marital discrimination, there are twenty
state statutes in the United States prohibiting marital discrimination.
There are two theories of employment discrimination: the disparate treatment and the disparate
impact . Under the disparate treatment analysis , the plaintiff must prove that an employment policy is
discriminatory on its face. No-spouse employment policies requiring an employee of a particular sex to
either quit, transfer, or be fired are facially discriminatory.
On the other hand, to establish disparate impact , the complainants must prove that a facially
neutral policy has a disproportionate effect on a particular class. For example, although most employment
policies do not expressly indicate which spouse will be required to transfer or leave the company, the policy
often disproportionately affects one sex. Though they agree that the term "marital status" encompasses
discrimination based on a person's status as either married, single, divorced, or widowed, they are divided
on whether the term has a broader meaning. The courts narrowly interpreting marital status to refer only
to a person's status as married, single, divorced, or widowed reason that if the legislature intended a
broader definition it would have either chosen different language or specified its intent. They hold that the
relevant inquiry is if one is married rather than to whom one is married. They construe marital status
discrimination to include only whether a person is single, married, divorced, or widowed and not the
"identity, occupation, and place of employment of one's spouse."
The courts that have broadly construed the term "marital status" rule that it encompassed the
identity, occupation and employment of one's spouse. These courts also find the no-spouse employment
policy invalid for failure of the employer to present any evidence of business necessity other than the
general perception that spouses in the same workplace might adversely affect the business. They hold that
the absence of such a bona fide occupational qualification invalidates a rule denying employment to one
spouse due to the current employment of the other spouse in the same office. Unless the employer can
prove that the reasonable demands of the business require a distinction based on marital status and there
Atty. Mercader
is no better available or acceptable policy which would better accomplish the business purpose, an
employer may not discriminate against an employee based on the identity of the employee’s spouse. This
is known as the bona fide occupational qualification exception.
There must be a compelling business necessity for which no alternative exists other than the
discriminatory practice. To justify a bona fide occupational qualification, the employer must prove two
factors:
(1) that the employment qualification is reasonably related to the essential operation of the job involved;
(2) that there is a factual basis for believing that all or substantially all persons meeting the qualification
would be unable to properly perform the duties of the job.
We employ the standard of reasonableness of the company policy which is parallel to the bona
fide occupational qualification requirement. The requirement that a company policy must be reasonable
under the circumstances to qualify as a valid exercise of management prerogative. We do not find a
reasonable business necessity in the case at bar. Petitioners’ sole contention that "the company did not
just want to have two (2) or more of its employees related between the third degree by affinity and/or
consanguinity" is lame. That the second paragraph was meant to give teeth to the first paragraph of the
questioned rule is evidently not the valid reasonable business necessity required by the law. Respondents
were hired after they were found fit for the job, but were asked to resign when they married a co-employee.
Petitioners failed to show how the marriage of Simbol, then a Sheeting Machine Operator, to Alma Dayrit,
then an employee of the Repacking Section, could be detrimental to its business operations.
The policy is premised on the mere fear that employees married to each other will be less efficient.
The questioned policy may not facially violate Article 136 of the Labor Code but it creates a disproportionate
effect and under the disparate impact theory, the only way it could pass judicial scrutiny is a showing that
it is reasonable despite the discriminatory, albeit disproportionate, effect. The failure of petitioners to prove
a legitimate business concern in imposing the questioned policy cannot prejudice the employee’s right to
be free from arbitrary discrimination based upon stereotypes of married persons working together in one
company.
Atty. Mercader
Capin-Cadiz v. Brent Hospital and Colleges

Reyes, J.
G.R. No.187417, 24 February 2016
FACTS:
Cadiz was the Human Resource Officer of respondent Brent Hospital and Colleges, Inc. (Brent) at
the time of her indefinite suspension from employment in 2006. The cause of suspension was Cadiz's
Unprofessionalism and Unethical Behavior Resulting to Unwed Pregnancy. It appears that Cadiz became
pregnant out of wedlock, and Brent imposed the suspension until such time that she marries her boyfriend
in accordance with law.
Cadiz then filed with the Labor Arbiter (LA) a complaint for Unfair Labor Practice, Constructive
Dismissal, Non-Payment of Wages and Damages with prayer for Reinstatement.
LA: LA ruled that Cadiz was not illegally dismissed as there was just cause for her dismissal, that is,
she engaged in premarital sexual relations with her boyfriend resulting in a pregnancy out of wedlock.
And that her "immoral conduct x x x [was] magnified as serious misconduct not only by her getting
pregnant as a result thereof before and without marriage, but more than that, also by the fact that Brent is
an institution of the Episcopal Church in the Philippines operating both a hospital and college where [Cadiz]
was employed." The LA deemed said act to be immoral, which was punishable by dismissal under
Brent's rules and which likewise constituted serious misconduct under Article 282(a) of the Labor
Code. The LA also ruled that she was not entitled to reinstatement "at least until she marries her boyfriend,"
to backwages and vacation/sick leave pay. Brent, however, manifested that it was willing to pay her 13th
month pay.
NLRC: Affirmed LA ruling.
CA: dismissed her petition outright due to technical defects in the petition. NLRC committed no grave abuse
of discretion amounting to lack or excess of jurisdiction x x x holding [Cadiz's] dismissal from employment
valid.
Petitioner:
 contends, among others, that getting pregnant outside of wedlock is not grossly immoral, especially
when both partners do not have any legal impediment to marry.
 Cadiz surmises that the reason for her suspension was not because of her relationship with her
then boyfriend but because of the resulting pregnancy.
 Cadiz also lambasts Brent's condition for her reinstatement - that she gets married to her boyfriend
- saying that this violates the stipulation against marriage under Article 136 of the Labor Code.
Respondent:
 adopts and reiterates its position before the LA and the NLRC that Cadiz's arguments are irrational
and out of context. Brent argues, among others, that for Cadiz to limit acts of immorality only to
extra-marital affairs is to "change the norms, beliefs, teachings and practices of BRENT as a
Church institution of the x x x Episcopal Church in the Philippines.
ISSUE:
1. Whether or not Cadiz was illegally dismissed. YES
2. Whether or not Marriage can be a condition for reinstatement. NO
HELD:
I.Cadiz was illegally dismissed.
Admittedly, one of the grounds for disciplinary action under Brent's policies is immorality, which is
punishable by dismissal at first offense. Its Employee's Manual of Policies, meanwhile, enumerates
"[a]cts of immorality such as scandalous behaviour, acts of lasciviousness against any person (patient,
visitors, co-workers) within hospital premises" as a ground for discipline and discharge. Brent also relied on
Section 94 of the Manual of Regulations for Private Schools (MRPS), which lists "disgraceful or immoral
conduct" as a cause for terminating employment.
Thus, the question that must be resolved is whether Cadiz's premarital relations with her boyfriend
and the resulting pregnancy out of wedlock constitute immorality. To resolve this, the Court makes
reference to the recently promulgated case of Cheryll Santos Leus v. St. Scholastica’s College
Westgrove and/or Sr. Edna Quiambao, OSB.
The Court ruled in Leus that the determination of whether a conduct is disgraceful or immoral involves
a two-step process: first, a consideration of the totality of the circumstances surrounding the conduct; and
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second, an assessment of the said circumstances vis-a-vis the prevailing norms of conduct, i.e., what the
society generally considers moral and respectable.
The foregoing circumstances, however, do not readily equate to disgraceful and immoral conduct. Brent's
Policy Manual and Employee's Manual of Policies do not define what constitutes immorality; it simply stated
immorality as a ground for disciplinary action. Instead, Brent erroneously relied on the standard dictionary
definition of fornication as a form of illicit relation and proceeded to conclude that Cadiz's acts fell under
such classification, thus constituting immorality.
Jurisprudence has already set the standard of morality with which an act should be gauged - it is
public and secular, not religious. Whether a conduct is considered disgraceful or immoral should be
made in accordance with the prevailing norms of conduct, which, as stated in Leus, refer to those conducts
which are proscribed because they are detrimental to conditions upon which depend the existence and
progress of human society. More importantly, there must be substantial evidence to establish that premarital
sexual relations and pregnancy out of wedlock is considered disgraceful or immoral.
Aside from these, the labor tribunals' respective conclusion that Cadiz's "indiscretion" "scandalized the
Brent community" is speculative, at most, and there is no proof adduced by Brent to support such sweeping
conclusion. Even Brent admitted that it came to know of Cadiz's "situation" only when her pregnancy
became manifest. This only goes to show that Cadiz did not flaunt her premarital relations with her boyfriend
and it was not carried on under scandalous or disgraceful circumstances.
As declared in Leus, "there is no law which penalizes an unmarried mother by reason of her sexual
conduct or proscribes the consensual sexual activity between two unmarried persons; that neither
does such situation contravene[s] any fundamental state policy enshrined in the Constitution. "
The fact that Brent is a sectarian institution does not automatically subject Cadiz to its religious
standard of morality absent an express statement in its manual of personnel policy and regulations,
prescribing such religious standard as gauge as these regulations create the obligation on both the
Brent, likewise, cannot resort to the MRPS because the Court already stressed in Leus that "premarital
sexual relations between two consenting adults who have no impediment to marry each other, and,
consequently, conceiving a child out of wedlock, gauged from a purely public and secular view of
morality, does not amount to a disgraceful or immoral conduct under Section 94(e) of the 1992
MRPS."
II. Marriage cannot be a condition for reinstatement.

The 1987 Constitution mandates that the "State shall afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment and equality of employment opportunities for all."
The Labor Code of the Philippines, meanwhile, provides:
Art. 136. Stipulation against marriage. It shall be unlawful for an employer to require as a condition of
employment or continuation of employment that a woman employee shall not get married, or to stipulate
expressly or tacitly that upon getting married, a woman employee shall be deemed resigned or separated,
or to actually dismiss, discharge, discriminate or otherwise prejudice a woman employee merely by reason
of her marriage.
With particular regard to women, Republic Act No. 9710 or the Magna Carta of Women protects women
against discrimination in all matters relating to marriage and family relations, including the right to choose
freely a spouse and to enter into marriage only with their free and full consent.
Weighed against these safeguards, it becomes apparent that Brent's condition is coercive, oppressive and
discriminatory. It forces Cadiz to marry for economic reasons and deprives her of the freedom to
choose her status, which is a privilege that inheres in her as an intangible and inalienable right.
While a marriage or no-marriage qualification may be justified as a "bona fide occupational
qualification," Brent must prove two factors necessitating its imposition, viz: (1) that the employment
qualification is reasonably related to the essential operation of the job involved; and (2) that there is a factual
basis for believing that all or substantially all persons meeting the qualification would be unable to properly
perform the duties of the job.54 Brent has not shown the presence of neither of these factors.
Given the foregoing, Cadiz, therefore, is entitled to reinstatement without loss of seniority rights, and
payment of backwages computed from the time compensation was withheld up to the date of actual
reinstatement.
Atty. Mercader
Inocente vs. St. Vincent Foundation

Brion, J.
G.R. No. 202621 June 22, 2016
FACTS:
Respondent St. Vincent Foundation for Children and Aging, Inc. (St. Vincent) is a non-stock, non-profit
foundation engaged in providing assistance to children and aging people and conducting weekly social and
educational activities among them. Respondent Veronica Menguito is St. Vincent's President/Directress.
In 2000, St. Vincent hired Zaida as Program Assistant; it promoted her as Program Officer the following
year. Zaida, then single, was known as Zaida Febrer Ranido. In 2001, Zaida met Marlon D. Inocente. Zaida
and Marlon became close and soon became romantically involved with each other. In September 2006, St.
Vincent adopted the CFCA's Non-Fraternization Policy.
Despite St. Vincent's adoption of the Non-Fraternization Policy, Zaida and Marlon discretely continued their
relationship; they kept their relationship private and unknown to St. Vincent even after Marlon resigned in
July 2008. On February 19, 2009, Zaida experienced severe abdominal pain requiring her to go to the
hospital. The doctor later informed her that she had suffered a miscarriage. While confined at the hospital,
Zaida informed St. Vincent of her situation. Menguito verbally allowed Zaida to go on maternity leave until
April 21, 2009. On March 31, 2009, Zaida was again confined at the hospital for ectopic pregnancy.
On May 18, 2009, Zaida received from St. Vincent a letter dated May 14, 2009 and signed by Menguito
requiring her to explain in writing why no administrative action should be taken against her. St. Vincent
charged her with violation of the CFCA Non-Fraternization Policy and of the St. Vincent's Code of Conduct
provisions.
In her May 19, 2009 reply-letter, Zaida defended that: (1) her relationship with Marlon started long before
St. Vincent's Non-Fraternization Policy took effect; (2) Marlon was no longer connected with St. Vincent
since 2008; (3) her relationship with Marlon is not immoral as they were both of legal age and with no
impediments to marry; (4) they kept their relationship private and were discreet in their actions; (5) Marlon
stayed at her place only to take care of her while she was sick; and (6) they already planned to get married
as soon as she recovers and their finances improve.
In the letter dated May 30, 2009, St. Vincent terminated Zaida's employment for immorality, gross
misconduct and violation of St. Vincent's Code of Conduct.
Zaida and Marlon were subsequently married on June 23, 2009.
LA: Ruled in favor of respondent. The LA found that, despite the implementation of the NonFraternization
Policy in 2006, Zaida maintained and concealed from St. Vincent her relationship with Marlon. The LA
pointed out that as a program officer, Zaida was under the obligation to observe this Policy and to inform
her employer of her relationship. Her acts, therefore, could be characterized as an act of dishonesty
constituting willful breach of trust and confidence justifying her dismissal.
NLRC: Agreed with the LA's findings. It additionally pointed out that Zaida's act of continuing her intimate
relationship with Marlon despite the implementation of the Non-Fraternization Policy constituted not only
immoral conduct; it also prejudiced the interest of St. Vincent as it set a bad example not only to her
subordinates but also to the children-beneficiaries of St. Vincent.
CA: The CA agreed that Zaida's dismissal was valid, reiterating that Zaida's act of continuing her
relationship with Marlon despite the implementation of the Non-Fraternization Policy, and without the benefit
of marriage, went against the very policy of promoting Christian values that she was charged to uphold.
The CA declared that her
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dismissal was not due to her pregnancy and, therefore, did not violate Article 137(2) of the Labor Code.
Rather, her pregnancy was merely the operative act that led to the discovery of her immoral conduct.
ISSUES:
1. Whether or not Zaida's intimate relationship with Marlon was, under the circumstances, immoral
2. Whether or not such relationship is absolutely prohibited by or is strictly required to be disclosed to the
management under St. Vincent's Non-Fraternization Policy
RULING: Petition granted.
1. No. Immorality pertains to a course of conduct that offends the morals of the community. The term
"immorality" still often escapes precise definition; the determination of whether it exists or has taken
place depends on the attendant circumstances, prevailing norms of conduct, and applicable laws. The
determination of whether a particular conduct is immoral involves: (1) a consideration of the totality of
the circumstances surrounding the conduct; and (2) an assessment of these circumstances in the light
of the prevailing norms of conduct, i.e., what the society generally considers moral and respectable,
laws. In dismissal situations, the sufficiency of a conduct claimed to be immoral must be judged based
on secular, not religious standards. In this case, we note that both Zaida and Marlon at all times had
no impediments to marry each other. They were adults who met at work, dated, fell in love and became
sweethearts. The intimate sexual relations between them were consensual, borne by their love for one
another and which they engaged in discreetly and in strict privacy. They continued their relationship
even after Marlon left St. Vincent in 2008. They took their marriage vows soon after Zaida recovered
from her miscarriage, thus validating their union in the eyes of both men and God. While their actions
might not have strictly conformed with the beliefs, ways, and mores of St. Vincent - which is governed
largely by religious morality - or with the personal views of its officials, these actions are not prohibited
under any law nor are they contrary to conduct generally accepted by society as respectable or moral.
Mere private sexual relations between two unmarried and consenting adults, even if the relations result
in pregnancy or miscarriage out of wedlock and without more, are not enough to warrant liability for
illicit behavior. The voluntary intimacy between two unmarried adults, where both are not under any
impediment to marry, where no deceit exists, and which was done in complete privacy, is neither
criminal nor so unprincipled as to warrant disciplinary action.
No. A reading of the Policy's provisions shows that they profess to touch only on on-duty conduct of its
employees. Contrary to the respondents' arguments, too, the CFCA employees who direct or coordinate
the work of others are only "strongly discouraged from engaging in consensual romantic or sexual
relationships with any employee or volunteer of CFCA. " It does not prohibit them, (either absolutely or
with qualifications) from engaging in consensual romantic or sexual relationships. To discourage means
"to deprive of courage or confidence: dishearten, deject; to attempt to dissuade from action: dampen or
lessen the boldness or zeal of for some action." To prohibit, on the other hand, means "to forbid by
authority or command: enjoin, interdict; to prevent from doing or accomplishing something: effectively
stop; to make impossible: disbar, hinder, preclude." If the actor/employee does or performs the
"discouraged" act, the employee may not be subjected to any punishment or disciplinary action as he or
she does not violate any rule, policy, or law. In contrast, "to prohibit" will certainly subject the
actor/employee to punishment or disciplinary action if the actor/employee does or performs the prohibited
act as he or she violates a rule, policy or law. From this perspective, a St. Vincent employee who directs
or coordinates the work of other St. Vincent employee or volunteer, and who engages in a consensual
romantic or sexual relationship with a St. Vincent employee or volunteer will not violate the Non-
Fraternization Policy unless circumstances are shown that the act goes beyond the usual norms of
morality. In addition, an examination of the Policy's provisions shows that it does not require St. Vincent's
employees to disclose any such consensual romantic or sexual relationships to the management. In fact,
nowhere in the records does it show that St. Vincent employees are under any obligation to make the
disclosure, whose violation would subject the employee to disciplinary action. Based on these
considerations, Zaida clearly did not violate the Non-Fraternization Policy when she continued her
relationship with Marlon despite the Policy's adoption in 2006.
Atty. Mercader
Union School International v. Dagdag

Tijam, J.
GR No. 234186 – 21 November 2018
FACTS:
Dagdag was employed as an Elementary School Teacher on a probationary status by Union
School. During her employment, she found out that she was eight weeks and five days pregnant. Soon
thereafter, Dagdag informed her superior of her pregnancy and that the father of the child was marrying
another woman. As Dagdag was single, the matter of being charged with gross immorality and
Dagdag's resignation was discussed. On December 12, 2012, Dagdag received a copy of a notice
addressed to the members of the Grievance Committee to attend to a Teacher's Disciplinary Committee
in 2 days regarding the disciplinary action against her for gross immorality. For her failure to attend the
same, the hearing was rescheduled on December 17, 2012. During the hearing, Dagdag
acknowledged the contents of the school's Faculty and Staff Handbook, which includes the offense on
gross immorality and the Professional Code of Ethics for Teachers. She was apprised of the possible
consequences if she will be dismissed from service as it might affect her next job application
as compared to resigning which, petitioners thought, was a better option. Dagdag then agreed
to resign.
On the same date, Dagdag filed a complaint against petitioners for illegal dismissal, non-
payment of salaries and benefits, moral and exemplary damages, and attorney's fees. For its part,
Union School denied the accusations of Dagdag and maintained that they did not suspend, transfer,
demote, or prevent Dagdag from performing her work as a result of her pregnancy out of wedlock.
LA: Union School committed acts of persecution, discrimination, insensitivity and disdain when
Dagdag was coerced into resigning from her job after having admitted to Mandapat (the superior) that
she was pregnant out of wedlock with no intentions of getting married to the father of her child as he
had already married another woman.
NLRC: Vacated the decision of the LA and dismissed the complaint for illegal dismissal and
money claims of Dagdag for lack of merit. They held that there was no evidence that Dagdag was ever
subjected to persecution or contempt after she reported her pregnancy; hence, she failed to prove by
substantial evidence that she was constructively dismissed. The dispositive portion of the Decision,
reads:
CA: Dagdag was illegally dismissed from service as the minutes of the grievance meeting
disclosed that she was only given two options — to resign or to be dismissed from service,
upon Union School's finding of her pregnancy out of wedlock. As such, the CA held that it
constituted a violation under Article 135 16 of the Labor Codewhich prohibits the employer to
discharge a woman employee on account of her pregnancy
Upon denial of the MR, this instant petition was filed.
ISSUE/S:
Whether or not Dagdag was constructively dismissed

Constructive dismissal is a cessation of work because continued employment is rendered
impossible, unreasonable or unlikely; when there is a demotion in rank or diminution in pay or both; or
when a clear discrimination, insensibility, or disdain by an employer becomes unbearable to the
employee. The test of constructive dismissal is whether a reasonable person in the employee's position
would have felt compelled to give up his employment/position under the circumstances."
As aptly observed by the CA, Mandapat's act of suggesting that Dagdag should simply tender
her resignation, as the school may impose harsher penalties, left Dagdag with no choice but to
discontinue working for Union School. Also, the CA noted that although there was a conduct of
grievance meeting, its outcome was already predetermined as petitioners were already resolute in their
decision to terminate Dagdag's employment. This is evident by the fact that Dagdag was left with two
choices — resignation or dismissal and threatening her with possible revocation of her teaching license.
Indeed, Dagdag agreed to resign because her actuation was perceived by petitioners as a
ground for the revocation of her license as a teacher. Such license serves as a permit for Dagdag to
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secure an employment and find a means of livelihood. Be that as it may, it appears that the grievance
committee finally voted on Dagdag's dismissal, per minutes of the meeting. Said committee made a
conclusion that Dagdag committed gross immorality in violation of the school rules and the Code of
Ethics for Professional Teachers. To determine whether a conduct is disgraceful or immoral, a
consideration of the totality of the circumstances surrounding the conduct; and an assessment of the
said circumstances vis-a-vis the prevailing norms of conduct, i.e., what the society generally considers
moral and respectable, are necessary. The totality of evidence in this case does not justify the dismissal
of Dagdag from her employment considering that there was no legal impediment to marry between
Dagdag and the father of her child at the time of the conception. Pregnancy of a school teacher out
of wedlock is not a just cause for termination of an employment absent any showing that the
pre-marital sexual relations and, consequently, pregnancy out of wedlock, are indeed
considered disgraceful or immoral.
SEPARATE OPINION OF J. JARDALEZA ON THE EQUAL PROTECTION CLAUSE IN CONNECTION
TO HEREIN CASE:
An unmarried woman has a liberty interest under the due process clause to engage in consensual sexual
relations with an unmarried man and bear a child with him as a result of said relations. I submit this
Opinion to show that (I) considering jurisprudential precedents and Filipino tradition, it is high time this
Court recognize this liberty interest as a fundamental right entitled to State protection. Thus, pregnancy of
an employee out of wedlock cannot constitute just cause for termination from employment absent any
showing that the pregnancy was contracted under grossly immoral circumstances; and (II) a contrary
ruling would violate the constitutional guarantee of equal protection of the law and result in an
unwarranted difference in treatment of men and women under like circumstances. An unmarried woman
has a liberty interest to engage in consensual sexual relations with an unmarried man and bear a child
with him as a result of said relations. I submit that it is high time that the Court recognize this liberty
interest as "fundamental," as to require a higher burden of proof to justify its intrusion. In this jurisdiction,
fundamental rights have been deemed to include only those basic liberties explicitly or implicitly
guaranteed by the Bill of Rights of the Constitution. Admittedly, there is nothing in our Bill of Rights which
explicitly guarantees a right in favor of an unmarried woman to engage in consensual sexual relations
with an unmarried man, and thereafter bear a child with him. Precedential decisions of this Court,
however, support the recognition of the fundamental nature of this liberty interest.
Existing facts and contemporary Filipino traditions also support the recognition of such a
fundamental right in favor of an unmarried woman to bear and carry her child to term. Premarital sexual
relations, and pregnancies resulting from such relations, while not trumpeted, are increasingly tolerated, if
not commonplace, in Philippine society. Thus, and unlike before, where unwed, pregnant women were
shunned by society, more recent experience seem to show a growing acceptance of women in such
situations, with friends and families banding together to support them. |Congress has also enacted
legislation in support of this tradition. The Labor Code, for example, does not distinguish between
married and unmarried female employees for purposes of availing of maternity leave privileges.
Maternity leave benefits are extended to a pregnant female employee, irrespective of marital
status. Under Republic Act (R.A.) No. 8972, solo parents entitled to government support include
women who give birth to (and rear) a child as a result of rape and other crimes of chastity and
unmarried women who preferred to keep and rear their child/children instead of having others
care for them or giving them up to a welfare institution. Under Section 13 of R.A. No. 9710, women
faculty and students cannot be expelled or refused re-admission solely on account of having
contracted pregnancy outside of marriage during their term in school.
Atty. Mercader
Libres v. NLRC
Bellosillo, J.
GR No. 123737 – 28 May 1999
This petition for certiorari seeks to annul the decision of public respondent National Labor Relations
Commission (NLRC) sustaining the Labor Arbiter's finding that petitioner was validly suspended by
private respondents, as well as the NLRC resolution denying petitioner's motion to reconsider its decision.
FACTS:
Petitioner Carlos G. Libres, an electrical engineer, was holding a managerial position with National Steel
Corporation (NSC) as Assistant Manager. On 3 August 1993 he received a Notice of Investigation from
Assistant Vice president Isidro F. Hynson Jr., his immediate superior, requesting him to submit a written
explanation relative to the charge of sexual harassment made by Susan D. Capiral, Hynson's secretary,
allegedly committed by Libres sometime in May 1992, and subsequently to answer clarificatory questions
on the matter. The notice also warned him that failure to file his written explanation would be construed as
a waiver of his right to be heard. On 14 August 1993 petitioner submitted his written explanation denying
the accusation against him and offering to submit himself for clarificatory interrogation. Subsequently,
Hynson Jr. conducted an internal investigation to which Libres and Capiral were invited to ventilate their
respective sides of the issue. They readily responded. Thereafter, Hynson Jr. submitted his report to the
Management Evaluation Committee (MEC).
MEC: The charges against petitioner constituted a violation of Item 2, Table V, of the Plant's Rules and
Regulations. It opined that "touching a female subordinate's hand and shoulder, caressing her nape and
telling other people that Capiral was the one who hugged and kissed or that she responded to the sexual
advances are unauthorized acts that damaged her honor". Referring to the Manual of the Philippine Daily
Inquirer in defining sexual harassment, the MEC finally concluded that petitioner's acts clearly constituted
sexual harassment as charged and recommended petitioner's suspension for thirty (30) days without pay.
Seeking to reverse his misfortune, Libres filed a complaint for illegal suspension and unjust discrimination
against respondent NSC and its officers, private respondents herein, before the Labor Arbiter. Citing the
failure of the MEC to grant him audience despite his offer to answer clarificatory questions, petitioner
claimed denial of due process.
LA: Due process was properly observed and that there was a positive finding of sexual harassment to
justify petitioner’s suspension. Petitioner should welcome that his penalty was only for suspension of 30
days as opposed to termination imposed in Villarama v. NLRC and Golden Donuts.
NLRC: Affirmed the LA decision.
ISSUE/S:
W/N the NLRC committed grave abuse of discretion in upholding the suspension of petitioner Carlos G.
Libres as justified due to the positive finding of sexual harassment and that due process was properly
observed
HELD: NO. PETITION DISMISSED.
 As to petitioner’s claim of failure of the NLRC to strictly apply RA No. 7877:

Petitioner never raised the applicability of the law in his appeal to the NLRC nor in his
motion for reconsideration. Issues or arguments must chiefly be raised before the court or
agency concerned so as to allow it to pass upon and correct its mistakes without the
intervention of a higher court. Further, Republic Act No. 7877 was not yet in effect at the
time of the occurrence of the act complained of. It was still being deliberated upon in
Congress when petitioner's case was decided by the Labor Arbiter. As a rule, laws shall
have no retroactive effect unless otherwise provided, or except in a criminal case when
their application will favor the accused. Hence, the Labor Arbiter have to rely on the MEC
report and the common connotation of sexual harassment as it is generally as
understood by the public. Faced with the same predicament, the NLRC had to agree with
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the Labor Arbiter. In so doing, the NLRC did not commit any abuse of discretion in
affirming the decision of the Labor Arbiter.
 As to petitioner’s assertion that the reliance by the NLRC on Villarama was
erroneous: The Court ruled otherwise and hold that it was both fitting and appropriate
since it singularly addressed the issue of a managerial employee committing sexual
harassment on a subordinate. The disparity in the periods of filing the complaints in the
two (2) cases did not in any way reduce this case into insignificance. On the contrary, it
even invited the attention of the Court to focus on sexual harassment as a just and valid
cause for termination. Whereas petitioner Libres was only meted a 30-day suspension by
the NLRC, Villarama in the other case was penalized with termination. As Mr. Justice
Puno elucidated, "As a managerial employee, petitioner is bound by more exacting work
ethics. He failed to live up to his higher standard of responsibility when he succumbed to
his moral perversity. And when such moral perversity is perpetrated against his
subordinate, he provides a justifiable ground for his dismissal for lack of trust and
confidence. It is the right, nay, the duty of every employer to protect its employees from
oversexed superiors."
 As to the petitioner’s contention that the delay in instituting the complaint shows
that it was only an afterthought: The Court disagrees. As pointed out by the Solicitor
General, it could be expected since Libres was Capiral's immediate superior. Fear of
retaliation and backlash, not to forget the social humiliation and embarrassment that
victims of this human frailty usually suffer, are all realities that Capiral had to contend
with. Moreover, the delay did not detract from the truth derived from the facts. Petitioner
Libres never questioned the veracity of Capiral's allegations.
 As to the question of due process: The Supreme Court finds that the requirements
thereof were sufficiently complied with. Due process as a constitutional precept does not
always and in all situations require a trial type proceeding. Due process is satisfied when
a person is notified of the charge against him and given an opportunity to explain or
defend himself. It is undeniable that petitioner was given a Notice of Investigation
informing him of the charge of sexual harassment as well as advising him to submit a
written explanation regarding the matter; that he submitted his written explanation to his
superior, Isidro F. Hyson Jr.; that Hynson Jr. further allowed him to air his grievance in a
private session; and, that upon release of the suspension order made by the MEC
petitioner requested its reconsideration but was denied. The personal confrontation with
the MEC officers, which he requested, was not necessary. The parties had already
exhaustively presented their claims and defenses in different fora. As stated in Howevers
Savings and Loan Association v. NLRC, litigants may be heard through pleadings, written
explanations, position papers, memoranda or oral arguments. Petitioner has been
afforded all of the above means to air his side. Due process was therefore properly
observed.
Atty. Mercader
Domingo v. Rayala
Nachura, J.:
G.R. No. 155831 - 18 February 2008
NATURE:
Sexual harassment is an imposition of misplaced "superiority" which is enough to dampen an employee’s
spirit and her capacity for advancement. It affects her sense of judgment; it changes her life.
Before this Court are three (3) Petitions for Review on Certiorari assailing the October 18, 2002
Resolution of the CA’s Former Ninth Division in CA-G.R. SP No. 61026. The Resolution modified the
December 14, 2001 Decision of the Court of Appeals’ Eleventh Division, which had affirmed the Decision
of the Office of the President (OP) dismissing from the service then National Labor Relations Commission
(NLRC) Chairman Rogelio I. Rayala (Rayala) for disgraceful and immoral conduct. All three (3) petitions
stem from the same factual antecedents.
FACTS:
Ma. Lourdes T. Domingo (Domingo), then Stenographic Reporter III at the NLRC, filed a Complaint on
November 16, 1998; for sexual harassment against Rayala before Secretary Bienvenido Laguesma of the
Department of Labor and Employment (DOLE). To support the Complaint, Domingo executed an Affidavit
narrating the incidences of sexual harassment complained of. After the last incident narrated, Domingo filed
for leave of absence and asked to be immediately transferred. Thereafter, she filed the Complaint for sexual
harassment on the basis of Administrative Order No. 250, the Rules and Regulations Implementing RA
7877 in the Department of Labor and Employment. Upon receipt of the Complaint, the DOLE Secretary
referred the Complaint to the OP, Rayala being a presidential appointee. The OP, through then Executive
Secretary Ronaldo Zamora, ordered Secretary Laguesma to investigate the allegations in the Complaint
and create a committee for such purpose. On December 4, 1998, Secretary Laguesma issued
Administrative Order (AO) No. 280, Series of 1998, constituting a Committee on Decorum and Investigation
(Committee) in accordance with Republic Act (RA) 7877, the Anti-Sexual Harassment Act of 1995. The
committee which was constituted found Rayala guilty of the offense charged. A copy of the Committee
Report and Recommendation was submitted by Secretary Laguesma to the OP, but with the
recommendation that in accordance with AO 250, the penalty should be suspension for six (6) months and
one (1) day. The OP issued AO 119 on May 8, 2000, disagreeing with the recommendation that respondent
be meted only the penalty of suspension for six (6) months and one (1) day considering the circumstances
of the case and the nature of Rayala’s position occupying the highest position in the NLRC, being its
Chairman. Respondent was found guilty of grave offense of disgraceful and immoral conduct and was
ordered to be dismissed from service.
CASE HISTORY:
Respondent filed Motions for Reconsideration until the case was finally referred to the Court of Appeals
for appropriate action. The CA found Rayala guilty and imposed the penalty of suspension of service for
the maximum period of one (1) year. Domingo filed a Petition for Review before the SC. Rayala likewise
filed a Petition for Review with this Court essentially arguing that he is not guilty of any act of sexual
harassment. The Republic then filed its own Petition for Review. On June 28, 2004, the Court directed the
consolidation of the three (3) petitions.
Contentions of the Parties:
G.R. No. 155831 – Domingo Petition
She argues that the power to remove Rayala, a presidential appointee, is lodged with the President who
has control of the entire Executive Department, its bureaus and offices. The OP’s decision was arrived at
after affording Rayala due process. Hence, his dismissal from the service is a prerogative that is entirely
with the President. As to the applicability of AO No. 250, she argues that the same was not intended to
cover cases against presidential appointees. AO No. 250 refers only to the instances wherein the DOLE
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Secretary is the disciplining authority, and thus, the AO does not circumscribe the power of the President
to dismiss an erring presidential appointee.
G.R. No. 155840 – Rayala Petition

In his petition, Rayala raises the following issues:
(1) His acts do not constitute sexual harassment as laid down by the En Banc ruling in the case of Aquino
vs Acosta, ibid., as well as in the application of existing laws; (2) Intent is an indispensable element in a
case for sexual harassment. The CA erred in its finding that it is an offense malum prohibitum; and (3)
Misapplication of the expanded definition of sexual harassment in RA 7877 by applying DOLE AO 250.
Rayala asserts that Domingo has failed to allege and establish any sexual favor, demand, or request from
petitioner in exchange for her continued employment or for her promotion. According to Rayala, the acts
imputed to him are without malice or ulterior motive. It was merely Domingo’s perception of malice in his
alleged acts – a "product of her own imagination" – that led her to file the sexual harassment complaint.
Likewise, Rayala assails the OP’s interpretation, as upheld by the CA, that RA 7877 is malum
prohibitum such that the defense of absence of malice is unavailing. He argues that sexual harassment is
considered an offense against a particular person, not against society as a whole.
Rayala next argues that AO 250 expands the acts proscribed in RA 7877. In particular, he assails the
definition of the forms of sexual harassment:
Rule IV: FORMS OF SEXUAL HARASSMENT
Section 1. Forms of Sexual Harassment. – Sexual harassment may be committed in any of the following forms:
a) Overt sexual advances; b) Unwelcome or improper gestures of affection; c) Request or demand for
sexual favors including but not limited to going out on dates, outings or the like for the same purpose; d)
Any other act or conduct of a sexual nature or for purposes of sexual gratification which is generally
annoying, disgusting or offensive to the victim.
He posits that these acts alone without corresponding demand, request, or requirement do not constitute
sexual harassment as contemplated by the law. He alleges that the rule-making power granted to the
employer in Section 4(a) of RA 7877 is limited only to procedural matters. The law did not delegate to the
employer the power to promulgate rules which would provide other or additional forms of sexual
harassment, or to come up with its own definition of sexual harassment.
G.R. No. 158700 - Republic
The Republic raises this issue: Whether or not the President of the Philippines may validly dismiss
respondent Rayala as Chairman of the NLRC for committing acts of sexual harassment.
The Republic posits: that Rayala’s acts constitute sexual harassment under AO 250, that there is no legal
basis for the CA’s reduction of the penalty imposed by the Office of the President; and that Rayala’s
dismissal is valid and warranted under the circumstances. The power to remove the NLRC Chairman
solely rests upon the President, limited only by the requirements under the law and the due process
clause. The Republic further claims that, although AO 250 provides only a one (1) year suspension, it will
not prevent the OP from validly imposing the penalty of dismissal on Rayala. It argues that even though
Rayala is a presidential appointee, he is still subject to the Civil Service Law. Under the Civil Service Law,
disgraceful and immoral conduct, the acts imputed to Rayala, constitute grave misconduct punishable by
dismissal from the service. The Republic adds that Rayala’s position is invested with public trust and his
acts violated that trust. This argument, according to the Republic, is also supported by Article 215 of the
Labor Code, which states that the Chairman of the NLRC holds office until he reaches the age of 65 only
during good behavior. Since Rayala’s security of tenure is conditioned upon his good behavior, he may
be removed from office if it is proven that he has failed to live up to this standard.
ISSUE/S:
1. Whether Rayala committed sexual harassment; and
2. Assuming that respondent committed sexual harassment, what is the applicable penalty?
HELD:
1.Yes. Even if we were to test Rayala’s acts strictly by the standards set in Section 3, RA 7877, he would
still be administratively liable. It is true that this provision calls for a "demand, request or requirement of a
sexual favor." But it is not necessary that the demand, request or requirement of a sexual favor be
Atty. Mercader
articulated in a categorical oral or written statement. It may be discerned, with equal certitude, from the acts
of the offender. Holding and squeezing Domingo’s shoulders, running his fingers across her neck and
tickling her ear, having inappropriate conversations with her, giving her money allegedly for school
expenses with a promise of future privileges, and making statements with unmistakable sexual overtones
– all these acts of Rayala resound with deafening clarity the unspoken request for a sexual favor. Likewise,
contrary to Rayala’s claim, it is not essential that the demand, request or requirement be made as a
condition for continued employment or for promotion to a higher position. It is enough that the respondent’s
acts result in creating an intimidating, hostile or offensive environment for the employee.That the acts of
Rayala generated an intimidating and hostile environment for Domingo is clearly shown by the common
factual finding of the Investigating Committee, the OP and the CA that Domingo reported the matter to an
officemate and, after the last incident, filed for a leave of absence and requested transfer to another unit.
The question of whether or not AO 250 covers Rayala is of no real consequence. The events of this case
unmistakably show that the administrative charges against Rayala were for violation of RA 7877; that the
OP properly assumed jurisdiction over the administrative case; that the participation of the DOLE, through
the Committee created by the Secretary, was limited to initiating the investigation process, reception of
evidence of the parties, preparation of the investigation report, and recommending the appropriate action
to be taken by the OP. AO 250 had never really been applied to Rayala. If it was used at all, it was to serve
merely as an auxiliary procedural guide to aid the Committee in the orderly conduct of the investigation.
What is before us is an administrative case for sexual harassment. Thus, whether the crime of sexual
harassment is malum in se or malum prohibitum is immaterial.
2. Only 1 year suspension as enshrined in AO 250.
Under AO 250, the penalty for the first offense is suspension for six (6) months and one (1) day to one (1)
year, while the penalty for the second offense is dismissal. On the other hand, Section 22(o), Rule XVI of
the Omnibus Rules Implementing Book V of the Administrative Code of 1987 and Section 52 A(15) of the
Revised Uniform Rules on Administrative Cases in the Civil Service both provide that the first offense of
disgraceful and immoral conduct is punishable by suspension of six (6) months and one (1) day to one (1)
year. A second offense is punishable by dismissal. Under the Labor Code, the Chairman of the NLRC
shall hold office during good behavior until he or she reaches the age of sixty-five, unless sooner
removed for cause as provided by law or becomes incapacitated to discharge the duties of the office.
In this case, it is the President of the Philippines, as the proper disciplining authority, who would
determine whether there is a valid cause for the removal of Rayala as NLRC Chairman. This power,
however, is qualified by the phrase "for cause as provided by law." Thus, when the President found that
Rayala was indeed guilty of disgraceful and immoral conduct, the Chief Executive did not have unfettered
discretion to impose a penalty other than the penalty provided by law for such offense. As cited above,
the imposable penalty for the first offense of either the administrative offense of sexual harassment or for
disgraceful and immoral conduct is suspension of six (6) months and one (1) day to one (1) year.
Accordingly, it was error for the Office of the President to impose upon Rayala the penalty of dismissal
from the service, a penalty which can only be imposed upon commission of a second offense.
Even if the OP properly considered the fact that Rayala took advantage of his high government position, it
still could not validly dismiss him from the service. Under the Revised Uniform Rules on Administrative
Cases in the Civil Service, taking undue advantage of a subordinate may be considered as an
aggravating circumstance and where only aggravating and no mitigating circumstances are present, the
maximum penalty shall be imposed. Hence, the maximum penalty that can be imposed on Rayala is
suspension for one (1) year.
Atty. Mercader
Atty. Mercader
APEX MINING COMPANY, INC., petitioner, vs. NATIONAL LABOR RELATIONS

COMMISSION and SINCLITICA CANDIDO, respondents.
[G.R. No. 94951. April 22, 1991.]
Under Rule XIII, Section 1(b), Book 3 of the Labor Code, as amended, the terms "househelper" or "domestic
servant" are defined as follows:
"The term 'househelper' as used herein is synonymous to the term 'domestic servant' and shall refer to
any person, whether male or female, who renders services in and about the employer's home
and which services are usually necessary or desirable for the maintenance and enjoyment
thereof, and ministers exclusively to the personal comfort and enjoyment of the employer's
family."
FACTS:
 Private respondent Sinclitica Candido was employed by petitioner Apex Mining Company, Inc. on
May 18, 1973 to perform laundry services at its staff house.
 In the beginning, she was paid on a piece rate basis. However, on January 17, 1982, she was
paid on a monthly basis at P250.00 a month which was ultimately increased to P575.00 a month.
 On December 18, 1987, while she was attending to her assigned task and she was hanging her
laundry, she accidentally slipped and hit her back on a stone.
 As a result of the accident she was not able to continue with her work. She was permitted to go
on leave for medication. De la Rosa offered her the amount of P2,000.00 which was eventually
increased to P5,000.00 to persuade her to quit her job, but she refused the offer and preferred to
return to work. Petitioner did not allow her to return to work and dismissed her.
 Petitioner contends that it is only when the househelper or domestic servant is assigned to certain
aspects of the business of the employer that such househelper or domestic servant may be
considered as such an employee.
PERTINENT ISSUE:
WHETHER or NOT a house helper in the staff houses of an industrial company a domestic helper or a
regular employee of the said firm?
HELD:
 The definition clearly contemplates such househelper or domestic servant who is employed in the
employer's home to minister exclusively to the personal comfort and enjoyment of the employer's family.
Such definition covers family drivers, domestic servants, laundry women, yayas, gardeners, houseboys and
other similar househelps.
 It cannot be interpreted to include househelp or laundry women working in staffhouses of a company, like
petitioner who attends to the needs of the company's guest and other persons availing of said facilities. The
criteria is the personal comfort and enjoyment of the family of the employer in the home of said
employer.
 The mere fact that the househelper or domestic servant is working within the premises of the business of
the employer and in relation to or in connection with its business, warrants the conclusion that such
househelper or domestic servant is and should be considered as a regular employee of the employer and
not as a mere family househelper or domestic servant.
Petitioner denies having illegally dismissed private respondent and maintains that respondent
abandoned her work. This argument notwithstanding, there is enough evidence to show that because of an
accident which took place while private respondent was performing her laundry services, she was not able
to work and was ultimately separated from the service. She is, therefore, entitled to appropriate relief as a
regular employee of petitioner. Inasmuch as private respondent appears not to be interested in returning to
her work for valid reasons, the payment of separation pay to her is in order.
Atty. Mercader
Barcenas v NLRC
Medialdea, J.
GR No. 87210 – 16 July 1990
FACTS:
Petitioner who speaks the Chinese language was hired as as secretary and interpreter by Chua Se
Su President and Chairman of the Board of Directors of the Poh Toh Buddhist Association of the Phils.
Inc. Aside from her pay and allowances under the law, she received an amount of P500.00 per month plus
free board and lodging in the temple. In 1981, Su and petitioner had amorous relations. In May, 1982, of
five months before giving birth to the alleged son of Su on October 12, 1982, petitioner was sent home to
Bicol. Upon the death of Su in July, 1983, complainant remained and continued in her job. Manuel Chua
was elected President and Chairman of the Board of the Association and Rev. Sim Dee was elected Head
Buddhist Priest. Chua and Dee discontinued payment of her monthly allowance and the additional P500.00
effective 1983. In addition, petitioner and her son were evicted forcibly from their quarters. She was brought
first to the Police precinct in Tondo and then brought to Aloha Hotel where she was compelled to sign a
written undertaking not to return to the Buddhist temple in consideration of the sum of P10,000.00.
Chua and Dee on the other hand, claimed that petitioner was never an employee of the Poh Toh
Temple but a servant who confined herself to the temple and to the personal needs of the late Chua Se Su
and thus, her position is coterminous with that of her master.
Labor Arbiter ruled in favor of the petitioner granting her money claims but dismissing the charge
of unfair labor practice. The NLRC reversed the Decision of the LA. Hence, this instant petition.
ISSUE: Whether or not petitioner is a regular employee of the Manila Buddhist Temple.
HELD: A painstaking review of the records compels the Court to dismiss the petition.
We agree with the petitioner's claim that she was a regular employee of the Manila Buddhist Temple
as secretary and interpreter of its Head Monk, Su As Head Monk, President and Chairman of the Board of
Directors of the Poh Toh Buddhist Association of the Philippines, Su was empowered to hire the petitioner
under Article V of the By-laws of the Association.
The work that petitioner performed in the temple could not be categorized as mere domestic work.
Thus, We find that petitioner, being proficient in the Chinese language, attended to the visitors, mostly
Chinese, who came to pray or seek advice before Buddha for personal or business problems; arranged
meetings between these visitors and Su and supervised the preparation of the food for the temple visitors;
acted as tourist guide of foreign visitors; acted as liaison with some government offices; and made the
payment for the temple's Meralco, MWSS and PLDT bills. Indeed, these tasks may not be deemed activities
of a household helper. They were essential and important to the operation and religious functions of the
temple.
The records do not show that petitioner filed any leave from work or that a leave was granted her.
Neither did she return to work after the birth of her child on October 12, 1982, whom she named Robert
Chua alias Chua Sim Tiong. The NLRC found that it was only in July, 1983 after Su died that she went back
to the Manila Buddhist Temple. Petitioner's pleadings failed to rebut this finding. Clearly, her return could
not be deemed as a resumption of her old position which she had already abandoned. Petitioner herself
supplied the reason for her return. Thus, her return to the temple was no longer as an employee but rather
as Su's mistress who is bent on protecting the proprietary and hereditary rights of her son and nephew.
Anent the petitioner's claim for unpaid wages since May, 1982 which she filed only in 1986, We
hold that the same has already prescribed. Under Article 292 of the Labor Code, all money claims arising
from employer-employee relations must be filed within three years from the time the cause of action
accrued, otherwise they shall forever be barred.
Finally, while petitioner contends that she continued to work in the temple after Su died, there is,
however, no proof that she was re-hired by the new Head Monk. In fact, she herself manifested that
respondents made it clear to her in no uncertain terms that her services as well as her presence and that
of her son were no longer needed.
Atty. Mercader
Atty. Mercader
Bernardo vs NLRC
Panganiban, J.
GR No. 122917 – 12 July 1999
FACTS:
The dismissed complainants, numbering 43, are deaf-mutes who were hired on various periods from 1988
to 1993 by respondent Far East Bank and Trust Co. as Money Sorters and Counters through a uniformly
worded agreement called "Employment Contract for Handicapped Workers". Disclaiming that complainants
were regular employees, respondent Far East Bank and Trust Company maintained that complainants were
hired temporarily under a special employment arrangement which was a result of overtures made by some
civic and political personalities to the respondent Bank; that complainant[s] were hired due to "pakiusap";
that the tellers themselves already did the sorting and counting chore as a regular feature and integral part
of their duties; that through the "pakiusap" of Arturo Borjal, the tellers were relieved of this task of counting
and sorting bills in favor of deaf-mutes without creating new positions as there is no position either in the
respondent or in any other bank in the Philippines which deals with purely counting and sorting of bills in
banking operations. The LA &, on appeal, the NLRC ruled against petitioners, holding that they could not
be deemed regular employees since they were hired as an accommodation to the recommendation of civic
oriented personalities whose employments were covered by Employment Contracts w/ special provisions
on duration of contract as specified under Art. 80. Hence, the terms of the contract shall be the law between
the parties.
ISSUE:
Whether or not the employees are qualified disabled persons whose employments were within the ambit
of Article 80 of the Labor Code.
HELD:
YES. The Magna Carta for Disabled Persons mandates that a qualified disabled employee should be
given the same terms and conditions of employment as a qualified able-bodied person. The fact that the
employees were qualified disabled persons necessarily removes the employment contracts from the
ambit of Article 80. Since the Magna Carta accords them the rights of qualified able-bodied persons, they
are thus covered by Article 280 of the Labor Code.
Atty. Mercader
Atty. Mercader
NITTO ENTERPRISES vs. NATIONAL LABOR RELATIONS COMMISSION and ROBERTO

CAPILI
[G.R. No. 114337. September 29, 1995.]
KAPUNAN, J
Petitioner Nitto Enterprises, a company engaged in the sale of glass and aluminum products,
hired Roberto Capili sometime in May 1990 as an apprentice machinist, molder and core maker
as evidenced by an apprenticeship agreement for a period of six (6) months from May 28, 1990
to November 28, 1990 with a daily wage rate of P66.75 which was 75% of the applicable
minimum wage.
At around 1:00 p.m. of August 2, 1990, Roberto Capili who was handling a piece of glass which
he was working on, accidentally hit and injured the leg of an office secretary who was treated at
a nearby hospital.
Later that same day, after office hours, private respondent entered a workshop within the office
premises which was not his work station. There, he operated one of the power press machines
without authority and in the process injured his left thumb. Petitioner spent the amount of
P1,023.04 to cover the medication of private respondent.
A letter was sent to Private Respondent that he has exceeded his authority by working on a
machine which he had no authority or even training to use, and that said usage was already
five(5) minutes after working hours, that the company will pay for all medical expenses until the
stitches are removed from his has, upon the condition that he (private Respondent) will sign a
quitclaim. On August 3, 1990 private respondent executed a Quitclaim and Release in favor of
petitioner for and in consideration of the sum of P1,912.79. Three days after, or on August 6,
1990, private respondent formally led before the NLRC Arbitration Branch, National Capital
Region a complaint for illegal dismissal and payment of other monetary benefit.
Labor Arbiter Patricio P. Libo-on gave two reasons for ruling that the dismissal of Roberto Capili
was valid. First, private respondent who was hired as an apprentice violated the terms of their
agreement when he acted with gross negligence resulting in the injury not only to himself but
also to his fellow worker. Second, private respondent had shown that "he does not have the
proper attitude in employment particularly the handling of machines without authority and
proper training."
IssueWas the dismissal of Private Respondent valid?
Held:
In the case at bench, the apprenticeship agreement between petitioner and private respondent was
executed on May 28, 1990 allegedly employing the latter as an apprentice in the trade of "core
maker/molder." On the same date, an apprenticeship program was prepared by petitioner and
submitted to the Department of Labor and Employment. However, the apprenticeship agreement
was led only on June 7, 1990. Notwithstanding the absence of approval by the Department of
Labor and Employment, the apprenticeship agreement was enforced the day it was signed.
Based on the evidence before us, petitioner did not comply with the requirements of the law. It is
mandated that apprenticeship agreements entered into by the employer and apprentice shall be
entered only in accordance with the apprenticeship program duly approved by the Minister of
Labor and Employment.
Prior approval by the Department of Labor and Employment of the proposed apprenticeship
program is, therefore, a condition sine qua non before an apprenticeship agreement can be
validly entered into. The act of ling the proposed apprenticeship program with the Department of Labor
and Employment is a preliminary step towards its final approval and does not instantaneously give
rise to an employer-apprentice relationship.
The fact is private respondent filed a case of illegal dismissal with the Labor Arbiter only three
days after he was made to sign a Quitclaim, a clear indication that such resignation was not
voluntary and deliberate.
Private Respondent is a regular employee since an apprenticeship agreement can only be done
with a proper apprenticeship agreement approved by the DOLE. Since at the time of the hiring
there was still no prior approval Private Respondent is deemed a regular employee by mandate of
Article 61 and 280 of the Labor Code.
Atty. Mercader
Century Canning Corporation v. Court of Appeals

Carpio, J.
GR No. 152894 – 17 August 2007
FACTS:
On July 15, 1997, petitioner hired Gloria Palad as a “fish cleaner” at petitioner’s tuna and sardines
factory. Palad signed an apprenticeship agreement and she received an apprentice allowance of P138.75
daily. Only July 25, 1997, petitioner submitted its apprenticeship program for approval to the Technical
Education and Skills Development Authority (TESDA) of the Department of Labor and Employment (DOLE).
On September 26, 1997, the apprenticeship program was approved by TESDA.
The performance evaluation gave Palad a rating of ‘needs improvement.’ Because Palad incurred
numerous tardiness and absences, petitioner terminated her service. Palad filed a complaint for illegal
dismissal, underpayment of wages and non-payment of pro-rated 13 month pay.
th
Before the LA: dismissed the complaint for lack of merit but ordered petitioner petitioner to pay Palad her
last salary and pro-rated 13 month pay.
th
Before the NLRC: affirmed the LA decision with modification that in addition, petitioner pay Palad her
backwages for 2 months
Before the CA: set aside the decision of the NLRC, finding Palad illegally dismissed. The CA held that the
apprenticeship agreement which Palad signed was not valid and binding because it was executed more
than 2 months before TESDA approved it. As held in the case of Nitto Enterprises v. NLRC, prior approval
by the DOLE of the proposed apprenticeship program is a condition sine qua non before an apprenticeship
agreement can be validly entered into.
ISSUE:
1. Whether or not Palad was an apprentice of petitioner
2. Whether or not Palad was illegally dismissed
HELD: The petitioner is without merit. The resolution of the CA is affirmed.
1. Palad was not an apprentice of petitioner. Registration and Approval by the TESDA of
apprenticeship program is required before hiring of apprentices
Republic Act No. 7796 (RA 7796), which created the TESDA, has transferred the authority over
apprenticeship programs from the Bureau of Local Employment of the DOLE to the TESDA. RA 7796
emphasizes TESDA's approval of the apprenticeship program as a pre-requisite for the hiring of
apprentices. Such intent is clear under Section 4 of RA 7796:
Pertinent section of R.A No. 7796 as used in the case at bar
SEC. 4. Definition of Terms . — As used in this Act:

…
j) "Apprenticeship" training within employment with compulsory related theoretical instructions involving a
contract between an apprentice and an employer on an approved apprenticeable occupation;
k) "Apprentice" is a person undergoing training for an approved apprenticeable occupation during an
established period assured by an apprenticeship agreement;
l) "Apprentice Agreement" is a contract wherein a prospective employer binds himself to train the
apprentice who in turn accepts the terms of training for a recognized apprenticeable occupation
emphasizing the rights, duties and
responsibilities of each party;
m) "Apprenticeable Occupation" is an occupation officially endorsed by a tripartite body and approved
for apprenticeship by the Authority [TESDA];
In the case at bar, the apprenticeship agreement was entered into between the parties before
petitioner filed its apprenticeship program with the TESDA for approval. The apprenticeship agreement was
Atty. Mercader
enforced even before the TESDA approved petitioner's apprenticeship program. Thus, the apprenticeship
agreement is void because it lacked prior approval from the TESDA.
The TESDA's approval of the employer's apprenticeship program is required before the employer
is allowed to hire apprentices. Prior approval from the TESDA is necessary to ensure that only employers
in the highly technical industries may employ apprentices and only in apprenticeable occupations. Thus,
under RA 7796, employers can only hire
apprentices for apprenticeable occupations which must be officially endorsed by a tripartite body and
approved for apprenticeship by the TESDA. This is to ensure the protection of apprentices and to obviate
possible abuses by prospective employers who may want to take advantage of the lower wage rates for
apprentices and circumvent the right of the
employees to be secure in their employment.
The requisite TESDA approval of the apprenticeship program prior to the hiring of apprentices was
further emphasized by the DOLE Department Order No. 68-04 (18 August 2004), the guidelines in the
implementation of the Apprenticeship and Employment Program of the government, which specifically
states that no enterprise shall be allowed to hire apprentices unless its apprenticeship program is registered
and approved by TESDA.
Since Palad is not considered an apprentice, she is deemed to be a regular employee. Her job as
a ‘fish cleaner’ is necessary in petitioner's business as a tuna and sardines factory.
2. Palad was illegally terminated.

Under Section 25, Rule VI, Book II of the Implementing Rules of the Labor Code, habitual
absenteeism and poor efficiency of performance are among the valid causes for which the employer may
terminate the apprenticeship agreement after the probationary period.
In the case at bar, petitioner failed to substantiate its claim that Palad was terminated for valid
reasons. Petitioner failed to prove the authenticity of the performance evaluation which petitioner claims to
have conducted. It was also never shown that petitioner apprised Palad of the performance standards set
by the company. She was not accorded due process as Palad denied having knowledge of the performance
evaluation, no notice of termination was served upon her, and the records are bereft of evidence to show
that petitioner gave Palad the opportunity to explain and defend herself.
Atty. Mercader
Atty. Mercader
Social Security Commission v. Azote

Mendoza, J.
GR No. 209741 – 15 April 2015
This petition for review on certiorari under Rule 45 of the Rules of Court filed by petitioner
Social Security Commission (SSC) assails the August 13, 2013 Decision of the Court of Appeals
(CA), and its October 29, 2013 Resolution in CA-G.R. SP No. 122933, allowing respondent Edna
A. Azote (Edna) to claim the death benefits of her late husband, Edgardo Azote (Edgardo).
R.A. No. 1161: Social Security Law, Section 8 (e) and (k):
SEC. 8. Terms Defined. - For purposes of this Act, the following terms shall, unless the context
indicates otherwise, have the following meanings:
xxxx
(e) Dependents - The dependents shall be the following:
(1) The legal spouse entitled by law to receive support from the member;
(2) The legitimate, legitimated or legally adopted, and illegitimate child who is unmarried, not
gainfully employed, and has not reached twenty-one (21) years of age, or if over twenty-one (21)
years of age, he is congenitally or while still a minor has been permanently incapacitated and
incapable of self-support, physically or mentally; and
(3) The parent who is receiving regular support from the member.
xxxx
(k) Beneficiaries - The dependent spouse until he or she remarries, the dependent legitimate,
legitimated or legally adopted, and illegitimate children, who shall be the primary beneficiaries of
the member: Provided, That the dependent illegitimate children shall be entitled to fifty percent
(50%) of the share of the legitimate, legitimated or legally adopted children: Provided, further,
That in the absence of the dependent legitimate, legitimated children of the member, his/her
dependent illegitimate children shall be entitled to one hundred percent (100%) of the benefits. In
their absence, the dependent parents who shall be the secondary beneficiaries of the member.
In the absence of all the foregoing, any other person designated by the member as his/her
secondary beneficiary.
FACTS:
 Respondent Edna and Edgardo, a member of the Social Security System (SSS), were
married in civil rites at the RTC Albay. Their union produced six children born.
 Edgardo submitted Form E-4 to the SSS with Edna and their three older children as
designated beneficiaries. Thereafter, Edgardo submitted another Form E-4 to the SSS
designating his three younger children as additional beneficiaries.
 Edgardo passed away.
 Edna filed her claim for death benefits with the SSS as the wife of a deceased-member. It
appeared, however, from the SSS records that Edgardo had earlier submitted another
Form E-4 with a different set of beneficiaries, namely: Rosemarie, as his spouse; and
Elmer, as dependent.
 Consequently, Edna’s claim was denied. Her children were adjudged as beneficiaries and
she was considered as the legal guardian of her minor children. The benefits, however,
would be stopped once a child would attain the age of 21.
 Edna filed a petition with the SSC to claim the death benefits, lump sum and monthly
pension of Edgardo, insisting that she was the legitimate wife of Edgardo.
 SSS: there was a conflicting information in the forms submitted by the
deceased. Summons was published in a newspaper of general circulation directing
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Rosemarie to file her answer, but No answer was filed and Rosemarie was declared in
default.
 SSC: dismissed Edna’s petition for lack of merit.
 Citing Section 24(c) of the SS Law, it explained that although Edgardo filed the
Form E-4 designating Edna and their six children as beneficiaries, he did not
revoke the designation of Rosemarie as his wife-beneficiary, and Rosemarie was
still presumed to be his legal wife.
 National Statistics Office (NSO) records revealed that the marriage of Edgardo to
one Rosemarie Teodora Sino was registered on July 28, 1982. Consequently, it
opined that Edgardo’s marriage to Edna was not valid as there was no showing
that his first marriage had been annulled or dissolved.
 There must be a judicial determination of nullity of a previous marriage before a
party could enter into a second marriage.
 Motion for reconsideration denied: it was incumbent upon Edna to prove that her marriage
to the deceased was valid, which she failed to do. It further opined that Rosemarie could
not be merely presumed dead, and that death benefits under the SSS could not be
considered properties which may be disposed of in a holographic will.
 CA: reversed and set aside the resolution and the order of the SSC.
 Held that the SSC could not make a determination of the validity or invalidity of the
marriage of Edna to Edgardo considering that no contest came from either
Rosemarie or Elmer.
 Explained that Edna had established her right to the benefits by substantial
evidence, namely, her marriage certificate and the baptismal certificates of her
children.
 Ruled that Edgardo made a deliberate change of his wife-beneficiary in his 1994
E-4 form, as such was clearly his voluntary act manifesting his intention to revoke
his former declaration in the 1982 E-4 form.
 The 1994 E-4 form submitted by Edgardo, designating Edna as his wife,
superseded his former declaration in his 1982 E-4 form.
 CA further opined that the Davac case cited by the SSC was not applicable because there
were two conflicting claimants in that case, both claiming to be wives of the
deceased, while in this case, Edna was the sole claimant for the death benefits, and that
her designation as wife-beneficiary remained valid and unchallenged.
 It was of the view that Rosemarie’s non-appearance despite notice could be deemed a
waiver to claim death benefits from the SSS, thereby losing whatever standing she might
have had to dispute Edna’s claim.
ISSUE/S:
1. Whether or not respondent CA gravely erred in ruling that the Commission is bereft of
authority to determine the validity or invalidity of the marriage of the private respondent
and member, Edgardo Azote.
2. Whether or not respondent CA gravely erred in granting the petition of the private
respondent and finding her entitled to the SS benefits.
3. Whether or not the honorable CA gravely erred in ruling that the designation of the
private respondent as wife-beneficiary is valid.
1. Yes. Although the SSC is not intrinsically empowered to determine the validity of
marriages, it is required by Section 4(b) (7) of R.A. No. 828229 to examine available
Atty. Mercader
statistical and economic data to ensure that the benefits fall into the rightful
beneficiaries.
 As held in Social Security Commission vs. Favila:
 SSS, as the primary institution in charge of extending social security protection to
workers and their beneficiaries is mandated by Section 4(b)(7) of RA 8282 to
require reports, compilations and analyses of statistical and economic data and to
make an investigation as may be needed for its proper administration and
development.
 The investigations conducted by SSS are appropriate in order to ensure that the
benefits provided under the SS Law are received by the rightful beneficiaries.
 It is not hard to see that such measure is necessary for the system’s proper
administration, otherwise, it will be swamped with bogus claims that will pointlessly
deplete its funds. Such scenario will certainly frustrate the purpose of the law
which is to provide covered employees and their families protection against the
hazards of disability, sickness, old age and death, with a view to promoting their
well-being in the spirit of social justice.
2. No. Only the legal spouse of the deceased-member is qualified to be the beneficiary
of the latter’s SS benefits.
 Applying Section 8(e) and (k) of R. A. No. 8282, it is clear that only the legal spouse of the
deceased-member is qualified to be the beneficiary of the latter’s SS benefits.
 In this case, there is a concrete proof that Edgardo contracted an earlier marriage with
another individual as evidenced by their marriage contract.
 Edgardo even acknowledged his married status when he filled out the 1982 Form
E-4 designating Rosemarie as his spouse.
 It is undisputed that the second marriage of Edgardo with Edna was celebrated at the time
when the Family Code was already in force.
 Using the parameters outlined in Article 41 of the Family Code, Edna, without doubt, failed
to establish that there was no impediment or that the impediment was already removed at
the time of the celebration of her marriage to Edgardo.
 Settled is the rule that “whoever claims entitlement to the benefits provided by law
should establish his or her right thereto by substantial evidence.”
 Edna could not adduce evidence to prove that the earlier marriage of Edgardo was either
annulled or dissolved or whether there was a declaration of Rosemarie’s presumptive
death before her marriage to Edgardo. What is apparent is that Edna was the second wife
of Edgardo. Considering that Edna was not able to show that she was the legal spouse of
a deceased-member, she would not qualify under the law to be the beneficiary of the
death benefits of Edgardo.
3. No. Although an SSS member is free to designate a beneficiary, the designation
must always conform to the statute.
 As a social security program of the government, Section 8 (e) and (k) of the said law
expressly provides who would be entitled to receive benefits from its deceased-member
 The Court does not subscribe to the disquisition of the CA that the updated Form E-4 of
Edgardo was determinative of Edna’s status and eligibility to claim the death benefits of
deceased-member.
 Although an SSS member is free to designate a beneficiary, the designation must always
conform to the statute. To blindly rely on the form submitted by the deceased-member
would subject the entire social security system to the whims and caprices of its members
and would render the SS Law inutile.
Atty. Mercader
SOCIAL SECURITY COMMISSION and SOCIAL SECURITY SYSTEM vs. TERESA G.

FAVILA
DEL CASTILLO, J.
G.R. No. 170195, March 28, 2011
Facts:
This Petition for Review on Certiorari assails the Decision dated May 24, 2005 of the Court
of Appeals (CA) in CA-G.R. SP No. 82763 which reversed and set aside the Resolution
dated June 4, 2003 and Order dated January 21, 2004 of the Social Security Commission
(SSC) in SSC Case No. 8-15348-02. Likewise assailed is the CA Resolution dated October
17, 2005 denying the Motion for Reconsideration thereto
On August 5, 2002, respondent Teresa G. Favila (Teresa) filed a Petition before petitioner
SSC. She averred therein that after she was married to Florante Favila (Florante) on
January 17, 1970, the latter designated her as the sole beneficiary in the E-1 Form he
submitted before petitioner Social Security System (SSS), Quezon City Branch on June 30,
1970. When they begot their children Jofel, Floresa and Florante II, her husband likewise
designated each one of them as beneficiaries.
In its Answer, SSS averred that on May 6, 1999, the claim for Florante’s pension benefits
was initially settled in favor of Teresa as guardian of the minor Florante II. Per its records,
Teresa was paid the monthly pension for a total period of 57 months or from February 1997
to October 2001 when Florante II reached the age of 21. The claim was, however, re-
adjudicated on July 11, 2002 and the balance of the five-year guaranteed pension was
again settled in favor of Florante II. SSS also alleged that Estelita Ramos, sister of Florante,
wrote a letter stating that her brother had long been separated from Teresa.
Ruling of the Social Security Commission SSC held that the surviving spouse’s entitlement
to an SSS member’s death benefits is dependent on two factors which must concur at the
time of the latter’s death, to wit: (1) legality of the marital relationship; and (2) dependency
for support.
Ruling of the Court of Appeals CA found Teresa’s petition impressed with merit. It gave
weight to the fact that she is a primary beneficiary because she is the lawful surviving
spouse of Florante and in addition, she was designated by Florante as such beneficiary.
There was no legal separation or annulment of marriage that could have disqualified her
from claiming the death benefits and that her designation as beneficiary had not been
invalidated by any court of law.
Issue: Whether or not Teresa is a primary beneficiary in contemplation of the Social Security
Law as to be entitled to death benefits accruing from the death of Florante.
Held: We find merit in the petition.The law in force at the time of Florante’s death was RA
1161. Section 8 (e) and (k) of said law.
While SSC believes that the foregoing constitutes substantial evidence of Teresa’s amorous
relationship, we, however, find otherwise. It is not hard to see that Estelita’s claim of
Teresa’s cohabitation with a married man is a mere allegation without proof. Likewise, the
interviews conducted by SSS revealed rumors only that Teresa had an affair with a certain
police officer. Notably, not one from those interviewed confirmed that such an affair indeed
existed. "The basic rule is that mere allegation is not evidence and is not equivalent to proof.
Charges based on mere suspicion and speculation likewise cannot be given credence."
"Mere uncorroborated hearsay or rumor does not constitute substantial
evidence."Remarkably, the Memorandum itself stated that there is not enough proof to
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establish Teresa’s alleged relationship with another man since they did not live as husband
and wife
In this case, aside from Teresa’s bare allegation that she was dependent upon her husband
for support and her misplaced reliance on the presumption of dependency by reason of her
valid and then subsisting marriage with Florante, Teresa has not presented sufficient
evidence to discharge her burden of proving that she was dependent upon her husband for
support at the time of his death.
As a final note, we do not agree with the CA’s pronouncement that the investigations
conducted by SSS violate a person’s right to privacy. SSS, as the primary institution in
charge of extending social security protection to workers and their beneficiaries is mandated
by Section 4(b)(7) of RA 828232 to require reports, compilations and analyses of statistical
and economic data and to make an investigation as may be needed for its proper
administration and development. Precisely, the investigations conducted by SSS are
appropriate in order to ensure that the benefits provided under the SS Law are received by
the rightful beneficiaries.
Atty. Mercader
Social Security System vs Jarque

Carpio Morales, J.
GR No. 165545 – 24 March 2006
Facts:
Clemente Bailon was married to one Alicia Diaz, but 15 years after his marriage
to Diaz, it was established that he obtained a declaration of Diaz’s presumptive death.
Subsequently, Bailon contracted a marriage with herein respondent Teresita Jarque.
Later, Bailon died. Jarque then claimed her death benefits from the Social Security
Commission (SSS) as the beneficiary of the deceased. However, later on said Alicia
reappeared after the death of Bailon and also after the latter has already contracted
marriage with herein respondent. Both Diaz and Jarque were claiming entitlement to
death benefits from the Social Security Commission as beneficiary of the deceased.
Issue:
Was respondent the legal wife of the deceased so as to constitute entitlement to
SSS benefits due a wife for the death of a husband?
Held:
Yes. Respondent is the wife and entitled to the benefits. Under the law, if the
absentee reappears, but no step is taken to terminate the subsequent marriage, either
by affidavit or by court action, such absentee's mere reappearance, even if made known
to the spouses in the subsequent marriage, will not terminate such marriage. Since the
second marriage has been contracted because of a presumption that the former spouse
is dead, such presumption continues in spite of the spouse's physical reappearance, and
by fiction of law, he or she must still be regarded as legally an absentee until the
subsequent marriage is terminated as provided by law. In the case at bar, as no step
was taken to nullify, in accordance with law, Bailon's and respondent's marriage prior to
the former's death in 1998, respondent is rightfully the dependent spouse-beneficiary of
Bailon.
Atty. Mercader
SIGNEY v. SOCIAL SECURITY SYSTEM

TINGA, J.:; G.R. No. 173582; January 28, 2008
FACTS: Rodolfo Signey, Sr., a member of the SSS, died on 21 May 2001. In his member's
records, he had designated Yolanda Signey (petitioner) as primary beneficiary and his four
children with her as secondary beneficiaries. On 6 July 2001, petitioner filed a claim for death
benefits with the public respondent SSS. She revealed in her SSS claim that the deceased had a
common-law wife, Gina Servano (Gina), with whom he had two minor children namey, Ginalyn
Servano (Ginalyn), and Rodelyn Signey (Rodelyn). Petitioner's declaration was confirmed when
Gina herself filed a claim for the same death benefits on 13 July 2001 in which she also declared
that both she and petitioner were common-law wives of the deceased and that Editha Espinosa
(Editha) was the legal wife. October 2001, Editha also filed an application for death benefits with
the SSS stating that she was the legal wife of the deceased. SSS: -denied the death benefit claim
of petitioner -it recognized Ginalyn and Rodelyn, the minor children of the deceased with Gina,
as the primary beneficiaries under the SSS Law. -also found that the 20 March 1992 marriage
between petitioner and the deceased was null and void because of a prior subsisting marriage
contracted on 29 October 1967 between the deceased and Editha, as confirmed with the Local
Civil Registry of Cebu City. SSC: -gave more weight to the SSS field investigation and the
confirmed certification of marriage showing that the deceased was married to Editha on 29
October 1967, than to the aforestated declarations of Editha in her waiver of rights. -It found that
petitioner only relied on the waiver of Editha, as she failed to present any evidence to invalidate
or otherwise controvert the confirmed marriage certificate. - found, based on the SSS field
investigation report dated 6 November 2001 that even if Editha was the legal wife, she was not
qualified to the death benefits since she herself admitted that she was not dependent on her
deceased husband for support inasmuch as she was cohabiting with a certain Aquilino Castillo. -
SSC applied Section 8(e) and (k) of Republic Act (RA) No. 8282, the SSS Law which was in force
at the time of the member's death on 21 May 2001, and held that the dependent legitimate and
illegitimate minor children of the deceased member were also considered primary beneficiaries. -
The records disclosed that the deceased had one legitimate child, Ma. Evelyn Signey, who
predeceased him, and several illegitimate children with petitioner and with Gina. -the deceased
SSS member's four illegitimate children with petitioner could no longer be considered dependents
at the time of his death because all of them were over 21 years old when he died on 21 May 2001,
the youngest having been born on 31 March 1978. - the other hand, the deceased SSS member's
illegitimate children with Gina were qualified to be his primary beneficiaries for they were still
minors at the time of his death, Ginalyn having been born on 13 April 1996, and Rodelyn on 20
April 2000.
ISSUE: WON petitioner has a superior legal right over the SSS benefits as against the illegitimate
minor children of the deceased.
SC: NO SSS death benefits, Section 8(e) and (k) of R. A. No. 8282 is very clear. Since petitioner
is disqualified to be a beneficiary and because the deceased has no legitimate child, it follows
that the dependent illegitimate minor children of the deceased shall be entitled to the death
benefits as primary beneficiaries. The SSS Law is clear that for a minor child to qualify as a
"dependent " the only requirements are that he/she must be below 21 years of age, not married
nor gainfully employed. In this case, the minor illegitimate children Ginalyn and Rodelyn were
born on 13 April 1996 and 20 April 2000, respectively. Had the legitimate child of the deceased
and Editha survived and qualified as a dependent under the SSS Law, Ginalyn and Rodelyn would
have been entitled to a share equivalent to only 50% of the share of the said legitimate child.
Since the legitimate child of the deceased predeceased him, Ginalyn and Rodelyn, as the only
qualified primary beneficiaries of the deceased, are entitled to 100% of the benefits.
Atty. Mercader
Mendoza vs People
Carpio Morales, J.
GR No. 183891 – 3 August 2010
FACTS:
Petitioner Romarico J. Mendoza, president of Summa Alta Tierra Industries, Inc.
(SATII), failed to remit the Social Security System (SSS) premium contributions of its
employees. For such he was convicted of violation of Section 22 (a) and (d) vis-à-vis
Section 28 of R.A. No. 8282 or the Social Security Act of 1997. The premiums which
petitioner failed to remit amounted to P421, 151. 09 inclusive of penalties. SSS granted
him several extensions within which to remit the premiums, however petitioner still failed
to comply. Petitioner contends that during the questioned period that he failed to remit
the premiums, SATII shut down due to the general decline in the economy, hence he
should be exculpated.
ISSUE:
Was petitioner justified for the non-remittance of the premiums?
HELD:
No. Remittance of contribution to the SSS under Section 22 (a) of the Social
Security Act is mandatory. United Christian Missionary Society v. Social Security
Commission explicitly explains: No discretion or alternative is granted in the enforcement
of the law's mandate that the employer who fails to comply with his legal obligation to
remit the premiums to the System within the prescribed period shall pay a penalty of
three 3% per month. The prescribed penalty is evidently of a punitive character, provided
by the legislature to assure that employers do not take lightly the State's exercise of the
police power in the implementation of the Republic's declared policy 'to develop,
establish gradually and perfect a social security system which shall be suitable to the
needs of the people throughout the Philippines and (to) provide protection to employers
against the hazards of disability, sickness, old age and death. In this concept, good faith
or bad faith is rendered irrelevant, since the law makes no distinction between an
employer who professes good reasons for delaying the remittance of premiums and
another who deliberately disregards the legal duty imposed upon him to make such
remittance. From the moment the remittance of premiums due is delayed, the penalty
immediately attaches to the delayed premium payments by force of law.
Atty. Mercader
Jorge Navarra vs People of the Philippines

[G.R. No. 224943. March 20, 2017.]
Perlas-Bernabe, J:
Facts:
Jorge Navarra is the President and Chairman of the board of directors of Far East Network of
Integrated Circuits Subcontractors (FENICS) . It was discovered that FENICS failed to remit the
SSS contributions of its employees from July 1997 to June 2000. A criminal case was filed
against Navarra for violation of Section 22 (a), in relation to Section 28 (h) and (f), of Republic
Act No. (RA) 8282. Navarra argues that the Information filed against him does not constitute a
crime.
Issue: Whether or not FENICS is liable under RA 8282
RULING:
Yes, prompt remittance of SSS contributions under the aforesaid provision is mandatory. Any
divergence from this rule subjects the employer not only to monetary sanctions, i.e., the
payment of penalty of three percent (3%) per month, but also to criminal prosecution if the
employer fails to: (a) register its employees with the SSS; (b) deduct monthly contributions from
the salaries/wages of its employees; or (c) remit to the SSS its employees' SSS contributions
and/or loan payments after deducting the same from their respective salaries/wages. In this
regard, Section 28 (f) of RA 8282 explicitly provides that "[i]f the act or omission penalized by
this Act be committed by an association, partnership, corporation or any other institution, its
managing head, directors or partners shall be liable to the penalties provided in this Act for the
offense." Notably, the aforesaid punishable acts are considered mala prohibita and, thus, the
defenses of good faith and lack of criminal intent are rendered immaterial.
In this case, a judicious review of the records reveals that the prosecution — through a plethora
of documentary evidence — had established by proof beyond reasonable doubt that during the
period of July 1997 to June 2000, FENICS failed to remit its employees' SSS contributions
despite withholding such amounts from their respective salaries. It is settled that "[f]actual
findings of the RTC, when a rmed by the CA, are entitled to great weight and respect by this
Court and are deemed nal and conclusive when supported by the evidence on record," as in
this case.
HELD:
WHEREFORE, the petition is DENIED. The Decision dated October 29, 2015 and the
Resolution dated May 19, 2016 of the Court of Appeals in CA-G.R. CR No. 35855, which a
rmed the Decision dated March 13, 2013 of the Regional Trial Court of Muntinlupa City, Branch
206 in Crim. Case No. 01-303 nding petitioner Jorge B. Navarra GUILTY beyond reasonable
doubt of the crime of violation of Section 22 (a), in relation to Section 28 (h) and (f), of Republic
Act No. 8282 is herebyAFFIRMED.
Atty. Mercader
Atty. Mercader
GSIS v. De Leon
Nachura J.
G.R. No. 186560 November 17, 2010
Facts:
Respondent Fernando P. de Leon retired as Chief State Prosecutor of the Department of Justice
(DOJ) in 1992, after 44 years of service to the government. He applied for retirement under
Republic Act (R.A.) No. 910, invoking R.A. No. 3783, as amended by R.A. No. 4140, which
provides that chief state prosecutors hold the same rank as judges. The application was approved
by GSIS. Thereafter, and for more than nine years, respondent continuously received his
retirement benefits, until 2001, when he failed to receive his monthly pension.
Respondent learned that GSIS cancelled the payment of his pension because the Department of
Budget and Management (DBM) informed GSIS that respondent was not qualified to retire under
R.A. No. 910; that the law was meant to apply only to justices and judges; and that having the
same rank and qualification as a judge did not entitle respondent to the retirement benefits
provided thereunder. Thus, GSIS stopped the payment of respondent’s monthly pension.
Respondent wrote GSIS several letters but he received no response until November 9, 2007,
when respondent received the following letter from GSIS:
Dear Atty. De Leon:
This is in response to your request for resumption of pension benefit.
It appears that you retired under Republic Act No. 910 in 1992 from your position as Chief State
Prosecutor in the Department of Justice. From 1992 to 2001, you were receiving pension benefits
under the said law. Beginning the year 2002, the Department of Budget and Management through
then Secretary Emilia T. Boncodin already refused to release the funds for your pension benefit
on the ground that Chief State Prosecutors are not covered by R.A. 910. This conclusion was
later on affirmed by Secretary Rolando G. Andaya, Jr. in a letter dated 6 June 2006.
In view of these, you now seek to secure benefits under Republic Act No. 660 or any other
applicable GSIS law.
We regret, however, that we cannot accede to your request because you have chosen to retire
and in fact have already retired under a different law, Republic Act No. 910, more than fifteen (15)
years ago. There is nothing in the GSIS law which sanctions double retirement unless the retiree
is first re-employed and qualifies once again to retire under GSIS law. In fact, Section 55 of
Republic Act No. 8291 provides for exclusivity of benefits which means that a retiree may choose
only one retirement scheme available to him to the exclusion of all others.
Nonetheless, we believe that the peculiarities of your case is a matter that may be jointly
addressed or threshed out by your agency, the Department of Justice, and the Department of
Budget and Management.
Very truly yours,
(signed)
CECIL L. FELEO
Senior Vice President
Social Insurance Group
Respondent then filed a petition for mandamus before the CA, praying that petitioner be
compelled to continue paying his monthly pension and to pay his unpaid monthly benefits from
2001. He also asked that GSIS and the DBM be ordered to pay him damages.
Issue: WON Atty. De Leon is entitled to his monthly pension?
Held: YES
The inflexible rule in our jurisdiction is that social legislation must be liberally construed in favor
of the beneficiaries. Retirement laws, in particular, are liberally construed in favor of the retiree
because their objective is to provide for the retiree’s sustenance and, hopefully, even comfort,
Atty. Mercader
when he no longer has the capability to earn a livelihood. The liberal approach aims to achieve
the humanitarian purposes of the law in order that efficiency, security, and well-being of
government employees may be enhanced. Indeed, retirement laws are liberally construed and
administered in favor of the persons intended to be benefited, and all doubts are resolved in favor
of the retiree to achieve their humanitarian purpose.
In this case, as adverted to above, respondent was able to establish that he has a clear legal right
to the reinstatement of his retirement benefits.
In stopping the payment of respondent’s monthly pension, GSIS relied on the memorandum of
the DBM, which, in turn, was based on the Chief Presidential Legal Counsel’s opinion that
respondent, not being a judge, was not entitled to retire under R.A. No. 910. And because
respondent had been mistakenly allowed to receive retirement benefits under R.A. No. 910, GSIS
erroneously concluded that respondent was not entitled to any retirement benefits at all, not even
under any other extant retirement law. This is flawed logic.
Respondent’s disqualification from receiving retirement benefits under R.A. No. 910 does not
mean that he is disqualified from receiving any retirement benefit under any other existing
retirement law.
Retirement benefits are a form of reward for an employee’s loyalty and service to the employer,
and are intended to help the employee enjoy the remaining years of his life, lessening the burden
of having to worry about his financial support or upkeep. A pension partakes of the nature of
"retained wages" of the retiree for a dual purpose: to entice competent people to enter the
government service; and to permit them to retire from the service with relative security, not only
for those who have retained their vigor, but more so for those who have been incapacitated by
illness or accident.
Atty. Mercader
Government Service Insurance System vs. Marilou Alcaraz

GR No. 187474 – 06 February 2013
Brion, J.
FACTS:
 Bernardo was employed for almost 29 years by the MMDA in Makati City. He worked at
the MMDA as laborer, Metro Aide and Metro Aide I.
 Sometime in February 2004, Bernardo was diagnosed with Pulmonary Tuberculosis
(PTB) and Community Acquired Pneumonia (CAP). On May 13, 2004, he was confined
at the Ospital ng Makati. He was discharged with the following diagnosis: Acute Diffuse
Anterolateral Wall Myocardial Infarction, Killips IV-1, CAP High Risk, PTB III and
Diabetes Mellitus Type 2.
 On January 15, 2005, Bernardo was found dead at the basement of the MMDA building.
Upon conducting an autopsy, the Medico-Legal Officer concluded that Bernardo died of
Myocardial Infarction, old and recent. Bernardo’s widow, Marilou, subsequently filed a
claim for death benefits with the GSIS.
 GSIS: Denied claim for death benefits on the ground that the cause of death was directly
related to diabetes which is considered not a work-related illness, hence its
complications are not work-related. Marilou appealed to the ECC which affirmed the
GSIS ruling. She sought relief from the CA through a petition for review, contending that
(1) the ECC misappreciated the facts. She argued that even if the undelying cause of
Bernardo’s death was diabetes, the illness was acquired in the course of his
employment and was further aggravated by the nature of his work; and (2) the ECC
gravely abused its discretion for giving scant consideration to the medical findings on
Bernardo’s true condition prior to his death.
 CA: Granted the petition and set aside the ECC ruling on the ground that there is
sufficient proof of work-connection between Bernardo’s ailment and his working
conditions. His work as a labourer and metro aide must have substantially contributed to
his illness. CA ordered the GSIS to pay Bernardo’s heirs the proper benefits for his
death. GSIS moved for reconsideration, but was denied. Hence, this petition.
ISSUE/S:
1. Whether or not myocardial infarction which caused Bernardo’s death have been
aggravated by the nature of his duties
2. Whether or not cardiovascular disease is compensable under the law

1. YES. Myocardial infarction has been aggravated by the nature of Bernardo’s work.
 Diabetes mellitus is not the sole predisposing factor to myocardial infarction.
 Bernardo died after almost three decades of service with the MMDA. His death occurred
within his employer’s premises while he was at work. The conclusions of the GSIS and
the ECC in denying the death benefits have disregarded the stressful and strenuous
conditions under which Bernardo toiled for almost 29 years.
 As early as May 2004, Bernardo was already complaining of shortness of breath and
dizziness, and despite such condition, he still continued performing his work until he was
confined. The short intervening period between his confinement and his last day of duty
with the MMDA indicate that he was suffering from such disease at the time he was
employed. His everyday exposure to heat and pollution, among others, aggravated pre-
existing illness like pulmonary tuberculosis and community acquired pneumonia.
Atty. Mercader
 While the diabetes was indeed a complicating factor in Bernardo’s health condition and
indisputably aggravated his heart problem, other employment factors, mental and
physical, cannot be discounted. They contributed, if not as a direct cause of the heart
condition itself, as aggravation that worsened and hastened his fatal myocardial
infarction.
 The Court declared in GSIS v. Cuanang that "Myocardial infarction, also known as
coronary occlusion or just a ‘coronary,’ is a life threatening condition. Predisposing
factors for myocardial infarction are the same for all forms of Coronary Artery Disease,
and these factors include stress. Stress appears to be associated with elevated blood
pressure.” Therefore, the CA is correct in holding that there is substantial evidence
supporting the conclusion that myocardial infarction in Bernardo’s case is work-related.
2. YES. Cardiovascular disease is compensable.

 Resolution No. 432 provides that a heart disease is compensable if it was known to
have been present during employment, there must be proof that an acute exacerbation
was clearly precipitated by the unusual strain by reason of the nature of his work.
 Based on the evidence on record, the nature of Bernardo’s duties and the conditions
under which he worked were such as to eventually cause the onset of his myocardial
infarction. The stresses, the strain, and the exposure to street pollution and to the
elements that Bernardo had to bear for almost 29 years are all too real to be ignored.
They cannot but lead to a deterioration of health particularly with the contributing factors
of diabetes and pulmonary disease.
 Records show that the debilitating effect of Bernardo’s working conditions on his health
manifested itself several months before his death. As early as May 3, 2004, Bernardo
was already complaining of shortness of breath and dizziness. From May 13 to 19, 2004,
he had to be confined at the Ospital ng Makati and was diagnosed with acute myocardial
infarction which caused his death on January 15, 2005 while he was at work.
 The CA committed no reversible error nor any grave abuse of discretion in awarding
death benefits to Bernardo’s heirs. As an agency charged by law with the
implementation of social justice guaranteed and secured by the Constitution – the ECC
(as well as the GSIS and the SSS) – should adopt a liberal attitude in favor of the
employees in deciding claims for compensability, especially where there is some basis in
the facts for inferring a work-connection to the accident or to the illness.21 This is what
the Constitution dictates.
Atty. Mercader
Atty. Mercader
Secretary of Department of Agrarian Reform vs. Nemesio Dumagpi

Reyes, J.
GR No. 195412 - February 4, 2015
FACTS:
On August 12, 1997, Nemesio Dumagpi (Nemesio), filed a complaint denominated Accion Reivindicatoria,
Quieting of Title, and Damages before the RTC against Juan Aguilar, Sr. (Aguilar), Rosalino C. Valencia
(Valencia), Dionito B. Custodio (Custodio) and the Secretary of DAR (defendants), wherein he alleged that
he is the owner of land in Siay, Zamboanga del Sur that due to his open, notorious, adverse and exclusive
possession, occupation and cultivation of the said land in the concept of owner since July 4, 1945, during
which he introduced improvements thereon such as a residential house of light materials, canals, dikes,
and rice paddies and planted coconut and fruit trees and exclusively enjoyed the produce, the said lot has
long been converted into his private property by operation of law.
In 1964, Nemesio applied for a free patent over the subject lot. which he said was approved in 1966, but
the patent was never released due to opposition from the defendants; that sometime in 1973, defendant
Aguilar forcibly entered and occupied the northwest portion of Lot in 1986, Aguilar intervened as
claimant/protestant and appeared at a hearing conducted by the Bureau of Lands at Buug, Zamboanga del
Sur on September 10, 1996; another claimant, Wenceslao Dominguez, occupant of the property at the
southeast boundary, also opposed his free patent application; sometime in 1989, defendants Custodio and
Valencia, by means of force, allegedly dispossessed Nemesio of a total of two hectares at the mid-northern
portion of his lot; in March 1997, the above-named free patent oppositors, all allegedly distant relatives of
Nemesio, threatened to physically oust him from his lot, and it was then that he learned for the first time
that titles had been issued by the DAR to the private defendants through deceit, fraud and
misrepresentation, along a much-reduced portion was also issued in his name.
Rodolfo G. Salvador, Jr., an employee of Land Management Services Office under the Bureau of Lands of
the Department of Environment and Natural Resources (DENR) Region 9, confirmed the free patent
application of Nemesio and identified the pertinent documents kept in a vault in his office; that while it
appears that the free patent was approved on September 5, 1966, he did not know if it was released; that
the private defendants were subsequently granted titles to portions of the lot by the DAR.
Florentino Dumagpi, first cousin of Nemesio, testified that upon invitation of Nemesio he and his brothers
came to farm the land in 1955 for a share of the crops; that by 1955, portions thereof had already been
cultivated and some trees had been cut to build a camarin; that they left in 1965 to be near the school of
their children; that in 1972, he visited the land and saw his cousin Nemesio still occupying a portion thereof
but none of the private defendants except some squatters
DAR presented Ariston Labrador (Labrador), a retired Municipal Agrarian Reform Officer for Diplahan,
Zamboanga del Sur, which then included the subject DAR resettlement site, now part of the Municipality of
Siay. He testified that the resettlement site contains 2,598 has and used to be part of a coal mine
reservation; that the area was reclassified and declared as a resettlement site under Proclamation No. 2342
dated March 14, 1984, to be administered and disposed of by DAR pursuant to the Comprehensive Agrarian
Reform Program; that following DAR guidelines, he verified a list of qualified beneficiaries, which included
the private defendants who had been personally cultivating portions which were eventually titled to them;
that Nemesio cultivated a small part of the lot he claimed but during his visit he had stopped doing so due
to advanced age; that he did not know that the surveyor was a brother of defendant Aguilar. The RTC
rendered its Decision on December 16, 2005 in favor of Nemesio.
ISSUE/S: W/N the present controversy is a civil action and not an agrarian reform matter within the
exclusive original jurisdiction of the DAR?
1) NO. Under Section 3 of Article XII, lands of the public domain are classified into agricultural, forest or
timber, mineral lands and national parks, and alienable lands of the public domain, which shall be limited
to agricultural lands.
As asserted by the DAR and testified to by Labrador, from 1938 to 1984 the subject lot was part of a coal
mine reservation, established under Proclamation No. 234, Series of 1938, as amended by Proclamation
No. 402, Series of 1953. On March 14, 1984, a portion of the reservation containing 2,598 has was
reclassified under Presidential Proclamation No. 2342 as agricultural land reserved for resettlement. On
Atty. Mercader
June 10, 1988, R.A. No. 6657, or the Comprehensive Agrarian Reform Law (CARL), placed the said
reclassified area under the administration and disposition of the DAR, pursuant to Section 2 thereof.
There is no dispute that the land Nemesio is claiming was not alienable public agricultural land but in truth
was classified and reserved as a coal mine from 1938 to 1984, a period which overlapped with his claimed
acquisitive possession. Clearly, he cannot invoke Section 48 (b) of Commonwealth Act No. 141 and assert
an acquisitive title thereto by reason of open, continuous, exclusive, and notorious possession for 30 years.
Then, even granting arguendo that his application for free patent was approved by DENR, it is not denied
that the same was never released. In fact, DAR claimed that it was never approved precisely because the
land was not alienable. Even Nemesio admitted that his free patent application was not approved due to
opposition by several other claimants.
Importantly, the CLOAs and OCTs issued over the subject lot were pursuant to the implementation of the
agrarian law under the exclusive jurisdiction of the DAR Secretary.
As the lead agency in the government's Agrarian Reform Program, DAR issued Administrative Order No.
09-89, Series of 1989, on May 5, 1989, containing the "Rules and Procedures Governing Titling and
Distribution of Lots in DAR Settlement Projects," intended to accelerate the issuance of CLOAs to quali􏰁ed
bene􏰁ciaries in settlement projects administered by the DAR; it covers the titling and distribution of
agricultural lands within proclaimed settlement projects under the administration of the DAR, as provided
for by existing laws.
Even DARAB's New Rules of Procedure issued on May 30, 1994 expressly recognized, under Section 1
(g), Rule II thereof, that matters involving strictly the administrative implementation of R.A. No. 6657,
otherwise known as the CARL of 1988 and other agrarian laws as enunciated by pertinent rules, shall be
the exclusive prerogative of and cognizable by the Secretary of the DAR.
Nemesio has doubtful standing to petition for quieting of title, which is clearly a collateral attack against the
CLOAs and titles the DAR Secretary issued to the private defendants. He has no title, records, or
instruments to uphold, and moreover, under Section 23 of R.A. No. 6657 as agrarian reform bene􏰁ciary he
is allowed only three has, not 22 has. Even granting that his complaint may be treated as one for
reconveyance, there is no ownership or title to reconvey to him because he never had one, not even through
acquisitive prescription.
Moreover, as the lead agency mandated to implement the government's agrarian reform program, the DAR
is the real party in interest, since at issue is the validity of its actions comprising the determination of the
qualified agrarian reform beneficiaries and the issuance of CLOAs and titles to them. Since, therefore, the
implementation of agrarian law is within the exclusive jurisdiction of the DAR Secretary, and issues
concerning the issuance of the subject titles can only be raised to the DAR Secretary, the RTC has no
jurisdiction to decide Civil Case No. 3985, and its judgment therein is of necessity void and can never
become final.
NOTES: The titles are: ACIDSc
1. Aguilar was awarded (a) Certificate of Land Ownership Award (CLOA) No. 00014318 over Lot 684, CSD-
09-001830, containing 15,304 sq.m., and was issued Original Certificate of Title (OCT) No. E-10590 on
December 8, 1990; and (b) CLOA No. 00014859 over Lot 686, CSD- 09-001830, with an area of 16,474
sq.m. for which he was issued OCT No. E-10591 on December 8, 1990;
2. Custodio was awarded CLOA No. 00014832 over Lot 682, CSD-09- 001830, containing 32,428 sq.m.
for which he was issued OCT No. E- 10375 on November 20, 1990;
3. Valencia was awarded CLOA No. 00014833 over Lot 683, CSD-09- 001830, containing 25,616 sq.m.,
and was issued OCT No. E-10376 on November 20, 1990;
4. Nemesio was issued OCT No. E-9704 containing 11,440 sq.m., although he never applied for Certificate
of Land Ownership from the DAR;
Atty. Mercader
Land Bank of the Philippines vs. Heirs of Jesus Alsua, represented by Bibiano C. Sabino
Perlas-Bernarbe, J.
GR No. 211351 - February 4, 2015
Facts:
 Jesus Alsua (Jesus) owned a 62.1108 has. parcel of unregistered agricultural land known as Lot
No. 8882, Cad-201, situated in Malidong, Pioduran, Albay, covered by Tax Declaration No. 99-
13-001-0067 in his name.
 On March 6, 1994, respondents Heirs of Jesus Alsua and their representative Bibiano C. Sabino
(respondents) voluntarily offered to sell the entire parcel of land to the government under
Republic Act No. (RA) 6657, as amended, otherwise known as the “Comprehensive Agrarian
Reform Law of 1988, but only 47.4535 has. thereof, consisting of 43.7158 has. of cocoland
and 3.7377 has. of unirrigated riceland (subject lands), were acquired
 Upon receipt from the DAR of the Claim Folder (CF) on April 20, 2001, albeit containing
incomplete documents, petitioner Land Bank of the Philippines (LBP) valued the subject lands
at P1,369,708.02 (LBP’s valuation) using the formula stated in DAR AO No. 5, series of 1998, as
follows
43.7158 ha. x
Cocoland P1,268,565.19
P29,018.46
Unirrigated 3.7377 ha. x
101,142.83
Riceland 27,060.18
P1,369,708.0212
 The necessary documents were completed only in September 2001,hence, the CF was
considered to have been received only on the latter date,and the LBP’s valuation approved on
September 25, 2001
 The DAR then offered to respondents the LBP’s valuation as just compensation for the lands, but
the latter rejected the valuation.Thus, the LBP was prompted to deposit the said amount in cash
and in Agrarian Reform Bonds in respondents’ name.
 After summary administrative proceedings for the determination of just compensation, docketed
as DARAB Case No. 05-01-0059-A’-2001, the Provincial Agrarian Reform
Adjudicator (PARAD), in a Decision dated January 29, 2004, fixed the value of the subject
lands at P5,479,744.15. The LBP moved for reconsideration but was denied in a Resolution
dated March 11, 2004.
 LBP filed a petition for determination of just compensation before the RTC of Legazpi.
 On the other hand, respondents maintained the correctness of the PARAD’s valuation, insisting
that it considered all the factors that may be used as basis in order to arrive at a just and
equitable valuation of the subject lands, including their potential use and corresponding increase
in value.
The RTC Ruling: rejected the valuation of both the LBP and the PARAD and fixed the just compensation
for the subject lands at P4,245,820.53. The RTC used the formula under DAR AO No. 5, series of 1998,
as amended, i.e., LV = (CNI x 0.9) + (MV x 0.1), utilizing production data or values within the 12-month
period preceding the presumptive date of taking on June 30, 2009 pursuant to DAR AO No. 1, series
of 2010, which “currentizes” the bases for the production data and values and does away with the
payment of interest that will compensate for the loss of purchasing power due to inflation.
The CA Ruling: fixed the just compensation of the subject lands at P2,465,423.02, less the initial
valuation already paid in the amount of P1,369,708.02, plus legal interest at the rate of 12% p.a. from
November 13, 2001 to June 30, 2013, and at 6% p.a. from July 1, 2013 until full satisfaction
Aggrieved, the LBP filed a motion for reconsideration which was, however, denied in a Resolution dated
February 18, 2014, hence, the instant petition.
Issue:
Whether or not the CA committed any reversible error in fixing the just compensation for the subject
lands.
Atty. Mercader
Held:
Yes. Settled is the rule that when the agrarian reform process is still incomplete, such as in this case
where the just compensation due the landowner has yet to be settled, just compensation should be
determined and the process be concluded under RA 6657 not the DAR AO No. 5 that the LBP, RTC,
and, CA used.
The following factors enumerated under Section 17 of RA 6657 should be considered, i.e., (a) the
acquisition cost of the land, (b) the current value of like properties, (c) the nature and actual use of the
property and the income therefrom, (d) the owner’s sworn valuation, (e) the tax declarations, (f) the
assessment made by government assessors, (g) the social and economic benefits contributed by the
farmers and the farmworkers, and by the government to the property, and (h) the non-payment of taxes or
loans secured from any government financing institution on the said land, if any, must be equally
considered.
Notes:
The Proper Valuation and Remand Guidelines.
1. Just compensation must be valued at the time of taking

2. The evidence must conform to Section 17 of RA 6657, as amended, prior to its amendment by
RA 9700
3. The RTC may impose interest on the just compensation as may be warranted by the
circumstances of the case
4. Finally, the RTC is advised that while it should be mindful of the different formulae created by the DAR
in arriving at just compensation, it is not strictly bound to adhere thereto if the situations before it do
not warrant their application.
Atty. Mercader
Hacienda Luisita v. PARC

VELASCO, JR., J.:
G.R. No. 171101; July 5, 2011
FACTS: Hacienda Luisita is once a 6,443-hectare mixed agricultural-industrial-residential expanse

straddling several municipalities of Tarlac and owned by Tabacalera. In 1957, the Spanish owners of
Tabacalera offered to sell Hacienda Luisita as well as their controlling interest in the sugar mill within the
hacienda, the Central Azucarera de Tarlac (CAT), as an indivisible transaction. The Tarlac Development
Corporation (Tadeco), then owned and/or controlled by the Jose Cojuangco, Sr. Group, was willing to buy.
As agreed upon, Tadeco undertook to pay the purchase price for Hacienda Luisita in pesos, while that for
the controlling interest in CAT, in US dollars.
To facilitate the adverted sale-and-purchase package, the Philippine government, through the then Central
Bank of the Philippines, assisted the buyer to obtain a dollar loan from a US bank. Also, the Government
Service Insurance System (GSIS) Board of Trustees extended on November 27, 1957 a PhP 5.911 million
loan in favor of Tadeco to pay the peso price component of the sale. One of the conditions contained in the
approving GSIS Resolution No. 3203, as later amended by Resolution No. 356, Series of 1958, reads as
follows:
That the lots comprising the Hacienda Luisita shall be subdivided by the applicant-corporation and sold at
cost to the tenants, should there be any, and whenever conditions should exist warranting such action
under the provisions of the Land Tenure Act;
As of March 31, 1958, Tadeco had fully paid the purchase price for the acquisition of Hacienda Luisita and
Tabacalera’s interest in CAT.
On May 7, 1980, the martial law administration filed a suit before the Manila Regional Trial Court (RTC)
against Tadeco, et al., for them to surrender Hacienda Luisita to the then Ministry of Agrarian Reform (MAR,
now the Department of Agrarian Reform [DAR]) so that the land can be distributed to farmers at cost.
Responding, Tadeco or its owners alleged that Hacienda Luisita does not have tenants, besides which
sugar lands––of which the hacienda consisted––are not covered by existing agrarian reform legislations.
As perceived then, the government commenced the case against Tadeco as a political message to the
family of the late Benigno Aquino, Jr.
Eventually, the Manila RTC rendered judgment ordering Tadeco to surrender Hacienda Luisita to the MAR.
Therefrom, Tadeco appealed to the Court of Appeals (CA).
On March 17, 1988, the Office of the Solicitor General (OSG) moved to withdraw the government’s case
against Tadeco, et al. By Resolution of May 18, 1988, the CA dismissed the case the Marcos government
initially instituted and won against Tadeco, et al. The dismissal action was, however, made subject to the
obtention by Tadeco of the PARC’s approval of a stock distribution plan (SDP) that must initially be
implemented after such approval shall have been secured. The appellate court wrote:
The defendants-appellants x x x filed a motion on April 13, 1988 joining the x x x governmental agencies
concerned in moving for the dismissal of the case subject, however, to the following conditions embodied
in the letter dated April 8, 1988 (Annex 2) of the Secretary of the [DAR] quoted, as follows:
1. Should TADECO fail to obtain approval of the stock distribution plan for failure to comply with all the requirements
for corporate landowners set forth in the guidelines issued by the [PARC]: or
2. If such stock distribution plan is approved by PARC, but TADECO fails to initially implement it.
xxxx
FARM asks for the invalidation of Sec. 31 of RA 6657, insofar as it affords the corporation, as a mode of
CARP compliance, to resort to stock distribution, an arrangement which, to FARM, impairs the fundamental
right of farmers and farmworkers under Sec. 4, Art. XIII of the Constitution.
To a more specific, but direct point, FARM argues that Sec. 31 of RA 6657 permits stock transfer in lieu of
outright agricultural land transfer; in fine, there is stock certificate ownership of the farmers or farmworkers
instead of them owning the land, as envisaged in the Constitution. For FARM, this modality of distribution
is an anomaly to be annulled for being inconsistent with the basic concept of agrarian reform ingrained in
Sec. 4, Art. XIII of the Constitution.
Reacting, HLI insists that agrarian reform is not only about transfer of land ownership to farmers and other
qualified beneficiaries. It draws attention in this regard to Sec. 3(a) of RA 6657 on the concept and scope
of the term "agrarian reform." The constitutionality of a law, HLI added, cannot, as here, be attacked
collaterally.
Atty. Mercader
ISSUE:
Whether there is breach of the fundamental law. Sec. 4, Article XIII of the Constitution
HELD:
No, there appears to be no breach of the fundamental law. Sec. 4, Article XIII of the Constitution reads:
The State shall, by law, undertake an agrarian reform program founded on the right of the farmers and
regular farmworkers, who are landless, to OWN directly or COLLECTIVELY THE LANDS THEY TILL or, in
the case of other farmworkers, to receive a just share of the fruits thereof. To this end, the State shall
encourage and undertake the just distribution of all agricultural lands, subject to such priorities and
reasonable retention limits as the Congress may prescribe, taking into account ecological, developmental,
or equity considerations, and subject to the payment of just compensation. In determining retention limits,
the State shall respect the right of small landowners. The State shall further provide incentives for voluntary
land-sharing.
The wording of the provision is unequivocal––the farmers and regular farmworkers have a right TO OWN
DIRECTLY OR COLLECTIVELY THE LANDS THEY TILL. The basic law allows two (2) modes of land
distribution—direct and indirect ownership. Direct transfer to individual farmers is the most commonly used
method by DAR and widely accepted. Indirect transfer through collective ownership of the agricultural land
is the alternative to direct ownership of agricultural land by individual farmers. The afore quoted Sec. 4
EXPRESSLY authorizes collective ownership by farmers. No language can be found in the 1987
Constitution that disqualifies or prohibits corporations or cooperatives of farmers from being the legal entity
through which collective ownership can be exercised. The word "collective" is defined as "indicating a
number of persons or things considered as constituting one group or aggregate," while "collectively" is
defined as "in a collective sense or manner; in a mass or body." By using the word "collectively," the
Constitution allows for indirect ownership of land and not just outright agricultural land transfer. This is in
recognition of the fact that land reform may become successful even if it is done through the medium of
juridical entities composed of farmers.
Collective ownership is permitted in two (2) provisions of RA 6657. Its Sec. 29 allows workers’ cooperatives
or associations to collectively own the land, while the second paragraph of Sec. 31 allows corporations or
associations to own agricultural land with the farmers becoming stockholders or members. Said provisions
read:
SEC. 29. Farms owned or operated by corporations or other business associations.—In the case of farms
owned or operated by corporations or other business associations, the following rules shall be observed by
the PARC.
In general, lands shall be distributed directly to the individual worker-beneficiaries.
In case it is not economically feasible and sound to divide the land, then it shall be owned collectively by
the worker beneficiaries who shall form a workers’ cooperative or association which will deal with the
corporation or business association. x x x (Emphasis supplied.)
SEC. 31. Corporate Landowners.— x x x
xxxx
Upon certification by the DAR, corporations owning agricultural lands may give their qualified beneficiaries
the right to purchase such proportion of the capital stock of the corporation that the agricultural land, actually
devoted to agricultural activities, bears in relation to the company’s total assets, under such terms and
conditions as may be agreed upon by them. In no case shall the compensation received by the workers at
the time the shares of stocks are distributed be reduced. The same principle shall be applied to
associations, with respect to their equity or participation. x x x (Emphasis supplied.)
Clearly, workers’ cooperatives or associations under Sec. 29 of RA 6657 and corporations or associations
under the succeeding Sec. 31, as differentiated from individual farmers, are authorized vehicles for the
collective ownership of agricultural land. Cooperatives can be registered with the Cooperative Development
Authority and acquire legal personality of their own, while corporations are juridical persons under the
Corporation Code. Thus, Sec. 31 is constitutional as it simply implements Sec. 4 of Art. XIII of the
Constitution that land can be owned COLLECTIVELY by farmers. Even the framers of the l987 Constitution
are in unison with respect to the two (2) modes of ownership of agricultural lands tilled by farmers––DIRECT
and COLLECTIVE
As Commissioner Tadeo explained, the farmers will work on the agricultural land "sama-sama" or
collectively. Thus, the main requisite for collective ownership of land is collective or group work by farmers
Atty. Mercader
of the agricultural land. Irrespective of whether the landowner is a cooperative, association or corporation
composed of farmers, as long as concerted group work by the farmers on the land is present, then it falls
within the ambit of collective ownership scheme.
Likewise, Sec. 4, Art. XIII of the Constitution makes mention of a commitment on the part of the State to
pursue, by law, an agrarian reform program founded on the policy of land for the landless, but subject to
such priorities as Congress may prescribe, taking into account such abstract variable as "equity
considerations." The textual reference to a law and Congress necessarily implies that the above
constitutional provision is not self-executory and that legislation is needed to implement the urgently needed
program of agrarian reform. And RA 6657 has been enacted precisely pursuant to and as a mechanism to
carry out the constitutional directives. This piece of legislation, in fact, restates the agrarian reform policy
established in the aforementioned provision of the Constitution of promoting the welfare of landless farmers
and farmworkers. RA 6657 thus defines "agrarian reform" as "the redistribution of lands … to farmers and
regular farmworkers who are landless … to lift the economic status of the beneficiaries and all other
arrangements alternative to the physical redistribution of lands, such as production or profit sharing, labor
administration and the distribution of shares of stock which will allow beneficiaries to receive a just share
of the fruits of the lands they work."
With the view We take of this case, the stock distribution option devised under Sec. 31 of RA 6657 hews
with the agrarian reform policy, as instrument of social justice under Sec. 4 of Article XIII of the Constitution.
Albeit land ownership for the landless appears to be the dominant theme of that policy, We emphasize that
Sec. 4, Article XIII of the Constitution, as couched, does not constrict Congress to passing an agrarian
reform law planted on direct land transfer to and ownership by farmers and no other, or else the enactment
suffers from the vice of unconstitutionality. If the intention were otherwise, the framers of the Constitution
would have worded said section in a manner mandatory in character.
For this Court, Sec. 31 of RA 6657, with its direct and indirect transfer features, is not inconsistent with the
State’s commitment to farmers and farmworkers to advance their interests under the policy of social justice.
The legislature, thru Sec. 31 of RA 6657, has chosen a modality for collective ownership by which the
imperatives of social justice may, in its estimation, be approximated, if not achieved. The Court should be
bound by such policy choice.
Atty. Mercader
JULIAN S. LEBRUDO and REYNALDO L. LEBRUDO, petitioners,

vs.
REMEDIOS LOYOLA, respondent
CARPIO, J.
G.R. No. 181370. March 9, 2011
Before the Court is a petition1 for review on certiorari assailing the Resolution dated 4 January
2008 and Decision dated 17 August 2007 of the Court of Appeals (CA) in CA-G.R. SP No. 90048.
FACTS:
Respondent Remedios Loyola (Loyola) owns a 240-square meter parcel of land located in Barangay
Milagrosa, Carmona, Cavite, known as Lot No. 723-6, Block 1, Psd-73149 (lot), awarded by the Department
of Agrarian Reform (DAR) under Republic Act No. 66574 (RA 6657) or the Comprehensive Agrarian Reform
Law of 1988. This lot is covered by Certificate of Land Ownership5 (CLOA) No. 20210 issued in favor of
Loyola on 27 December 1990 and duly registered on 14 March 1991 under Transfer of Certificate of Title
(TCT)/CLOA No. 998.
On 27 June 1995, petitioner Julian S. Lebrudo (Lebrudo), now deceased and represented by his son,
petitioner Reynaldo L. Lebrudo, filed with the Office of the Provincial Agrarian Reform Adjudicator (PARAD)
of Trece Martires City, Cavite, an action6 for the cancellation of the TCT/CLOA in the name of Loyola and
the issuance of another for the one-half portion of the lot in Lebrudo’s favor.
PARAD Ruling: dismissed the case without prejudice on the ground that the case was filed prematurely.
PARAD amended its ruling in a Decision dated 13 February 2002, the PARAD of Trece Martires City, Cavite
decided the case in Lebrudo’s favor.
DARAB Ruling: In a Decision dated 24 August 2004, the DARAB reversed the decision of the PARAD and
ruled in Loyola’s favor.
Lebrudo alleged that he was approached by Loyola sometime in 1989 to redeem the lot, which was
mortgaged by Loyola’s mother, Cristina Hugo, to Trinidad Barreto. After Lebrudo redeemed the lot for
P250.00 and a cavan of palay, Loyola again sought Lebrudo’s help in obtaining title to the lot in her name
by shouldering all the expenses for the transfer of the title of the lot from her mother, Cristina Hugo. In
exchange, Loyola promised to give Lebrudo the one-half portion of the lot. Thereafter, TCT/CLOA No. 998
was issued in favor of Loyola. Loyola then allegedly executed a Sinumpaang Salaysay dated 28 December
1989, waiving and transferring her rights over the one-half portion of the lot in favor of Lebrudo. To reiterate
her commitment, Loyola allegedly executed two more Sinumpaang Salaysay dated 1 December 1992 and
3 December 1992, committing herself to remove her house constructed on the corresponding one-half
portion to be allotted to Lebrudo.
Thereafter, Lebrudo asked Loyola to comply with her promise. However, Loyola refused. Lebrudo sought
the assistance of the Sangguniang Barangay of Milagrosa, Carmona, Cavite; the Philippine National Police
(PNP) of Carmona, Cavite; and the Department of Agrarian Reform to mediate. However, despite steps
taken to amicably settle the issue, as evidenced by certifications from the PNP and the barangay, there
was no amicable settlement. Thus, Lebrudo filed an action against Loyola.
In her Answer, Loyola maintained that Lebrudo was the one who approached her and offered to redeem
the lot and the release of the CLOA. Loyola denied promising one-half portion of the lot as payment for the
transfer, titling and registration of the lot. Loyola explained that the lot was her only property and it was
already being occupied by her children and their families. Loyola also denied the genuineness and due
execution of the two Sinumpaang Salaysay dated 28 December 1989 and 3 December 1992. The records
do not show whether Loyola renounced the Sinumpaang Salaysay dated 1 December 1992.
In a Decision dated 17 August 2007, the CA affirmed the decision of the DARAB. Lebrudo filed a motion
for reconsideration which the CA denied in a Resolution dated 4 January 2008.
ISSUE/S:
1) W/N Lebrudo is entitled to the one-half portion of the lot covered by RA 6657 on the basis of the
waiver and transfer of rights embodied in the two Sinumpaang Salaysay dated 28 December 1989
and 3 December 1992 allegedly executed by Loyola in his favor.
HELD: Petition lacks merit, hence denied and the Court affirmed the Decision of the Court of
Appeals on affirming the decision of the DARAB.
Atty. Mercader
A Certificate of Land Ownership or CLOA is a document evidencing ownership of the land granted or
awarded to the beneficiary by DAR, and contains the restrictions and conditions provided for in RA 6657
and other applicable laws. Section 27 of RA 6657, as amended by RA 9700, which provides for the
transferability of awarded lands, states:
“SEC. 27. Transferability of Awarded Lands.—Lands acquired by beneficiaries under this ACT may not
be sold, transferred or conveyed except through hereditary succession, or to the government, or to the LBP,
or to other qualified beneficiaries for a period of ten (10) years: Provided, however, That the children or the
spouse of the transferor shall have a right to repurchase the land from the government or LBP within a
period of two (2) years. Due notice of the availability of the land shall be given by the LBP to the Barangay
Agrarian Reform Committee (BARC) of the barangay where the land is situated. The Provincial Agrarian
Coordinating Committee (PARCCOM), as herein provided, shall, in turn, be given due notice thereof by the
BARC.
The title of the land awarded under the agrarian reform must indicate that it is an emancipation patent or a
certificate of land ownership award and the subsequent transfer title must also indicate that it is an
emancipation patent or a certificate of land ownership award.
If the land has not yet been fully paid by the beneficiary, the rights to the land may be transferred or
conveyed, with prior approval of the DAR, to any heir of the beneficiary or to any other beneficiary who, as
a condition for such transfer or conveyance, shall cultivate the land himself. Failing compliance herewith,
the land shall be transferred to the LBP which shall give due notice of the availability of the land in the
manner specified in the immediately preceding paragraph. x x x” (Emphasis supplied)
It is clear from the provision that lands awarded to beneficiaries under the Comprehensive Agrarian Reform
Program (CARP) may not be sold, transferred or conveyed for a periodof 10 years. The law enumerated
four exceptions: (1) through hereditary succession; (2) to the government; (3) to the Land Bank of the
Philippines (LBP); or (4) to other qualified beneficiaries. In short, during the prohibitory 10-year period, any
sale, transfer or conveyance of land reform rights is void, except as allowed by law, in order to prevent a
circumvention of agrarian reform laws.
In the present case, Lebrudo insists that he is entitled to one-half portion of the lot awarded to Loyola under
the CARP as payment for shouldering all the expenses for the transfer of the title of the lot from Loyola’s
mother, Cristina Hugo, to Loyola’s name. Lebrudo used the two Sinumpaang Salaysay executed by Loyola
alloting to him the one-half portion of the lot as basis for his claim.
NOTES:
The mere issuance of an emancipation patent does not put the ownership of the agrarian reform beneficiary
beyond attack and scrutiny. Emancipation patents issued to agrarian reform beneficiaries may be corrected
and cancelled for violations of agrarian laws, rules and regulations. (Mago vs. Barbin, 603 SCRA 383
[2009])
Atty. Mercader
CHARLES BUMAGAT, et al v. REGALADO ARRIBAY

GR NO. 194818, JUNE 9, 2014
A case involving agricultural and does not immediately qualify it as an agrarian dispute. The mere
fact that the land is agricultural does not ipso facto make the possessor an agricultural lessee or
tenant. There are conditions before he can qualify as an agricultural lessee or tenant, and the
subject being agricultural land constitutes just one condition. In order to qualify as an agrarian
dispute, there must likewise exist a tenancy relation between the parties.
FACTS:
Bumagat and other petitioners are the registered owners of agricultural land. Subsequently, they
filed a complaint before the Municipal Circuit Trial Court for forcible entry against Arribay stating
that the latter entered the former’s parcels of land and ousted them from their lawful possession,
with the aid of armed goons and through the use of intimidation and threats of physical harm.
Arribay, however, filed for the dismissal of the complaint, claiming that the said properties are
agricultural lands, which indicates that the dispute is considered an agrarian matter, hence falls
under the exclusive jurisdiction of the Department of Agrarian Reform Adjudication Board or known
as DARAB.
Municipal Agrarian Reform Office denied Arribay’s motion because he failed to prove that there is an
existing tenancy or agrarian relationship between the parties. MCTC likewise found that there was
no tenancy or other agrarian relationship present between the parties, which the RTC affirmed.
However, CA reversed the decision of RTC, claiming that the dispute was indeed under the
jurisdiction of DARAB.
ISSUE:
Whether or not the dispute falls under the jurisdiction of DARAB.
HELD:
No, the CA erred in its decision because it failed to realize the fact that as between parties, there
is no expressed or even implied tenurial agreement. It was established that the acquisition of
jurisdiction by DARAB over the case, there must be an existing tenancy relation between the
parties. Hence, for a tenancy agreement exist, it is important to consider all its indispensable
elements, such as:
1. That the parties are landowner and the tenant of agricultural lessee
2. That the subject matter of relationship is an agricultural land
3. That there is consent between the parties to the relationship
4. That the purpose of the relationship is to bring about agricultural production
5. That there is personal cultivation on the part of the tenant or agricultural lessee
6. That the harvest is shared between the landowner and the tenant or agricultural lessee.
Atty. Mercader
Department of Agrarian Reform v. Carriedo

Jardeleza, J.
G.R. No. 176549 – January 20, 2016
FACTS:
The land originally formed part of the agricultural land covered by Transfer Certificate of Title (TCT) No.
17680, which in turn, formed part of the total of 73.3157 hectares of agricultural land owned by Roman De
Jesus (Roman).
On May 23, 1972, petitioner Pablo Mendoza (Mendoza) became the tenant of the land by virtue of a
Contrato King Pamamuisan executed between him and Roman. Pursuant to the Contrato, Mendoza has
been paying twenty-five (25) piculs of sugar every crop year as lease rental to Roman. It was later changed
to Two Thousand Pesos (P2, 000.00) per crop year, the land being no longer devoted to sugarcane.
On November 7, 1979, Roman died leaving the entire 73.3157 hectares to his surviving wife Alberta
Constales (Alberta), and their two sons Mario De Jesus (Mario) and Antonio De Jesus (Antonio). On August
23, 1984, Antonio executed a Deed of Extrajudicial Succession with Waiver of Right which made Alberta
and Mario co-owners in equal proportion of the agricultural land left by Roman.
On June 26, 1986, Mario sold approximately 70.4788 hectares to respondent Romeo C. Carriedo
(Carriedo)/
The area sold to Carriedo included the land tenanted by Mendoza (forming part of the area covered by TCT
No. 17680). Mendoza alleged that the sale took place without his knowledge and consent.
In June of 1990, Carriedo sold all of these landholdings to the Peoples’ Livelihood Foundation, Inc. (PLFI)
represented by its president, Bernabe Buscayno.13 All the lands, except that covered by TCT No. 17680,
were subjected to Voluntary Land Transfer/Direct Payment Scheme and were awarded to agrarian reform
beneficiaries in 1997.
On February 26, 2002, Mendoza, his daughter Corazon Mendoza (Corazon) and Orlando Gomez (Orlando)
filed a Petition for Coverage of the land under RA No. 6657. They claimed that they had been in physical
and material possession of the land as tenants since 1956, and made the land productive. They prayed (1)
that an order be issued placing the land under Comprehensive Agrarian Reform Program (CARP); and (2)
that the DAR, the Provincial Agrarian Reform Officer (PARO) and the Municipal Agrarian Reform Officer
(MARO) of Tarlac City be ordered to proceed with the acquisition and distribution of the land in their favor.44
The petition was granted by the Regional Director (RD) in an Order dated October 2, 2002.
On October 23, 2002, Carriedo filed a Protest with Motion to Reconsider the Order dated October 2, 2002
and to Lift Coverage on the ground that he was denied his constitutional right to due process. He alleged
that he was not notified of the filing of the Petition for Coverage, and became aware of the same only upon
receipt of the challenged Order.
On October 24, 2002, Carriedo received a copy of a Notice of Coverage dated October 21, 200248 from
MARO Maximo E. Santiago informing him that the land had been placed under the coverage of the CARP.
On December 16, 2002, the RD denied Carriedo’s protest in an Order dated December 5, 2002. Carriedo
filed an appeal to the DAR-CO.
In an Order dated February 22, 2005, the DAR-CO, through Secretary Rene C. Villa, affirmed the Order of
the RD granting coverage. The DAR-CO ruled that Carriedo was no longer allowed to retain the land due
to his violation of the provisions of RA No. 6657. His act of disposing his agricultural landholdings was
tantamount to the exercise of his retention right, or an act amounting to a valid waiver of such right in
accordance with applicable laws and jurisprudence. However, it did not rule whether Mendoza was qualified
to be a farmer-beneficiary of the land.
Carriedo filed a Petition for Review with the CA assailing the DAR-CO Order. The appeal was docketed as
CA-G.R. SP No. 88935. In a Decision dated October 5, 2006, the CA reversed the DAR-CO, and declared
the land as Carriedo’s retained area. The CA ruled that the right of retention is a constitutionally-guaranteed
right, subject to certain qualifications specified by the legislature. It serves to mitigate the effects of
compulsory land acquisition by balancing the rights of the landowner and the tenant by implementing the
doctrine that social justice was not meant to perpetrate an injustice against the landowner. It held that
Carriedo did not commit any of the acts which would constitute waiver of his retention rights found under
Section 6 of DAR Administrative Order No. 02, S.2003.
Petitioners maintain that the CA committed a reversible error in declaring the land as Carriedo’s retained
area.
Atty. Mercader
They claim that Paragraph 4, Section 6 of RA No. 6657 prohibits any sale, disposition, lease, management
contract or transfer of possession of private lands upon effectivity of the law. Thus, Regional Director
Renato Herrera correctly observed that Carriedo’s act of disposing his agricultural property would be
tantamount to his exercise of retention under the law. By violating the law, Carriedo could no longer retain
what was left of his property. "To rule otherwise would be a roundabout way of rewarding a landowner who
has violated the explicit provisions of the Comprehensive Agrarian Reform Law."
They also assert that Carriedo waived his right to retain for failure or neglect for an unreasonable length of
time to do that which he may have done earlier by exercising due diligence, warranting a presumption that
he abandoned his right or declined to assert it. Petitioners claim that Carriedo has not filed an Application
for Retention over the subject land over a considerable passage of time since the same was acquired for
distribution to qualified farmer beneficiaries.
ISSUE: Whether or not Carriedo has the right to retain the land. YES.
HELD: We rule in the affirmative. Carriedo did not waive his right of retention over the land.
The right of retention is a constitutionally guaranteed right, which is subject to qualification by the legislature.
It serves to mitigate the effects of compulsory land acquisition by balancing the rights of the landowner and
the tenant and by implementing the doctrine that social justice was not meant to perpetrate an injustice
against the landowner. A retained area, as its name denotes, is land which is not supposed to anymore
leave the landowner's dominion, thus sparing the government from the inconvenience of taking land only
to return it to the landowner afterwards, which would be a pointless process. For as long as the area to be
retained is compact or contiguous and does not exceed the retention ceiling of five (5) hectares, a
landowner's choice of the area to be retained must prevail. xxx
To interpret Section 6 of RA No. 6657, DAR issued Administrative Order No. 02, Series of 2003 (DAR AO
02-03). Section 6 of DAR AO 02-03 provides for the instances when a landowner is deemed to have waived
his right of retention.
Petitioners cannot rely on the RD’s Order dated October 2, 2002 which granted Mendoza’s petition for
coverage on the ground that Carriedo violated paragraph 4 Section 667 of RA No. 6657 for disposing of his
agricultural land, consequently losing his right of retention. At the time when the Order was rendered, up to
the time when it was affirmed by the DAR-CO in its Order dated February 22, 2005, the applicable law is
Section 6 of DAR 02-03. Section 6 clearly shows that the disposition of agricultural land is not an act
constituting waiver of the right of retention.
Thus, as correctly held by the CA, Carriedo "[n]ever committed any of the acts or omissions above-stated
(DAR AO 02-03). Not even the sale made by the herein petitioner in favor of PLFI can be considered as a
waiver of his right of retention. Likewise, the Records of the present case is bereft of any showing that the
herein petitioner expressly waived (in writing) his right of retention as required under sub-section 6.3,
section 6, DAR Administrative Order No. 02-S.2003."
Petitioners claim that Carriedo’s alleged failure to exercise his right of retention after a long period of time
constituted a waiver of his retention rights, as envisioned in Item 6.7 of DAR AO 02-03.
We disagree.
Laches is defined as the failure or neglect for an unreasonable and unexplained length of time, to do that
which by exercising due diligence could or should have been done earlier; it is negligence or omission to
assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either
has abandoned it or declined to assert it. Where a party sleeps on his rights and allows laches to set in, the
same is fatal to his case.
Section 4 of DAR AO 02-03 gives Carriedo any time before receipt of the notice of coverage to exercise his
right of retention, or if under compulsory acquisition (as in this case), within sixty (60) days from receipt of
the notice of coverage. The validity of the notice of coverage is the very subject of the controversy before
this court. Thus, the period within which Carriedo should exercise his right of retention cannot commence
until final resolution of this case.
Even assuming that the period within which Carriedo could exercise his right of retention has commenced,
Carriedo cannot be said to have neglected to assert his right of retention over the land. The records show
that per Legal Report dated December 13, 1999 prepared by Legal Officer Ariel Reyes, Carriedo filed an
application for retention which was even contested by Pablo Mendoza’s son, Fernando. Though Carriedo
subsequently withdrew his application, his act of filing an application for retention belies the allegation that
he abandoned his right of retention or declined to assert it.
Atty. Mercader
DEPARTMENT OF AGRARIAN REFORM vs. CARRIEDO

JARDELEZA, J.
October 10, 2018
FACTS:
1. The land originally formed part of the agricultural land covered by Transfer Certificate of Title (TCT)
No. 17680, which in turn, formed part of the total of 73.3157 hectares of agricultural land owned by
Roman De Jesus (Roman).
2. On May 23, 1972, petitioner Pablo Mendoza (Mendoza) became the tenant of the land by virtue of
a Contrato King Pamamuisan executed between him and Roman. Pursuant to the Contrato,
Mendoza has been paying twenty-five (25) piculs of sugar every crop year as lease rental to
Roman. It was later changed to Two Thousand Pesos (P2,000.00) per crop year, the land being
no longer devoted to sugarcane.
3. On November 7, 1979, Roman died leaving the entire 73.3157 hectares to his surviving wife Alberta
Constales (Alberta), and their two sons Mario De Jesus (Mario) and Antonio De Jesus (Antonio).
On August 23, 1984, Antonio executed a Deed of Extrajudicial Succession with Waiver of Right
which made Alberta and Mario co-owners in equal proportion of the agricultural land left by Roman.
4. On June 26, 1986, Mario sold approximately 70.4788 hectares to respondent Romeo C. Carriedo.
The area sold to Carriedo included the land tenanted by Mendoza (forming part of the area covered
by TCT No. 17680). Mendoza alleged that the sale took place without his knowledge and consent.
5. In June of 1990, Carriedo sold all of these landholdings to the Peoples' Livelihood Foundation, Inc.
(PLFI) represented by its president, Bernabe Buscayno. All the lands, except that covered by TCT
No. 17680, were subjected to Voluntary Land Transfer/Direct Payment Scheme and were awarded
to agrarian reform beneficiaries in 1997.
6. At the onset, we note that the DAR was not given the opportunity to participate in the proceedings
before the Court of Appeals and before this Court, until it filed its motion for reconsideration of this
Court's Decision. In its motion for reconsideration, the DAR contends that the agency had been
denied due process when it was not afforded the opportunity to refute the allegations against the
validity of DAR Administrative Order No. 5, Series of 2006 (AO 05-06) before the Court of Appeals
and before this Court. It argues that the basic requirement of due process has not been accorded
to the agency because it was not even notified of the petition filed before the Court of Appeals; nor
did the Court of Appeals notify the DAR of the proceedings and its Decision. The DAR, therefore,
insists that the Decision dated January 20, 2016 be reconsidered by this Court especially so that
the issues involve the enforcement and validity of its regulations.
ISSUE/S:
1. The core issue before us is whether Romeo C. Carriedo's previous sale of his landholdings to
Peoples' Livelihood Foundation, Inc. (PLFI) can be treated as the exercise of his retention rights,
such that he cannot lawfully claim the subject landholding as his retained area anymore.
The issue necessarily touches on the validity of Item No. 4 of AO 05-06 and the relevant provisions of the CARL.
Further, the issue of whether Certificates of Land Ownership Awards (CLOAs) possess the
indefeasibility accorded to a Torrens certificate of title is likewise raised before this Court.
HELD:
WHEREFORE, premises considered, the motion for reconsideration filed by the Department of Agrarian
Reform is hereby GRANTED, and the Decision dated January 20, 2016 is REVERSED and SET
ASIDE.
1. We agree with the DAR. Being the government agency legally mandated to implement the
Comprehensive Agrarian Reform Law of 1988 (CARL) and the primary agency vested with
the expertise on the technicalities of the CARL, the DAR's position on the issues raised
before us deserves cogent consideration. In fact, the CARL specifically empowers the DAR
to issue rules and regulations, whether substantive or procedural, to carry out the objects
and purposes of the law. Administrative rules and regulations ordinarily deserve to be given
weight and respect by the courts in view of the rule-making authority given to those who
Atty. Mercader
formulate them and their specific expertise in their respective fields. In this case, it cannot
be denied that the DAR possesses the special knowledge and acquired expertise on the
implementation of the agrarian reform program. To pay no heed to its position on the issues
raised before us ignores the basic precepts of due process. Therefore, under these
circumstances, we are impelled to revisit our Decision, this time taking into account the
arguments and position of the DAR.
2. On the validity of Item No. 4, AO 05-06:
The Decision adjudged Item No. 4 of AO 05-06 as ultra vires for providing terms which appear to expand
or modify some provisions of the CARL. The DAR argues that this ruling sets back the
Comprehensive Agrarian Reform Program by upsetting its established substantive and procedural
components. Particularly, the DAR contends that the nullification of Item No. 4 of AO 05-06
disregarded the long-standing procedure where the DAR treats a sale (without its clearance) as
valid based on the doctrine of estoppel, and that the sold portion is treated as the landowner's
retained area.
Applying Item No. 4 of AO 05-06 to the facts of this case, the DAR submits that the subject landholding
cannot be considered as the retained area of Carriedo anymore because he has already exercised
his right of retention when he previously sold his landholdings without DAR clearance. The DAR
specifies that sometime in June 1990, Carriedo unilaterally sold to PLFI his agricultural
landholdings with approximately 58.3723 hectares. The DAR, therefore, argues that Carriedo's act
of disposing his landholdings is tantamount to the exercise of his right of retention under the law.
3. In view of the foregoing, we hold that Item No. 4 of AO 05-06 is valid. Indeed, the issue in this
case is more than the mere claim of an individual to his retained area, but had been, at the onset, an issue
of the implementation of the CARL in line with the mandate and objective as set forth in the Constitution.
4. On Certificate of Land Ownership Award:
The Decision also adjudged that CLOAs are not equivalent to a Torrens certificate of title, and thus are not
indefeasible. The DAR disagrees and submits that this ruling relegated Emancipation Patents and
CLOAs to the status of a Certificate of Land Transfer, which is merely part of the preparatory steps
for the eventual issuance of a certificate of title. We agree with the DAR. A Certificate of Land
Ownership Award or CLOA is a document evidencing ownership of the land granted or awarded to
the beneficiary by the DAR, and contains the restrictions and conditions provided for in the CARL
and other applicable laws.
Atty. Mercader
Mateo v. DAR
Reyes, J.
G.R. No. 186339 - February 15, 2017
FACTS:
The Mateos were the registered owners of coconut and rice lands with a total area of 1,323,112
square meters situated at Fabrica, Bacon, Sorsogo. A portion of the land[s] was brought under the coverage
of the CARP of the government and for this reason,the DAR entered the premises sometime in June 1994.
LBP valued the Mateos' land at fifty-two thousand pesos (₱52,000.00) per ha. The Mateos, however,
rejected the LBP's valuation. The Mateos filed a complaint against LBP, DAR, and the farmer beneficiaries
of the land for just compensation.
Under R.A. No. 6657, it provides that in determining the just compensation, the initial determination
thereof may be agreed upon by the LBP. In the event of disagreement, the matter is referred to the DAR
Adjudication Board for further determination. Initially, the DAR valued the property at ₱6,112,598.86 but
these was rejected by the Marcos. Engr. Dino represents only the fair market value of the land but does not
include the value of the coconut trees and the actual production of the coconut trees. Although it valued the
improvements in the property for acquisition, it did not include the value of the trees/hectare and the actual
production of the coconut trees as well as the potentials of the land in terms of productivity and proximity
to the center of commerce, the City of Sorsogon. Engr. Dino made a detailed assessment computing the
subject property's Fair Market Value to be ₱4,764,323.00, and the fruit-bearing and timber-producing trees
found thereon amounting to ₱806,870.00 and ₱445, 110.00, respectively. The Court considers said land
valuation too low considering that the land subject for acquisition is within the city limit of the City of
Sorsogon. The SAC then adopted Engr. Dino's valuation of the improvements found in the subject property
and made estimates of the total amount the coconuts, copra and rice harvested therefrom could have
fetched.
On the LBP's part, it mainly argued that the complaint of the Mateos was premature as the DAR Adjudication
Board (DARAB) had not yet made an administrative valuation of the subject property and that the SAC, in
determining just compensation, failed to consider the guidelines provided for in Section 17 of R.A. No. 6657.
The Mateos argue that the rule on exhaustion of administrative remedies admits of exceptions, one of which
is when there are circumstances indicating the urgency of judicial intervention, like in the case at bar. The
Mateos were prematurely deprived of the subject property in 1994, and as compensation therefor, a trust
account was belatedly created for them in 1997 or three years after the illegal entry. The LBP, on the other
hand stresses that the doctrine of exhaustion of administrative remedies is a cornerstone of our judicial
system; hence,it cannot be disregarded.
ISSUE/S:
1. W/N there was a violation of the doctrine of administrative exhaustion
2. W/N the valuation of just compensation made by the SAC deviated from the prescribed procedures
HELD: PETITION PARTIALLY GRANTED.
1. NO. DAR is vested with ''primary jurisdiction to determine and adjudicate agrarian reform
matters" and "exclusive original jurisdiction over all matters involving the implementation of agrarian reform”
except those falling under the jurisdiction of the Department of Agriculture (DA) and the Department of
Environment and Natural Resources. Section57,on the other hand,confers "special" and “original and
exclusive” jurisdiction to the SAC over all petitions of landowners for the determination of just compensation.
The LBP is charged with the initial responsibility of determining the value of lands placed under
land reform and the just compensation to be paid for their taking. Through a notice of voluntary offer to sell
(VOS) submitted by the landowner, accompanied by the required documents, the DAR evaluates the
application and determines the land's suitability for agriculture. The LBP likewise reviews the application
and the supporting documents and determines the valuation of the land. Thereafter, the DAR issues the
Notice of Land Valuation to the landowner. In both voluntary and compulsory acquisition, where the
landowner rejects the offer, the DAR opens an account in the name of the landowner and conducts a
summary administrative proceeding. If the landowner disagrees with the valuation, the matter may be
Atty. Mercader
brought to the [RTC] acting as a [SAC]. This in essence is the procedure for the determination of just
compensation.
The doctrine of primary jurisdiction has been increasingly called into play on matters demanding
the special competence of administrative agencies even if such matters are at the same time within the
jurisdiction of the courts. A case that requires for its determination the expertise, specialized skills,
and knowledge of some administrative board or commission because it involves technical matters
or intricate questions of fact, relief must first be obtained in an appropriate administrative
proceeding before a remedy will be supplied by the courts although the matter comes within the
jurisdiction of the courts. The application of the doctrine does not call for the dismissal of the case in the
court but only for its suspension until after the matters within the competence of the administrative
body are threshed out and determined. Our landmark ruling in Association has already validated
the grant by Congress to the DAR of the primary jurisdiction to determine just compensation. The
schem eprovided by Congress under RA 6657 does not take discretion away from the courts in
determining just compensation in agrarian cases. In fact, the regulatory scheme provided by
Congress in fact sets the stage for a heightened judicial review of the DAR's preliminary
determination of just compensation pursuant to Section 17 of RA 6657. In other words, in exercising
its exclusive and original jurisdiction to determine just compensation under RA 6657, the SAC is
possessed with exactly the same powers and prerogatives of the RTC under Rule 67 of the Revised
Rules of Court.
Belista and Heirs of Vidad as bases to show that SACs possess original and exclusive
jurisdiction to determine just compensation, regardless of prior exercise by the DAR of its primary
jurisdiction. We do not disagree with the rulings in Belista and Heirs of Vidad, both of which
acknowledge the grant of primary jurisdiction to the DAR, subject to judicial review. We are,
however, of the view that the better rule would be to read these seemingly conflicting cases without
having to disturb established doctrine.
Belista, for example, should be read in conjunction with Association, the landmark case directly
resolving the constitutionality of RA 6657. In Association, this Court unanimously upheld the grant
of jurisdiction accorded to the DAR under Section 16 to preliminarily determine just compensation.
This grant of primary jurisdiction is specific, compared to the general grant of quasi-judicial power
to the DAR under Section 50. Belista, which speaks of exceptions to the general grant of quasi-
judicial power under Section 50, cannot be read to extend to the specific grant of primary
jurisdiction under Section 16.
Administrative remedies cannot be dispensed with and direct resort to the SAC is proscribed. However, the
foregoing rule cannot be applied in the case at bar for reasons. While the Court recognizes the primacy of
the doctrine of exhaustion of administrative remedies in our judicial system, it bears emphasizing that the
principle admits of exceptions, among which is when there is unreasonable delay or official inaction that
irretrievably prejudices a complainant. This exception is a is attendant herein where the LBP and the DAR
entered the property of the Mateos sometime in 1994, but deposited cash and Agrarian Reform Bonds as
payment therefor only on December13,1996 and February11,1997. The LBP and the DAR were
indisputably aware that the Mateos rejected the price offered as just compensation for the subject property.
Still, at the time the Mateos filed their suit before the SAC, no summary administrative proceeding was yet
initiated by the DAR to make further valuation. The SAC even had to issue no less than three orders for the
DAR to conduct the necessary proceedings. DAR’s delay and inaction had unjustly prejudiced the Mateos
and precluding them from filing a complaint before the SAC shall result in an injustice, which the law never
intends.
2. YES. SAC's deviation from the prescribed procedures in determining just compensation due to
the Mateos is evident. The SAC made no exact finding as to when the subject property was taken by the
government. Without anything more, the SAC merely mentioned Vivencio's testimony that in the early part
of June of 1994, the DAR entered the subject property. The SAC did not discuss when the subject property
was actually transferred through the issuance of emancipation patents, certificates of land ownership
awards or any other titles to the farmer beneficiaries. The dates are significant as they are to be considered
as the time of taking, and just compensation must be valued in relation thereto.
Atty. Mercader
Reference to any DAR AOs or formulas is conspicuously absent as well. The applicability of AO
No. 11 in the case at bar is, however, still uncertain pending the SAC 's determination of when: the subject
property was actually transferred to the farmer beneficiaries. ItemII(I) provides that "all claims whose [MoV]
have not yet been forwarded to DAR shall be valued in accordance with this [AO]."
There shall be one basic formula for the valuation of lands covered by [Voluntary Offer to Sell] or
[Compulsory Acquisition] regardless of the date of offer or coverage of the claim:
LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1) where LV= land value, CNI = Capitalised Net income, CS =
Comparable Sales and MV = Market Value per Tax Declaration
In the valuation of the subject property owned by the Mateos, the SAC did not even minutely refer
to any formula mandated to be applied by pertinent DAR regulations. There was also no explanation at all
a s to why the case should be excepted from the application of AO No. 6. The valuation of the property
should be pegged at the time of taking. Anent the productivity of the subject property, the SAC made
estimates, the bases of which are likewise unclear.
The transitory provision of DAR AO No. 2, series of 2009, in part, provides that "with respect to land
valuation, all Claim Folders received by LBP prior to July 1, 2009 shall be valued in accordance with Section
17 of R.A. No. 6657 prior to its amendment by R.A. No. 9700."
Accordingly then, in LBP v. Heirs of Jesus Alsua, the Court "excepted from the application of the
amended Section 17 all claim folders received by LBP prior to July 1, 2009, which shall be valued in
accordance with Section 17 of [R.A. No.] 6657, as amended, prior to its further amendment by [R.A.] No.
9700."
In the case of the Mateos, the Claim Folder was received by LBP earlier than July 1, 2009; hence,
the amendments in Section 17, as introduced by R.A. No. 9700, shall not be applicable. Note too that the
LBP valued the subject property at more or less ₱52,000.00 per ha without considering factors relating to
productivity and the prices of comparable parcels of land. The SAC is reminded that the valuation shall be
based at the time of taking of the subject property, not the date of the filing of or period of pendency of the
suit, or the rendition of judgment.
The case is hereby remanded to the trial court to determine with utmost dispatch the just
compensation due to Mateo strictly in accordance with Section 17 of Republic Act No. 6657 prior to its
amendment by Republic Act No. 9700.
Atty. Mercader
Land Bank v. Heirs of Tañada

Leonardo-De Castro, J.
G.R. No. 170506 – January 11, 2017
FACTS:
Respondents, the Heirs of Lorenzo Tañada and Expedita Ebarle, are the owners of several parcels
of land situated in Gabon, Abucay, Bataan, covered by TCT Nos. T-8483 and T-12610, with respective land
areas of 56.8564 and 16.9268 hectares. The record shows that sometime in 1988, the aforesaid parcels of
land were placed under the land reform program of the government. It was determined that 16.7692
hectares from TCT No. T-8483 and 13 hectares from TCT No. T-12610 would be included in the program.
Pursuant to its mandate under Executive Order No. 405, petitioner Land Bank of the Philippines
(LBP) valued the properties to be taken at ₱223,837.29 for 16.7692 hectares and ₱192,610.16 for 13
hectares or a total of ₱416,447.43. Dissatisfied with this valuation for being unreasonably and
unconscionably low, respondents instituted the summary administrative proceedings for the preliminary
determination of just compensation in 1992 and 1993. Said cases were docketed as DARAB Case Nos.
068-B'92 for TCT No. 12610 and 103-BT'93 for TCT No. T-8483 with the Department of Agrarian Reform
Adjudication Board (DARAB) in Region III.
With the DARAB's affirmation of the acquisition cost fixed by petitioner for the subject properties,
respondents instituted separate petitions for the determination and payment of just compensation.
Contending that the price fixed by petitioner was unconscionably low, respondents prayed that their
properties be revalued at ₱150,000.00 per hectare. Since they raised similar issues, the two (2) cases were
eventually consolidated.
To establish their claim for just compensation, respondents presented Jose Dela Cruz, a vault
keeper from the Office of the Bataan Register of Deeds, who testified that he is the custodian of documents
and titles in the said office. Said witness identified a Deed of Sale dated 05 April 1997 executed by Horacio
Limcangco who sold 6,158 square meters of land in Abucay, Bataan for ₱20,000.00 or for ₱3.24 per square
meter. He also identified a Deed of Absolute Sale dated 27 August 1996 executed by Franklin and Benigno
Morales whereby 53,102 square meters of land in Abucay, Bataan was sold for ₱830,000.00 or for ₱15.91
per square meter.
ISSUE/S: whether or not the trial court utilized the correct method in fixing the just compensation
due to respondents' parcels of land which have been subjected to land reform proceedings under
Republic Act No. 6657 or the Comprehensive Agrarian Reform Law of 1988
HELD: NO.
This Court has defined "just compensation" for parcels of land taken pursuant to the agrarian reform
program as "the full and fair equivalent of the property taken from its owner by the expropriator." The
measure of compensation is not the taker's gain but the owner's loss. Just compensation means the
equivalent for the value of the property at the time of its taking. It means a fair and full equivalent value for
the loss sustained. All the facts as to the condition of the property and its surroundings, its improvements
and capabilities should be considered.
It is settled in jurisprudence that, in order to determine just compensation, the trial court acting as
a SAC must take into consideration the factors prescribed by Section 17 of Republic Act No. 6657 and is
obliged to apply the formula crafted by the DAR. While [the RTC] is required to consider the acquisition cost
of the land, the current value of like properties, its nature, actual use and income, the sworn valuation by
the owner, the tax declaration and the assessments made by the government assessors to determine just
compensation, it is equally true that these factors have been translated into a basic formula by the DAR
pursuant to its rule-making power under Section 49 of R.A. No. 6657. As the government agency principally
tasked to implement the agrarian reform program, it is the DAR's duty to issue rules and regulations to carry
out the object of the law. [The] DAR [Administrative Order] precisely "filled in the details" of Section 17, R.A.
No. 6657 by providing a basic formula by which the factors mentioned therein may be taken into account.
The [RTC] was at no liberty to disregard the formula which was devised to implement the said provision. It
is elementary that rules and regulations issued by administrative bodies to interpret the law which they are
entrusted to enforce, have the force of law, and are entitled to great respect.
Atty. Mercader
When faced with situations which do not warrant the formula's strict application, courts may, in the
exercise of their judicial discretion, relax the formula's application to fit the factual situations before them,
subject only to the condition that they clearly explain in their Decision their reasons (as borne by the
evidence on record) for the deviation undertaken. It is thus entirely allowable for a court to allow a
landowner's claim for an amount higher than what would otherwise have been offered (based on an
application of the formula) for as long as there is evidence on record sufficient to support the award.
In the case at bar, the trial court, in arriving at the amount of just compensation to be paid to
respondents, solely based its conclusion on the alleged selling price or market value of the land adjoining
respondents' properties.
Likewise, the Court of Appeals merely sustained the trial court's method of valuation which was
chiefly based on the market value of adjoining properties.
It is apparent from the foregoing that both the trial court and the Court of Appeals did not observe
the valuation factors under Section 17 of Republic Act No. 6657 as translated into a basic formula in DAR
Administrative Order No. 06, series of 1992, without a well-reasoned justification for the deviation as
supported by the evidence on record. This is in clear violation of the express mandate of both the law and
jurisprudence concerning the determination of just compensation of land subjected to coverage by the
agrarian reform law. For this reason, the valuation made by the trial court cannot be upheld and must be
struck down as illegal.
However, despite the necessity of setting aside the computation of just compensation of the trial
court, the Court cannot automatically adopt petitioner's own calculation as prayed for in the instant petition.
Thus, a remand of this case for reception of further evidence is necessary in order for the trial court
acting as a SAC to determine just compensation in accordance with Section 17 of Republic Act No. 6657
and the applicable DAR regulations.
Atty. Mercader
Robustum Agricultural Corporation vs. Department of Agrarian Reform

Peralta, J.
G.R. No. 221484 November 19, 2018
FACTS:
Petitioner Robustum Agricultural Corporation is the registered owner of a 50,000-square meter parcel of
agricultural land (subject land) in Silay City per Transfer Certificate of Title (TCT) No. T-15256. The subject
land was formerly a part of a 300,000-square meter agricultural estate (mother estate) owned by Puyas
Agro, Inc. (PAI), petitioner's predecessor-in-interest. The Department of Agrarian Reform (DAR) prepared
a letter, denominated as "Transmittal of NOC to the Landowner-Transferee/s, addressed to petitioner. The
letter sought to furnish petitioner with a copy of a notice of coverage previously issued by the DAR which
identifies the mother estate as subject to the agrarian reform program. The letter also aims to inform
petitioner that, as a transferee of a portion of the mother estate, it will be included by the DAR as an
"alternative land owner and payee."
Petitioner refused to receive the foregoing letter, as well as the notice of coverage attached thereto. The
DAR issued another notice of coverage that identified the mother estate and the subject land, as well as
several other agricultural lands in Negros Occidental, as subject to the government's agrarian reform
program. This notice was published the following day in an issue of the Philippine Star. Petitioner
questioned the efficacy of the notice coverage published by the DAR. Petitioner reckoned such notice as
ineffective on two (2) accounts: 1) the notice of coverage - for being merely published in a newspaper of
general circulation - was not properly served. The publication of the said notice was not preceded by any
attempt on the part of the DAR to effect personal service of the same. Such immediate resort to publication,
in turn, violates Section 16 of DAR Administrative Order (AO) No. 07-11 which prescribes personal service
as the "primary" means of serving notices of coverage; and 2) even assuming that the notice of coverage
was properly served by publication, the same still cannot be enforced as against the subject land. Such
notice remains infirm because it was never posted at a conspicuous place within the subject land and on a
bulletin board in the city or barangay hall, where the subject land is located, for seven (7) days, as required
under Section 19 of DAR AO No. 07-11.
The DAR and the LBP shared a common objection against the jurisdiction of the RTC. Both contended that
the RTC lacked jurisdiction to hear and decide the petition, pointing out that the issues raised therein but
pertain to matters of implementation of the agrarian reform program which belong to the exclusive
competence of the DAR to determine.
RTC: Agreed with the DAR and LBP. The RTC issued an Order dismissing the petition on the ground of
lack of jurisdiction.
Petitioner questions the RTC's supposed lack of jurisdiction to take cognizance of the petition for quieting
of title and declaratory relief. Petitioner postulates that Section 30 of RA No. 9700 limited the jurisdiction of
the DAR over agrarian law implementation cases. As worded, the provision only allows the DAR to exercise
its jurisdiction over such cases that are already pending as of June 30, 2014. This, according to petitioner,
means that the DAR no longer has any authority, much less exclusive jurisdiction, to take cognizance of
agrarian law implementation cases that have been filed after the statutory cut-off date of June 30, 2014. It
also means, petitioner adds, that jurisdiction over these cases are now, as they should be, deemed vested
with the regular courts.
ISSUE:
Whether or not RTC, by virtue of Section 30 of RA No. 9700, has jurisdiction over the case
RULING: No. Petition denied.

Atty. Mercader
Petitioner misunderstands Section 30 of RA No. 9700. Section 30 of RA No. 9700 did not vest any kind of
jurisdiction over any kind of case unto the regular courts. By its language, the provision is simply an
authorization for the DAR to continue to process, bring to finality and execute any case or proceeding
involving the implementation of the agrarian reform law already pending as of June 30, 2014 even beyond
the said date. Nothing more.
Since the sole question raised in the petition is really only an agrarian reform matter incidental to an on-
going proceeding for compulsory land acquisition and distribution, jurisdiction to resolve the same - as is
the case for the main proceeding itself - must rest too with the DAR. The authority given to the DAR under
Section 30 of RA No. 9700 to conclude any agrarian reform proceeding pending as of June 30, 2014, by
necessity, includes an authority for the same to continue exercising its quasi-judicial powers under Section
50 of RA No. 6657 with respect to any agrarian reform matter or controversy that may arise in such
proceeding.
The existence of an on-going proceeding for land acquisition and distribution involving the mother estate
and the subject land is, in turn, fatal to petitioner's petition for quieting of title and declaratory relief. The
grant of authority upon the DAR to conclude a proceeding involving the implementation of the agrarian
reform law pending as of June 30, 2014 under Section 30 of RA No. 9700, like any statutory grant of
authority, must be deemed to include all such powers, even those not expressly stated, that are necessary
to effectuate the granted authority. This construction is justified by the doctrine of necessary implication.
Accordingly, the authority of the DAR to bring to completion a proceeding for land acquisition and
distribution initiated prior to June 30, 2014 must be deemed inclusive of a coordinate authority to continue
exercising its quasi-judicial powers under Section 50 of RA No. 6657 with respect to agrarian reform
controversies that may arise from such proceeding.
NOTES:
Doctrine of necessary implication
The doctrine states that what is implied in a statute is as much a part thereof as that which is expressed.
Every statute is understood, by implication, to contain all such provisions as may be necessary to effectuate
its object and purpose, or to make effective rights, powers, privileges or jurisdiction which it grants, including
all such collateral and subsidiary consequences as may be fairly and logically inferred from its terms. Ex
necessitate legis. And every statutory grant of power, right or privilege is deemed to include all incidental
power, right or privilege. This is so because the greater includes the lesser, expressed in the maxim, in eo
plus sit, simper inest et minus.

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SAN BEDA UNIVERSITY COLLEGE OF LAW

Labor Law 1 & Agrarian Law and Social Legislation

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