2011 Supreme Court Decision (Labor )

Abandonment

For abandonment to exist, it is essential (a) that the employee must have failed to report for work or must have been absent without valid or justifiable reason; and (b) that there must have been a clear intention to sever the employer-employee relationship manifested by some overt acts. The employer has the burden of proof to show the employee’s deliberate and unjustified refusal to resume his employment without any intention of returning. Mere absence is not sufficient. There must be an unequivocal intent on the part of the employee to discontinue his employment. It is a settled rule that failure to report for work after a notice to return to work has been served does not necessarily constitute abandonment. The intent to discontinue the employment must be shown by clear proof that it was deliberate and unjustified. In this case, petitioner- corporation failed to show overt acts committed by respondents from which it may be deduced that they had no more intention to work. Respondents’ filing of the case for illegal dismissal barely four (4) days from their alleged abandonment is totally inconsistent with our known concept of what constitutes abandonment. (E.G. & I. Construction Corporation vs. Sato, et. al., G.R. No. 182070, February 16, 2011)

More so that it is settled that an employee’s excusable and unavoidable absences does (sic) not amount to an abandonment of his employment. Abandonment, as a just and valid ground for termination, means the deliberate, unjustified refusal of an employee to resume his employment. For abandonment to be a valid ground for dismissal, two (2) elements must be proved: the intention of an employee to abandon, coupled with an overt act from which it may be inferred that the employee has no more intention to resume his work. The burden of proof is on the employer to show a clear and deliberate intent on the part of the employee to discontinue employment. (Grandteq Industrial Steel Products, Inc., et. al. vs. Estrella, G.R. No. 192416, March 23, 2011)

It is a settled rule that “mere absence or failure to report for work x x x is not enough to amount to abandonment of work.” “Abandonment is the deliberate and unjustified refusal of an employee to resume his employment.” In Northwest Tourism Corporation v. Former Special 3rd Division of the Court of Appeals this Court held that “to constitute abandonment of work, two elements must concur: (1) the employee must have failed to report for work or must have been absent without valid or justifiable reason; and (2) there must have been a clear intention on the part of the employee to sever the employer-employee relationship manifested by some overt act.” It is the employer who has the burden of proof to show a deliberate and unjustified refusal of the employee to resume his employment without any intention of returning. It is therefore incumbent upon petitioners to ascertain the respondents’ interest or non-interest in the continuance of their employment. (Exodus International Construction Corp. vs. Biscocho, G.R. No. 166109, February 23, 2011)

Appeals

Section 4(c), Rule VI of the 2002 Rules of Procedure of the NLRC, which was in effect at the time respondents appealed the Labor Arbiter’s decision, expressly provided that, on appeal, the NLRC shall limit itself only to the specific issues that were elevated for review, to wit:

RULE VI
Appeals

Section 4. Requisites for Perfection of Appeal. x x x.

x x x x

(c) Subject to the provisions of Article 218, once the appeal is perfected in accordance with these Rules, the Commission shall limit itself to reviewing and deciding specific issues that were elevated on appeal. (Emphasis supplied.)

As a testament to its effectivity and the NLRC’s continued implementation of this procedural policy, the same provision was retained as Section 4(d), Rule VI of the 2005 Revised Rules of Procedure of the NLRC.

To reiterate, the clear import of the aforementioned procedural rule is that the NLRC shall, in cases of perfected appeals, limit itself to reviewing those issues which are raised on appeal. As a consequence thereof, any other issues which were not included in the appeal shall become final and executory.

We are cognizant of the fact that Article 218(c) of the Labor Code grants the NLRC the authority to “correct, amend or waive any error, defect or irregularity whether in substance or in form” in the exercise of its appellate jurisdiction. However, a careful perusal of the body of jurisprudence wherein we upheld the validity of the NLRC’s invocation of that prerogative would reveal that the said cases involved factual issues and circumstances materially dissimilar to the case at bar.

On the other hand, it is already settled in jurisprudence that the NLRC may not rely on Article 218(c) of the Labor Code as basis for its act of reviewing an entire case above and beyond the sole legal question raised.

With regard to the second assignment of error which essentially involves the determination of factual issues, we are reminded that, in a petition under Rule 45 of the Rules of Court, only questions of law, not of fact, may be raised before the Court. However, where the findings of the NLRC contradict those of the Labor Arbiter, the Court, in the exercise of equity jurisdiction, may look into the records of the case and reexamine the questioned findings. (Luna vs. Allado Construction Co., Inc., G.R. No. 175251, May 30, 2011)

Posting of Appeal Bonds

We can infer from the foregoing jurisprudential precedents that, as a general rule, the government and all the attached agencies with no legal personality distinct from the former are exempt from posting appeal bonds, whereas government-owned and controlled corporations (GOCCs) are not similarly exempted. This distinction is brought about by the very reason of the appeal bond itself: to protect the presumptive judgment creditor against the insolvency of the presumptive judgment debtor. When the State litigates, it is not required to put up an appeal bond because it is presumed to be always solvent. This exemption, however, does not, as a general rule, apply to GOCCs for the reason that the latter has a personality distinct from its shareholders. Thus, while a GOCC’s majority stockholder, the State, will always be presumed solvent, the presumption does not necessarily extend to the GOCC itself. However, when a GOCC becomes a “government machinery to carry out a declared government policy,” it becomes similarly situated as its majority stockholder as there is the assurance that the government will necessarily fund its primary functions. Thus, a GOCC that is sued in relation to its governmental functions may be, under appropriate circumstances, exempted from the payment of appeal fees. (Banahaw Broadcasting Corporation vs. Pacana, III, et. al., G.R. No. 171673, May 30, 2011)

Assumption of Jurisdiction

The law is explicit: no strike shall be declared after the Secretary of Labor has assumed jurisdiction over a labor dispute. A strike conducted after such assumption is illegal and any union officer who knowingly participates in the same may be declared as having lost his employment. Here, what is involved is a slowdown strike. Unlike other forms of strike, the employees involved in a slowdown do not walk out of their jobs to hurt the company. They need only to stop work or reduce the rate of their work while generally remaining in their assigned post.

A distinction exists, however, between the ordinary workers’ liability for illegal strike and that of the union officers who participated in it. The ordinary worker cannot be terminated for merely participating in the strike. There must be proof that he committed illegal acts during its conduct. On the other hand, a union officer can be terminated upon mere proof that he knowingly participated in the illegal strike.

Still, the participating union officers have to be properly identified. The CA held that the company illegally terminated union officers Ruben Alvarez, John Asotigue, Alberto Castillo, Nemesio Agtay, Carlito Abacan, Danilo Rolle, and Juanito Tenorio, there being no substantial evidence that would connect them to the slowdowns. The CA said that their part in the same could not be established with certainty.

Ordinarily, the illegally dismissed employees are entitled to two reliefs: reinstatement and backwages. Still, the Court has held that the grant of separation pay, instead of reinstatement, may be proper especially when as in this case such reinstatement is no longer practical or will be for the best interest of the parties. But they shall likewise be entitled to attorney’s fees equivalent to 10% of the total monetary award for having been compelled to litigate in order to protect their interests. (Fadriquelan, et. al. vs. Monterey Foods Corp., G.R. No. 178409, June 8, 2011; Monterey Foods Corp. vs. Bukliran ng mga Mangagawa sa Monterey-Ilaw at Bukold ng Manggagawa, et. al., G.R. No. 178434, June 8, 2011)

Arbitral Awards; CBA; Intra-Union DIsputes

While an arbitral award cannot per se be categorized as an agreement voluntarily entered into by the parties because it requires the interference and imposing power of the State thru the Secretary of Labor when he assumes jurisdiction, the award can be considered as an approximation of a collective bargaining agreement which would otherwise have been entered into by the parties. Hence, it has the force and effect of a valid contract obligation between the parties.

In determining arbitral awards then, aside from the MOA, courts considered other factors and documents including, as in this case, the financial documents submitted by respondent as well as its previous bargaining history and financial outlook and improvements as stated in its own website.

A CBA (assuming in this case that the MOA can be treated as one) is a contract imbued with public interest. It must thus be given a liberal, practical and realistic, rather than a narrow and technical construction, with due consideration to the context in which it is negotiated and the purpose for which it is intended.

At all events, the issue of disaffiliation is an intra-union dispute which must be resolved in a different forum in an action at the instance of either or both the FFW and the Union or a rival labor organization, not the employer.

An intra-union dispute refers to any conflict between and among union members, including grievances arising from any violation of the rights and conditions of membership, violation of or disagreement over any provision of the union’s constitution and by-laws, or disputes arising from chartering or disaffiliation of the union. Sections 1 and 2, Rule XI of Department Order No. 40-03, Series of 2003 of the DOLE enumerate the following circumstances as inter/intra-union disputes x x x

Indeed, as respondent-movant itself argues, a local union may disaffiliate at any time from its mother federation, absent any showing that the same is prohibited under its constitution or rule. Such, however, does not result in it losing its legal personality altogether. Verily, Anglo-KMU v. Samahan Ng Mga Manggagawang Nagkakaisa Sa Manila Bay Spinning Mills At J.P. Coats enlightens:

A local labor union is a separate and distinct unit primarily designed to secure and maintain an equality of bargaining power between the employer and their employee-members. A local union does not owe its existence to the federation with which it is affiliated. It is a separate and distinct voluntary association owing its creation to the will of its members. The mere act of affiliation does not divest the local union of its own personality, neither does it give the mother federation the license to act independently of the local union. It only gives rise to a contract of agency where the former acts in representation of the latter. (emphasis and underscoring supplied) (Cirtek Employees Labor Union vs. Cirtek Electronics, Inc., G.R. No. 190515, June 6, 2011)

Attorney’s Fees

Even though respondents were not represented by counsel in most of the stages of the proceedings of this case, the award of attorney’s fees as ruled by the Labor Arbiter, the NLRC and the CA to the respondents is still proper. In Rutaquio v. National Labor Relations Commission, this Court held that: It is settled that in actions for recovery of wages or where an employee was forced to litigate and, thus, incur expenses to protect his rights and interest, the award of attorney’s fees is legally and morally justifiable.

In Producers Bank of the Philippines v. Court of Appeals this Court ruled that: Attorney’s fees may be awarded when a party is compelled to litigate or to incur expenses to protect his interest by reason of an unjustified act of the other party.

In this case, respondents filed a complaint for illegal dismissal with claim for payment of their holiday pay, service incentive leave pay, and 13th month pay. The Labor Arbiter, the NLRC and the CA were one in ruling that petitioners did not pay the respondents their holiday pay, service incentive leave pay, and 13th month pay as mandated by law. For sure, this unjustified act of petitioners had compelled the respondents to institute an action primarily to protect their rights and interests. (Exodus International Construction Corp. vs. Biscocho, G.R. No. 166109, February 23, 2011)

Article 111 of the Labor Code, as amended, governs the grant of attorney’s fees in labor cases:

Art. 111. Attorney’s fees. – (a) In cases of unlawful withholding of wages, the culpable party may be assessed attorney’s fees equivalent to ten percent of the amount of wages recovered.

(b) It shall be unlawful for any person to demand or accept, in any judicial or administrative proceedings for the recovery of wages, attorney’s fees which exceed ten percent of the amount of wages recovered.

Section 8, Rule VIII, Book III of its Implementing Rules also provides, viz.:

Section 8. Attorney’s fees. – Attorney’s fees in any judicial or administrative proceedings for the recovery of wages shall not exceed 10% of the amount awarded. The fees may be deducted from the total amount due the winning party.

The Court explained in PCL Shipping Philippines, Inc. v. National Labor Relations Commission, G.R. No. 153031, December 14, 2006 that there are two commonly accepted concepts of attorney’s fees – the ordinary and extraordinary. In its ordinary concept, an attorney’s fee is the reasonable compensation paid to a lawyer by his client for the legal services the former renders; compensation is paid for the cost and/or results of legal services per agreement or as may be assessed. In its extraordinary concept, attorney’s fees are deemed indemnity for damages ordered by the court to be paid by the losing party to the winning party. The instances when these may be awarded are enumerated in Article 2208 of the Civil Code, specifically in its paragraph 7 on actions for recovery of wages, and is payable not to the lawyer but to the client, unless the client and his lawyer have agreed that the award shall accrue to the lawyer as additional or part of compensation.

The Court also held in PCL Shipping, supra. that Article 111 of the Labor Code, as amended, contemplates the extraordinary concept of attorney’s fees and that Article 111 is an exception to the declared policy of strict construction in the award of attorney’s fees. Although an express finding of facts and law is still necessary to prove the merit of the award, there need not be any showing that the employer acted maliciously or in bad faith when it withheld the wages. In carrying out and interpreting the Labor Code’s provisions and implementing regulations, the employee’s welfare should be the primary and paramount consideration. This kind of interpretation gives meaning and substance to the liberal and compassionate spirit of the law as embodied in Article 4 of the Labor Code (which provides that “all doubts in the implementation and interpretation of the provisions of the Labor Code, including its implementing rules and regulations, shall be resolved in favor of labor”) and Article 1702 of the Civil Code (which provides that “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 Court similarly so ruled in RTG Construction, Inc. v. Facto, G.R. No. 163872, December 21, 2009 and in Ortiz v. San Miguel Corporation, G.R. Nos. 151983-84, July 31, 2008. In RTG Construction, the Court specifically stated:

Settled is the rule that in actions for recovery of wages, or where an employee was forced to litigate and, thus, incur expenses to protect his rights and interests, a monetary award by way of attorney’s fees is justifiable under Article 111 of the Labor Code; Section 8, Rule VIII, Book III of its Implementing Rules; and paragraph 7, Article 2208 of the Civil Code. The award of attorney’s fees is proper, and there need not be any showing that the employer acted maliciously or in bad faith when it withheld the wages. There need only be a showing that the lawful wages were not paid accordingly.

In PCL Shipping, the Court found the award of attorney’s fees due and appropriate since the respondent therein incurred legal expenses after he was forced to file an action for recovery of his lawful wages and other benefits to protect his rights. From this perspective and the above precedents, the Court conclude that the CA erred in ruling that a finding of the employer’s malice or bad faith in withholding wages must precede an award of attorney’s fees under Article 111 of the Labor Code. To reiterate, a plain showing that the lawful wages were not paid without justification is sufficient.

In the present case, the Court find it undisputed that the union members are entitled to their AA benefits and that these benefits were not paid by the Company. That the Company had no funds is not a defense as this was not an insuperable cause that was cited and properly invoked. As a consequence, the union members represented by the Union were compelled to litigate and incur legal expenses. On these bases, the Court found no difficulty in upholding the NLRC’s award of ten percent (10%) attorney’s fees.

In Traders Royal Bank Employees Union-Independent v. NLRC, 336 Phil. 705 (1997), the Court expounded on the concept of attorney’s fees in the context of Article 111 of the Labor Code, as follows:

In the first place, the fees mentioned here are the extraordinary attorney’s fees recoverable as indemnity for damages sustained by and payable to the prevailing party. In the second place, the ten percent (10%) attorney’s fees provided for in Article 111 of the Labor Code and Section 11, Rule VIII, Book III of the Implementing Rules is the maximum of the award that may thus be granted. Article 111 thus fixes only the limit on the amount of attorney’s fees the victorious party may recover in any judicial or administrative proceedings and it does not even prevent the NLRC from fixing an amount lower than the ten percent (10%) ceiling prescribed by the article when circumstances warrant it.

In the present case, the ten percent (10%) attorney’s fees awarded by the NLRC on the basis of Article 111 of the Labor Code accrue to the Union’s members as indemnity for damages and not to the Union’s counsel as compensation for his legal services, unless, they agreed that the award shall be given to their counsel as additional or part of his compensation; in this case the Union bound itself to pay 10% attorney’s fees to its counsel under the MOA and also gave up the attorney’s fees awarded to the Union’s members in favor of their counsel. The limit to this agreement is that the indemnity for damages imposed by the NLRC on the losing party (i.e., the Company) cannot exceed ten percent (10%). Properly viewed from this perspective, the award cannot be taken to mean an additional grant of attorney’s fees, in violation of the ten percent (10%) limit under Article 111 of the Labor Code since it rests on an entirely different legal obligation than the one contracted under the MOA. Simply stated, the attorney’s fees contracted under the MOA do not refer to the amount of attorney’s fees awarded by the NLRC; the MOA provision on attorney’s fees does not have any bearing at all to the attorney’s fees awarded by the NLRC under Article 111 of the Labor Code.

The Company’s argument that the attorney’s fees are unconscionable as they represent 20% of the amount due or about P21.4 million is more apparent than real. Since the attorney’s fees awarded by the LA pertained to the Union’s members as indemnity for damages, it was totally within their right to waive the amount and give it to their counsel as part of their contingent fee agreement. Beyond the limit fixed by Article 111 of the Labor Code, such as between the lawyer and the client, the attorney’s fees may exceed ten percent (10%) on the basis of quantum meruit, as in the present case. (Kaisahan at Kapatiran ng mga Manggagawa at Kawani sa MWC-East Zone Union and Eduardo Borela vs. Manila Water Company, Inc., G.R. No. 174179, November 16, 2011)

Bargaining Unit; Payroll Master

In San Miguel Corporation Supervisors and Exempt Employees Union v. Laguesma, the Court explained that the employees of San Miguel Corporation Magnolia Poultry Products Plants of Cabuyao, San Fernando, and Otis constitute a single bargaining unit, which is not contrary to the one-company, one-union policy. An appropriate bargaining unit is defined as a group of employees of a given employer, comprised of all or less than all of the entire body of employees, which the collective interest of all the employees, consistent with equity to the employer, indicate to be best suited to serve the reciprocal rights and duties of the parties under the collective bargaining provisions of the law.

In National Association of Free Trade Unions v. Mainit Lumber Development Company Workers Union–United Lumber and General Workers of the Phils, the Court, taking into account the “community or mutuality of interests” test, ordered the formation of a single bargaining unit consisting of the Sawmill Division in Butuan City and the Logging Division in Zapanta Valley, Kitcharao, Agusan Del Norte of the Mainit Lumber Development Company. It held that while the existence of a bargaining history is a factor that may be reckoned with in determining the appropriate bargaining unit, the same is not decisive or conclusive. Other factors must be considered. The test of grouping is community or mutuality of interest. This is so because the basic test of an asserted bargaining unit’s acceptability is whether or not it is fundamentally the combination which will best assure to all employees the exercise of their collective bargaining rights (Democratic Labor Association v. Cebu Stevedoring Company, Inc., et. al.). Certainly, there is a mutuality of interest among the employees of the Sawmill Division and the Logging Division. Their functions mesh with one another. One group needs the other in the same way that the company needs them both. There may be differences as to the nature of their individual assignments, but the distinctions are not enough to warrant the formation of a separate bargaining unit.

Thus, applying the ruling to the present case, the Court affirms the finding of the CA that there should be only one bargaining unit for the employees in Cabuyao, San Fernando, and Otis of Magnolia Poultry Products Plant involved in “dressed” chicken processing and Magnolia Poultry Farms engaged in “live” chicken operations. Certain factors, such as specific line of work, working conditions, location of work, mode of compensation, and other relevant conditions do not affect or impede their commonality of interest. Although they seem separate and distinct from each other, the specific tasks of each division are actually interrelated and there exists mutuality of interests which warrants the formation of a single bargaining unit.

The Court of Appeals is correct in not excluding the position of Payroll Master (and all other positions with access to salary and compensation data) in the definition of a confidential employee. Confidential employees are defined as those who (1) assist or act in a confidential capacity, in regard (2) to persons who formulate, determine, and effectuate management policies in the field of labor relations (Sugbuanon Rural Bank, Inc. v. Laguesma). The two criteria are cumulative, and both must be met if an employee is to be considered a confidential employee – that is, the confidential relationship must exist between the employee and his supervisor, and the supervisor must handle the prescribed responsibilities relating to labor relations. The exclusion from bargaining units of employees who, in the normal course of their duties, become aware of management policies relating to labor relations is a principal objective sought to be accomplished by the “confidential employee rule” (Tunay na Pagkakaisa ng Manggagawa sa Asia Brewery v. Asia Brewery, Inc., G.R. No. 162025, August 3, 2010). A confidential employee is one entrusted with confidence on delicate, or with the custody, handling or care and protection of the employer’s property (Pepsi-Cola Products Phils., Inc. v. Secretary of Labor). Confidential employees, such as accounting personnel, should be excluded from the bargaining unit, as their access to confidential information may become the source of undue advantage (Golden Farms, Inc. v. Ferrer-Calleja). However, such fact does not apply to the position of Payroll Master and the whole gamut of employees who, as perceived by SMFI, has access to salary and compensation data. The position of Payroll Master does not involve dealing with confidential labor relations information in the course of the performance of his functions. Since the nature of his work does not pertain to company rules and regulations and confidential labor relations, it follows that he cannot be excluded from the subject bargaining unit.

Corollarily, although Article 245 of the Labor Code limits the ineligibility to join, form and assist any labor organization to managerial employees, jurisprudence has extended this prohibition to confidential employees or those who by reason of their positions or nature of work are required to assist or act in a fiduciary manner to managerial employees and, hence, are likewise privy to sensitive and highly confidential records (Tunay na Pagkakaisa ng Manggagawa sa Asia Brewery v. Asia Brewery, Inc., supra). Confidential employees are thus excluded from the rank-and-file bargaining unit. The rationale for their separate category and disqualification to join any labor organization is similar to the inhibition for managerial employees, because if allowed to be affiliated with a union, the latter might not be assured of their loyalty in view of evident conflict of interests and the union can also become company-denominated with the presence of managerial employees in the union membership (Bulletin Publishing Corporation v. Sanchez). Having access to confidential information, confidential employees may also become the source of undue advantage. Said employees may act as a spy or spies of either party to a collective bargaining agreement (Golden Farms, Inc. v. Ferrrer-Calleja).

In this regard, the positions of Human Resource Assistant and Personnel Assistant belong to the category of confidential employees and, hence, are excluded from the bargaining unit, considering their respective positions and job descriptions. As Human Resource Assistant, the scope of one’s work necessarily involves labor relations, recruitment and selection of employees, access to employees’ personal files and compensation package, and human resource management. As regards a Personnel Assistant, one’s work includes the recording of minutes for management during collective bargaining negotiations, assistance to management during grievance meetings and administrative investigations, and securing legal advice for labor issues from the SMFI’s team of lawyers, and implementation of company programs. Therefore, in the discharge of their functions, both gain access to vital labor relations information which outrightly disqualifies them from union membership.

The proceedings for certification election are quasi-judicial in nature and, therefore, decisions rendered in such proceedings can attain finality (United Pepsi-Cola Supervisory Union v. B.F. Goodrich [Marikina Factory] Confidential & Salaried Employees Union-NATU). Applying the doctrine of res judicata, the issue in the present case pertaining to the coverage of the employees who would constitute the bargaining unit is now a foregone conclusion. It bears stressing that a certification election is the sole concern of the workers; hence, an employer lacks the personality to dispute the same. The general rule is that an employer has no standing to question the process of certification election, since this is the sole concern of the workers (Barbizon Philippines, Inc. v. Nagkakaisang Supervisor ng Barbizon Phils., Inc.). Law and policy demand that employers take a strict, hands-off stance in certification elections. The bargaining representative of employees should be chosen free from any extraneous influence of management. A labor bargaining representative, to be effective, must owe its loyalty to the employees alone and to no other (Barbizon Philippines, Inc. v. Nagkakaisang Supervisor ng Barbizon Phils., Inc.). The only exception is where the employer itself has to file the petition pursuant to Article 258 of the Labor Code because of a request to bargain collectively (National Association of Trade Unions-Republic Planters Bank Supervisors Chapter v. Torres). With the foregoing disquisition, the Court writes finis to the issues raised so as to forestall future suits of similar nature. (San Miguel Foods, Inc. vs. San Miguel Corporation Supervisors and Exempt Union (SMCSEU), G.R. No. 146206, August 1, 2011)

Boundary Scheme

Under a boundary scheme, the driver remits the “boundary,” which is a fixed amount, to the owner/operator and gets to earn the amount in excess thereof. Thus, on a day when there are many passengers along the route, it is the driver who actually benefits from it. It would be unfair then if, during the times when passengers are scarce, the owner/operator will be made to suffer by not getting the full amount of the boundary. Unless clearly shown or explained by an event that irregularly and negatively affected the usual number of passengers within the route, the scarcity of passengers should not excuse the driver from paying the full amount of the boundary. (Caong, Jr., et. al. vs. Regualos, G.R. No. 179428, January 26, 2011)

Burden of Proof in Termination Cases

We must stress anew that, in termination cases, the burden rests upon the employer to show that the dismissal of an employee is for just cause, and failure to do so would mean that the dismissal is not justified. Failure to discharge that burden would mean that the dismissal is not justified and, therefore, illegal. (Grandteq Industrial Steel Products, Inc., et. al. vs. Estrella, G.R. No. 192416, March 23, 2011)

Cash and Surety Bond

The abovementioned provisions highlight the importance of posting a cash or surety bond in the perfection of an appeal to the NLRC from the Labor Arbiter’s judgment involving a monetary award. Thus, in Ramirez v. Court of Appeals this Court held, viz:

Under the Rules, appeals involving monetary awards are perfected only upon compliance with the following mandatory requisites, namely: (1) payment of the appeal fees; (2) filing of the memorandum of appeal; and (3) payment of the required cash or surety bond.

Notably, however, under Section 6, Rule VI of the NLRC’s Revised Rules
of Procedure, the bond may be reduced albeit only on meritorious grounds and upon posting of a partial bond in a reasonable amount in relation to the monetary award. Suffice it to state that while said Rules “allows the Commission to reduce the amount of the bond, the exercise of the authority is not a matter of right on the part of the movant, but lies within the sound discretion of the NLRC upon a showing of meritorious grounds.”

In Nicol v. Footjoy Industrial Corporation, the Court reviewed the jurisprudence respecting the bond requirement for perfecting appeal and summarized the guidelines under which the NLRC must exercise its discretion in considering an appellant’s motion for reduction of bond, viz:

[T]he bond requirement on appeals involving monetary awards has been and may be relaxed in meritorious cases. These cases include instances in which (1) there was substantial compliance with the Rules, (2) surrounding facts and circumstances constitute meritorious grounds to reduce the bond, (3) a liberal interpretation of the requirement of an appeal bond would serve the desired objective of resolving controversies on the merits, or (4) the appellants, at the very least, exhibited their willingness and/or good faith by posting a partial bond during the reglementary period.

Conversely the reduction of the bond is not warranted when no meritorious ground is shown to justify the same; the appellant absolutely failed to comply with the requirement of posting a bond, even if partial; or when the circumstances show the employer’s unwillingness to ensure the satisfaction of its workers’ valid claims

Collective Bargaining Agreement

Article 253 mandates the parties to keep the status quo and to continue in full force and effect the terms and conditions of the existing agreement during the 60-day period prior to the expiration of the old CBA and/or until a new agreement is reached by the parties. In the same manner that it does not provide for any exception nor qualification on which economic provisions of the existing agreement are to retain its force and effect, the law does not distinguish between a CBA duly agreed upon by the parties and an imposed CBA like the one under consideration.

Although generally looked upon with disfavor, it cannot be gainsaid that legitimate waivers that represent a voluntary and reasonable settlement of laborers’ claims should be so respected by the Court as the law between the parties. It is only where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or the terms of settlement are unconscionable on its face, that the law will step in to annul the questionable transaction.

In administrative or quasi-judicial proceedings like those conducted before the NLRC, the standard of proof is substantial evidence which is understood to be more than just a scintilla or such amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. Since it does not mean just any evidence in the record of the case for, otherwise, no finding of fact would be wanting in basis, the test to be applied is whether a reasonable mind, after considering all the relevant evidence in the record of a case, would accept the findings of fact as adequate. (General Milling Corp.-Independent Labor Union vs. General Milling Corp., G.R. No. 183122, June 15, 2011)

Commissions

The Labor Arbiter, the NLRC and the CA unanimously held that respondent is entitled to his accrued commissions in the amount of P10,000.00 for every vessel repaired/constructed by the company or the total amount of P70,000.00 for the seven vessels repaired/constructed under his supervision.

The Court, however, is inclined to rule otherwise. Examination of the check vouchers presented by respondent reveals that an amount of P30,000.00 and P10,000.00 alleged as commissions were paid to respondent on June 9, 2000 and September 28, 2000, respectively. Although the veracity and genuineness of these documents were not effectively disputed by petitioners, nothing in them provides that commissions were paid to respondent on account of a repair or construction of a vessel. It cannot also be deduced from said documents for what or for how many vessels the amounts stated therein are for. In other words, the check vouchers contain very scant details and can hardly be considered as sufficient and substantial evidence to conclude that respondent is entitled to a commission of P10,000.00 for every vessel repaired or constructed by the company. At most, these vouchers only showed that respondent was paid on two occasions but were silent as to the specific purpose of payment. The list of vessels supposedly repaired/constructed by the company neither validates respondent’s monetary claim as it merely contains an enumeration of 17 names of vessels and nothing more. No particulars, notation or any clear indication can be found on the list that the repair or complete construction of seven of the seventeen boats listed therein was supervised or managed by respondent. Worse, the list is written only on a piece of paper and not on petitioners’ official stationery and is unverified and unsigned. Verily, its patent vagueness makes it unworthy of any credence to be used as basis for awarding respondent compensations as alleged commissions. Aside from these documents, no other competent evidence was presented by respondent to determine the value of what is properly due him, much less his entitlement to a commission. Respondent’s claim cannot be based on allegations and unsubstantiated assertions without any competent document to support it. Certainly, the award of commissions in favor of respondent in the amount of P70,000.00 should not be allowed as the claim is founded on mere inferences, speculations and presumptions. (Harpoon Marine Services, Inc. vs. Francisco, G.R. No. 167751, March 2, 2011)

Certiorari; Verification; Doctrine of Piercing the Veil of Corporate
Fiction; Unfair Labor Practice

The power of the CA to review NLRC decisions via a petition for certiorari under Rule 65 of the Rules of Court has been settled as early as this Court’s decision in St. Martin Funeral Homes v. NLRC, 356 Phil. 811 (1998). In said case, the Court held that the proper vehicle for such review is a special civil action for certiorari under Rule 65 of the said Rules, and that the case should be filed with the CA in strict observance of the doctrine of hierarchy of courts. Moreover, it is already settled that under Section 9 of Batas Pambansa Blg. 129, as amended by Republic Act No. 7902, the CA — pursuant to the exercise of its original jurisdiction over petitions for certiorari — is specifically given the power to pass upon the evidence, if and when necessary, to resolve factual issues (PICOP Resources Incorporated v. Taneca, et. al., G.R. No. 160828, August 9, 2010; Maralit v. PNB, G.R. No. 163788, August 24, 2009; Triumph International (Phils.), Inc. v. Apostol, G.R. No. 164423, June 16, 2009). Section 9 clearly states:

The Court of Appeals shall have the power to try cases and conduct hearings, receive evidence and perform any and all acts necessary to resolve factual issues raised in cases falling within its original and appellate jurisdiction, including the power to grant and conduct new trials or further proceedings. x x x

However, equally settled is the rule that factual findings of labor officials, who are deemed to have acquired expertise in matters within their jurisdiction, are generally accorded not only respect but even finality by the courts when supported by substantial evidence, i.e., the amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion (Philippine Veterans Bank v. NLRC, G.R. No. 188882, March 30, 2010). But these findings are not infallible. When there is a showing that they were arrived at arbitrarily or in disregard of the evidence on record, they may be examined by the courts (Faeldonia v. Tong Yak Groceries, G.R. No. 182499, October 2, 2009). The CA can grant the petition for certiorari if it finds that the NLRC, in its assailed decision or resolution, made a factual finding not supported by substantial evidence (Emcor Incorporated v. Sienes, G.R. No. 152101, September 8, 2009). It is within the jurisdiction of the CA, whose jurisdiction over labor cases has been expanded to review the findings of the NLRC.

In this case, the NLRC sustained the factual findings of the Labor Arbiter. Thus, these findings are generally binding on the appellate court, unless there was a showing that they were arrived at arbitrarily or in disregard of the evidence on record. In respondents’ petition for certiorari with the CA, these factual findings were reexamined and reversed by the appellate court on the ground that they were not in accord with credible evidence presented in this case. To determine if the CA’s reexamination of factual findings and reversal of the NLRC decision are proper and with sufficient basis, it is incumbent upon this Court to make its own evaluation of the evidence on record (Triump v. Apostol, supra).

The CA did not commit error in arriving at its own findings and conclusions for reasons to be discussed hereunder. Contrary to the position of the petitioners that the petition filed with the CA is fatally defective, because the attached verification and certificate against forum shopping was signed only by respondent Garcia, it was been held that while the general rule is that the certificate of non-forum shopping must be signed by all the plaintiffs in a case and the signature of only one of them is insufficient, the Court has stressed that the rules on forum shopping, which were designed to promote and facilitate the orderly administration of justice, should not be interpreted with such absolute literalness as to subvert its own ultimate and legitimate objective (Juaban v. Espina, G.R. No. 170049, March 14, 2008, citing Cua v. Vargas, 506 SCRA 374, 389-390 [2006]; Pacquing v. Coca-Cola Phils., Inc., G.R. No. 157966, January 31, 2008). Strict compliance with the provision regarding the certificate of non-forum shopping underscores its mandatory nature in that the certification cannot be altogether dispensed with or its requirements completely disregarded. It does not, however, prohibit substantial compliance therewith under justifiable circumstances, considering especially that although it is obligatory, it is not jurisdictional.

In a number of cases, the Court has consistently held that when all the petitioners share a common interest and invoke a common cause of action or defense, the signature of only one of them in the certification against forum shopping substantially complies with the rules. In the present case, there is no question that respondents share a common interest and invoke a common cause of action. Hence, the signature of respondent Garcia is a sufficient compliance with the rule governing certificates of non-forum shopping. In the first place, some of the respondents actually executed a Special Power of Attorney authorizing Garcia as their attorney-in-fact in filing a petition for certiorari with the CA.

The Court, likewise, does not agree with petitioners’ argument that the CA should not have given due course to the petition filed before it with respect to some of the respondents, considering that these respondents did not sign the verification attached to the Memorandum of Partial Appeal earlier filed with the NLRC. Petitioners assert that the decision of the Labor Arbiter has become final and executory with respect to these respondents and, as a consequence, they are barred from filing a petition for certiorari with the CA.

In any case, the settled rule is that a pleading which is required by the Rules of Court to be verified, may be given due course even without a verification if the circumstances warrant the suspension of the rules in the interest of justice (Heirs of the Late Jose De Luzuriaga v. Republic, G.R. No. 168848 & 169019, June 30, 2009; Woodridge School v. Pe Benito, G.R. No. 160240, October 29, 2008; Linton Commercial Co., Inc. v. Hellera, G.R. No. 163147, October 10, 2007). Indeed, the absence of a verification is not jurisdictional, but only a formal defect, which does not of itself justify a court in refusing to allow and act on a case (Spic N’ Span Services Corp. v. Paje, G.R. No. 174084, August 25, 2010; Sari-Sari Group of Companies, Inc. v. Piglas Kamao [Sari-Sari Chapter], G.R. No. 164624, August 11, 2008). Hence, the failure of some of the respondents to sign the verification attached to their Memorandum of Appeal filed with the NLRC is not fatal to their cause of action.

On the contrary, the Court agrees with the CA that Lubas is a mere agent, conduit or adjunct of PTI. A settled formulation of the doctrine of piercing the corporate veil is that when two business enterprises are owned, conducted and controlled by the same parties, both law and equity will, when necessary to protect the rights of third parties, disregard the legal fiction that these two entities are distinct and treat them as identical or as one and the same (Pantranco Employees Association [PEA-PTGWO] v. NLRC, G.R. Nos. 170689 and 170705, March 17, 2009). In the present case, it may be true that Lubas is a single proprietorship and not a corporation. However, petitioners’ attempt to isolate themselves from and hide behind the supposed separate and distinct personality of Lubas so as to evade their liabilities is precisely what the classical doctrine of piercing the veil of corporate entity seeks to prevent and remedy.

Thus, the Court agrees with the observations of the CA, to wit:

As correctly pointed out by petitioners, if Lubas were truly a separate entity, how come that it was Prince Transport who made the decision to transfer its employees to the former? Besides, Prince Transport never regarded Lubas Transport as a separate entity. In the aforesaid letter, it referred to said entity as “Lubas operations.” Moreover, in said letter, it did not transfer the employees; it “assigned” them. Lastly, the existing funds and 201 file of the employees were turned over not to a new company but a “new management. (emphasis ours)

The Court also agrees with respondents that if Lubas is indeed an entity separate and independent from PTI why is it that the latter decides which employees shall work in the former? What is telling is the fact that in a memorandum issued by PTI, dated January 22, 1998, PTI company admitted that Lubas is one of its sub-companies. In addition, PTI, in its letters to its employees who were transferred to Lubas, referred to the latter as its “New City Operations Bus.”

Moreover, petitioners failed to refute the contention of respondents that despite the latter’s transfer to Lubas of their daily time records, reports, daily income remittances of conductors, schedule of drivers and conductors were all made, performed, filed and kept at the office of PTI. In fact, respondents’ identification cards bear the name of PTI. It may not be amiss to point out at this juncture that in two separate illegal dismissal cases involving different groups of employees transferred by PTI to other companies, the Labor Arbiter handling the cases found that these companies and PTI are one and the same entity; thus, making them solidarily liable for the payment of backwages and other money claims awarded to the complainants therein.

It is clear from the complaints filed by respondents that they are seeking reinstatement. In any case, Section 2 (c), Rule 7 of the Rules of Court provides that a pleading shall specify the relief sought, but may add a general prayer for such further or other reliefs as may be deemed just and equitable. Under this rule, a court can grant the relief warranted by the allegation and the proof even if it is not specifically sought by the injured party; the inclusion of a general prayer may justify the grant of a remedy different from or together with the specific remedy sought, if the facts alleged in the complaint and the evidence introduced so warrant (Philippine Charter Insurance Corporation v. Philippine National Construction Corporation, G.R. No. 185066, October 2, 2009).

Moreover, in BPI Family Bank v. Buenaventura, 508 Phil. 423, 436 (2005), the Court ruled that the general prayer is broad enough “to justify extension of a remedy different from or together with the specific remedy sought.” Even without the prayer for a specific remedy, proper relief may be granted by the court if the facts alleged in the complaint and the evidence introduced so warrant. The court shall grant relief warranted by the allegations and the proof even if no such relief is prayed for. The prayer in the complaint for other reliefs equitable and just in the premises justifies the grant of a relief not otherwise specifically prayed for (Gutierrez v. Valiente, G.R. No. 166802, July 4, 2008). In the instant case, aside from their specific prayer for reinstatement, respondents, in their separate complaints, prayed for such reliefs which are deemed just and equitable.

The Court finds no cogent reason to depart from the findings of the CA that respondents’ transfer of work assignments to Lubas was designed by petitioners as a subterfuge to foil the former’s right to organize themselves into a union. Under Article 248 (a) and (e) of the Labor Code, an employer is guilty of unfair labor practice if it interferes with, restrains or coerces its employees in the exercise of their right to self-organization or if it discriminates in regard to wages, hours of work and other terms and conditions of employment in order to encourage or discourage membership in any labor organization.

Indeed, evidence of petitioners’ unfair labor practice is shown by the established fact that, after respondents’ transfer to Lubas, petitioners left them high and dry insofar as the operations of Lubas was concerned. The Court finds no error in the findings and conclusion of the CA that petitioners “withheld the necessary financial and logistic support such as spare parts, and repair and maintenance of the transferred buses until only two units remained in running condition.” This left respondents virtually jobless. (Prince Transport, Inc. and Renato Claros vs. Diosdado Garcia, et. al., G.R. No. 167291, January 12, 2011)

Petition for Review on Certiorari

Well-settled is the rule that the jurisdiction of this Court in a petition for review on certiorari is limited to reviewing only errors of law, not of fact, unless the factual findings being assailed are not supported by the evidence on record or the impugned judgment is based on a misapprehension of facts. Patently erroneous findings of the Labor Arbiter, even when affirmed by the NLRC and the Court of Appeals, are not binding on this Court. (The University of the Immaculate Concepcion vs. NLRC and Axalan, G.R. No. 181146, January 26, 2011)

Certiorari under Rule 65

As a rule, the CA cannot undertake a re-assessment of the evidence presented in the case in certiorari proceedings under Rule 65 of the Rules of Court (Protacio v. Laya Mananghaya & Co., G.R. No. 168654, March 25, 2009). However, the rule admits of exceptions. In Mercado v. AMA Computer College-Parañaque City, Inc., G.R. No. 183572, April 13, 2010, the Court held that the CA may examine the factual findings of the NLRC to determine whether or not its conclusions are supported by substantial evidence, whose absence justifies a finding of grave abuse of discretion. The Court ruled:

We agree with the petitioners that, as a rule in certiorari proceedings under Rule 65 of the Rules of Court, the CA does not assess and weigh each piece of evidence introduced in the case. The CA only examines the factual findings of the NLRC to determine whether or not the conclusions are supported by substantial evidence whose absence points to grave abuse of discretion amounting to lack or excess of jurisdiction. In the recent case of Protacio v. Laya Mananghaya & Co., we emphasized that:

As a general rule, in certiorari proceedings under Rule 65 of the Rules of Court, the appellate court does not assess and weigh the sufficiency of evidence upon which the Labor Arbiter and the NLRC based their conclusion. The query in this proceeding is limited to the determination of whether or not the NLRC acted without or in excess of its jurisdiction or with grave abuse of discretion in rendering its decision. However, as an exception, the appellate court may examine and measure the factual findings of the NLRC if the same are not supported by substantial evidence. The Court has not hesitated to affirm the appellate court’s reversals of the decisions of labor tribunals if they are not supported by substantial evidence. (italics and emphasis supplied; citation omitted)

As discussed below, the review of the records and of the CA decision shows that the CA erred in ruling that the NLRC gravely abused its discretion in awarding the Union ten percent (10%) attorney’s fees without basis in fact and in law. Corollary to the above-cited rule is the basic approach in the Rule 45 review of Rule 65 decisions of the CA in labor cases which the Court articulated in Montoya v. Transmed Manila Corporation, G.R. No. 183329, August 27, 2009 as a guide and reminder to the CA. The Court laid down that:

In a Rule 45 review, we consider the correctness of the assailed CA decision, in contrast with the review for jurisdictional error that we undertake under Rule 65. Furthermore, Rule 45 limits us to the review of questions of law raised against the assailed CA decision. In ruling for legal correctness, we have to view the CA decision in the same context that the petition for certiorari it ruled upon was presented to it; we have to examine the CA decision from the prism of whether it correctly determined the presence or absence of grave abuse of discretion in the NLRC decision before it, not on the basis of whether the NLRC decision on the merits of the case was correct. In other words, we have to be keenly aware that the CA undertook a Rule 65 review, not a review on appeal, of the NLRC decision challenged before it. This is the approach that should be basic in a Rule 45 review of a CA ruling in a labor case. In question form, the question to ask is: Did the CA correctly determine whether the NLRC committed grave abuse of discretion in ruling on the case? (italics and emphases supplied)

In the present case, the Court are therefore tasked to determine whether the CA correctly ruled that the NLRC committed grave abuse of discretion in awarding 10% attorney’s fees to the Union. (Kaisahan at Kapatiran ng mga Manggagawa at Kawani sa MWC-East Zone Union and Eduardo Borela vs. Manila Water Company, Inc., G.R. No. 174179, November 16, 2011)

employer] financial capability to post the required bond, without necessarily passing upon the merits. Since the intention is merely to give the NLRC an idea of the justification for the reduced bond, the evidence for the purpose would necessarily be less than the evidence required for a ruling on the merits.

Indeed, it only bears stressing that the NLRC is not precluded from receiving evidence on appeal as technical rules of evidence are not binding in labor cases. On the contrary, the Labor Code explicitly mandates it to ‘use every and all reasonable means to ascertain the facts in each case speedily and objectively, without regard to technicalities of law or procedure, all in the interest of due process. (University Plans Incorporated vs. Solano, et. al., G.R. No. 170416, June 22, 2011)

Petition for Certiorari

In a special civil action for certiorari, the Court of Appeals has ample authority to make its own factual determination. Thus, the Court of Appeals can grant a petition for certiorari when it finds that the NLRC committed grave abuse of discretion by disregarding evidence material to the controversy. To make this finding, the Court of Appeals necessarily has to look at the evidence and make its own factual determination. In the same manner, this Court is not precluded from reviewing the factual issues when there are conflicting findings by the Labor Arbiter, the NLRC and the Court of Appeals. In this case, we find that the findings of the Labor Arbiter and the NLRC are more in accord with the evidence on record. (Plastimer Industrial Corporation and Teo Kee Bin vs. Gopo, et. al., G.R. No. 183390, February 16, 2011)

Certification Against Forum Shopping

A reading of said Verification with Certification reveals that petitioner nonetheless certified therein that she has not filed a similar case before any other court or tribunal and that she would inform the court if she learns of a pending case similar to the one she had filed therein. This, to our mind is more than substantial compliance with the requirements of the Rules. It has been held that “with respect to the contents of the certification[,] x x x the rule on substantial compliance may be availed of.” (Santos vs. Litton Mills Inc., G.R. No. 170646, June 22, 2011)

Corporate Rehabilitation Proceedings

The Court finds that all pending actions in the instant case, including the execution of the judgment in favor of M, should be suspended pending termination of the rehabilitation proceedings. The Court’s ruling in the more recent case of Castillo v. Uniwide Warehouse Club, Inc., G.R. No. 169725, April 30, 2010 is instructive, thus:

An essential function of corporate rehabilitation is the mechanism of suspension of all actions and claims against the distressed corporation, which operates upon the due appointment of a management committee or rehabilitation receiver. The governing law concerning rehabilitation and suspension of actions for claims against corporations is P.D. No. 902-A, as amended. Section 6(c) of the law mandates that, upon appointment of a management committee, rehabilitation receiver, board, or body, all actions for claims against corporations, partnerships or associations under management or receivership pending before any court, tribunal, board, or body shall be suspended. It materially provides:

Section 6 (c). x x x

x x x Provided, finally, that upon appointment of a management committee, rehabilitation receiver, board or body, pursuant to this Decree, all actions for claims against corporations, partnerships or associations under management or receivership pending before any court, tribunal, board or body, shall be suspended accordingly.

In Finasia Investments and Finance Corporation v. Court of Appeals, G.R. No. 107002, October 7, 1994, the term “claim” has been construed to refer to debts or demands of a pecuniary nature, or the assertion to have money paid. It was referred to, in Arranza v. B.F. Homes, Inc., 389 Phil. 318, as an action involving monetary considerations and in Philippine Airlines v. Kurangking, 438 Phil. 375, the term was identified as the right to payment, whether or not it is reduced to judgment, liquidated or unliquidated, fixed or contingent, matured or unmatured, disputed or undisputed, legal or equitable, and secured or unsecured. Furthermore, the actions that were suspended cover all claims against a distressed corporation whether for damages founded on a breach of contract of carriage, labor cases, collection suits or any other claims of a pecuniary nature. More importantly, the new rules on corporate rehabilitation, as well as the interim rules, provide an all-encompassing definition of the term and, thus, include all claims or demands of whatever nature or character against a debtor or its property, whether for money or otherwise. There is no doubt that petitioner’s claim in this case, arising as it does from his alleged illegal dismissal, is a claim covered by the suspension order issued by the SEC, as it is one for pecuniary consideration.

Jurisprudence is settled that the suspension of proceedings referred to in the law uniformly applies to “all actions for claims” filed against a corporation, partnership or association under management or receivership, without distinction, except only those expenses incurred in the ordinary course of business. In the oft-cited case of Rubberworld (Phils.) Inc. v. NLRC, G.R. No. 126773, April 14, 1999, the Court noted that aside from the given exception, the law is clear and makes no distinction as to the claims that are suspended once a management committee is created or a rehabilitation receiver is appointed. Since the law makes no distinction or exemptions, neither should this Court. Ubi lex non distinguit nec nos distinguere debemos. Philippine Airlines, Inc. v. Zamora, G.R. No. 166996, February 6, 2007 declares that the automatic suspension of an action for claims against a corporation under a rehabilitation receiver or management committee embraces all phases of the suit, that is, the entire proceedings of an action or suit and not just the payment of claims.

The reason behind the imperative nature of a suspension or stay order in relation to the creditors’ claims cannot be downplayed, for indeed the indiscriminate suspension of actions for claims intends to expedite the rehabilitation of the distressed corporation by enabling the management committee or the rehabilitation receiver to effectively exercise its/his powers free from any judicial or extrajudicial interference that might unduly hinder or prevent the rescue of the debtor company. To allow such other actions to continue would only add to the burden of the management committee or rehabilitation receiver, whose time, effort and resources would be wasted in defending claims against the corporation, instead of being directed toward its restructuring and rehabilitation. (Molina vs. Pacific Plans, Inc., G.R. No. 165476, August 15, 2011)

Constitutionality of Section 10, R.A. 8042

Verily, we have already declared in Serrano that 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 is unconstitutional for being violative of the rights of Overseas Filipino Workers (OFWs) to equal protection of the laws. In an exhaustive discussion of the intricacies and ramifications of the said clause, this Court, in Serrano, pertinently held:

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 petitioner’s 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.

First. It is only at this late stage, more particularly in their Memorandum, that respondents are raising this issue. It was not raised before the LA, the NLRC, and the CA. They did not even assail the award accorded by the CA, which computed the lump-sum salary of petitioner at the basic salary of US$1,430.00, and which clearly included the US$130.00 tanker allowance. Hence, fair play, justice, and due process dictate that this Court cannot now, for the first time on appeal, pass upon this question. Matters not taken up below cannot be raised for the first time on appeal. They must be raised seasonably in the proceedings before the lower tribunals. Questions raised on appeal must be within the issues framed by the parties; consequently, issues not raised before the lower tribunals cannot be raised for the first time on appeal.

Second. Respondents’ invocation of Serrano is unavailing. Indeed, we made the following pronouncements in Serrano, to wit:

The word salaries in Section 10(5) does not include overtime and leave pay. For seafarers like petitioner, DOLE Department Order No. 33, series 1996, provides a Standard Employment Contract of Seafarers, in which salary is understood as the basic wage, exclusive of overtime, leave pay and other bonuses; whereas overtime pay is compensation for all work “performed” in excess of the regular eight hours, and holiday pay is compensation for any work “performed” on designated rest days and holidays.

We ought to be reminded of the plight and sacrifices of our OFWs. In Olarte v. Nayona, this Court held that:

Our overseas workers belong to a disadvantaged class. Most of them come from the poorest sector of our society. Their profile shows they live in suffocating slums, trapped in an environment of crimes. Hardly literate and in ill health, their only hope lies in jobs they find with difficulty in our country. Their unfortunate circumstance makes them easy prey to avaricious employers. They will climb mountains, cross the seas, endure slave treatment in foreign lands just to survive. Out of despondence, they will work under sub-human conditions and accept salaries below the minimum. The least we can do is to protect them with our laws.

(Yap vs. Thenamaris Ship’s Management and Intermare Maritime Agencies, Inc., G.R. No. 179532, May 30, 2011)

Constructive Dismissal: Monetary Claims

Article 279 of the Labor Code provides that an employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges, to full backwages, inclusive of allowances, and to other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement. However, due to the strained relations of the parties, the payment of separation pay has been considered an acceptable alternative to reinstatement, when the latter option is no longer desirable or viable. On the one hand, such payment liberates the employee from what could be a highly oppressive work environment. On the other, the payment releases the employer from the grossly unpalatable obligation of maintaining in its employ a worker it could no longer trust.

Thus, as an illegally or constructively dismissed employee, respondent is entitled to: (1) either reinstatement, if viable, or separation pay, if reinstatement is no longer viable; and (2) backwages. These two reliefs are separate and distinct from each other and are awarded conjunctively. In this case, since respondent was a probationary employee at the time she was constructively dismissed by petitioners, she is entitled to separation pay and backwages. Reinstatement of respondent is no longer viable considering the circumstances.

However, the backwages that should be awarded to respondent shall be reckoned from the time of her constructive dismissal until the date of the termination of her employment, i.e., from October 30, 1997 to March 14, 1998. The computation should not cover the entire period from the time her compensation was withheld up to the time of her actual reinstatement. This is because respondent was a probationary employee, and the lapse of her probationary employment without her appointment as a regular employee of petitioner Supermarket effectively severed the employer-employee relationship between the parties.
In all cases involving employees engaged on probationary basis, the employer shall make known to its employees the standards under which they will qualify as regular employees at the time of their engagement. Where no standards are made known to an employee at the time, he shall be deemed a regular employee, unless the job is self-descriptive, like maid, cook, driver, or messenger. However, the constitutional policy of providing full protection to labor is not intended to oppress or destroy management. Naturally, petitioner Supermarket cannot be expected to retain respondent as a regular employee considering that she lost P20,299.00 while acting as a cashier during the probationary period. The rules on probationary employment should not be used to exculpate a probationary employee who acts in a manner contrary to basic knowledge and common sense, in regard to which, there is no need to spell out a policy or standard to be met. (Robinsons Galleria/Robinsons Supermarket Corporation vs. Ranchez, G.R. No. 177937, January 19, 2011)

Constructive dismissal occurs when there is cessation of work because continued employment is rendered impossible, unreasonable, or unlikely as 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 leaving the latter with no other option but to quit. In this case however, there was no cessation of employment relations between the parties. It is unrefuted that Axalan promptly resumed teaching at the university right after the expiration of the suspension period. In other words, Axalan never quit. Hence, Axalan cannot claim that she was left with no choice but to quit, a crucial element in a finding of constructive dismissal. Thus, Axalan cannot be deemed to have been constructively dismissed. (The University of the Immaculate Concepcion vs. NLRC and Axalan, G.R. No. 181146, January 26, 2011)

The Court agrees with the Labor Arbiter that there was no violation of the prohibition on diminution of benefits. Indeed, any benefit and perks being enjoyed by employees cannot be reduced and discontinued, otherwise, the constitutional mandate to afford full protection to labor shall be offended. But the rule 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 which is consistent and deliberate. (Barroga vs. DataCenterCollege of the Philippines, G.R. No. 174158, June 27, 2011)

Control Test: Insurance Agency

Control over the performance of the task of one providing service – both with respect to the means and manner, and the results of the service – is the primary element in determining whether an employment relationship exists.

There are built-in elements of control specific to an insurance agency, which do not amount to the elements of control that characterize an employment relationship governed by the Labor Code. The Insurance Code provides definite parameters in the way an agent negotiates for the sale of the company’s insurance products, his collection activities and his delivery of the insurance contract or policy. In addition, the Civil Code defines an agent as a person who binds himself to do something in behalf of another, with the consent or authority of the latter. Article 1887 of the Civil Code also provides that in the execution of the agency, the agent shall act in accordance with the instructions of the principal. All these, read without any clear understanding of fine legal distinctions, appear to speak of control by the insurance company over its agents. They are, however, controls aimed only at specific results in undertaking an insurance agency, and are, in fact, parameters set by law in defining an insurance agency and the attendant duties and responsibilities an insurance agent must observe and undertake. They do not reach the level of control into the means and manner of doing an assigned task that invariably characterizes an employment relationship as defined by labor law.

To reiterate, guidelines indicative of labor law “control” do 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. Tested by this norm, Manulife’s instructions regarding the objectives and sales targets, in connection with the training and engagement of other agents, are among the directives that the principal may impose on the agent to achieve the assigned tasks. They are targeted results that Manulife wishes to attain through its agents. Manulife’s codes of conduct, likewise, do not necessarily intrude into the insurance agents’ means and manner of conducting their sales. Codes of conduct are norms or standards of behavior rather than employer directives into how specific tasks are to be done. These codes, as well as insurance industry rules and regulations, are not per se indicative of labor law control under our jurisprudence. (Tongko vs. The Manufacturers Life Insurance Co. (Phils.), Inc., G.R. No. 167622, January 25, 2011)

Court of Appeals’ Power to Review Facts in a Petition
For Certiorari under Rule 65

This Court has already confirmed the power of the Court of Appeals, even on a Petition for Certiorari under Rule 65, to review the evidence on record, when necessary, to resolve factual issues:

The power of the Court of Appeals to review NLRC decisions via Rule 65 or Petition for Certiorari has been settled as early as in our decision in St. Martin Funeral Home v. National Labor Relations Commission. This Court held that the proper vehicle for such review was a Special Civil Action for Certiorari under Rule 65 of the Rules of Court, and that this action should be filed in the Court of Appeals in strict observance of the doctrine of the hierarchy of courts. Moreover, it is already settled that under Section 9 of Batas Pambansa Blg. 129, as amended by Republic Act No. 7902[10] (An Act Expanding the Jurisdiction of the Court of Appeals, amending for the purpose of Section Nine of Batas Pambansa Blg. 129 as amended, known as the Judiciary Reorganization Act of 1980), the Court of Appeals — pursuant to the exercise of its original jurisdiction over Petitions for Certiorari — is specifically given the power to pass upon the evidence, if and when necessary, to resolve factual issues.

While it is true that factual findings made by quasi-judicial and administrative tribunals, if supported by substantial evidence, are accorded great respect and even finality by the courts, this general rule admits of exceptions. When there is a showing that a palpable and demonstrable mistake that needs rectification has been committed or when the factual findings were arrived at arbitrarily or in disregard of the evidence on record, these findings may be examined by the courts. In the case at bench, the Court of Appeals found itself unable to completely sustain the findings of the NLRC thus, it was compelled to review the facts and evidence and not limit itself to the issue of grave abuse of discretion. With the conflicting findings of facts by the tribunals below now before us, it behooves this Court to make an independent evaluation of the facts in this case. (Culili vs. Eastern Telecommunications Philippines, Inc., et. al., G.R. No. 165381, February 9, 2011).

Cancellation of Union Registration

Articles 238 and 239 of the Labor Code read:

ART. 238. CANCELLATION OF REGISTRATION; APPEAL

The certificate of registration of any legitimate labor organization, whether national or local, shall be canceled by the Bureau if it has reason to believe, after due hearing, that the said labor organization no longer meets one or more of the requirements herein prescribed.

ART. 239. GROUNDS FOR CANCELLATION OF UNION REGISTRATION.

The following shall constitute grounds for cancellation of union registration:

x x x x

(d) Failure to submit the annual financial report to the Bureau within thirty (30) days after the closing of every fiscal year and misrepresentation, false entries or fraud in the preparation of the financial report itself;

x x x x

(i) Failure to submit list of individual members to the Bureau once a year or whenever required by the Bureau.

These provisions give the Regional Director ample discretion in dealing with a petition for cancellation of a union’s registration, particularly, determining whether the union still meets the requirements prescribed by law. It is sufficient to give the Regional Director license to treat the late filing of required documents as sufficient compliance with the requirements of the law. After all, the law requires the labor organization to submit the annual financial report and list of members in order to verify if it is still viable and financially sustainable as an organization so as to protect the employer and employees from fraudulent or fly-by-night unions. With the submission of the required documents by respondent, the purpose of the law has been achieved, though belatedly.

The Court did not ascribe abuse of discretion to the Regional Director and the DOLE Secretary in denying the petition for cancellation of respondent’s registration. The union members and, in fact, all the employees belonging to the appropriate bargaining unit should not be deprived of a bargaining agent, merely because of the negligence of the union officers who were responsible for the submission of the documents to the BLR.

Labor authorities should, indeed, act with circumspection in treating petitions for cancellation of union registration, lest they be accused of interfering with union activities. In resolving the petition, consideration must be taken of the fundamental rights guaranteed by Article XIII, Section 3 of the Constitution, i.e., the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities. Labor authorities should bear in mind that registration confers upon a union the status of legitimacy and the concomitant right and privileges granted by law to a legitimate labor organization, particularly the right to participate in or ask for certification election in a bargaining unit. Thus, the cancellation of a certificate of registration is the equivalent of snuffing out the life of a labor organization. For without such registration, it loses – as a rule – its rights under the Labor Code.

It is worth mentioning that the Labor Code’s provisions on cancellation of union registration and on reportorial requirements have been recently amended by Republic Act (R.A.) No. 9481, An Act Strengthening the Workers’ Constitutional Right to Self-Organization, Amending for the Purpose Presidential Decree No. 442, As Amended, Otherwise Known as the Labor Code of the Philippines, which lapsed into law on May 25, 2007 and became effective on June 14, 2007. The amendment sought to strengthen the workers’ right to self-organization and enhance the Philippines’ compliance with its international obligations as embodied in the International Labour Organization (ILO) Convention No. 87, pertaining to the non-dissolution of workers’ organizations by administrative authority. Thus, R.A. No. 9481 amended Article 239 to read:

ART. 239. Grounds for Cancellation of Union Registration.—The following may constitute grounds for cancellation of union registration:

(a) Misrepresentation, false statement or fraud in connection with the adoption or ratification of the constitution and by-laws or amendments thereto, the minutes of ratification, and the list of members who took part in the ratification;

(b) Misrepresentation, false statements or fraud in connection with the election of officers, minutes of the election of officers, and the list of voters;

R.A. No. 9481 also inserted in the Labor Code Article 242-A, which provides:

ART. 242-A. Reportorial Requirements.—The following are documents required to be submitted to the Bureau by the legitimate labor organization concerned:

(a) Its constitution and by-laws, or amendments thereto, the minutes of ratification, and the list of members who took part in the ratification of the constitution and by-laws within thirty (30) days from adoption or ratification of the constitution and by-laws or amendments thereto;

(b) Its list of officers, minutes of the election of officers, and list of voters within thirty (30) days from election;

(d) Its list of members at least once a year or whenever required by the Bureau.

Failure to comply with the above requirements shall not be a ground for cancellation of union registration but shall subject the erring officers or members to suspension, expulsion from membership, or any appropriate penalty.

ILO Convention No. 87, which we have ratified in 1953, provides that “workers’ and employers’ organizations shall not be liable to be dissolved or suspended by administrative authority.” The ILO has expressed the opinion that the cancellation of union registration by the registrar of labor unions, which in our case is the BLR, is tantamount to dissolution of the organization by administrative authority when such measure would give rise to the loss of legal personality of the union or loss of advantages necessary for it to carry out its activities, which is true in our jurisdiction. Although the ILO has allowed such measure to be taken, provided that judicial safeguards are in place, i.e., the right to appeal to a judicial body, it has nonetheless reminded its members that dissolution of a union, and cancellation of registration for that matter, involve serious consequences for occupational representation. It has, therefore, deemed it preferable if such actions were to be taken only as a last resort and after exhausting other possibilities with less serious effects on the organization.

The aforesaid amendments and the ILO’s opinion on this matter serve to fortify our ruling in this case. We therefore quote with approval the DOLE Secretary’s rationale for denying the petition, thus:

It is undisputed that appellee failed to submit its annual financial reports and list of individual members in accordance with Article 239 of the Labor Code. However, the existence of this ground should not necessarily lead to the cancellation of union registration. Article 239 recognizes the regulatory authority of the State to exact compliance with reporting requirements. Yet there is more at stake in this case than merely monitoring union activities and requiring periodic documentation thereof.

The more substantive considerations involve the constitutionally guaranteed freedom of association and right of workers to self-organization. Also involved is the public policy to promote free trade unionism and collective bargaining as instruments of industrial peace and democracy. An overly stringent interpretation of the statute governing cancellation of union registration without regard to surrounding circumstances cannot be allowed. Otherwise, it would lead to an unconstitutional application of the statute and emasculation of public policy objectives. Worse, it can render nugatory the protection to labor and social justice clauses that pervades the Constitution and the Labor Code.

Moreover, submission of the required documents is the duty of the officers of the union. It would be unreasonable for this Office to order the cancellation of the union and penalize the entire union membership on the basis of the negligence of its officers. In National Union of Bank Employees vs. Minister of Labor, L-53406, 14 December 1981, 110 SCRA 296, the Supreme Court ruled:

As aptly ruled by respondent Bureau of Labor Relations Director Noriel: “The rights of workers to self-organization finds general and specific constitutional guarantees. x x x Such constitutional guarantees should not be lightly taken much less nullified. A healthy respect for the freedom of association demands that acts imputable to officers or members be not easily visited with capital punishments against the association itself.”

At any rate, we note that on 19 May 2000, appellee had submitted its financial statement for the years 1996-1999. With this submission, appellee has substantially complied with its duty to submit its financial report for the said period. To rule differently would be to preclude the union, after having failed to meet its periodic obligations promptly, from taking appropriate measures to correct its omissions. For the record, we do not view with favor appellee’s late submission. Punctuality on the part of the union and its officers could have prevented this petition. (The Heritage Hotel Manila vs. National Union of Workers in the Hotel, Restaurant and Allied Industries-Heritage Hotel Manila Supervisors Chapter, G.R. No. 178296, January 12, 2011)

Damages in Illegal Dismissal

In illegal dismissal cases, moral damages are awarded only where the dismissal 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. Exemplary damages may avail if the dismissal was effected in a wanton, oppressive or malevolent manner to warrant an award for exemplary damages. (Culili vs. Eastern Telecommunications Philippines, Inc., et. al., G.R. No. 165381, February 9, 2011)

Nominal Damages

Where dismissal is for an authorized cause like redundancy, the employer is, instead, required to serve a written notice of termination on the worker concerned and the DOLE, at least one month from the intended date thereof (Serrano v. NLRC). Here, NHPI specifically made L’s termination from service effective August 22, 2002, but only informed said employee of the same on August 8, 2002 and filed with the DOLE the required Establishment Termination Report only on August 16, 2002. For its failure to comply strictly with the 30-day minimum requirement for said notice and effectively violating L’s right to due process, NHPI should be held liable to pay nominal damages in the sum of P50,000.00. The penalty should understandably be stiffer because the dismissal process was initiated by the employer’s exercise of its management prerogative (Smart Communications, Inc. v. Astorga, G.R. Nos. 148132, 151079, 151372, January 28, 2008 citing Jaka Food Processing Corporation v. Pacot, G.R. No. 151378, March 28, 2005).

With respect to moral and exemplary damages: For lack of showing of bad faith, malice or arbitrariness on the part of NHPI, there is, however, no justifiable ground for an award of moral and exemplary damages (See Lambert Pawnbrokers & Jewelry Corporation v. Binamira, G.R. No. 170464, July 12, 2010). (Nippon Housing Phil. Inc., et. al. vs. Leynes, G.R. No. 177816, August 3, 2011)

Certiorari; Damages

A writ of certiorari is a remedy to correct errors of jurisdiction, for which reason it must clearly show that the public respondent has no jurisdiction to issue an order or to render a decision. Rule 65 of the Rules of Court has instituted the petition for certiorari to correct acts of any tribunal, board or officer exercising judicial or quasi-judicial functions with grave abuse of discretion amounting to lack or excess of jurisdiction. This remedy serves as a check on acts, either of excess or passivity, that constitute grave abuse of discretion of a judicial or quasi-judicial function. The Court, in San Fernando Rural Bank, Inc. v. Pampanga Omnibus Development Corporation and Dominic G. Aquino, G.R. No. 168088, April 3, 2007, explained thus:

Certiorari is a remedy narrow in its scope and inflexible in character. It is not a general utility tool in the legal workshop. Certiorari will issue only to correct errors of jurisdiction and not to correct errors of judgment. An error of judgment is one which the court may commit in the exercise of its jurisdiction, and which error is reviewable only by an appeal. Error of jurisdiction is one where the act complained of was issued by the court without or in excess of jurisdiction and which error is correctible only by the extraordinary writ of certiorari. As long as the court acts within its jurisdiction, any alleged errors committed in the exercise of its discretion will amount to nothing more than mere errors of judgment, correctible by an appeal if the aggrieved party raised factual and legal issues; or a petition for review under Rule 45 of the Rules of Court if only questions of law are involved.

A certiorari writ may be issued if the court or quasi-judicial body issues an order with grave abuse of discretion amounting to excess or lack of jurisdiction. Grave abuse of discretion implies such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction or, in other words, where the power is exercised in an arbitrary manner by reason of passion, prejudice, or personal hostility, and it must be so patent or gross as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law. Mere abuse of discretion is not enough. Moreover, a party is entitled to a writ of certiorari only if there is no appeal nor any plain, speedy or adequate relief in the ordinary course of law.

The raison d’etre for the rule is that when a court exercises its jurisdiction, an error committed while so engaged does not deprive it of the jurisdiction being exercised when the error was committed. If it did, every error committed by a court would deprive it of its jurisdiction and every erroneous judgment would be a void judgment. In such a situation, the administration of justice would not survive. Hence, where the issue or question involved affects the wisdom or legal soundness of the decision – not the jurisdiction of the court to render said decision – the same is beyond the province of a special civil action for certiorari. (citations omitted)

In this case, there must first be a finding on whether the NLRC committed grave abuse of discretion and on what these acts were. The CA seemed to have forgotten that its function in resolving a petition for certiorari was to determine whether there was grave abuse of discretion amounting to lack or excess of jurisdiction on the part of public respondent NLRC. The CA proceeded to review the records and to rule on issues that were no longer disputed during the appeal to the NLRC, such as the existence of an employer-employee relationship. The pivotal issue before the NLRC was whether A’s telling Y to take a rest, or to have a break, was already a positive act of dismissing him. This issue was not discussed by the CA. A reading of the assailed Decision will readily reveal the patent errors of the CA. On page 11 of its Decision, it held as follows: “The NLRC likewise concluded that petitioner was not entitled to separation pay because he was not a regular employee of private respondent, he (the petitioner) being paid on purely ‘commission’ or ‘pakyaw’ basis.” The CA took off from that point to give a discussion on regular employment and further held:

To Us, private respondent’s “advice to take a rest” theory is nothing but a mere ploy to reinforce his hypothesis that the petitioner is not a regular employee. What makes this worse is that the NLRC bought private respondent’s aforesaid theory hook, line and sinker and ruled that the petitioner was neither dismissed from work, he (the petitioner) being considered merely on “leave of absence without pay”, nor is he (the petitioner) entitled to separation pay on the ground that he was paid on purely “commission” or “pakyaw” basis which is in legal parlance, in effect, implies that the petitioner is not a regular employee of the private respondent, but a mere seasonal worker or independent contractor.

It is most disturbing to see how the CA regarded labor terms “paid on commission,” “pakyaw” and “seasonal worker” as one and the same. In labor law, they are different and have distinct meanings. It should also be remembered that a regular status of employment is not based on how the salary is paid to an employee. An employee may be paid purely on commission and still be considered a regular employee. Moreover, a seasonal employee may also be considered a regular employee.

Further, the appreciation by the CA of the NLRC Resolution was erroneous. The fact is that the refusal by the NLRC to grant separation pay was merely consistent with its ruling that there was no dismissal. Since Y was not dismissed, much less illegally dismissed, separation pay was unnecessary. The CA looked at the issue differently and erroneously, as it held that the NLRC refused to grant the award of separation pay because Y had not been found to be a regular employee. The NLRC had in fact made no such ruling. These are flagrant errors that are reversible by the Court. They should be corrected for the sake not only of the litigants, but also of the CA, so that it would become more circumspect in its appreciation of the records before it. The Court reviewed the NLRC Resolution that reversed the LA Decision and found nothing in it that was whimsical, unreasonable or patently violative of the law. It was the CA which erred in finding faults that were inexistent in the NLRC Resolution.

The pertinent provisions of the 2005 Rules of Procedure of the NLRC are as follows:

Rule VII, Section 14. Motions for Reconsideration. – Motions for reconsideration of any order, resolution or decision of the Commission shall not be entertained except when based on palpable or patent errors, provided that the motion is under oath and filed within ten (10) calendar days from receipt of the order, resolution or decision, with proof of service that a copy of the same has been furnished, within the reglementary period, the adverse party and provided further, that only one such motion from the same party shall be entertained.

Rule VIII, Section 2. Finality of decisions of the Commission. – (a) Finality of the decisions, resolutions or orders of the Commission. Except as provided in Rule XI, Section 10, the decisions, resolutions orders of the Commission/Division shall become executory after (10) calendar days from receipt of the same.

When Y failed to file a Motion for Reconsideration of the NLRC’s 30 November 2006 Resolution within the reglementary period, the Resolution attained finality and could no longer be modified by the Court of Appeals. The Court has ruled as follows:

It is a fundamental rule that when a final judgment becomes executory, it thereby becomes immutable and unalterable. The judgment may no longer be modified in any respect, even if the modification is meant to correct what is perceived to be an erroneous conclusion of fact or law, and regardless of whether the modification is attempted to be made by the court rendering it or by the highest Court of the land. The only recognized exceptions are the correction of clerical errors or the making of so-called nunc pro tunc entries which cause no prejudice to any party, and, of course, where the judgment is void. Any amendment or alteration which substantially affects a final and executory judgment is null and void for lack of jurisdiction, including the entire proceedings held for that purpose.

¬It cannot be argued that prescriptive periods are mere procedural rules and technicalities, which may be brushed aside at every cry of injustice, and may be bent and broken by every appeal to pity. The Court’s ruling in Videogram Regulatory Board v. Court of Appeals finds application to the present case:

There are certain procedural rules that must remain inviolable, like those setting the periods for perfecting an appeal or filing a petition for review, for it is doctrinally entrenched that the right to appeal is a statutory right and one who seeks to avail of that right must comply with the statute or rules. The rules, particularly the requirements for perfecting an appeal within the reglementary period specified in the law, must be strictly followed as they are considered indispensable interdictions against needless delays and for orderly discharge of judicial business. Furthermore, the perfection of an appeal in the manner and within the period permitted by law is not only mandatory but also jurisdictional and the failure to perfect the appeal renders the judgment of the court final and executory. Just as a losing party has the right to file an appeal within the prescribed period, the winning party also has the correlative right to enjoy the finality of the resolution of his/her case.

These periods are carefully guarded and lawyers are well-advised to keep track of their applications. After all, a denial of a petition for being time-barred is a decision on the merits.

Similarly, a motion for reconsideration filed out of time cannot reopen a final and executory judgment of the NLRC. Untimeliness in filing motions or petitions is not a mere technical or procedural defect, as leniency regarding this requirement will impinge on the right of the winning litigant to peace of mind resulting from the laying to rest of the controversy.

Since the CA could no longer modify the NLRC Resolution, it logically follows that the modification of the award cannot be done either. Had the Resolution not yet attained finality, the CA could have granted some other relief, even if not specifically sought by petitioner, if such ruling is proper under the circumstances. Rule 65 of the Rules of Court provides:

Section. 8. Proceedings after comment is filed. – After the comment or other pleadings required by the court are filed, or the time for the filing thereof has expired, the court may hear the case or require the parties to submit memoranda. If after such hearing or filing of memoranda or upon the expiration of the period for filing, the court finds that the allegations of the petition are true, it shall render judgment for such relief to which the petitioner is entitled.

However, the NLRC Resolution sought to be set aside had become final and executory 25 days before Y filed his Motion for Reconsideration. Thus, subsequent proceedings and modifications are not allowed and are deemed null and void. (AGG Trucking vs. Yuag, G.R. No. 195033, October 12, 2011)

Decision

Service of Decision

Section 10, Rule 13 of the Rules of Court provides:

SEC. 10. Completeness of service. – Personal service is complete upon actual delivery. Service by ordinary mail is complete upon the expiration of ten (10) days after mailing, unless the court otherwise provides. Service by registered mail is complete upon actual receipt by the addressee, or after five (5) days from the date he received the first notice of the postmaster, whichever date is earlier.
The rule on service by registered mail contemplates two situations: (1) actual service the completeness of which is determined upon receipt by the addressee of the registered mail; and (2) constructive service the completeness of which is determined upon expiration of five days from the date the addressee received the first notice of the postmaster (Philemploy Services and Resources, Inc. v. Rodriguez, G.R. No. 152616, March 31, 2006). Insofar as constructive service is concerned, there must be conclusive proof that a first notice was duly sent by the postmaster to the addressee. Not only is it required that notice of the registered mail be issued but that it should also be delivered to and received by the addressee. Notably, the presumption that official duty has been regularly performed is not applicable in this situation. It is incumbent upon a party who relies on constructive service to prove that the notice was sent to, and received by, the addressee (Spouses Aguilar v. Court of Appeals). The best evidence to prove that notice was sent would be a certification from the postmaster, who should certify not only that the notice was issued or sent but also as to how, when and to whom the delivery and receipt was made. The mailman may also testify that the notice was actually delivered (Barrameda v. Castillo).

In this case, B failed to present any concrete proof as to how, when and to whom the delivery and receipt of the three notices issued by the post office was made. There is no conclusive evidence showing that the post office notices were actually received by PBA, negating B’s claim of constructive service of the Labor Arbiter’s decision to PBA. The Postmaster’s Certification does not sufficiently prove that the three notices were delivered to and received by respondents; it only indicates that the post office issued the three notices. Simply put, the issuance of the notices by the post office is not equivalent to delivery to and receipt by the addressee of the registered mail. Thus, there is no proof of completed constructive service of the Labor Arbiter’s decision to PBA. At any rate, the NLRC declared the issue on the finality of the Labor Arbiter’s decision moot as PBA’s appeal was considered in the interest of substantial justice. The Court agrees with the NLRC. The ends of justice will be better served if they resolve the instant case on the merits rather than allowing the substantial issue of whether B is an independent contractor or an employee linger and remain unsettled due to procedural technicalities. (Bernarte vs. Philippine Basketball Association (PBA), et. al., G.R. No. 192084, September 14, 2011)

Legal Interest(Decision)

With respect to the matter of legal interest, it should be noted that the Court’s Resolution of January 14, 2009 granted M’s Very Urgent Manifestation and Motion to Order Execution of a Final and Executory Judgment. M prayed in the said Manifestation and Motion that in addition to the amount of P4,366,954.80 granted to him as monetary award, he should also be awarded legal interest at the rate of 12% per annum. Hence, the matter of the award of 12% legal interest is already settled. Nonetheless, it may not be amiss to reiterate the prevailing rule as enunciated in the landmark case of Eastern Shipping Lines, Inc. v. Court of Appeals, thus:

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on “Damages” of the Civil Code govern in determining the measure of recoverable damages.

II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Article 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2 above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.

Hence, the payment of legal interest becomes a necessary consequence of the finality of the Court’s Decision, because reckoned from that time the said Decision becomes a judgment for money which, under established jurisprudence, earns interest at the rate of 12% per annum.

Decision of the Regional Director

Generally, the DOLE Secretary has no authority to review the decision of the Regional Director in a petition for cancellation of union registration. Jurisdiction to review the decision of the Regional Director lies with the Bureau of Labor Relations (BLR). This is clearly provided in Sec. 4, Rule VIII, Book V of the Omnibus Rules Implementing the Labor Code and enunciated by the Court in Abbot Labs. Phils., Inc vs. Abbot Labs. Employees Union (380 Phil. 364 [2000]).
However, the present case involves a peculiar circumstance that was not present or covered by the ruling in Abbott. In this case, the BLR Director inhibited himself from the case because he was a former counsel of NUWHRAIN. Who, then, shall resolve the case in his place? In Abbott, the appeal from the Regional Director’s decision was directly filed with the Office of the DOLE Secretary, and the Court ruled that the latter has no appellate jurisdiction. In the instant case, the appeal was filed by TH Hotel with the BLR, which, undisputedly, acquired jurisdiction over the case. Once jurisdiction is acquired by the court, it remains with it until the full termination of the case. Thus, jurisdiction remained with the BLR despite the BLR Director’s inhibition. When the DOLE Secretary resolved the appeal, she merely stepped into the shoes of the BLR Director and performed a function that the latter could not himself perform. She did so pursuant to her power of supervision and control over the BLR.

Expounding on the extent of the power of control, the Court, in Araneta, et al. vs. Hon. M. Gatmaitan, et al., pronounced that, if a certain power or authority is vested by law upon the Department Secretary, then such power or authority may be exercised directly by the President, who exercises supervision and control over the departments. This principle was incorporated in the Administrative Code of 1987, which defines “supervision and control” as including the authority to act directly whenever a specific function is entrusted by law or regulation to a subordinate. Applying the foregoing to the present case, it is clear that the DOLE Secretary, as the person exercising the power of supervision and control over the BLR, has the authority to directly exercise the quasi-judicial function entrusted by law to the BLR Director.

It is true that the power of control and supervision does not give the Department Secretary unbridled authority to take over the functions of his or her subordinate. Such authority is subject to certain guidelines which are stated in Book IV, Chapter 8, Section 39(1)(a) of the Administrative Code of 1987. However, in the present case, the DOLE Secretary’s act of taking over the function of the BLR Director was warranted and necessitated by the latter’s inhibition from the case and the objective to “maintain the integrity of the decision, as well as the Bureau itself.” (The Heritage Hotel Manila vs. National Union of Workers in the Hotel, Restaurant and Allied Industries-Heritage Hotel Manila Supervisors Chapter, G.R. No. 178296, January 12, 2011)

Execution of Judgment; Third-Party Claims

The Court has long recognized that regular courts have no jurisdiction to hear and decide questions which arise from and are incidental to the enforcement of decisions, orders, or awards rendered in labor cases by appropriate officers and tribunals of the Department of Labor and Employment. To hold otherwise is to sanction splitting of jurisdiction which is obnoxious to the orderly administration of justice. Thus, it is, first and foremost, the NLRC Manual on the Execution of Judgment that governs any question on the execution of a judgment of that body. Petitioner need not look further than that. The Rules of Court apply only by analogy or in a suppletory character.

Consider the provision in Section 16, Rule 39 of the Rules of Court on third-party claims:

SEC. 16. Proceedings where property claimed by third person.—If the property levied on is claimed by any person other than the judgment obligor or his agent, and such person makes an affidavit of his title thereto or right to the possession thereof, stating the grounds of such right or title, and serves the same upon the officer making the levy and a copy thereof upon the judgment obligee, the officer shall not be bound to keep the property, unless such judgment obligee, on demand of the officer, files a bond approved by the court to indemnify the third-party claimant in a sum not less than the value of the property levied on. In case of disagreement as to such value, the same shall be determined by the court issuing the writ of execution. No claim for damages for the taking or keeping of the property may be enforced against the bond unless the action therefor is filed within one hundred twenty (120) days from the date of the filing of the bond.

The officer shall not be liable for damages for the taking or keeping of the property, to any third-party claimant if such bond is filed. Nothing herein contained shall prevent such claimant or any third person from vindicating his claim to the property in a separate action, or prevent the judgment obligee from claiming damages in the same or a separate action against a third-party claimant who filed a frivolous or plainly spurious claim.

When the writ of execution is issued in favor of the Republic of the Philippines, or any officer duly representing it, the filing of such bond shall not be required, and in case the sheriff or levying officer is sued for damages as a result of the levy, he shall be represented by the Solicitor General and if held liable therefor, the actual damages adjudged by the court shall be paid by the National Treasurer out of such funds as may be appropriated for the purpose.

On the other hand, the NLRC Manual on the Execution of Judgment deals specifically with third-party claims in cases brought before that body. It defines a third-party claim as one where a person, not a party to the case, asserts title to or right to the possession of the property levied upon. It also sets out the procedure for the filing of a third-party claim, to wit:

SECTION 2. Proceedings. — If property levied upon be claimed by any person other than the losing party or his agent, such person shall make an affidavit of his title thereto or right to the possession thereof, stating the grounds of such right or title and shall file the same with the sheriff and copies thereof served upon the Labor Arbiter or proper officer issuing the writ and upon the prevailing party. Upon receipt of the third party claim, all proceedings with respect to the execution of the property subject of the third party claim shall automatically be suspended and the Labor Arbiter or proper officer issuing the writ shall conduct a hearing with due notice to all parties concerned and resolve the validity of the claim within ten (10) working days from receipt thereof and his decision is appealable to the Commission within ten (10) working days from notice, and the Commission shall resolve the appeal within same period.

There is no doubt in our mind that petitioner’s complaint is a third- party claim within the cognizance of the NLRC. Petitioner may indeed be considered a “third party” in relation to the property subject of the execution vis-à-vis the Labor Arbiter’s decision. There is no question that the property belongs to petitioner and his wife, and not to the corporation. It can be said that the property belongs to the conjugal partnership, not to petitioner alone. Thus, the property belongs to a third party, i.e., the conjugal partnership. At the very least, the Court can consider that petitioner’s wife is a third party within contemplation of the law.

The Court’s pronouncements in Deltaventures Resources, Inc. v. Hon. Cabato are instructive:

Ostensibly the complaint before the trial court was for the recovery of possession and injunction, but in essence it was an action challenging the legality or propriety of the levy vis-a-vis the alias writ of execution, including the acts performed by the Labor Arbiter and the Deputy Sheriff implementing the writ. The complaint was in effect a motion to quash the writ of execution of a decision rendered on a case properly within the jurisdiction of the Labor Arbiter, to wit: Illegal Dismissal and Unfair Labor Practice. Considering the factual setting, it is then logical to conclude that the subject matter of the third party claim is but an incident of the labor case, a matter beyond the jurisdiction of regional trial courts.

x x x x

x x x. Whatever irregularities attended the issuance an execution of the alias writ of execution should be referred to the same administrative tribunal which rendered the decision. This is because any court which issued a writ of execution has the inherent power, for the advancement of justice, to correct errors of its ministerial officers and to control its own processes.

The broad powers granted to the Labor Arbiter and to the National Labor Relations Commission by Articles 217, 218 and 224 of the Labor Code can only be interpreted as vesting in them jurisdiction over incidents arising from, in connection with or relating to labor disputes, as the controversy under consideration, to the exclusion of the regular courts.

There is no denying that the present controversy arose from the complaint for illegal dismissal. The subject matter of petitioner’s complaint is the execution of the NLRC decision. Execution is an essential part of the proceedings before the NLRC. Jurisdiction, once acquired, continues until the case is finally terminated, and there can be no end to the controversy without the full and proper implementation of the commission’s directives.

Moreover, the power of the NLRC, or the courts, to execute its judgment extends only to properties unquestionably belonging to the judgment debtor alone. A sheriff, therefore, has no authority to attach the property of any person except that of the judgment debtor. (Ando vs. Campo, et. al., G.R. No. 184007, February 16, 2011)

Employer-Employee Relationship

It is already settled that the relationship between jeepney owners/operators and jeepney drivers under the boundary system is that of employer-employee and not of lessor-lessee. The fact that the drivers do not receive fixed wages but only get the amount in excess of the so-called “boundary” that they pay to the owner/operator is not sufficient to negate the relationship between them as employer and employee. (Caong, Jr., et. al. vs. Regualos, G.R. No. 179428, January 26, 2011).

Fees for Workers; Prohibited Practices

Respondent was originally charged with violation of Article 32 and Article 34(a) and (b) of the Labor Code, as amended. The pertinent provisions read:

ART. 32. Fees to be Paid by Workers. – Any person applying with a private fee charging employment agency for employment assistance shall not be charged any fee until he has obtained employment through its efforts or has actually commenced employment. Such fee shall be always covered with the appropriate receipt clearly showing the amount paid. The Secretary of Labor shall promulgate a schedule of allowable fees.

ART. 34. Prohibited Practices. – It shall be unlawful for any individual, entity, licensee, or holder of authority:

(a) To charge or accept, directly or indirectly, any amount greater than that specified in the schedule of allowable fees prescribed by the Secretary of Labor; or to make a worker pay any amount greater than that actually received by him as a loan or advance;

(b) To furnish or publish any false notice or information or document in relation to recruitment or employment.

The POEA, the Secretary of Labor, the OP, and the CA already absolved respondent of liability under Articles 32 and 34(b). As no appeal was interposed by petitioner when the Secretary of Labor freed respondent of said liabilities, the only issue left for determination is whether respondent is liable for collection of excess placement fee defined in Article 34(a) of the Labor Code, as amended.

Although initially, the POEA dismissed petitioner’s complaint for lack of merit, the Secretary of Labor and the OP reached a different conclusion. On appeal to the CA, the appellate court, however, reverted to the POEA conclusion. Following this turn of events, we are constrained to look into the records of the case and weigh anew the evidence presented by the parties.

In proceedings before administrative and quasi-judicial agencies, the quantum of evidence required to establish a fact is substantial evidence, or that level of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.

In this case, are the pieces of evidence presented by petitioner substantial to show that respondent collected from her more than the allowable placement fee? We answer in the negative.

To show the amount it collected as placement fee from petitioner, respondent presented an acknowledgment receipt showing that petitioner paid and respondent received P20,840.00. This notwithstanding, petitioner claimed that she paid more than this amount. In support of her allegation, she presented a photocopy of a promissory note she executed, and testified on the purported deductions made by her foreign employer. In the promissory note, petitioner promised to pay respondent the amount of P10,000.00 that she borrowed for only two weeks. Petitioner also explained that her foreign employer deducted from her salary a total amount of NT$60,000.00. She claimed that the P10,000.00 covered by the promissory note was never obtained as a loan but as part of the placement fee collected by respondent. Moreover, she alleged that the salary deductions made by her foreign employer still formed part of the placement fee collected by respondent.

We are inclined to give more credence to respondent’s evidence, that is, the acknowledgment receipt showing the amount paid by petitioner and received by respondent. A receipt is a written and signed acknowledgment that money or goods have been delivered. Although a receipt is not conclusive evidence, an exhaustive review of the records of this case fails to disclose any other evidence sufficient and strong enough to overturn the acknowledgment embodied in respondent’s receipt as to the amount it actually received from petitioner. Having failed to adduce sufficient rebuttal evidence, petitioner is bound by the contents of the receipt issued by respondent. The subject receipt remains as the primary or best evidence.

The promissory note presented by petitioner cannot be considered as adequate evidence to show the excessive placement fee. It must be emphasized that a promissory note is a solemn acknowledgment of a debt and a formal commitment to repay it on the date and under the conditions agreed upon by the borrower and the lender. A person who signs such an instrument is bound to honor it as a legitimate obligation duly assumed by him through the signature he affixes thereto as a token of his good faith. Moreover, as held by the CA, the fact that respondent is not a lending company does not preclude it from extending a loan to petitioner for her personal use. As for the deductions purportedly made by petitioner’s foreign employer, we reiterate the findings of the CA that “there is no single piece of document or receipt showing that deductions have in fact been made, nor is there any proof that these deductions from the salary formed part of the subject placement fee.”

At this point, we would like to emphasize the well-settled rule that the factual findings of quasi-judicial agencies, like the POEA, which have acquired expertise because their jurisdiction is confined to specific matters, are generally accorded not only respect, but at times even finality if such findings are supported by substantial evidence. While the Constitution is committed to the policy of social justice and to the protection of the working class, it should not be presumed that every dispute will automatically be decided in favor of labor.

To be sure, mere general allegations of payment of excessive placement fees cannot be given merit as the charge of illegal exaction is considered a grave offense which could cause the suspension or cancellation of the agency’s license. They should be proven and substantiated by clear, credible, and competent evidence. (Sagun vs. Sunace International Management Services, Inc., G.R. No. 179242, February 23, 2011)

Finding of Facts

The Labor Arbiter, the NLRC, and the CA uniformly declared that petitioners were not dismissed from employment but merely suspended pending payment of their arrears. Findings of fact of the CA, particularly where they are in absolute agreement with those of the NLRC and the Labor Arbiter, are accorded not only respect but even finality, and are deemed binding upon this Court so long as they are supported by substantial evidence. (Caong, Jr., et. al. vs. Regualos, G.R. No. 179428, January 26, 2011).

Absent any showing that the appellate court ignored, misconstrued and misapplied facts and circumstances of substance, its affirmance of the NLRC decision holding that petitioners were illegally dismissed stands. It is settled that where the Labor Arbiter, the NLRC and the Court of Appeals all concur in their factual findings and it does not appear that they acted with grave abuse of discretion or otherwise acted without jurisdiction or in excess of the same, this Court is bound by the said findings. The Labor Arbiter and the NLRC, being the most equipped and having acquired expertise in the specific matters entrusted to their jurisdiction, their findings of fact are accorded not only respect but even finality if they are supported by substantial evidence, or that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.

An employee’s execution of a final settlement and receipt of amounts agreed upon do not foreclose his right to pursue a claim for illegal dismissal. For, as reflected above, Joan was illegally retrenched. She is thus entitled to reinstatement without loss of seniority rights and privileges, as well as to payment of full backwages from the time of her separation until actual reinstatement, less the amount of P9,990.14 which she received as retrenchment pay.

Respecting the appellate court’s freeing Ang from liability, the same is in . order. Corporate officers, absent any evidence that they have exceeded their authority, are not personally liable for their official acts. For a corporation has, by legal fiction a personality separate and distinct from its officers, stockholders and members. In cases of illegal dismissal, this fictional veil may be pierced and its directors and officers held solidarily liable with it, where the dismissals of its employees are done with malice or in bad faith, which was not proven to be the case here. (Londonio, et. al. vs. Bio Research, Inc., et. al., G.R. No. 191459, January 17, 2011)

Four-Fold Test of Employment

S and P are not employees of V since their relationship fails to pass muster the four-fold test of employment, that is: (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 employee’s conduct, which is the most important element. V had no part in S and P’s selection and management; S and P’s compensation was paid out of the arriba (which is a percentage deducted from the total bets), not by V; and S and P performed their functions as masiador and sentenciador free from the direction and control of V. In the conduct of their work, S and P relied mainly on their “expertise that is characteristic of the cockfight gambling,” and were never given by V any tool needed for the performance of their work. V, not being S and P’s employers, could never have dismissed, legally or illegally, S and P, since V were without power or prerogative to do so in the first place. (Semblante, et. al. vs. Court of Appeals, et. al., G.R. No. 196426, August 15, 2011)

To ascertain the existence of an employer-employee relationship jurisprudence has invariably adhered to the four-fold test, to wit: (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 employee’s conduct, or the so-called “control test.” Of these four, the last one is the most important. The so-called “control test” is commonly regarded as the most crucial and determinative indicator of the presence or absence of an employer-employee relationship. Under the control test, an employer-employee relationship exists where the person for whom the services are performed reserves the right to control not only the end achieved, but also the manner and means to be used in reaching that end. Applying the aforementioned test, an employer-employee relationship is apparently absent in the case at bar. As found by the Court, among other things, G was not required to report everyday during regular office hours of ABW Company, Inc. G’s monthly retainer fees were paid to him either at his residence or a local restaurant. More importantly, the company did not prescribe the manner in which G would accomplish any of the tasks in which his expertise as a liaison officer was needed; G was left alone and given the freedom to accomplish the tasks using his own means and method. G was assigned tasks to perform, but the company did not control the manner and methods by which G performed these tasks.

Verily, the absence of the element of control on the part of the company engenders a conclusion that he is not an employee of the company. Moreover, the absence of the parties’ retainership agreement notwithstanding, G clearly admitted that the company hired him in a limited capacity only and that there will be no employer-employee relationship between them. G was well aware of the agreement that he was hired merely as a liaison or consultant of the company and he agreed to perform tasks for the company on a temporary employment status only. However, G anchors his claim that he became a regular employee based on his contention that the “temporary” aspect of his job and its “limited” nature could not have lasted for eleven years unless some time during that period, he became a regular employee of the company by continually performing services for the company.

G is not an employee, much more a regular employee of ABW Company, Inc. The premise that regular employees are those who perform activities which are desirable and necessary for the business of the employer is not determinative in this case. In fact, any agreement may provide that one party shall render services for and in behalf of another, no matter how necessary for the latter’s business, even without being hired as an employee. Hence, G’s length of service and ABW Company, Inc.’s repeated act of assigning G some tasks to be performed did not result to G’s entitlement to the rights and privileges of a regular employee. Furthermore, despite the fact that the company made use of the services of G for eleven years, he still cannot be considered as a regular employee of the company. Indeed, the Court has ruled that Article 280 of the Labor Code is not the yardstick for determining the existence of an employment relationship because it merely distinguishes between two kinds of employees, i.e., regular employees and casual employees, for purposes of determining the right of an employee to certain benefits, to join or form a union, or to security of tenure; it does not apply where the existence of an employment relationship is in dispute. Considering that there is no employer-employee relationship between the parties, the termination of G’s services by ABW Company, Inc. after due notice did not constitute illegal dismissal. (Atok Big Wedge Company, Inc. vs. Gison, G.R. No. 169510, August 8, 2011)

Notice of Dismissal

Article 277(b) of the Labor Code mandates that subject to the constitutional right of workers to security of tenure and their right to be protected against dismissal, except for just and authorized cause and without prejudice to the requirement of notice under Article 283 of the same Code, the employer shall furnish the worker, whose employment is sought to be terminated, a written notice containing a statement of the causes of termination, and shall afford the latter ample opportunity to be heard and to defend himself with the assistance of a representative if he so desires, in accordance with company rules and regulations pursuant to the guidelines set by the Department of Labor and Employment. In the instant case, based on the facts on record, petitioners failed to accord respondent substantive and procedural due process. The haphazard manner in the investigation of the missing cash, which was left to the determination of the police authorities and the Prosecutor’s Office, left respondent with no choice but to cry foul. Administrative investigation was not conducted by petitioner Supermarket. On the same day that the missing money was reported by respondent to her immediate superior, the company already pre-judged her guilt without proper investigation, and instantly reported her to the police as the suspected thief, which resulted in her languishing in jail for two weeks. The due process requirements under the Labor Code are mandatory and may not be supplanted by police investigation or court proceedings. The criminal aspect of the case is considered independent of the administrative aspect. Thus, employers should not rely solely on the findings of the Prosecutor’s Office. They are mandated to conduct their own separate investigation, and to accord the employee every opportunity to defend himself. Furthermore, respondent was not represented by counsel when she was strip-searched inside the company premises or during the police investigation, and in the preliminary investigation before the Prosecutor’s Office. (Robinsons Galleria/Robinsons Supermarket Corporation vs. Ranchez, G.R. No. 177937, January 19, 2011)

Constructive Dismissal; Transfer; Diminution of Benefits

Constructive dismissal is quitting because continued employment is rendered impossible, unreasonable or unlikely, or because of a demotion in rank or a diminution of pay. It exists when there is a clear act of discrimination, insensibility or disdain by an employer which becomes unbearable for the employee to continue his employment. B was originally appointed as instructor in 1991 and was given additional administrative functions as Head for Education during his stint in Laoag branch. He did not deny having been designated as Head for Education in a temporary capacity for which he cannot invoke any tenurial security. Hence, being temporary in character, such designation is terminable at the pleasure of DC College who made such appointment. Moreover, DC College’s right to transfer B rests not only on contractual stipulation but also on jurisprudential authorities. In any event, it is management prerogative for employers to transfer employees on just and valid grounds such as genuine business necessity. It is also important to stress at this point that DC College have shown that it was experiencing some financial constraints. Because of this, DC College opted to temporarily suspend the post-graduate studies of B and some other employees who were given scholarship grants in order to prioritize more important expenditures. Indeed, B’s re-assignment was not tainted with bad faith. As a matter of fact, DC College displayed commiseration over the health condition of B’s father when they suggested that he take an indefinite leave of absence to attend to this personal difficulty. Also, during the time when DC College directed all its administrative officers to submit courtesy resignations, B’s letter of resignation was not accepted. This bolsters the fact that DC College never intended to get rid of B. In fine, B’s assertions of bad faith on the part of DC College are purely unsubstantiated conjectures.

There was no violation of the prohibition on diminution of benefits. Indeed, any benefit and perks being enjoyed by employees cannot be reduced and discontinued, otherwise, the constitutional mandate to afford full protection to labor shall be offended. But the rule 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 which is consistent and deliberate. In this case, however, B was granted a monthly allowance for board and lodging during his stint as instructor. B however failed to present any other evidence that DC College committed to provide the additional allowance or that they were consistently granting such benefit as to have ripened into a practice which cannot be peremptorily withdrawn. Moreover, there is no conclusive proof that B’s basic salary will be reduced as it was not shown that such allowance is part of B’s basic salary. Hence, there will be no violation of the rule against diminution of pay enunciated under Article 100 of the Labor Code. (Barroga vs. DataCenterCollege of the Philippines, G.R. No. 174158, June 27, 2011)

Case law defines constructive dismissal as a cessation of work because continued employment has been rendered impossible, unreasonable, or unlikely, as 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 (La Rosa v. Ambassador Hotel, G.R. No. 177059, March 13, 2009). In this case, the Court note that, other than his bare and self-serving allegations, Bello has not offered any evidence that he was promoted in a span of four months since his employment as traffic marshal in July 2001 to a detachment commander in November 2001. During his six-month probationary period of employment, it is highly improbable that Bello would be promoted after just a month of employment, from a traffic marshal in July 2001 to supervisor in August 2001, and three months later to assistant detachment commander and to detachment commander in November 2001. At most, BSSI merely changed his assignment or transferred him to the post where his service would be most beneficial to its clients. The management’s prerogative of transferring and reassigning employees from one area of operation to another in order to meet the requirements of the business is generally not constitutive of constructive dismissal (Bisig Manggagawa sa Tryco v. NLRC, G.R. No. 151309, October 15, 2008). Thus, the consequent reassignment of Bello to a traffic marshal post was well within the scope of the BSSI’s management prerogative. (Bello vs. Bonifacio Security Services, Inc., G.R. No. 188086, August 3, 2011)

Article 286 of the Labor Code of the Philippines provides as follows:

Art. 286. When employment not deemed terminated. – The bona fide suspension of the operation of a business undertaking for a period not exceeding six (6) months, or the fulfillment by the employee of a civic duty shall not terminate employment. In all such cases the employer shall reinstate the employee to his former position without loss of seniority rights if he indicates his desire to resume his work not later than one (1) month from the resumption of operations of his employer or from his relief from the military or civic duty.

In this case, it is worth noting that the evidence the parties adduced a quo clearly indicates that NHPI and its officers were not in bad faith when they placed L under floating status. Disgruntled by NHPI’s countermanding of her decision to bar Engr. C from the Project, L twice signified her intention to resign from her position to O on February 12, 2002. Upon receiving the copy of the memorandum issued for Engr. C’s return to work, L submitted to O, NHPI’s President, a letter asking for an emergency leave of absence for the supposed purpose of coordinating with her lawyer regarding her resignation letter. In view of the sensitive nature of L’s position and the critical stage of the Project’s business development, NHPI was constrained to relay the situation to BGCC which, in turn, requested the immediate adoption of remedial measures including the appointment of a new Property Manager for the Project. Far from being the indication of bad faith, these factual antecedents suggest that NHPI’s immediate hiring of Engr. J as the new Property Manager for the Project was brought about by L’s own rash announcement of her intention to resign from her position. Although she subsequently changed her mind and sent R a letter by telefax on February 13, 2002 announcing the reconsideration of her planned resignation and her intention to return to work on February 15, 2002, L evidently had only herself to blame for precipitately setting in motion the events which led to NHPI’s hiring of her own replacement. Moreover, acting on L’s February 20, 2002 letter protesting against the hiring of her replacement and reiterating her lack of intention to resign from her position, NHPI simply placed her on floating status “until such time that another project could be secured for her.

Traditionally invoked by security agencies when guards are temporarily sidelined from duty while waiting to be transferred or assigned to a new post or client (Nationwide Security and Allied Services, Inc. v. Valderama, G.R. No. 186614, February 23, 2011), Article 286 of the Labor Code has been applied to other industries when, as a consequence of the bona fide suspension of the operation of a business or undertaking, an employer is constrained to put employees on floating status for a period not exceeding six months (JPL Marketing Promotions v. Court of Appeals, 501 Phil. 440 [2005]). Considering that even labor laws discourage intrusion in the employers’ judgment concerning the conduct of their business, courts often decline to interfere in their legitimate business decisions (Coca-Cola Bottlers Philippines, Inc. v. Del Villar, G.R. No. 163091, October 6, 2010), absent showing of illegality, bad faith or arbitrariness. Indeed, the right of employees to security of tenure does not give them vested rights to their positions to the extent of depriving management of its prerogative to change their assignments or to transfer them (Mendoza v. Rural Bank of Lucban). The record shows that L filed the complaint for actual illegal dismissal from which the case originated on February 22, 2002 or immediately upon being placed on floating status as a consequence of NHPI’s hiring of a new Property Manager for the Project. The rule is settled, however, that “off-detailing” is not equivalent to dismissal, so long as such status does not continue beyond a reasonable time and that it is only when such a “floating status” lasts for more than six months that the employee may be considered to have been constructively dismissed (Megaforce Security and Allied Services, Inc. v. Lactao, G.R. No. 160940, July 21, 2008). A complaint for illegal dismissal filed prior to the lapse of said six-month and/or the actual dismissal of the employee is generally considered as prematurely filed (Sasan, Sr. v. NLRC, 4th Div., G.R. No. 176240, October 17, 2008).

Verily, there is said to be constructive dismissal when an act of clear discrimination, insensitivity or disdain on the part of the employer has become so unbearable as to leave an employee with no choice but to forego continued employment (Soliman Security Services, Inc. v. Court of Appeals). Constructive dismissal exists where there is cessation of work because continued employment is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank and a diminution in pay (Endico v. QuantumFoodsDistributionCenter, G.R. No. 161615, January 30, 2009). Stated otherwise, it is a dismissal in disguise or an act amounting to dismissal but made to appear as if it were not (Uniwide Sales Warehouse Club v. NLRC, G.R. No. 154503, February 29, 2008). In constructive dismissal cases, the employer is, concededly, charged with the burden of proving that its conduct and action or the transfer of an employee are for valid and legitimate grounds such as genuine business necessity (Philippine Veterans Bank v. NLRC, 4th Div., G.R. No. 188882, March 30, 2010).

With no other client aside from BGCC for the building management side of its business, NHPI was acting well within its prerogatives when it eventually terminated L’s services on the ground of redundancy. One of the recognized authorized causes for the termination of employment, redundancy exists when the service capability of the workforce is in excess of what is reasonably needed to meet the demands of the business enterprise (Edge Apparel, Inc. v. NLRC). A redundant position is one rendered superfluous by any number of factors, such as overhiring of workers, decreased volume of business, dropping of a particular product line previously manufactured by the company or phasing out of service activity priorly undertaken by the business (AMAComputerCollege v. Garcia, G.R. No. 166703, April 14, 2008). It has been held that the exercise of business judgment to characterize an employee’s service as no longer necessary or sustainable is not subject to discretionary review where, as here, it is exercised there is no showing of violation of the law or arbitrariness or malice on the part of the employer (DOLE Philippines, Inc. v. NLRC). An employer has no legal obligation to keep more employees than are necessary for the operation of its business (Almodiel v. NLRC).

Illegal Dismissal; Separation Pay

The Labor Code provides that an employer may terminate the services of an employee for a just cause. One of the just causes enumerated in the Labor Code is serious misconduct. Misconduct is improper or wrong conduct (PLDT v. Bolso, G.R. No. 159701, August 17, 2007). It is the transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment. Such misconduct, however serious, must nevertheless be in connection with the employee’s work to constitute just cause for his separation. Thus, for misconduct or improper behavior to be a just cause for dismissal, (a) it must be serious; (b) it must relate to the performance of the employee’s duties; and (c) it must show that the employee has become unfit to continue working for the employer (Marival Trading, Inc. v. NLRC, G.R. No. 169600, June 26, 2007).

In this case, there was an evidence to support the allegation of serious misconduct or insubordination. The misconduct to be serious within the meaning of the Labor Code must be of such a grave and aggravated character and not merely trivial or unimportant (PLDT v. Bolso, supra). The subject Letter-Explanation shows to be grossly discourteous in content and tenor. The most appropriate thing A could have done was simply to state his facts without resorting to such strong language. Past decisions of the Court have been one in ruling that accusatory and inflammatory language used by an employee to the employer or superior can be a ground for dismissal or termination (See St. Mary’s College v. NLRC; Garcia v. Manila Times).

Verily, one of the fundamental duties of an employee is to obey all reasonable rules, orders and instructions of the employer. Disobedience, to be a just cause for termination, must be willful or intentional, willfulness being characterized by a wrongful and perverse mental attitude rendering the employee’s act inconsistent with proper subordination. A willful or intentional disobedience of such rule, order or instruction justifies dismissal only where such rule, order or instruction is (1) reasonable and lawful, (2) sufficiently known to the employee, and (3) connected with the duties which the employee has been engaged to discharge (Escobin v. NLRC). The allegation of willful disobedience can still be adduced and proven from the subject Letter-Explanation.

On the issue of gross or habitual negligence, it bears to note that neglect of duty, to be a ground for dismissal, must be both gross and habitual (Genuino Ice Company, Inc. v. Magpantay, G.R. No. 147790, June 27, 2006). In finding that NMPI was able to adduce evidence that would justify its dismissal of A, the NLRC correctly ruled that the latter’s failure to turn over his functions to someone capable of performing the vital tasks which he could not effectively perform or undertake because of his heart ailment or condition constitutes gross neglect. Gross negligence connotes want of care in the performance of one’s duties. Habitual neglect implies repeated failure to perform one’s duties for a period of time, depending upon the circumstances. On the other hand, fraud and willful neglect of duties imply bad faith on the part of the employee in failing to perform his job to the detriment of the employer and the latter’s business (Genuino Ice Company, Inc., supra).

It must be emphasized at this point 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. Failure to do so would necessarily mean that the dismissal was not justified and, therefore, was illegal (NLRC v. Salgarino, G.R. No. 164376, July 31, 2006). In this case, both the Labor Arbiter and the NLRC were not amiss in finding that the dismissal of A was legal or for a just cause based on substantial evidence presented by NMPI. Substantial evidence, which is the quantum of proof required in labor cases, is that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion (Rule 133, Sec. 5, Rules of Court).

Although the dismissal was legal, A is still entitled to a separation pay as a measure of financial assistance, considering his length of service and his poor physical condition which was one of the reasons he filed a leave of absence. As a general rule, an employee who has been dismissed for any of the just causes enumerated under Article 282 of the Labor Code is not entitled to separation pay. Although by way of exception, the grant of separation pay or some other financial assistance may be allowed to an employee dismissed for just causes on the basis of equity (Solidbank Corporation v. NLRC, G.R. No. 165951, March 30, 2010). This concept has been thoroughly discussed in Solidbank Corporation v. NLRC, thus:

The reason that the law does not statutorily grant separation pay or financial assistance in instances of termination due to a just cause is precisely because the cause for termination is due to the acts of the employee. In such instances, however, this Court, inspired by compassionate and social justice, has in the past awarded financial assistance to dismissed employees when circumstances warranted such an award.

In Central Philippines Bandag Retreaders, Inc. v. Diasnes, G.R. No. 163607, July 14, 2008, this Court discussed the parameters of awarding separation pay to dismissed employees as a measure of financial assistance, viz:

To reiterate our ruling in Toyota, labor adjudicatory officials and the CA must demur the award of separation pay based on social justice when an employee’s dismissal is based on serious misconduct or willful disobedience; gross and habitual neglect of duty; fraud or willful breach of trust; or commission of a crime against the person of the employer or his immediate family – grounds under Art. 282 of the Labor Code that sanction dismissals of employees. They must be most judicious and circumspect in awarding separation pay or financial assistance as the constitutional policy to provide full protection to labor is not meant to be an instrument to oppress the employers. The commitment of the Court to the cause of labor should not embarrass us from sustaining the employers when they are right, as here. In fine, we should be more cautious in awarding financial assistance to the undeserving and those who are unworthy of the liberality of the law.

Thus, in Philippine Commercial International Bank v. Abad, this Court, having considered the circumstances present therein and as a measure of social justice, awarded separation pay to a dismissed employee for a just cause under Article 282. The same concession was given by this Court in Aparente, Sr. v. National Labor Relations Commission, 387 Phil. 96 (2000), and Tanala v. National Labor Relations Commission, 322 Phil. 343 (1996). (Nissan Motors Phils., Inc. vs. Angelo, G.R. No. 164181, September 14, 2011)
Petition for Certiorari under Rule 65

The power of the CA to review NLRC decisions via a petition for certiorari under Rule 65 of the Rules of Court has been settled as early as the Court’s decision in St. Martin Funeral Homes v. NLRC (1999). In said case, the Court held that the proper vehicle for such review is a special civil action for certiorari under Rule 65 of the said Rules, and that the case should be filed with the CA in strict observance of the doctrine of hierarchy of courts. Moreover, it is already settled that under Section 9 of Batas Pambansa Blg. 129, as amended by Republic Act No. 7902, the CA – pursuant to the exercise of its original jurisdiction over petitions for certiorari – is specifically given the power to pass upon the evidence, if and when necessary, to resolve factual issues (PICOP Resources Incorporated vs. Tañeca, et. al., G.R. No. 160828, August 9, 2010; Maralit vs. PNB, G.R. No. 163788, August 24, 2009; Triumph International (Phils.), Inc. vs. Apostol, G.R. No. 164423, June 16, 2009). Section 9 clearly states:

x x x x

However, equally settled is the rule that factual findings of labor officials, who are deemed to have acquired expertise in matters within their jurisdiction, are generally accorded not only respect but even finality by the courts when supported by substantial evidence, i.e., the amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion (Philippine Veterans Bank vs. NLRC, G.R. No. 188882, March 30, 2010). But these findings are not infallible. When there is a showing that they were arrived at arbitrarily or in disregard of the evidence on record, they may be examined by the courts (Faeldonia vs. Tong Yak Groceries, G.R. No. 182499, October 2, 2009). The CA can grant the petition for certiorari if it finds that the NLRC, in its assailed decision or resolution, made a factual finding not supported by substantial evidence. It is within the jurisdiction of the CA, whose jurisdiction over labor cases has been expanded to review the findings of the NLRC (Emcor Incorporated vs. Sienes, G.R. No. 152101, September 8, 2009).

While the general rule is that the certificate of non-forum shopping must be signed by all the plaintiffs in a case and the signature of only one of them is insufficient, the Court has stressed that the rules on forum shopping, which were designed to promote and facilitate the orderly administration of justice, should not be interpreted with such absolute literalness as to subvert its own ultimate and legitimate objective. Strict compliance with the provision regarding the certificate of non-forum shopping underscores its mandatory nature in that the certification cannot be altogether dispensed with or its requirements completely disregarded. It does not, however, prohibit substantial compliance therewith under justifiable circumstances, considering especially that although it is obligatory, it is not jurisdictional. In a number of cases, the Court has consistently held that when all the petitioners share a common interest and invoke a common cause of action or defense, the signature of only one of them in the certification against forum shopping substantially complies with the rules (Juaban vs. Espina, G.R. No. 170049, March 14, 2008; Pacquing vs. Coca-Cola, Phils., Inc., G.R. No. 157966, January 31, 2008). In the present case, there is no question that A, B, C, D, E, F, and G share a common interest and invoke a common cause of action. Hence, the signature of G is a sufficient compliance with the rule governing certificates of non-forum shopping. In the first place, some of them actually executed a Special Power of Attorney authorizing G as their attorney-in-fact in filing a petition for certiorari with the CA.

With respect to the absence of some of the workers’ signatures in the verification, the verification requirement is deemed substantially complied with when some of the parties who undoubtedly have sufficient knowledge and belief to swear to the truth of the allegations in the petition had signed the same. Such verification is deemed a sufficient assurance that the matters alleged in the petition have been made in good faith or are true and correct, and not merely speculative. In any case, the settled rule is that a pleading which is required by the Rules of Court to be verified, may be given due course even without a verification if the circumstances warrant the suspension of the rules in the interest of justice (Heirs of the Late Jose De Luzuriaga vs. Republic, G.R. Nos. 168848 & 169019, June 30, 2009; Woodridge School vs. Benito, G.R. No. 160240, October 29, 2008; Linton Commercial Co., Inc. vs. Hellera, G.R. No.163147, October 10, 2007). Indeed, the absence of a verification is not jurisdictional, but only a formal defect, which does not of itself justify a court in refusing to allow and act on a case (Spic N’ Span Services Corp. vs. Paje, G.R. No.174084, August 25, 2010; Sari-Sari Group of Companies, Inc. vs. Piglas Kamao, G.R. No. 164624, August 11, 2008). Hence, the failure to sign the verification attached to their Memorandum of Appeal is not fatal to their cause of action. (Prince Transport, Inc. vs. Garcia, et. al., G.R. No.167291, January 12, 2011)

The Court noted that this case was dismissed on purely technical grounds at both the NLRC and the CA levels, in total disregard of the merits of the case. The NLRC dismissed the company’s appeal for non-perfection for its failure “to substantially address the issue of failure to post the required appeal bond pursuant to Section 6, Rule VI of the 2005 Revised Rules of Procedure of the NLRC.” In summarily throwing out the appeal, the NLRC apparently forgot that earlier, or on September 15, 2008, it gave the company “ten (10) unextendible days xxx within which to file an additional cash or surety bond in the amount of FOUR HUNDRED THIRTY TWO THOUSAND EIGHT HUNDRED NINETY TWO PESOS and 93/100 (P432,892.93)” when it denied the company’s motion to reduce bond. The NLRC even warned that “their failure to post the required bond shall result in the dismissal of the appeal for non-perfection.” As earlier mentioned, the company complied with the NLRC directive by posting a surety bond in the required amount within the 10-day period; it received a copy of the NLRC resolution directing it to post an additional cash or surety bond on October 13, 2008 and posted the bond on October 23, 2008. The company likewise submitted a joint declaration between the company representative and the surety company on the period of effectivity of the bond, and the documents on the legal status of the surety company. The NLRC grossly erred, therefore, in declaring that the company failed to address the issue of its failure to post the required bond. The CA grossly failed to consider this lapse.

The Court noted also that the CA’s refusal to consider the petition was the absence of a duplicate original or certified true copy of the assailed NLRC decision, in violation of Section 3, Rule 46 of the Rules of Court (in relation to Section 1, Rule 65). The company though corrected the procedural lapse by attaching a certified copy of the NLRC decision to its motion for reconsideration. At this point, the CA should have at least considered the merits of the JE’s case as the Court did in Gutierrez v. Secretary of the Department of Labor and Employment. The Court held in that case that while “what were submitted were mere photocopies, there was substantial compliance with the Rules since petitioner attached to her Supplemental Motion for Reconsideration certified true copies of the questioned DOLE Orders.”

As careful scrutiny of the records shows that the company’s case is not, on its face, unmeritorious and should have been considered further to determine what really transpired between the parties. For instance, the company argued that it did not dismiss M. It claimed that M refused to return to work and, during conciliation, demanded outright that he be paid P300,000.00, manifesting at the same time that he no longer wanted to work for the company. Before the labor arbiter, the company even manifested its willingness to accept M back to work as no dismissal actually took place. Thus, the concrete issue posed was whether M had been dismissed or had simply walked out of his job. Under these circumstances, the CA precipitately denied the petition for certiorari based on an overly rigid application of the rules of procedure. In effect, it sacrificed substance to form in a situation where JE’s recourse was not patently frivolous or meritless. This is a matter of substantial justice – in fact, a lack of it – that should not be allowed to remain uncorrected. (Jobel Enterprises vs. NLRC (7th Division), et. al., G.R. No. 194031, August 8, 2011)

Illegal Dismissal; Abandonment; Solidary Liability

Yes. As a rule, employment cannot be terminated by an employer without any just or authorized cause. No less than the 1987 Constitution in Section 3, Article 13 guarantees security of tenure for workers and because of this, an employee may only be terminated for just or authorized causes that must comply with the due process requirements mandated by law. Hence, employers are barred from arbitrarily removing their workers whenever and however they want. The law sets the valid grounds for termination as well as the proper procedure to take when terminating the services of an employee.

In De Guzman, Jr. v. Commission on Elections, the Court, speaking of the Constitutional guarantee of security of tenure to all workers, ruled:

x x x It only means that an employee cannot be dismissed (or transferred) from the service for causes other than those provided by law and after due process is accorded the employee. What it seeks to prevent is capricious exercise of the power to dismiss. x x x

Although it recognizes the right of employers to shape their own work force, this management prerogative must not curtail the basic right of employees to security of tenure. There must be a valid and lawful reason for terminating the employment of a worker. Otherwise, it is illegal and would be dealt with by the courts accordingly.

As stated in Bascon v. Court of Appeals:

x x x The employer’s power to dismiss must be tempered with the employee’s right to security of tenure. Time and again we have said that the preservation of the lifeblood of the toiling laborer comes before concern for business profits. Employers must be reminded to exercise the power to dismiss with great caution, for the State will not hesitate to come to the succor of workers wrongly dismissed by capricious employers.

In this case, A, B, and C were relieved from their posts because they filed with the Labor Arbiter a complaint against their employer for money claims due to underpayment of wages. This reason is unacceptable and illegal. Nowhere in the law providing for the just and authorized causes of termination of employment is there any direct or indirect reference to filing a legitimate complaint for money claims against the employer as a valid ground for termination. The Labor Code, as amended, enumerates several just and authorized causes for a valid termination of employment. An employee asserting his right and asking for minimum wage is not among those causes. Dismissing an employee on this ground amounts to retaliation by management for an employee’s legitimate grievance without due process. Such stroke of retribution has no place in Philippine Labor Laws.

For abandonment of work to fall under Article 282 (b) of the Labor Code, as amended, as gross and habitual neglect of duties there must be the concurrence of two elements. First, there should be a failure of the employee to report for work without a valid or justifiable reason, and second, there should be a showing that the employee intended to sever the employer-employee relationship, the second element being the more determinative factor as manifested by overt acts. As regards the second element of intent to sever the employer-employee relationship, it must be noted the fact that the complaint filed by A, B, and C for illegal dismissal is indicative of their intention to remain employed with AS considering that one of their prayers in the complaint is for re-instatement. It has been settled that a complaint for illegal dismissal is inconsistent with the charge of abandonment, because when an employee takes steps to protect himself against a dismissal, this cannot, by logic, be said to be abandonment by him of his right to be able to work (Cebu Marine Beach Resort v. NLRC; Samarca v. Arc-Men Industries, Inc.). Further, according to AS itself, A, B, and C continued to report for work and loiter in the DOST after the alleged transfer order was issued. Such circumstance makes it unlikely that they have clear intention of leaving their respective jobs. In any case, there is no dispute that in cases of abandonment of work, notice shall be served at the worker’s last known address (Coca-Cola Bottlers Philippines, Inc. v. Garcia, G.R. No. 159625, January 31, 2008). On the element of the failure of the employee to report for work, there is no showing that A, B, and C were notified of their new assignments. The employer cannot simply conclude that an employee is ipso facto notified of a transfer when there is no evidence to indicate that the employee had knowledge of the transfer order. Hence, the failure of an employee to report for work at the new location cannot be taken against him as an element of abandonment. The Court acknowledge and recognize the right of an employer to transfer employees in the interest of the service. This exercise is a management prerogative which is a lawful right of an employer. However, like all rights, there are limitations to the right to transfer employees. As ruled in the case of Blue Dairy Corporation v. NLRC:

x x x The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion, bearing in mind the basic elements of justice and fair play. Having the right should not be confused with the manner in which that right is exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of an undesirable worker. In particular, the employer must be able to show that the transfer is not unreasonable, inconvenient or prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges and other benefits. x x x

In addition to these tests for a valid transfer, there should be proper and effective notice to the employee concerned. It is the employer’s burden to show that the employee was duly notified of the transfer. Verily, an employer cannot reasonably expect an employee to report for work in a new location without first informing said employee of the transfer.

Basic is the rule that a corporation has a separate and distinct personality apart from its directors, officers, or owners. In exceptional cases, courts find it proper to breach this corporate personality in order to make directors, officers, or owners solidarily liable for the companies’ acts. Section 31, Paragraph 1 of the Corporation Code provides:

Sec. 31. Liability of directors, trustees or officers. – Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors, or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons.

Jurisprudence has been consistent in defining the instances when the separate and distinct personality of a corporation may be disregarded in order to hold the directors, officers, or owners of the corporation liable for corporate debts. In McLeod v. National Labor Relations Commission, G.R. No. 146667, January 23, 2007, the Court ruled:

Thus, the rule is still that the doctrine of piercing the corporate veil applies only when the corporate fiction is used to defeat public convenience, justify wrong, protect fraud, or defend crime. In the absence of malice, bad faith, or a specific provision of law making a corporate officer liable, such corporate officer cannot be made personally liable for corporate liabilities. x x x

Further, in Carag v. National Labor Relations Commission, G.R. No. 147590, April 2, 2007, the Court clarified the McLeod doctrine as regards labor laws, to wit:

We have already ruled in McLeod v. NLRC, supra and Spouses Santos v. NLRC, G.R. No. 120944, July 23, 1998 that Article 212(e) of the Labor Code, by itself, does not make a corporate officer personally liable for the debts of the corporation. The governing law on personal liability of directors for debts of the corporation is still Section 31 of the Corporation Code. x x x

In the present case, there is no evidence to indicate that D, as president and general manager of AS, is using the veil of corporate fiction to defeat public convenience, justify wrong, protect fraud, or defend crime. Further, there is no showing that AS has folded up its business or is reneging in its obligations. In the final analysis, it is AS that A, B, and C are after and it is also AS who should take responsibility for their illegal dismissal. (Alert Security and Investigation Agency, Inc. vs. Pasawilan, et. al., G.R. No. 182397, September 14, 2011)

Illegal Dismissal; Abandonment

It hardly convinces the Court that after declining his supposed transfer to another department as per the information relayed to him by his supervisor, U would readily turn over his files and samples unless something critical indeed took place in his subsequent closed-door meeting with S and G. It is irrelevant whether or not he had earlier inquired from his supervisor what he will receive if he offers instead to resign upon being told of his impending transfer, for what matters is the action of S on his employment status. If ever U momentarily contemplated resignation and such was the impression he conveyed in his talk with his supervisor prior to the meeting with S, such is borne by circumstances indicating G’s antagonism towards U. In any event, whether such perception of a strained working relationship with G was mistaken or not is beside the point. The crucial factor is the verbal order directly given by S, the company president, for U to immediately turn over his accountabilities. Notably, S got irked when U asked for his termination paper. U apparently wanted to ascertain whether such summary dismissal was official, and it was well within his right to demand that he be furnished with a written notice in order to apprise him of the real ground for his termination.

Contrary to S and G’s theory that U’s act of turning over the company files and samples is proof of his voluntary informal resignation rather than of the summary dismissal effected by management, no other plausible explanation can be made of such immediate turn over except that U directly confirmed from the company president herself that he was already being dismissed. The subsequent memos sent to U’s residence after he did not anymore report for work only reinforce the conclusion that the belated written notice of the charge against him – his alleged failure to meet the prescribed sales quota – was an afterthought on the part of S and G who may have realized that they failed to observe due process in terminating him. That S and G would still require a written explanation for U’s poor sales performance after the latter already complied with S’s directive to turn over all his accountabilities is simply inconsistent with their claim that U offered to resign and voluntarily relinquished possession of company files and samples when told of his impending transfer. In other words, U was not given any opportunity to defend himself from whatever charges hurled by management against him, such as poor sales performance as relayed to him by his supervisor, when S unceremoniously terminated him which must have shocked him considering that his supervisor earlier advised that he would just be transferred to another department. Under this scenario, U’s decision not to report for work anymore was perfectly understandable, as the sensible reaction of an employee fired by no less than the company president. It was indeed a classic case of dismissal without just cause and due process, which is proscribed under our labor laws.

Moreover, given the strained working relationship with G, or at least a perception of such gap on the part of U, the latter could not have been properly informed of the actual ground for his dismissal. But more importantly, S and G terminated U first and only belatedly sent him written notices of the charge against him. Fairness requires that dismissal, being the ultimate penalty that can be meted out to an employee, must have a clear basis. Any ambiguity in the ground for the termination of an employee should be interpreted against the employer, who ordained such ground in the first place (Pascua v. NLRC).

Resignation is defined as “the voluntary act of employees who are compelled by personal reasons to disassociate themselves from their employment. It must be done with the intention of relinquishing an office, accompanied by the act of abandonment (Fungo v. Lourdes School of Mandaluyong, G.R. No. 152531, July 27, 2007). In this case, the evidence on record suggests that U did not resign; he was orally dismissed by S. It is this lack of clear, valid and legal cause, not to mention due process that made his dismissal illegal, warranting reinstatement and the award of backwages. Moreover, the filing of a complaint for illegal dismissal just three weeks later is difficult to reconcile with voluntary resignation. Had U intended to voluntarily relinquish his employment after being unceremoniously dismissed by no less than the company president, he would not have sought redress from the NLRC and vigorously pursued this case against S and G. When there is no showing of a clear, valid and legal cause for the termination of employment, the law considers it a case of illegal dismissal. Furthermore, Article 4 of the Labor Code expresses the basic principle that all doubts in the interpretation and implementation of the Labor Code should be interpreted in favor of the workingman. This principle has been extended by jurisprudence to cover doubts in the evidence presented by the employer and the employee (Penaflor v. Outdoor Clothing Manufacturing Corporation, G.R. No. 177114, January 21, 2010). Thus it was held that if the evidence presented by the employer and the employee are in equipoise, the scales of justice must be tilted in favor of the latter (Mobile Protective & Detective Agency v. Ompad, G.R. No. 159195, May 9, 2005). Accordingly, the NLRC’s finding of illegal dismissal must be upheld.

However, the award of back wages and separation pay in lieu of reinstatement should be modified. Under the doctrine of strained relations, the payment of separation pay has been considered an acceptable alternative to reinstatement when the latter option is no longer desirable or viable (Century Canning Corporation v. Ramil, G.R. No. 171630, August 9, 2010). Under the facts established, U is entitled to the payment of full back wages, inclusive of allowances, and other benefits or their monetary equivalent, computed from the date of his dismissal on February 19, 2002 up to the finality of this decision, and separation pay in lieu of reinstatement equivalent to one month salary for every year of service, computed from the time of his engagement by S and G on March 21, 1999 up to the finality of this decision. (Uy vs. Centro Ceramica Corporation, et. al., G.R. No. 174631, October 19, 2011)

Illegal Recruitment

The crime of illegal recruitment is committed when these two elements concur: (1) the offenders have no valid license or authority required by law to enable them to lawfully engage in the recruitment and placement of workers; and (2) the offenders undertake any activity within the meaning of recruitment and placement defined in Article 13 (b) or any prohibited practices enumerated in Article 34 of the Labor Code. In case of illegal recruitment in large scale, a third element is added — that the accused commits the acts against three or more persons, individually or as a group. Notably, illegal recruiters need not even expressly represent themselves to the victims as persons who have the ability to send workers abroad. It is enough that these recruiters give the impression that they have the ability to enlist workers for job placement abroad in order to induce the latter to tender payment of fees. (See People vs. Ganigan, G.R. No. 178204, August 20, 2008; Romero vs. People, et. al., G.R. No. 171644, November 23, 2011)
Supplements and Facilities

In the case of Atok-Big Wedge Assn. v. Atok-Big Wedge Co., the two terms were distinguished from one another in this wise:

“Supplements,” therefore, constitute extra remuneration or special privileges or benefits given to or received by the laborers over and above their ordinary earnings or wages. “Facilities,” on the other hand, are items of expense necessary for the laborer’s and his family’s existence and subsistence so that by express provision of law (Sec. 2[g]), 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.

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. (SLL International Cables Specialist vs. NLRC, et. al., G.R. No. 172161, March 2, 2011)

Burden of Proof in Illegal Dismissal

In an illegal dismissal case, the onus probandi rests on the employer to prove that the dismissal of an employee is for a valid cause. (E.G. & I. Construction Corporation vs. Sato, et. al., G.R. No. 182070, February 16, 2011)

Legality of Dismissal: Redundancy

Under our laws, an employee may be terminated for reasons involving measures taken by the employer due to business necessities. Article 283 of the Labor Code provides:

Art. 283. Closure of establishment and reduction of personnel. – The employer may also terminate the employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Department of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.

There is redundancy when the service capability of the workforce is greater than what is reasonably required to meet the demands of the business enterprise. A position becomes redundant when it is rendered superfluous by any number of factors such as over-hiring of workers, decrease in volume of business, or dropping a particular product line or service activity previously manufactured or undertaken by the enterprise.

This Court has been consistent in holding that the determination of whether or not an employee’s services are still needed or sustainable properly belongs to the employer. Provided there is no violation of law or a showing that the employer was prompted by an arbitrary or malicious act, the soundness or wisdom of this exercise of business judgment is not subject to the discretionary review of the Labor Arbiter and the NLRC.

However, an employer cannot simply declare that it has become overmanned and dismiss its employees without producing adequate proof to sustain its claim of redundancy. Among the requisites of a valid redundancy program are: (1) the good faith of the employer in abolishing the redundant position; and (2) fair and reasonable criteria in ascertaining what positions are to be declared redundant, such as but not limited to: preferred status, efficiency, and seniority.

This Court also held that the following evidence may be proffered to substantiate redundancy: the new staffing pattern, feasibility studies/ proposal on the viability of the newly created positions, job description and the approval by the management of the restructuring. (Culili vs. Eastern Telecommunications Philippines, Inc., et. al., G.R. No. 165381, February 9, 2011).

Illegal Dismissal: Neglect of Duty

Article 282 (b) of the Labor Code provides that an employer may terminate an employment for gross and habitual neglect by the employee of his duties. Neglect of duty, to be a ground for dismissal, must be both gross and habitual. Gross negligence connotes want of care in the performance of one’s duties. Habitual neglect implies repeated failure to perform one’s duties for a period of time, depending upon the circumstances. A single or isolated act of negligence does not constitute a just cause for the dismissal of the employee. Negligence is defined as the failure to exercise the standard of care that a reasonably prudent person would have exercised in a similar situation. The Court emphasizes that the nature of the business of a hospital requires a higher degree of caution and exacting standard of diligence in patient management and health care as what is involved are lives of patients who seek urgent medical assistance. An act or omission that falls short of the required degree of care and diligence amounts to serious misconduct which constitutes a sufficient ground for dismissal.

However, in some cases, the Court had ruled that sanctioning an erring employee with suspension would suffice as the extreme penalty of dismissal would be too harsh. Considering that this was the first offense of respondent De Castro in her nine (9) years of employment with petitioner hospital as a staff nurse without any previous derogatory record and, further, as her lapse was not characterized by any wrongful motive or deceitful conduct, the Court deems it appropriate that, instead of the harsh penalty of dismissal, she would be suspended for a period of six (6) months without pay, inclusive of the suspension for a period of 14 days which she had earlier served. (Hospital Management Services, Inc.-MedicalCenterManila vs. Hospital Management Services, Inc.-MedicalCenterManila Employees Association-AFW, G.R. No. 176287, January 31, 2011).

Illegal Dismissal; Resignation; Temporary Off-Detail

In cases involving security guards, a relief and transfer order in itself does not sever employment relationship between a security guard and his agency. An employee has the right to security of tenure, but this does not give him a vested right to his position as would deprive the company of its prerogative to change his assignment or transfer him where his service, as security guard, will be most beneficial to the client. Temporary “off-detail” or the period of time security guards are made to wait until they are transferred or assigned to a new post or client does not constitute constructive dismissal, so long as such status does not continue beyond six months.

The onus of proving that there is no post available to which the security guard can be assigned rests on the employer, viz.:

When a security guard is placed on a “floating status,” he does not receive any salary or financial benefit provided by law. Due to the grim economic consequences to the employee, the employer should bear the burden of proving that there are no posts available to which the employee temporarily out of work can be assigned.

Respondent claims that he was relieved from PHC on January 30, 2006; thereafter, he was not given a new assignment. Petitioner, on the other hand, asserts that respondent refused to report to petitioner for his reassignment. Otherwise stated, petitioner claims that respondent abandoned his job.

The jurisprudential rule on abandonment is constant. It is a matter of intention and cannot lightly be presumed from certain equivocal acts. 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 intent, manifested through overt acts, to sever the employer-employee relationship.

In this case, petitioner failed to establish clear evidence of respondent’s intention to abandon his employment. Except for petitioner’s bare assertion that respondent did not report to the office for reassignment, no proof was offered to prove that respondent intended to sever the employer-employee relationship.

Besides, the fact that respondent filed the instant complaint negates any intention on his part to forsake his work. It is a settled doctrine that the filing of a complaint for illegal dismissal is inconsistent with the charge of abandonment, for an employee who takes steps to protest his dismissal cannot by logic be said to have abandoned his work.

Resignation is the voluntary act of an employee who is in a situation where one believes that personal reasons cannot be sacrificed in favor of the exigency of the service, and one has no other choice but to dissociate oneself from employment. It is a formal pronouncement or relinquishment of an office, with the intention of relinquishing the office accompanied by the act of relinquishment. As the intent to relinquish must concur with the overt act of relinquishment, the acts of the employee before and after the alleged resignation must be considered in determining whether, he or she, in fact, intended to sever his or her employment.

In Mobile Protective & Detective Agency v. Ompad and Mora v. Avesco Marketing Corporation, we ruled that should the employer interpose the defense of resignation, it is incumbent upon the employer to prove that the employee voluntarily resigned. On this point, petitioner failed to discharge the burden.

Petitioner was also firm in asserting that respondent voluntarily resigned. Oddly, it failed to present the alleged resignation letter of respondent. We also note that, in its March 24, 2006 letter, petitioner required respondent to report at its office for reassignment. It strains credulity that petitioner would require respondent to report for reassignment if the latter already tendered his resignation effective February 10, 2006.

Petitioner capitalizes on the withdrawal of the cash and firearm bonds by respondent. It contends that the withdrawal of bonds sufficiently proved respondent’s intention to terminate his employment contract with petitioner. In support of its argument, petitioner cited Roberta Gaa v. Nationwide Security and Allied Services, Inc. and Romeo Nolasco, which declared that cash bond and firearm bond are never withdrawable for as long as the security guard intends to remain an employee of the security agency.

Petitioner’s reliance on Gaa is misplaced. We note that the declaration that cash bond and firearm bond are never withdrawable for as long as the security guard intends to remain an employee of the security agency was made by the NLRC. Although this Court affirmed the NLRC in a Minute Resolution dated September 26, 2007, still, the said NLRC ruling cannot be considered a binding precedent that can be invoked by petitioner in its favor.

As explained by this Court in Philippine Health Care Providers, Inc. v. Commissioner of Internal Revenue:

It is true that, although contained in a minute resolution, our dismissal of the petition was a disposition of the merits of the case. When we dismissed the petition, we effectively affirmed the CA ruling being questioned. As a result, our ruling in that case has already become final. When a minute resolution denies or dismisses a petition for failure to comply with formal and substantive requirements, the challenged decision, together with its findings of fact and legal conclusions, are deemed sustained. But what is its effect on other cases?

With respect to the same subject matter and the same issues concerning the same parties, it constitutes res judicata. However, if other parties or another subject matter (even with the same parties and issues) is involved, the minute resolution is not binding precedent. Thus, in CIR v. Baier-Nickel, the Court noted that a previous case, CIR v. Baier-Nickel involving the same parties and the same issues, was previously disposed of by the Court thru a minute resolution dated February 17, 2003 sustaining the ruling of the CA. Nonetheless, the Court ruled that the previous case “ha(d) no bearing” on the latter case because the two cases involved different subject matters as they were concerned with the taxable income of different taxable years.

Besides, there are substantial, not simply formal, distinctions between a minute resolution and a decision. The constitutional requirement under the first paragraph of Section 14, Article VIII of the Constitution that the facts and the law on which the judgment is based must be expressed clearly and distinctly applies only to decisions, not to minute resolutions. A minute resolution is signed only by the clerk of court by authority of the justices, unlike a decision. It does not require the certification of the Chief Justice. Moreover, unlike decisions, minute resolutions are not published in the Philippine Reports. Finally, the proviso of Section 4(3) of Article VIII speaks of a decision. Indeed, as a rule, this Court lays down doctrines or principles of law which constitute binding precedent in a decision duly signed by the members of the Court and certified by the Chief Justice.

Accordingly, since petitioner was not a party in G.R. No. 148680 and since petitioner’s liability for DST on its health care agreement was not the subject matter of G.R. No. 148680, petitioner cannot successfully invoke the minute resolution in that case (which is not even binding precedent) in its favor.

Furthermore, the filing of the complaint belies petitioner’s claim that respondent voluntarily resigned. As held by this Court in Valdez v. NLRC:

It would have been illogical for herein petitioner to resign and then file a complaint for illegal dismissal. Resignation is inconsistent with the filing of the said complaint.

Indubitably, respondent remained on “floating status” for more than six months. He was relieved on January 30, 2006, and was not given a new assignment at the time he filed the complaint on August 2, 2006. Jurisprudence is trite with pronouncements that the temporary inactivity or “floating status” of security guards should continue only for six months. Otherwise, the security agency concerned could be liable for constructive dismissal. The failure of petitioner to give respondent a work assignment beyond the reasonable six-month period makes it liable for constructive dismissal. The CA was correct in sustaining respondent’s claim.

If there is a surplus of security guards caused by lack of clients or projects, the security agency may resort to retrenchment upon compliance with the requirements set forth in the Labor Code. In this way, the security agency will not to be held liable for constructive dismissal and be burdened with the payment of backwages.

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; to his full backwages, inclusive of allowances; and to other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement. Therefore, the CA committed no reversible error in sustaining the LA’s award of backwages and ordering respondent’s reinstatement. (Nationwide Security and Allied Services, Inc. vs. Valderama, G.R. No. 186614, February 23, 2011)

Dismissal; Loan Agreement

Article 282 of the Labor Code provides:

Art. 282. Termination by Employer. – An employer may terminate an employment for any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representative; and
(e) Other causes analogous to the foregoing.

J was terminated for neglect of duty and breach of trust and confidence. Gross negligence connotes want or absence of or failure to exercise slight care or diligence, or the entire absence of care. It evinces a thoughtless disregard of consequences without exerting any effort to avoid them. Fraud and willful neglect of duties imply bad faith of the employee in failing to perform his job, to the detriment of the employer and the latter’s business. Habitual neglect, on the other hand, implies repeated failure to perform one’s duties for a period of time, depending upon the circumstances. It has been said that a single or an isolated act of negligence cannot constitute as a just cause for the dismissal of an employee (St. Luke’s Medical Center, Inc. v. Kuan, et. al., G.R. No. 152166, October 20, 2010). To be a ground for removal, the neglect of duty must be both gross and habitual (JGB and Associates, Inc. v. NLRC).

On the other hand, breach of trust and confidence, as a just cause for termination of employment, is premised on the fact that the employee concerned holds a position of trust and confidence, where greater trust is placed by management and from whom greater fidelity to duty is correspondingly expected. The betrayal of this trust is the essence of the offense for which an employee is penalized (Caingat v. NLRC, 493 Phil. 299 [2005]). It should be noted, however, that the finding of guilt or innocence in a charge of gross and habitual neglect of duty does not preclude the finding of guilty or innocence in a charge of breach of trust and confidence. Each of the charges must be treated separately, as the law itself has treated them separately. To repeat, to warrant removal from service for gross and habitual neglect of duty, it must be shown that the negligence should not merely be gross, but also habitual. In breach of trust and confidence, so long as it is shown there is some basis for management to lose its trust and confidence and that the dismissal was not used as an occasion for abuse, as a subterfuge for causes which are illegal, improper, and unjustified and is genuine, that is, not a mere afterthought intended to justify an earlier action taken in bad faith, the free will of management to conduct its own business affairs to achieve its purpose cannot be denied.

In this case, J cannot be dismissed on the ground of gross and habitual neglect of duty. The Court notes the apparent neglect of J of her duty in ensuring that her subordinates were properly monitored and that she had dutifully done all that was expected of her to ensure the safety of the consuming public who continue to patronize the KFC branches under her jurisdiction. Had J discharged her duties to be highly visible in the restaurants under her jurisdiction, monitor and support the day to day operations of the branches and ensure that all the facilities and equipment at the restaurant were properly maintained and serviced, the deplorable conditions and irregularities at the various KFC branches under her jurisdiction would have been prevented. Considering, however, that over a year had lapsed between the incidences at KFC-Gaisano and KFC-Bohol, and that the nature of the anomalies uncovered were each of a different nature, the Court finds that her acts or lack of action in the performance of her duties is not born of habit.

Despite saying this, it cannot be denied that J willfully breached her duties as to be unworthy of the trust and confidence of HFFI. First, there is no denying that J was a managerial employee. J executed management policies and had the power to discipline the employees of KFC branches in her area. She recommended actions on employees to the head office. Pertinent is Article 212 (m) of the Labor Code defining a managerial employee as one who is vested with powers or prerogatives to lay down and execute management policies and/or hire, transfer, suspend, lay off, recall, discharge, assign or discipline employees. Based on established facts, the mere existence of the grounds for the loss of trust and confidence justifies J’s dismissal. Pursuant to the Court’s ruling in Lima Land, Inc. v. Cuevas, G.R. No. 169523, June 16, 2010, as long as there is some basis for such loss of confidence, such as when the employer has reasonable ground to believe that the employee concerned is responsible for the purported misconduct, and the nature of his participation therein renders him unworthy of the trust and confidence demanded of his position, a managerial employee may be dismissed.

It is noteworthy that the CER’s reports of HFFI show that there were anomalies committed in the branches managed by J. On the principle of respondeat superior or command responsibility alone, J may be held liable for negligence in the performance of her managerial duties. She may not have been directly involved in causing the cash shortages in KFC-Bohol, but her involvement in not performing her duty monitoring and supporting the day to day operations of the branches and ensure that all the facilities and equipment at the restaurant were properly maintained and serviced, could have truly prevented the whole debacle from ever occurring. Moreover, it is observed that rather than taking proactive steps to prevent the anomalies at her branches, J merely effected remedial measures. In the restaurant business where the health and well-being of the consuming public is at stake, this does not suffice. Thus, there is reasonable basis for HFFI to withdraw its trust in her and dismissing her from its service.

Verily, as the employer, HFFI has the right to regulate, according to its discretion and best judgment, all aspects of employment, including work assignment, working methods, processes to be followed, working regulations, transfer of employees, work supervision, lay-off of workers and the discipline, dismissal and recall of workers. Management has the prerogative to discipline its employees and to impose appropriate penalties on erring workers pursuant to company rules and regulations (Deles, Jr. v. NLRC). So long as they are exercised in good faith for the advancement of the employer’s interest and not for the purpose of defeating or circumventing the rights of the employees under special laws or under valid agreements, the employer’s exercise of its management prerogative must be upheld (Meralco v. NLRC). Notably, HFFI exercised in good faith its management prerogative as there is no dispute that it has lost trust and confidence in her and her managerial abilities, to its damage and prejudice. Her dismissal, was therefore, justified. The law imposes many obligations on the employer such as providing just compensation to workers, observance of the procedural requirements of notice and hearing in the termination of employment. On the other hand, the law also recognizes the right of the employer to expect from its workers not only good performance, adequate work and diligence, but also good conduct and loyalty. The employer may not be compelled to continue to employ such persons whose continuance in the service will patently be inimical to its interests (Agabon v. NLRC).

The claim of J for the reimbursement of the 40% of the value of the car loan subsidized by HFFI under its car loan policy must be denied. The rights and obligations of the parties to a car loan agreement is not a proper issue in a labor dispute but in a civil one (Nestle Philippines, Inc. v. NLRC). It involves the relationship of debtor and creditor rather than employee-employer relations (Smart Communications, Inc. v. Astorga, G.R. No. 148132, January 28, 2008). Jurisdiction, therefore, lies with the regular courts in a separate civil action (HSBC, Ltd. v. Broqueza, G.R. No. 178610, November 17, 2010). (Jumuad vs. Hi-Flyer Food, Inc., G.R. No. 187887, September 7, 2011)

Illegal Dismissal for Failure to Prove Existence of Just Cause

Respondent belies these claims and explained that his absence for three days as reflected in the time card was due to petitioner Rosit’s prohibition for them to report for work owing to the latter’s hospitalization. He claims that he was illegally terminated on June 15, 2001 and was subsequently prevented from entering company premises. In defense, petitioners deny terminating respondent on June 15, 2001, maintaining that petitioner Rosit merely reminded him of his numerous absences. However, in defiance of the company’s order, respondent continued to absent himself, went on AWOL and abandoned his work.

We find no merit in petitioners’ contention that respondent incurred unexplained and habitual absences and tardiness. A scrutiny of the time card and payroll discloses that respondent incurred only three days of absence and no record of tardiness. As aptly held by the NLRC, the time card and payroll presented by petitioners do not show gross and habitual absenteeism and tardiness especially since respondent’s explanation of his three-day absence was not denied by petitioners at the first instance before the Labor Arbiter. No other evidence was presented to show the alleged absences and tardiness. On the other hand, Solares, a co-worker of respondent has stated under oath that, as their supervisor, respondent was diligent in reporting for work until June 20, 2001 when they heard the news concerning respondent’s termination from his job.

Likewise, we are not persuaded with petitioners’ claim that respondent incurred additional absences, went on AWOL and abandoned his work. It is worthy to note at this point that petitioners never denied having offered respondent his separation pay. In fact, in their letter-reply dated September 28, 2001, petitioners intimated that respondent may pick up the amount of P27,584.37 any time he wants, which amount represents his separation and 13th month pays. Oddly, petitioners deemed it fit to give respondent his separation pay despite their assertion that there is just cause for his dismissal on the ground of habitual absences. This inconsistent stand of petitioners bolsters the fact that they wanted to terminate respondent, thus giving more credence to respondent’s protestation that he was barred and prevented from reporting for work.

Jurisprudence provides for two essential requirements for abandonment of work to exist. The “failure to report for work or absence without valid or justifiable reason” and “clear intention to sever the employer-employee relationship x x x manifested by some overt acts” should both concur. Further, the employee’s deliberate and unjustified refusal to resume his employment without any intention of returning should be established and proven by the employer.

Petitioners failed to prove that it was respondent who voluntarily refused to report back for work by his defiance and refusal to accept the memoranda and the notices of absences sent to him. The CA correctly ruled that petitioners failed to present evidence that they sent these notices to respondent’s last known address for the purpose of warning him that his continued failure to report would be construed as abandonment of work. The affidavit of petitioner Harpoon’s liaison officer that the memoranda/notices were duly sent to respondent is insufficient and self-serving. Despite being stamped as received, the memoranda do not bear any signature of respondent to indicate that he actually received the same. There was no proof on how these notices were given to respondent. Neither was there any other cogent evidence that these were properly received by respondent.

The fact that respondent never prayed for reinstatement and has sought employment in another company which is a competitor of petitioner Harpoon cannot be construed as his overt acts of abandoning employment. Neither can the delay of four months be taken as an indication that the respondent’s filing of a complaint for illegal dismissal is a mere afterthought. Records show that respondent first attempted to get his separation pay and alleged commissions from the company. It was only after his requests went unheeded that he resorted to judicial recourse. (Harpoon Marine Services, Inc. vs. Francisco, G.R. No. 167751, March 2, 2011)

Interpretation and Construction

We are guided by the time-honored principle that if doubts exist between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter. It is the rule in controversies between a laborer and his master that doubts reasonably arising from the evidence, or in the interpretation of agreements and writing, should be resolved in the former’s favor. (E.G. & I. Construction Corporation vs. Sato, et. al., G.R. No. 182070, February 16, 2011)

Independent Contractor

The existence of an employer-employee relationship is ultimately a question of fact. As a general rule, factual issues are beyond the province of the Supreme Court. However, this rule admits of exceptions, one of which is where there are conflicting findings of fact between the Court of Appeals, on one hand, and the NLRC and Labor Arbiter, on the other, such as in the present case (Sycip Gorres Velayo & Company v. De Raedt, G.R. No. 161366, June 16, 2009). To determine the existence of an employer-employee relationship, case law has consistently applied the four-fold test, to wit: (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 so-called “control test” is the most important indicator of the presence or absence of an employer-employee relationship (Sonza v. ABS-CBN Broadcasting Corporation).

In this case, PBA repeatedly engaged B’s services, as shown in the retainer contracts. PBA pays B a retainer fee, exclusive of per diem or allowances, as stipulated in the retainer contract. PBA can terminate the retainer contract for B’s violation of its terms and conditions. Notably, PBA argue that the all-important element of control is lacking in this case, making B an independent contractor and not an employee of PBA. On the contrary, B asserts that he is an employee of respondents since the latter exercise control over the performance of his work. B cites the following stipulations in the retainer contract which evidence control: PBA classify or rate a referee, require referees to attend all basketball games organized or authorized by the PBA, at least one hour before the start of the first game of each day; assign B to officiate ballgames, or to act as alternate referee or substitute, and the like.

The Court however ruled that the foregoing stipulations hardly demonstrate control over the means and methods by which B performs his work as a referee officiating a PBA basketball game. The contractual stipulations do not pertain to, much less dictate, how and when B will blow the whistle and make calls. On the contrary, they merely serve as rules of conduct or guidelines in order to maintain the integrity of the professional basketball league. “How could a skilled referee perform his job without blowing a whistle and making calls? How can the PBA control the performance of work of a referee without controlling his acts of blowing the whistle and making calls?”

In Sonza v. ABS-CBN Broadcasting Corporation which determined the relationship between a television and radio station and one of its talents, the Court held that not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the former. The Court held:

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. We have ruled that:

Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to the services being rendered may be accorded the effect of establishing an employer-employee relationship. The facts of this case fall squarely with the case of Insular Life Assurance Co., Ltd. v. NLRC. In said case, we held that:

Logically, 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.

Notably, once in the playing court, the referees exercise their own independent judgment, based on the rules of the game, as to when and how a call or decision is to be made. The referees decide whether an infraction was committed, and the PBA cannot overrule them once the decision is made on the playing court. The referees are the only, absolute, and final authority on the playing court. The PBA or any of the PBA officers cannot and do not determine which calls to make or not to make and cannot control the referee when he blows the whistle because such authority exclusively belongs to the referees. The very nature of B’s job of officiating a professional basketball game undoubtedly calls for freedom of control by PBA. Moreover, the following circumstances indicate that B is an independent contractor: (1) the referees are required to report for work only when PBA games are scheduled, which is three times a week spread over an average of only 105 playing days a year, and they officiate games at an average of two hours per game; and (2) the only deductions from the fees received by the referees are withholding taxes. In other words, unlike regular employees who ordinarily report for work eight hours per day for five days a week, B is required to report for work only when PBA games are scheduled or three times a week at two hours per game. In addition, there are no deductions for contributions to the Social Security System, Philhealth or Pag-Ibig, which are the usual deductions from employees’ salaries. These undisputed circumstances buttress the fact that B is an independent contractor, and not an employee of PBA.

Similarly, in Yonan v. United States Soccer Federation, Inc., Case No. 09 C 4280, June 22, 2011, the United States District Court of Illinois held that plaintiff, a soccer referee, is an independent contractor, and not an employee of defendant which is the statutory body that governs soccer in the United States. As such, plaintiff was not entitled to protection by the Age Discrimination in Employment Act. The U.S. District Court ruled:

Generally, “if an employer has the right to control and direct the work of an individual, not only as to the result to be achieved, but also as to details by which the result is achieved, an employer/employee relationship is likely to exist.” The Court must be careful to distinguish between “control[ling] the conduct of another party contracting party by setting out in detail his obligations” consistent with the freedom of contract, on the one hand, and “the discretionary control an employer daily exercises over its employee’s conduct” on the other.

Yonan asserts that the Federation “closely supervised” his performance at each soccer game he officiated by giving him an assessor, discussing his performance, and controlling what clothes he wore while on the field and traveling. Putting aside that the Federation did not, for the most part, control what clothes he wore, the Federation did not supervise Yonan, but rather evaluated his performance after matches. That the Federation evaluated Yonan as a referee does not mean that he was an employee. There is no question that parties retaining independent contractors may judge the performance of those contractors to determine if the contractual relationship should continue. x x x

It is undisputed that the Federation did not control the way Yonan refereed his games. He had full discretion and authority, under the Laws of the Game, to call the game as he saw fit. x x x In a similar vein, subjecting Yonan to qualification standards and procedures like the Federation’s registration and training requirements does not create an employer/employee relationship. x x x

A position that requires special skills and independent judgment weights in favor of independent contractor status. x x x Unskilled work, on the other hand, suggests an employment relationship. x x x Here, it is undisputed that soccer refereeing, especially at the professional and international level, requires “a great deal of skill and natural ability.” Yonan asserts that it was the Federation’s training that made him a top referee, and that suggests he was an employee. Though substantial training supports an employment inference, that inference is dulled significantly or negated when the putative employer’s activity is the result of a statutory requirement, not the employer’s choice. x x x

In McInturff v. BattleGroundAcademy of Franklin, No. M2009-00501-COA-R3-CV, December 16, 2009, it was held that the umpire was not an agent of the Tennessee Secondary School Athletic Association (TSSAA), so the player’s vicarious liability claim against the association should be dismissed. In finding that the umpire is an independent contractor, the Court of Appeals of Tennesse ruled:

The TSSAA deals with umpires to achieve a result-uniform rules for all baseball games played between TSSAA member schools. The TSSAA does not supervise regular season games. It does not tell an official how to conduct the game beyond the framework established by the rules. The TSSAA does not, in the vernacular of the case law, control the means and method by which the umpires work.

In addition, the fact that PBA repeatedly hired B does not by itself prove that he is an employee of the former. For a hired party to be considered an employee, the hiring party must have control over the means and methods by which the hired party is to perform his work, which is absent in this case. The continuous rehiring by PBA of B simply signifies the renewal of the contract between PBA and B, and highlights the satisfactory services rendered by B warranting such contract renewal. Conversely, if PBA decides to discontinue B’s services at the end of the term fixed in the contract, whether for unsatisfactory services, or violation of the terms and conditions of the contract, or for whatever other reason, the same merely results in the non-renewal of the contract, as in the present case. The non-renewal of the contract between the parties does not constitute illegal dismissal of B by PBA. (Bernate vs. Philippine Basketball Association (PBA), et. al., G.R. No. 192084, September 14, 2011)

Insubordination

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. The facts of the case do not show the presence of the second requisite. The failure to return the vehicle and the Purchase/Assignment of Car Agreement, from which Grandteq derives its claim of ownership over the car, had no relation at all to the discharge of respondent’s duties as a sales engineer. (Grandteq Industrial Steel Products, Inc., et. al. vs. Estrella, G.R. No. 192416, March 23, 2011)

Jurisdiction: Intra-Corporate Controversy

Respondents strongly rely on Court’s pronouncement in the 1997 case of Tabang v. National Labor Relations Commission, to wit:

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.

In view of this, respondents contend that even if petitioner challenges his being a corporate officer, the present case still constitutes an intra-corporate controversy as petitioner is undisputedly a stockholder and a director of respondent corporation. It is worthy to note, however, that before the promulgation of the Tabang case, the Court provided in Mainland Construction Co., Inc. v. Movilla a “better policy” in determining which between the Securities and Exchange Commission (SEC) and the Labor Arbiter has jurisdiction over termination disputes, or similarly, whether they are intra-corporate or not, viz:

The fact that the parties involved in the controversy are all stockholders or that the parties involved are the stockholders and the corporation does not necessarily place the dispute within the ambit of the jurisdiction of the SEC (now the Regional Trial Court). The better policy to be followed in determining jurisdiction over a case should be to consider concurrent factors such as the status or relationship of the parties or the nature of the question that is subject of their controversy. In the absence of any one of these factors, the SEC will not have jurisdiction. Furthermore, it does not necessarily follow that every conflict between the corporation and its stockholders would involve such corporate matters as only SEC (now the Regional Trial Court) can resolve in the exercise of its adjudicatory or quasi-judicial powers. (Emphasis ours)

And, while Tabang was promulgated later than Mainland Construction Co., Inc., the “better policy” enunciated in the latter appears to have developed into a standard approach in classifying what constitutes an intra-corporate controversy. This is explained lengthily in Reyes v. Regional Trial Court of Makati, Br. 142, to wit:

A review of relevant jurisprudence shows a development in the Court’s approach in classifying what constitutes an intra-corporate controversy. Initially, the main consideration in determining whether a dispute constitutes an intra-corporate controversy was limited to a consideration of the intra-corporate relationship existing between or among the parties. The types of relationships embraced under Section 5(b) x x x were as follows:

a) between the corporation, partnership or association and the public;
b) between the corporation, partnership or association and its stockholders, partners, members or officers;
c) between the corporation, partnership or association and the State as far as its franchise, permit or license to operate is concerned; and
d) among the stockholders, partners or associates themselves.

The existence of any of the above intra-corporate relations was sufficient to confer jurisdiction to the SEC (now the RTC), regardless of the subject matter of the dispute. This came to be known as the relationship test.

However, in the 1984 case of DMRC Enterprises v. Esta del Sol Mountain Reserve, Inc., the Court introduced the nature of the controversy test. We declared in this case that it is not the mere existence of an intra-corporate relationship that gives rise to an intra-corporate controversy; to rely on the relationship test alone will divest the regular courts of their jurisdiction for the sole reason that the dispute involves a corporation, its directors, officers, or stockholders. We saw that there is no legal sense in disregarding or minimizing the value of the nature of the transactions which gives rise to the dispute.

Under the nature of the controversy test, the incidents of that relationship must also be considered for the purpose of ascertaining whether the controversy itself is intra-corporate. The controversy must not only be rooted in the existence of an intra-corporate relationship, but must as well pertain to the enforcement of the parties’ correlative rights and obligations under the Corporation Code and the internal and intra-corporate regulatory rules of the corporation. If the relationship and its incidents are merely incidental to the controversy or if there will still be conflict even if the relationship does not exist, then no intra-corporate controversy exists.

The Court then combined the two tests and declared that jurisdiction should be determined by considering not only the status or relationship of the parties, but also the nature of the question under controversy. This two-tier test was adopted in the recent case of Speed Distribution Inc. v. Court of Appeals:

‘To determine whether a case involves an intra-corporate controversy, and is to be heard and decided by the branches of the RTC specifically designated by the Court to try and decide such cases, two elements must concur: (a) the status or relationship of the parties, and (2) the nature of the question that is the subject of their controversy.

The first element requires that the controversy must arise out of intra-corporate or partnership relations between any or all of the parties and the corporation, partnership, or association of which they are not stockholders, members or associates, 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 it concerns the individual franchises. The second element requires that the dispute among the parties be intrinsically connected with the regulation of the corporation. If the nature of the controversy involves matters that are purely civil in character, necessarily, the case does not involve an intra-corporate controversy.’ [Citations omitted.]

Guided by this recent jurisprudence, the Court thus found no merit in respondents’ contention that the fact alone that petitioner is a stockholder and director of respondent corporation automatically classifies this case as an intra-corporate controversy. To reiterate, not all conflicts between the stockholders and the corporation are classified as intra-corporate. There are other factors to consider in determining whether the dispute involves corporate matters as to consider them as intra-corporate controversies. What then is the nature of petitioner’s Complaint for Illegal Dismissal? Is it intra-corporate and thus beyond the jurisdiction of the Labor Arbiter? The Court shall answer this question by using the standards set forth in the Reyes case.

In this case, an examination of the complaint for illegal dismissal, however, reveals that the root of the controversy is petitioner’s dismissal as Manager of respondent corporation, a position which respondents claim to be a corporate office. Hence, petitioner is involved in this case not in his capacity as a stockholder or director, but as an alleged corporate officer. In applying the relationship test, therefore, it is necessary to determine if petitioner is a corporate officer of respondent corporation so as to establish the intra-corporate relationship between the parties.

Corporate officers’ in the context of Presidential Decree No. 902-A are those officers of the corporation who are given that character by the Corporation Code or by the corporation’s by-laws. There are three specific officers whom a corporation must have under Section 25 of the Corporation Code. These are the president, secretary and the treasurer. The number of officers is not limited to these three. A corporation may have such other officers as may be provided for by its by-laws like, but not limited to, the vice-president, cashier, auditor or general manager. The number of corporate officers is thus limited by law and by the corporation’s by-laws.”

We now go to the nature of controversy test. As earlier stated, respondents terminated the services of petitioner for the following reasons: (1) his continuous absences at his post at Ogino Philippines, Inc; (2) respondents’ loss of trust and confidence on petitioner; and, (3) to cut down operational expenses to reduce further losses being experienced by the corporation. Hence, petitioner filed a complaint for illegal dismissal and sought reinstatement, backwages, moral damages and attorney’s fees. From these, it is not difficult to see that the reasons given by respondents for dismissing petitioner have something to do with his being a Manager of respondent corporation and nothing with his being a director or stockholder. For one, petitioner’s continuous absences in his post in Ogino relates to his performance as Manager. Second, respondents’ loss of trust and confidence in petitioner stemmed from his alleged acts of establishing a company engaged in the same line of business as respondent corporation’s and submitting proposals to the latter’s clients while he was still serving as its Manager. While we note that respondents also claim these acts as constituting acts of disloyalty of petitioner as director and stockholder, we, however, think that same is a mere afterthought on their part to make it appear that the present case involves an element of intra-corporate controversy. This is because before the Labor Arbiter, respondents did not see such acts to be disloyal acts of a director and stockholder but rather, as constituting willful breach of the trust reposed upon petitioner as Manager. It was only after respondents invoked the Labor Arbiter’s lack of jurisdiction over petitioner’s complaint in the Supplemental Memorandum of Appeal filed before the NLRC that respondents started considering said acts as such. Third, in saying that they were dismissing petitioner to cut operational expenses, respondents actually want to save on the salaries and other remunerations being given to petitioner as its Manager. Thus, when petitioner sought for reinstatement, he wanted to recover his position as Manager, a position which we have, however, earlier declared to be not a corporate position. He is not trying to recover a seat in the board of directors or to any appointive or elective corporate position which has been declared vacant by the board. Certainly, what we have here is a case of termination of employment which is a labor controversy and not an intra-corporate dispute. In sum, we hold that petitioner’s complaint likewise does not satisfy the nature of controversy test.

With the elements of intra-corporate controversy being absent in this case, we thus hold that petitioner’s complaint for illegal dismissal against respondents is not intra-corporate. Rather, it is a termination dispute and, consequently, falls under the jurisdiction of the Labor Arbiter pursuant to Section 217 of the Labor Code.

We take note of the cases cited by respondents and find them inapplicable to the case at bar. Fortune Cement Corporation v. National Labor Relations Commission involves a member of the board of directors and at the same time a corporate officer who claims he was illegally dismissed after he was stripped of his corporate position of Executive Vice-President because of loss of trust and confidence. On the other hand, Philippine School of Business Administration v. Leano and Pearson & George v. National Labor Relations Commission both concern a complaint for illegal dismissal by corporate officers who were not re-elected to their respective corporate positions. The Court declared all these cases as involving intra-corporate controversies and thus affirmed the jurisdiction of the SEC (now the RTC) over them precisely because they all relate to corporate officers and their removal or non-reelection to their respective corporate positions. Said cases are by no means similar to the present case because as discussed earlier, petitioner here is not a corporate officer.

With the foregoing, it is clear that the CA erred in affirming the decision of the NLRC which dismissed petitioner’s complaint for lack of jurisdiction. In cases such as this, the Court normally remands the case to the NLRC and directs it to properly dispose of the case on the merits. “However, when there is enough basis on which a proper evaluation of the merits of petitioner’s case may be had, the Court may dispense with the time-consuming procedure of remand in order to prevent further delays in the disposition of the case.” “It is already an accepted rule of procedure for us to strive to settle the entire controversy in a single proceeding, leaving no root or branch to bear the seeds of litigation. If, based on the records, the pleadings, and other evidence, the dispute can be resolved by us, we will do so to serve the ends of justice instead of remanding the case to the lower court for further proceedings.” We have gone over the records before us and we are convinced that we can now altogether resolve the issue of the validity of petitioner’s dismissal and hence, we shall proceed to do so.

“In an illegal dismissal case, the onus probandi rests on the employer to prove that [the] dismissal of an employee is for a valid cause.” Here, as correctly observed by the Labor Arbiter, respondents failed to produce any convincing proof to support the grounds for which they terminated petitioner. Respondents contend that petitioner has been absent for several months, yet they failed to present any proof that petitioner was indeed absent for such a long time. Also, the fact that petitioner was still able to collect his salaries after his alleged absences casts doubts on the truthfulness of such charge. Respondents likewise allege that petitioner engaged in a heated argument with the employees of Epson, one of respondents’ clients. But just like in the charge of absenteeism, there is no showing that an investigation on the matter was done and that disciplinary action was imposed upon petitioner. At any rate, we have reviewed the records of this case and we agree with the Labor Arbiter that under the circumstances, said charges are not sufficient bases for petitioner’s termination. As to the charge of breach of trust allegedly committed by petitioner when he established a new company engaged in the same line of business as respondent corporation’s and submitted proposals to two of the latter’s clients while he was still a Manager, we again observe that these are mere allegations without sufficient proof. To reiterate, allegations must be proven by sufficient evidence because mere allegation is definitely not evidence.

Moreover, petitioner’s dismissal was effected without due process of law. “The twin requirements of notice and hearing constitute the essential elements of due process. The law requires the employer to furnish the employee sought to be dismissed with two written notices before termination of employment can be legally effected: (1) a written notice apprising the employee of the particular acts or omissions for which his dismissal is sought in order to afford him an opportunity to be heard and to defend himself with the assistance of counsel, if he desires, and (2) a subsequent notice informing the employee of the employer’s decision to dismiss him. This procedure is mandatory and its absence taints the dismissal with illegality.” Since in this case, petitioner’s dismissal was effected through a board resolution and all that petitioner received was a letter informing him of the board’s decision to terminate him, the abovementioned procedure was clearly not complied with. All told, we agree with the findings of the Labor Arbiter that petitioner has been illegally dismissed. And, as an illegally dismissed employee is entitled to the two reliefs of backwages and reinstatement, we affirm the Labor Arbiter’s judgment ordering petitioner’s reinstatement to his former position without loss of seniority rights and other privileges and awarding backwages from the time of his dismissal until actually reinstated. Considering that petitioner has to secure the services of counsel to protect his interest and necessarily has to incur expenses, we likewise affirm the award of attorney’s fees which is equivalent to 10% of the total backwages that respondents must pay petitioner in accordance with this Decision. (Real vs. Sangu Phils., Inc., G.R. No. 168757, January 19, 2011)

Jurisdiction of Voluntary Arbitrators

Article 217 of the Labor Code states that unfair labor practices and termination disputes fall within the original and exclusive jurisdiction of the Labor Arbiter:

ART. 217. Jurisdiction of Labor Arbiters and the Commission. – (a) Except as otherwise provided under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide x x x the following cases involving all workers, whether agricultural or non-agricultural:

1. Unfair labor practice cases;
2. Termination disputes;
x x x x (Emphasis supplied)

Article 262 of the same Code provides the exception:

ART. 262. Jurisdiction over other labor disputes. – The Voluntary Arbitrator or panel of Voluntary Arbitrators, upon agreement of the parties, shall also hear and decide all other labor disputes including unfair labor practices and bargaining deadlocks. (Emphasis supplied)

In San Miguel Corp. v. NLRC, the Court ruled that for the exception to apply, there must be agreement between the parties clearly conferring jurisdiction to the voluntary arbitrator. Such agreement may be stipulated in a collective bargaining agreement. However, in the absence of a collective bargaining agreement, it is enough that there is evidence on record showing the parties have agreed to resort to voluntary arbitration. No less than Section 3, Article XIII of the Constitution declares as state policy the preferential use of voluntary modes in settling disputes, to wit:

Sec. 3. x x x x The State shall promote the principle of shared responsibility between workers and employers and the preferential use of voluntary modes in settling disputes, including conciliation, and shall enforce their mutual compliance therewith to foster industrial peace. (Emphasis supplied)

(The University of the Immaculate Concepcion vs. NLRC and Axalan, G.R. No. 181146, January 26, 2011)

Labor-Only Contracting

Article 106 defines “labor-only” contracting, viz:

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 person 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.

Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by Department Order No. 18-02, pertinently 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 which are directly related to the main business of the principal; OR

ii) [T]he contractor does not exercise the right to control over the performance of the work of the contractual employee.

Attorney’s 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.

It must be emphasized that in labor-only contracting, “the labor-only contractor is considered merely an agent of the principal employer. The principal employer is responsible to the employees of the labor-only contractor as if such employees had been directly employed by the principal employer. The principal employer therefore becomes solidarily liable with the labor-only contractor for all the rightful claims of the employees.” (Aliviado, et. al. vs. Procter & Gamble Phils., Inc., G.R. No. 160506, June 6, 2011)

Loss of Trust and Confidence

It is well-settled in our jurisdiction that loss of trust and confidence constitutes a just and valid cause for an employee’s termination. In Etcuban, Jr. v. Sulpicio Lines, Inc. this Court held:

Law and jurisprudence have long recognized the right of employers to dismiss employees by reason of loss of trust and confidence. More so, in the case of supervisors or personnel occupying positions of responsibility, loss of trust justifies termination. Loss of confidence as a just cause for termination of employment is premised from the fact that an employee concerned holds a position of trust and confidence. This situation holds where a person is entrusted with confidence on delicate matters, such as the custody, handling, or care and protection of the employer’s property. But, 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.

It has oft been held that loss of confidence should not be used as a subterfuge for causes which are illegal, improper and unjustified. It must be genuine, not a mere afterthought to justify an earlier action taken in bad faith. It bears stressing that what is at stake here are the sole means of livelihood, the name and the reputation of the employee.

Verily, in Tiu and/or Conti Pawnshop v. National Labor Relations Commission, we held that the language of Article 282(c) of the Labor Code states that the loss of trust and confidence must be based on willful breach of the trust reposed in the employee by the employer. Ordinary breach will not suffice; it must be willful. 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. And in the case of supervisors or personnel occupying positions of responsibility, like respondent Gacayan, the loss of trust and confidence must spring from the voluntary or willful act of the employee, or by reason of some blameworthy act or omission on the part of the employee.

As far as the notice requirement is concerned, the law requires the employer to give two (2) kinds of notices to the employee sought to be terminated:

‘It is evident from the said provisions that the employer is required to furnish an employee who is to be dismissed two (2) written notices before such termination. The first is the notice to apprise the employee of the particular act or omissions for which his dismissal is sought. This may loosely be considered as the proper charge. The second is the notice informing the employee of the employer’s decision to dismiss him. This decision, however, must come only after the employee is given a reasonable period from receipt of the first notice within which to answer the charge, and ample opportunity to be heard and defend himself with the assistance of his representative, if he so desires. This is in consonance with the express provisions of law on the protection of labor and the broader dictates of procedural due process. Non compliance therewith is fatal because these requirements are conditions sine qua non before dismissal may be validly effected. (Tiu vs. National Labor Relations Commission, 215 SCRA 540, 551-552, emphasis added).’

‘Due process is not violated where a person is not heard because he has chosen, for whatever reason, not to be heard. It is obvious that if he opts to be silent where he has the right to be (sic) speak, he cannot later be heard to complain that he was unduly silenced.’ (Pepsi Cola Distributors of the Philippines, Inc. vs. National Labor Relations Commission, G.R. No. 100686, August 15, 1995)

While the Constitution is committed to the policy of social justice and the protection of the working class, it should not be expected that every labor dispute will be automatically decided in favor of labor. Management also has its own rights which, as such, are entitled to respect and enforcement in the interest of simple fair play. (The Coca-Cola Export Corp. vs. Gacayan, G.R. No. 149433, June 22, 2011)

Loss of Trust and Confidence

There is likewise no basis for a finding of legitimate loss of confidence because Grandteq failed to show that Estrella held a position of trust and confidence. Firm is the rule that loss of confidence as a just cause for termination of employment is premised on the fact that the employee concerned holds a position of trust and confidence, where greater trust is placed by management and from whom greater fidelity to duty is correspondingly expected. The betrayal of this trust is the essence of the offense for which an employee is penalized. (Grandteq Industrial Steel Products, Inc., et. al. vs. Estrella, G.R. No. 192416, March 23, 2011)

Article 282(c) of the Labor Code prescribes two separate and distinct grounds for termination of employment, namely: (1) fraud or (2) willful breach by the employee of the trust reposed in him by his employer or duly authorized representative. Settled is the rule that under Article 282(c), the breach of trust must be willful. Ordinary breach will not suffice. A breach is willful if it is done intentionally and knowingly without any justifiable excuse, as distinguished from an act done carelessly, thoughtlessly or inadvertently. As firmly entrenched in our jurisprudence, loss of trust and confidence as a just cause for termination of employment is premised on the fact that an employee concerned holds a position where greater trust is placed by management and from whom greater fidelity to duty is correspondingly expected. The betrayal of this trust is the essence of the offense for which an employee is penalized. Unlike in other cases where the complainant has the burden of proof to [prove] its allegations, the burden of establishing facts as bases for an employer’s loss of confidence in an employee – facts which reasonably generate belief by the employer that the employee was connected with some misconduct and the nature of his participation therein is such as to render him unworthy of trust and confidence demanded of his position – is on the employer. (Sanden Aircon Philippines and Ang vs. Rosales, G.R. No. 169260, March 23, 2011)
While it is true that loss of trust and confidence is one of the just causes for termination, such loss of trust and confidence must, however, have some basis. Proof beyond reasonable doubt is not required. It is sufficient that there must only be some basis for such loss of confidence or that there is reasonable ground to believe if not to entertain the moral conviction that the concerned employee is responsible for the misconduct and that the nature of his participation therein rendered him absolutely unworthy of trust and confidence demanded by his position. In this case, Sanden failed to discharge the burden of proof that the dismissal of Loressa is for a just cause. The first requisite for dismissal on the ground of loss of trust and confidence is that the employee concerned must be holding a position of trust and confidence. Loressa, who had immediate access to Sanden’s confidential files, papers and documents, held a position of trust and confidence as Coordinator and Data Custodian of the MIS Department. The second requisite is that there must be an act that would justify the loss of trust and confidence. Loss of trust and confidence, to be a valid cause for dismissal, must be based on a willful breach of trust and founded on clearly established facts. The basis for the dismissal must be clearly and convincingly established but proof beyond reasonable doubt is not necessary. Sanden’s evidence against Loressa fails to meet this standard. (Sanden Aircon Philippines and Ang vs. Rosales, G.R. No. 169260, March 23, 2011)

Loss of Confidence

The right of an employer to freely select or discharge his employee is a recognized prerogative of management; an employer cannot be compelled to continue employing one who has been guilty of acts inimical to its interests. When this happens, the employer can dismiss the employee for loss of confidence (Tabacalera Insurance Co. v. NLRC). At the same time, loss of confidence as a just cause of dismissal was never intended to provide employers with a blank check for terminating employment. Loss of confidence should ideally apply only: (1) to cases involving employees occupying positions of trust and confidence, or (2) to situations where the employee is routinely charged with the care and custody of the employer’s money or property. To the first class belong managerial employees, i.e., those vested with the powers and prerogatives to lay down management polices and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees, or effectively recommend such managerial actions. To the second class belong cashiers, auditors, property custodians, or those who, in the normal and routine exercise of their functions, regularly handle significant amounts of money or property (Mabeza v. NLRC).

In this case, L, as branch manager, clearly occupies a “position of trust.” His hold on his position and his stay in the service depend on the employer’s trust and confidence in him and on his managerial services (International Harvester Macleod, Inc. v. Intermediate Appellate Court). According to the bank, L betrayed this trust and confidence when he issued the subject POs without authority and despite the express directive to put the client’s application on hold. In response, L insists that he had sufficient authority to act as he did, as this authority is inherent in his position as bank manager. He points to his record in the past when he issued POs which were honored and paid by the bank and which constituted the arbiter’s “overwhelming evidence” in support of the finding that “complainant’s dismissal from work was without just cause, hence, illegal.”

However, the Court disagreed with L’s contention. Despite evidence of his past exercise of authority, the Court cannot disregard evidence showing that in August 2003, the bank specifically instructed L not to proceed with the Hertz loan application because of the negative credit rating issued by the bank’s credit committee. L however processed the loan despite the adverse credit rating. In fact, he admitted that he overlooked the “control aspects” of the transaction as far as the bank was concerned because of his eagerness to get a bigger share of the market. L’s good intentions, assuming them to be true, are beside the point for, ultimately, what comes out is his defiance of a direct order of the bank on a matter of business judgment. He went over the heads of the bank officers, including the credit committee, when, based on inquiries he made on his own regarding the credit worthiness of JPC, he simply proceeded to act on the basis of his own judgment. Evident in his written explanation was his failure to inform the credit committee of his own efforts to check on the committee’s adverse findings against Hertz and his independent action based solely on his own authority.

As a bank official, L must have been aware that it is basic in every sound management that people under one’s supervision and direction are bound to follow instructions or to inform their superior of what is going on in their respective areas of concern, especially regarding matters of vital interest to the enterprise. Under these facts, it appears that L disobeyed the bank’s directive to put the Hertz loan application on hold, and did not wait until its negative credit rating was cleared before proceeding to act. That he might have been proven right is immaterial. Neither does the submission that the bank honored and paid the first PO and even realized a profit from the transaction, mitigate the gravity of L’s defiance of the directive of higher authority on a business judgment. What appears clear is that the bank cannot in the future trust L as a manager who would follow directives from higher authorities on business policy and directions. The bank can be placed at risk if this kind of managerial attitude will be repeated, especially if it becomes an accepted rule among lower managers.

In Nokom v. NLRC, the Court reiterated the guidelines for the application of loss of confidence as follows: (1) loss of confidence, should not be simulated; (2) it should not be used as a subterfuge for causes which are improper, illegal or unjustified; (3) it may not be arbitrarily asserted in the face of overwhelming evidence to the contrary; and (4) it must be genuine, not a mere afterthought to justify an earlier action taken in bad faith. Under the circumstances of this case, the bank was justified in terminating L’s employment by reason of loss of trust and confidence. He admitted issuing the two POs, claiming merely that he had the requisite authority. He could not present any proof in this regard, however, except to say that it was part of his inherent duty as bank manager. He also claimed that the bank acquiesced to the issuance of the POs as it paid the first PO and the POs he issued in the past. This submission flies in the face of the bank’s directive for him not to proceed unless matters are cleared with the bank’s credit committee. The bank had a genuine concern over the issue as it found through its credit committee that Hertz was a credit risk. Whether the credit committee was correct or not is immaterial as the bank’s direct order left L without any authority to clear the loan application on his own. (Lopez vs. Keppel Bank Philippines, Inc., et. al., G.R. No. 176800, September 5, 2011)

Management Prerogatives

The Court recognizes the right of employers to discipline its employees for serious violations of company rules after affording the latter due process and if the evidence warrants. The university, after affording Axalan due process and finding her guilty of incurring AWOL on two separate occasions, acted well within the bounds of labor laws in imposing the penalty of six-month suspension without pay for each incidence of AWOL. As a learning institution, the university cannot be expected to take lightly absences without official leave among its employees, more so among its faculty members even if they happen to be union officers. To do so would send the wrong signal to the studentry and the rest of its teaching staff that irresponsibility is widely tolerated in the academe. The law protects both the welfare of employees and the prerogatives of management. Courts will not interfere with prerogatives of management on the discipline of employees, as long as they do not violate labor laws, collective bargaining agreements if any, and general principles of fairness and justice (The University of the Immaculate Concepcion vs. NLRC and Axalan, G.R. No. 181146, January 26, 2011).

It is acknowledged that an employer has free rein and enjoys a wide latitude of discretion to regulate all aspects of employment, including the prerogative to instill discipline on his employees and to impose penalties, including dismissal, if warranted, upon erring employees. This is a management prerogative. Indeed, the manner in which management conducts its own affairs to achieve its purpose is within the management’s discretion. The only limitation on the exercise of management prerogative is that the policies, rules, and regulations on work-related activities of the employees must always be fair and reasonable, and the corresponding penalties, when prescribed, commensurate to the offense involved and to the degree of the infraction. A company policy must be implemented in such manner as will accord social justice and compassion to the employee. In case of noncompliance with the company policy, the employer must consider the surrounding circumstances and the reasons why the employee failed to comply. When the circumstances merit the relaxation of the application of the policy, then its noncompliance must be excused. (Caong, Jr., et. al. vs. Regualos, G.R. No. 179428, January 26, 2011).

Neglect of Duty

Grandteq also imputes gross and habitual neglect of duty when Estrella was absent from work for three (3) weeks without an approved application for leave. Gross negligence connotes want of care in the performance of one’s duties, while habitual neglect implies repeated failure to perform one’s duties for a period of time, depending on the circumstances. The single or isolated act of negligence does not constitute a just cause for the dismissal of an employee. Grandteq does not dispute receiving Estrella’s Medical Certificate and worse, proffers no explanation why it did not act on Estrella’s application for sick leave. And even if, arguendo, such absences were established, still, they would merit at best mere suspension from service. The penalty of dismissal would be too harsh, considering that apparently, management had no complaint as regards Estrella’s quality of work. (Grandteq Industrial Steel Products, Inc., et. al. vs. Estrella, G.R. No. 192416, March 23, 2011)

One-Month Notice of Termination of Employment

Article 283 of the Labor Code provides:

ART. 283. Closure of establishment and reduction of personnel. – The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Department of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or to at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.

In this case, Plastimer submitted the notice of termination of employment to the DOLE on 26 May 2004. However, notice to the affected employees were given to them on 14 May 2004 or 30 days before the effectivity of their termination from employment on 13 June 2004. While notice to the DOLE was short of the one-month notice requirement, the affected employees were sufficiently informed of their retrenchment 30 days before its effectivity. Petitioners’ failure to comply with the one-month notice to the DOLE is only a procedural infirmity and does not render the retrenchment illegal. In Agabon v. NLRC, the Court ruled that when the dismissal is for a just cause, the absence of proper notice should not nullify the dismissal or render it illegal or ineffectual. Instead, the employer should indemnify the employee for the violation of his statutory rights. Here, the failure to fully comply with the one-month notice of termination of employment did not render the retrenchment illegal but it entitles respondents to nominal damages. (Plastimer Industrial Corporation and Teo Kee Bin vs. Gopo, et. al., G.R. No. 183390, February 16, 2011)

Probationary Employment

There is probationary employment when the employee upon his engagement is made to undergo a trial period during which the employer determines his fitness to qualify for regular employment based on reasonable standards made known to him at the time of engagement. A probationary employee, like a regular employee, enjoys security of tenure. However, in cases of probationary employment, aside from just or authorized causes of termination, an additional ground is provided under Article 281 of the Labor Code, i.e., the probationary employee may also be terminated for failure to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of the engagement. Thus, the services of an employee who has been engaged on probationary basis may be terminated for any of the following: (1) a just or (2) an authorized cause; and (3) when he fails to qualify as a regular employee in accordance with reasonable standards prescribed by the employer. (Robinsons Galleria/Robinsons Supermarket Corporation vs. Ranchez, G.R. No. 177937, January 19, 2011)

Probationary Status of Teaching Personnel

A reality we have to face in the consideration of employment on probationary status of teaching personnel is that they are not governed purely by the Labor Code (Mercado, et. al. v. AMA Computer College-Parañaque City, Inc., G.R. No. 183572, April 13, 2010). The Labor Code is supplemented with respect to the period of probation by special rules found in the Manual of Regulations for Private Schools (See also Magis Young Achievers’ LearningCenter v. Manalo, G.R. No. 178835, February 13, 2009). On the matter of probationary period, Section 92 of these regulations provides:

Section 92. Probationary Period. – Subject in all instances to compliance with the Department and school requirements, the probationary period for academic personnel shall not be more than three (3) consecutive years of satisfactory service for those in the elementary and secondary levels, six (6) consecutive regular semesters of satisfactory service for those in the tertiary level, and nine (9) consecutive trimesters of satisfactory service for those in the tertiary level where collegiate courses are offered on a trimester basis.

A probationary employee or probationer is one who is on trial for an employer, during which the latter determines whether or not he is qualified for permanent employment. The probationary employment is intended to afford the employer an opportunity to observe the fitness of a probationary employee while at work, and to ascertain whether he will become an efficient and productive employee. While the employer observes the fitness, propriety and efficiency of a probationer to ascertain whether he is qualified for permanent employment, the probationer, on the other hand, seeks to prove to the employer that he has the qualifications to meet the reasonable standards for permanent employment. Thus, the word probationary, as used to describe the period of employment, implies the purpose of the term or period, not its length (Magis Young Achievers’ LearningCenter, supra).

The common practice is for the employer and the teacher to enter into a contract, effective for one school year. At the end of the school year, the employer has the option not to renew the contract, particularly considering the teacher’s performance. If the contract is not renewed, the employment relationship terminates. If the contract is renewed, usually for another school year, the probationary employment continues. Again, at the end of that period, the parties may opt to renew or not to renew the contract. If renewed, this second renewal of the contract for another school year would then be the last year – since it would be the third school year – of probationary employment. At the end of this third year, the employer may now decide whether to extend a permanent appointment to the employee, primarily on the basis of the employee having met the reasonable standards of competence and efficiency set by the employer. For the entire duration of this three-year period, the teacher remains under probation. Upon the expiration of his contract of employment, being simply on probation, he cannot automatically claim security of tenure and compel the employer to renew his employment contract. (Magis Young Achievers’ LearningCenter, supra).

Verily, Section 91 of the Manual of Regulations for Private Schools, states that:

Section 91. Employment Contract. – Every contract of employment shall specify the designation, qualification, salary rate, the period and nature of service and its date of effectivity, and such other terms and condition of employment as may be consistent with laws and rules, regulations and standards of the school. A copy of the contract shall be furnished the personnel concerned.

It is important that the contract of probationary employment specify the period or term of its effectivity (Magis Young Achievers’ LearningCenter, supra).The failure to stipulate its precise duration could lead to the inference that the contract is binding for the full three-year probationary period (Espiritu SantoParochial School v. NLRC). (See St. Paul College Quezon City, et. al. vs. Ancheta II, G.R. No. 169905, September 7, 2011)

Procedural Due Process

The Court had previously held that “there are two aspects which characterize the concept of due process under the Labor Code: one is substantive — whether the termination of employment was based on the provision of the Labor Code or in accordance with the prevailing jurisprudence; the other is procedural — the manner in which the dismissal was effected.”

Section 2(d), Rule I, Book VI of the Rules Implementing the Labor Code provides:

(d) In all cases of termination of employment, the following standards of due process shall be substantially observed:

x x x x

For termination of employment as defined in Article 283 of the Labor Code, the requirement of due process shall be deemed complied with upon service of a written notice to the employee and the appropriate Regional Office of the Department of Labor and Employment at least thirty days before effectivity of the termination, specifying the ground or grounds for termination.

In Mayon Hotel & Restaurant v. Adana, the Court observed:

The requirement of law mandating the giving of notices was intended not only to enable the employees to look for another employment and therefore ease the impact of the loss of their jobs and the corresponding income, but more importantly, to give the Department of Labor and Employment (DOLE) the opportunity to ascertain the verity of the alleged authorized cause of termination.

In Serrano v. National Labor Relations Commission, the Court noted that “a job is more than the salary that it carries.” There is a psychological effect or a stigma in immediately finding one’s self laid off from work. This is exactly why our labor laws have provided for mandating procedural due process clauses. Our laws, while recognizing the right of employers to terminate employees it cannot sustain, also recognize the employee’s right to be properly informed of the impending severance of his ties with the company he is working for. In the case at bar, ETPI, in effecting Culili’s termination, simply asked one of its guards to serve the required written notice on Culili. Culili, on one hand, claims in his petition that this was handed to him by ETPI’s vice president, but previously testified before the Labor Arbiter that this was left on his table. Regardless of how this notice was served on Culili, the Court believes that ETPI failed to properly notify Culili about his termination. Aside from the manner the written notice was served, a reading of that notice shows that ETPI failed to properly inform Culili of the grounds for his termination.

Over the years, this Court has had the opportunity to reexamine the sanctions imposed upon employers who fail to comply with the procedural due process requirements in terminating its employees. In Agabon v. National Labor Relations Commission, the Court reverted back to the doctrine in Wenphil Corporation v. National Labor Relations Commission and held that where the dismissal is due to a just or authorized cause, but without observance of the due process requirements, the dismissal may be upheld but the employer must pay an indemnity to the employee. The sanctions to be imposed however, must be stiffer than those imposed in Wenphil to achieve a result fair to both the employers and the employees. In Jaka Food Processing Corporation v. Pacot, the Court, taking a cue from Agabon, held that since there is a clear-cut distinction between a dismissal due to a just cause and a dismissal due to an authorized cause, the legal implications for employers who fail to comply with the notice requirements must also be treated differently:

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.

Hence, since it has been established that Culili’s termination was due to an authorized cause and cannot be considered unfair labor practice on the part of ETPI, his dismissal is valid. However, in view of ETPI’s failure to comply with the notice requirements under the Labor Code, Culili is entitled to nominal damages in addition to his separation pay. (Culili vs. Eastern Telecommunications Philippines, Inc., et. al., G.R. No. 165381, February 9, 2011).

Project Employees

In Maraguinot, Jr. v. National Labor Relations Commission, the Court ruled that “a project employee x x x may acquire the status of a regular employee when the following [factors] concur: (1) there is a continuous rehiring of project employees even after cessation of a project; and, (2) the tasks performed by the alleged “project employee” are vital, necessary and indispensable to the usual business or trade of the employer.” In this case, the evidence on record shows that respondents were employed and assigned continuously to the various projects of petitioners. As painters, they performed activities which were necessary and desirable in the usual business of petitioners, who are engaged in subcontracting jobs for painting of residential units, condominium and commercial buildings. As regular employees, respondents are entitled to be reinstated without loss of seniority rights. (Exodus International Construction Corp. vs. Biscocho, G.R. No. 166109, February 23, 2011)

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.

The foregoing contemplates four (4) kinds of employees: (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. Jurisprudence has added a fifth kind— a fixed-term employee. Article 280 of the Labor Code, as worded, establishes that the nature of the employment is determined by law, regardless of any contract expressing otherwise. The supremacy of the law over the nomenclature of the contract and the stipulations contained therein is to bring to life the policy enshrined in the Constitution to “afford full protection to labor.” Thus, labor contracts are placed on a higher plane than ordinary contracts; these are imbued with public interest and therefore subject to the police power of the State. However, notwithstanding the foregoing iterations, project employment contracts which fix the employment for a specific project or undertaking remain valid under the law:

x x x 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. It is of judicial notice that project employees engaged for manual services or those for special skills like those of carpenters or masons, are, as a rule, unschooled. However, this fact alone is not a valid reason for bestowing special treatment on them or for invalidating a contract of employment. Project employment contracts are not lopsided agreements in favor of only one party thereto. 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.

Registration; Petition for Certification ELection

In Pepsi-Cola Products Philippines, Inc. v. Secretary of Labor, we already ruled that: Anent the issue of whether or not the Petition to cancel/revoke registration is a prejudicial question to the petition for certification election, the following ruling in the case of Association of the Court of Appeals Employees (ACAE) v. Hon. Pura Ferrer-Calleja, x x x is in point, to wit:

x x x It is well-settled rule that ‘a certification proceedings is not a litigation in the sense that the term is ordinarily understood, but an investigation of a non-adversarial and fact finding character.’ (Associated Labor Unions (ALU) v. Ferrer-Calleja, 179 SCRA 127 [1989]; Philippine Telegraph and Telephone Corporation v. NLRC, 183 SCRA 451 [1990]. Thus, the technical rules of evidence do not apply if the decision to grant it proceeds from an examination of the sufficiency of the petition as well as a careful look into the arguments contained in the position papers and other documents.

At any rate, the Court applies the established rule correctly followed by the public respondent that an order to hold a certification election is proper despite the pendency of the petition for cancellation of the registration certificate of the respondent union. The rationale for this is that at the time the respondent union filed its petition, it still had the legal personality to perform such act absent an order directing the cancellation. (Emphasis supplied.)

In Capitol Medical Center, Inc. v. Hon. Trajano, we also held that “the pendency of a petition for cancellation of union registration does not preclude collective bargaining.” Citing the Secretary of Labor, we held viz:

That there is a pending cancellation proceedings against the respondent Union is not a bar to set in motion the mechanics of collective bargaining. If a certification election may still be ordered despite the pendency of a petition to cancel the union’s registration certificate x x x more so should the collective bargaining process continue despite its pendency.

In Association of Court of Appeals Employees v. Ferrer-Calleja, this Court was tasked to resolve the issue of whether “the certification proceedings should be suspended pending [the petitioner’s] petition for the cancellation of union registration of the UCECA. The Court resolved the issue in the negative holding that “an order to hold a certification election is proper despite the pendency of the petition for cancellation of the registration certificate of the respondent union. The rationale for this is that at the time the respondent union filed its petition, it still had the legal personality to perform such act absent an order directing a cancellation.” We reiterated this view in Samahan ng Manggagawa sa Pacific Plastic v. Hon. Laguesma where we declared that “a certification election can be conducted despite pendency of a petition to cancel the union registration certificate. For the fact is that at the time the respondent union filed its petition for certification, it still had the legal personality to perform such act absent an order directing its cancellation.”

Based on the foregoing jurisprudence, it is clear that a certification election may be conducted during the pendency of the cancellation proceedings. This is because at the time the petition for certification was filed, the petitioning union is presumed to possess the legal personality to file the same. There is therefore no basis for LEGEND’s assertion that the cancellation of KML’s certificate of registration should retroact to the time of its issuance or that it effectively nullified all of KML’s activities, including its filing of the petition for certification election and its demand to collectively bargain.

The legitimacy of the legal personality of KML cannot be collaterally attacked in a petition for certification election. We agree with the ruling of the Office of the Secretary of DOLE that the legitimacy of the legal personality of KML cannot be collaterally attacked in a petition for certification election proceeding. This is in consonance with our ruling in Laguna Autoparts Manufacturing Corporation v. Office of the Secretary, Department of Labor and Employment that “such legal personality may not be subject to a collateral attack but only through a separate action instituted particularly for the purpose of assailing it.” We further held therein that:

This is categorically prescribed by Section 5, Rule V of the Implementing Rules of Book V, which states as follows:

SEC. 5. Effect of registration. – The labor organization or worker’s association shall be deemed registered and vested with legal personality on the date of issuance of its certificate of registration. Such legal personality cannot thereafter be subject to collateral attack but may be questioned only in an independent petition for cancellation in accordance with these Rules.

Hence, to raise the issue of the respondent union’s legal personality is not proper in this case. The pronouncement of the Labor Relations Division Chief, that the respondent union acquired a legal personality x x x cannot be challenged in a petition for certification election.

The discussion of the Secretary of Labor and Employment on this point is also enlightening, thus:

. . . Section 5, Rule V of D.O. 9 is instructive on the matter. It provides that the legal personality of a union cannot be the subject of collateral attack in a petition for certification election, but may be questioned only in an independent petition for cancellation of union registration. This has been the rule since NUBE v. Minister of Labor, 110 SCRA 274 (1981). What applies in this case is the principle that once a union acquires a legitimate status as a labor organization, it continues as such until its certificate of registration is cancelled or revoked in an independent action for cancellation.

Equally important is Section 11, Paragraph II, Rule IX of D.O. 9, which provides for the dismissal of a petition for certification election based on the lack of legal personality of a labor organization only in the following instances: (1) appellant is not listed by the Regional Office or the BLR in its registry of legitimate labor organizations; or (2) appellant’s legal personality has been revoked or cancelled with finality. Since appellant is listed in the registry of legitimate labor organizations, and its legitimacy has not been revoked or cancelled with finality, the granting of its petition for certification election is proper.

“[T]he legal personality of a legitimate labor organization x x x cannot be subject to a collateral attack. The law is very clear on this matter. x x x The Implementing Rules stipulate that a labor organization shall be deemed registered and vested with legal personality on the date of issuance of its certificate of registration. Once a certificate of registration is issued to a union, its legal personality cannot be subject to a collateral attack. In may be questioned only in an independent petition for cancellation in accordance with Section 5 of Rule V, Book V of the Implementing Rules.” (Legend International Resorts Limted vs. Kilusang Manggagawa ng Legenda, G.R. No. 169754, February 23, 2011)

Reinstatement

At the outset, we note that PFIZER’s previous payment to respondent of the amount of P1,963,855.00 (representing her wages from December 5, 2003, or the date of the Labor Arbiter decision, until May 5, 2005) that was successfully garnished under the Labor Arbiter’s Writ of Execution dated May 26, 2005 cannot be considered in its favor. Not only was this sum legally due to respondent under prevailing jurisprudence but also this circumstance highlighted PFIZER’s unreasonable delay in complying with the reinstatement order of the Labor Arbiter. A perusal of the records, including PFIZER’s own submissions, confirmed that it only required respondent to report for work on July 1, 2005, as shown by its Letter dated June 27, 2005, which is almost two years from the time the order of reinstatement was handed down in the Labor Arbiter’s Decision dated December 5, 2003.

As far back as 1997 in the seminal case of Pioneer Texturizing Corporation v. National Labor Relations Commission, the Court held that an award or order of reinstatement is immediately self-executory without the need for the issuance of a writ of execution in accordance with the third paragraph of Article 223 of the Labor Code. In that case, we discussed in length the rationale for that doctrine, to wit:

The provision of Article 223 is clear that an award [by the Labor Arbiter] for reinstatement shall be immediately executory even pending appeal and the posting of a bond by the employer shall not stay the execution for reinstatement. The legislative intent is quite obvious, i.e., to make an award of reinstatement immediately enforceable, even pending appeal. To require the application for and issuance of a writ of execution as prerequisites for the execution of a reinstatement award would certainly betray and run counter to the very object and intent of Article 223, i.e., the immediate execution of a reinstatement order. The reason is simple. An application for a writ of execution and its issuance could be delayed for numerous reasons. A mere continuance or postponement of a scheduled hearing, for instance, or an inaction on the part of the Labor Arbiter or the NLRC could easily delay the issuance of the writ thereby setting at naught the strict mandate and noble purpose envisioned by Article 223. In other words, if the requirements of Article 224 [including the issuance of a writ of execution] were to govern, as we so declared in Maranaw, then the executory nature of a reinstatement order or award contemplated by Article 223 will be unduly circumscribed and rendered ineffectual. In enacting the law, the legislature is presumed to have ordained a valid and sensible law, one which operates no further than may be necessary to achieve its specific purpose. Statutes, as a rule, are to be construed in the light of the purpose to be achieved and the evil sought to be prevented. x x x In introducing a new rule on the reinstatement aspect of a labor decision under Republic Act No. 6715, Congress should not be considered to be indulging in mere semantic exercise. x x x (Italics in the original; emphasis and underscoring supplied.)

To reiterate, under Article 223 of the Labor Code, an employee entitled to reinstatement “shall either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation or, at the option of the employer, merely reinstated in the payroll.”

It is established in jurisprudence that reinstatement means restoration to a state or condition from which one had been removed or separated. The person reinstated assumes the position he had occupied prior to his dismissal. Reinstatement presupposes that the previous position from which one had been removed still exists, or that there is an unfilled position which is substantially equivalent or of similar nature as the one previously occupied by the employee.

Applying the foregoing principle to the case before us, it cannot be said that with PFIZER’s June 27, 2005 Letter, in belated fulfillment of the Labor Arbiter’s reinstatement order, it had shown a clear intent to reinstate respondent to her former position under the same terms and conditions nor to a substantially equivalent position. To begin with, the return-to-work order PFIZER sent respondent is silent with regard to the position or the exact nature of employment that it wanted respondent to take up as of July 1, 2005. Even if we assume that the job awaiting respondent in the new location is of the same designation and pay category as what she had before, it is plain from the text of PFIZER’s June 27, 2005 letter that such reinstatement was not “under the same terms and conditions” as her previous employment, considering that PFIZER ordered respondent to report to its main office in Makati City while knowing fully well that respondent’s previous job had her stationed in Baguio City (respondent’s place of residence) and it was still necessary for respondent to be briefed regarding her work assignments and responsibilities, including her relocation benefits.

The Court is cognizant of the prerogative of management to transfer an employee from one office to another within the business establishment, provided that there is no demotion in rank or diminution of his salary, benefits and other privileges and the action is not motivated by discrimination, made in bad faith, or effected as a form of punishment or demotion without sufficient cause. Likewise, the management prerogative to transfer personnel must be exercised without grave abuse of discretion and putting to mind the basic elements of justice and fair play. There must be no showing that it is unnecessary, inconvenient and prejudicial to the displaced employee.

The June 27, 2005 return-to-work directive implying that respondent was being relocated to PFIZER’s Makati main office would necessarily cause hardship to respondent, a married woman with a family to support residing in BaguioCity. However, PFIZER, as the employer, offered no reason or justification for the relocation such as the filling up of respondent’s former position and the unavailability of substantially equivalent position in BaguioCity. A transfer of work assignment without any justification therefor, even if respondent would be presumably doing the same job with the same pay, cannot be deemed faithful compliance with the reinstatement order. In other words, in this instance, there was no real, bona fide reinstatement to speak of prior to the reversal by the Court of Appeals of the finding of illegal dismissal.

In view of PFIZER’s failure to effect respondent’s actual or payroll reinstatement, it is indubitable that the Roquero ruling is applicable to the case at bar. The circumstance that respondent opted for separation pay in lieu of reinstatement as manifested in her counsel’s Letter dated July 18, 2005 is of no moment. We do not see respondent’s letter as taking away the option from management to effect actual or payroll reinstatement but, rather under the factual milieu of this case, where the employer failed to categorically reinstate the employee to her former or equivalent position under the same terms, respondent was not obliged to comply with PFIZER’s ambivalent return-to-work order. To uphold PFIZER’s view that it was respondent who unjustifiably refused to work when PFIZER did not reinstate her to her former position, and worse, required her to report for work under conditions prejudicial to her, is to open the doors to potential employer abuse. Foreseeably, an employer may circumvent the immediately enforceable reinstatement order of the Labor Arbiter by crafting return-to-work directives that are ambiguous or meant to be rejected by the employee and then disclaim liability for backwages due to non-reinstatement by capitalizing on the employee’s purported refusal to work. In sum, the option of the employer to effect actual or payroll reinstatement must be exercised in good faith.

Moreover, while the Court has upheld the employer’s right to choose between actually reinstating an employee or merely reinstating him in the payroll, we have also in the past recognized that reinstatement might no longer be possible under certain circumstances. In F.F. Marine Corporation v. National Labor Relations Commission, we had the occasion to state:

It is well-settled that when a person is illegally dismissed, he is entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages. In the event, however, that reinstatement is no longer feasible, or if the employee decides not be reinstated, the employer shall pay him separation pay in lieu of reinstatement. Such a rule is likewise observed in the case of a strained employer-employee relationship or when the work or position formerly held by the dismissed employee no longer exists. In sum, an illegally dismissed employee is entitled to: (1) either reinstatement if viable or separation pay if reinstatement is no longer viable, and (2) backwages. (Emphasis supplied.)

Similarly, we have previously held that an employee’s demand for separation pay may be indicative of strained relations that may justify payment of separation pay in lieu of reinstatement. This is not to say, however, that respondent is entitled to separation pay in addition to backwages. We stress here that a finding of strained relations must nonetheless still be supported by substantial evidence.

In the case at bar, respondent’s decision to claim separation pay over reinstatement had no legal effect, not only because there was no genuine compliance by the employer to the reinstatement order but also because the employer chose not to act on said claim. If it was PFIZER’s position that respondent’s act amounted to a “resignation” it should have informed respondent that it was accepting her resignation and that in view thereof she was not entitled to separation pay. PFIZER did not respond to respondent’s demand at all. As it was, PFIZER’s failure to effect reinstatement and accept respondent’s offer to terminate her employment relationship with the company meant that, prior to the Court of Appeals’ reversal in the November 23, 2005 Decision, PFIZER’s liability for backwages continued to accrue for the period not covered by the writ of execution dated May 24, 2005 until November 23, 2005.

Lastly, PFIZER exhorts the Court to re-examine the application of Roquero with a view that a mechanical application of the same would cause injustice since, in the present case, respondent was able to gain pecuniary benefit notwithstanding the circumstance of reversal by the Court of Appeals of the rulings of the Labor Arbiter and the NLRC thereby allowing respondent to profit from the dishonesty she committed against PFIZER which was the basis for her termination. In its stead, PFIZER proposes that the Court apply the ruling in Genuino v. National Labor Relations Commission which it believes to be more in accord with the dictates of fairness and justice. In that case, we canceled the award of salaries from the date of the decision of the Labor Arbiter awarding reinstatement in light of our subsequent ruling finding that the dismissal is for a legal and valid ground, to wit:

Anent the directive of the NLRC in its September 3, 1994 Decision ordering Citibank “to pay the salaries due to the complainant from the date it reinstated complainant in the payroll (computed at P60,000.00 a month, as found by the Labor Arbiter) up to and until the date of this decision,” the Court hereby cancels said award in view of its finding that the dismissal of Genuino is for a legal and valid ground.

Ordinarily, the employer is required to reinstate the employee during the pendency of the appeal pursuant to Art. 223, paragraph 3 of the Labor Code, which states:

x x x x

If the decision of the labor arbiter is later reversed on appeal upon the finding that the ground for dismissal is valid, then the employer has the right to require the dismissed employee on payroll reinstatement to refund the salaries s/he received while the case was pending appeal, or it can be deducted from the accrued benefits that the dismissed employee was entitled to receive from his/her employer under existing laws, collective bargaining agreement provisions, and company practices. However, if the employee was reinstated to work during the pendency of the appeal, then the employee is entitled to the compensation received for actual services rendered without need of refund.

Considering that Genuino was not reinstated to work or placed on payroll reinstatement, and her dismissal is based on a just cause, then she is not entitled to be paid the salaries stated in item no. 3 of the fallo of the September 3, 1994 NLRC Decision. (Emphases supplied.)

Thus, PFIZER implores the Court to annul the award of backwages and separation pay as well as to require respondent to refund the amount that she was able to collect by way of garnishment from PFIZER as her accrued salaries.

The contention cannot be given merit since this question has been settled by the Court en banc.

In the recent milestone case of Garcia v. Philippine Airlines, Inc., the Court wrote finis to the stray posture in Genuino requiring the dismissed employee placed on payroll reinstatement to refund the salaries in case a final decision upholds the validity of the dismissal. In Garcia, we clarified the principle of reinstatement pending appeal due to the emergence of differing rulings on the issue, to wit:

On this score, the Court’s attention is drawn to seemingly divergent decisions concerning reinstatement pending appeal or, particularly, the option of payroll reinstatement. On the one hand is the jurisprudential trend as expounded in a line of cases including Air Philippines Corp. v. Zamora, while on the other is the recent case of Genuino v. National Labor Relations Commission. At the core of the seeming divergence is the application of paragraph 3 of Article 223 of the Labor Code x x x.

x x x x

The view as maintained in a number of cases is that:

x x x [E]ven if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the dismissed employee during the period of appeal until reversal by the higher court. On the other hand, if the employee has been reinstated during the appeal period and such reinstatement order is reversed with finality, the employee is not required to reimburse whatever salary he received for he is entitled to such, more so if he actually rendered services during the period. (Emphasis in the original; italics and underscoring supplied)

In other words, a dismissed employee whose case was favorably decided by the Labor Arbiter is entitled to receive wages pending appeal upon reinstatement, which is immediately executory. Unless there is a restraining order, it is ministerial upon the Labor Arbiter to implement the order of reinstatement and it is mandatory on the employer to comply therewith.

The opposite view is articulated in Genuino which states:

If the decision of the labor arbiter is later reversed on appeal upon the finding that the ground for dismissal is valid, then the employer has the right to require the dismissed employee on payroll reinstatement to refund the salaries [he] received while the case was pending appeal, or it can be deducted from the accrued benefits that the dismissed employee was entitled to receive from [his] employer under existing laws, collective bargaining agreement provisions, and company practices. However, if the employee was reinstated to work during the pendency of the appeal, then the employee is entitled to the compensation received for actual services rendered without need of refund.

It has thus been advanced that there is no point in releasing the wages to petitioners since their dismissal was found to be valid, and to do so would constitute unjust enrichment.

Prior to Genuino, there had been no known similar case containing a dispositive portion where the employee was required to refund the salaries received on payroll reinstatement. In fact, in a catena of cases, the Court did not order the refund of salaries garnished or received by payroll-reinstated employees despite a subsequent reversal of the reinstatement order.

The dearth of authority supporting Genuino is not difficult to fathom for it would otherwise render inutile the rationale of reinstatement pending appeal.

x x x Then, by and pursuant to the same power (police power), the State may authorize an immediate implementation, pending appeal, of a decision reinstating a dismissed or separated employee since that saving act is designed to stop, although temporarily since the appeal may be decided in favor of the appellant, a continuing threat or danger to the survival or even the life of the dismissed or separated employee and his family.

Furthermore, in Garcia, the Court went on to discuss the illogical and unjust effects of the “refund doctrine” erroneously espoused in Genuino:

Even outside the theoretical trappings of the discussion and into the mundane realities of human experience, the “refund doctrine” easily demonstrates how a favorable decision by the Labor Arbiter could harm, more than help, a dismissed employee. The employee, to make both ends meet, would necessarily have to use up the salaries received during the pendency of the appeal, only to end up having to refund the sum in case of a final unfavorable decision. It is mirage of a stop-gap leading the employee to a risky cliff of insolvency.

Advisably, the sum is better left unspent. It becomes more logical and practical for the employee to refuse payroll reinstatement and simply find work elsewhere in the interim, if any is available. Notably, the option of payroll reinstatement belongs to the employer, even if the employee is able and raring to return to work. Prior to Genuino, it is unthinkable for one to refuse payroll reinstatement. In the face of the grim possibilities, the rise of concerned employees declining payroll reinstatement is on the horizon.

Further, the Genuino ruling not only disregards the social justice principles behind the rule, but also institutes a scheme unduly favorable to management. Under such scheme, the salaries dispensed pendente lite merely serve as a bond posted in installment by the employer. For in the event of a reversal of the Labor Arbiter’s decision ordering reinstatement, the employer gets back the same amount without having to spend ordinarily for bond premiums. This circumvents, if not directly contradicts, the proscription that the “posting of a bond [even a cash bond] by the employer shall not stay the execution for reinstatement.”

In playing down the stray posture in Genuino requiring the dismissed employee on payroll reinstatement to refund the salaries in case a final decision upholds the validity of the dismissal, the Court realigns the proper course of the prevailing doctrine on reinstatement pending appeal vis-à-vis the effect of a reversal on appeal.

x x x x

The Court reaffirms the prevailing principle that even if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the dismissed employee during the period of appeal until reversal by the higher court. x x x. (Emphasis supplied.)

In sum, the Court reiterates the principle that reinstatement pending appeal necessitates that it must be immediately self-executory without need for a writ of execution during the pendency of the appeal, if the law is to serve its noble purpose, and any attempt on the part of the employer to evade or delay its execution should not be allowed. Furthermore, we likewise restate our ruling that an order for reinstatement entitles an employee to receive his accrued backwages from the moment the reinstatement order was issued up to the date when the same was reversed by a higher court without fear of refunding what he had received. It cannot be denied that, under our statutory and jurisprudential framework, respondent is entitled to payment of her wages for the period after December 5, 2003 until the Court of Appeals Decision dated November 23, 2005, notwithstanding the finding therein that her dismissal was legal and for just cause. Thus, the payment of such wages cannot be deemed as unjust enrichment on respondent’s part. (Pfizer, Inc., et. al. vs. Velasco, G.R. No. 177467, March 9, 2011)

Reinstatement and Backwages

In cases where there is no evidence of dismissal, the remedy is reinstatement but without backwages. In this case, both the Labor Arbiter and the NLRC made a finding that there was no dismissal much less an illegal one. “It is settled that factual findings of quasi-judicial agencies are generally accorded respect and finality so long as these are supported by substantial evidence.”

In Leonardo v. National Labor Relations Commission, this Court held that: In a case where the employee’s failure to work was occasioned neither by his abandonment nor by a termination, the burden of economic loss is not rightfully shifted to the employer; each party must bear his own loss.

Thus, inasmuch as no finding of illegal dismissal had been made, and considering that the absence of such finding is supported by the records of the case, this Court is bound by such conclusion and cannot allow an award of the payment of backwages.

Lastly, since there was no need to award backwages to respondents, the ruling of the CA that Javalera is solidarily liable with Exodus International Construction Corporation in paying full backwages need not be discussed. (Exodus International Construction Corp. vs. Biscocho, G.R. No. 166109, February 23, 2011)

Regular Employees: Construction Industry

There are two types of employees in the construction industry. The first is referred to as project employees or those employed in connection with a particular construction project or phase thereof and such employment is coterminous with each project or phase of the project to which they are assigned. The second is known as non-project employees or those employed without reference to any particular construction project or phase of a project. The second category is where respondents are classified. As such they are regular employees of petitioners. It is clear from the records of the case that when one project is completed, respondents were automatically transferred to the next project awarded to petitioners. There was no employment agreement given to respondents which clearly spelled out the duration of their employment, the specific work to be performed and that such is made clear to them at the time of hiring. It is now too late for petitioners to claim that respondents are project employees whose employment is coterminous with each project or phase of the project to which they are assigned. (Exodus International Construction Corp. vs. Biscocho, G.R. No. 166109, February 23, 2011)

Determination of Employment Status: Regular
Employment vs. Apprenticeship

The fact that Costales, Almoite, Sebolino and Sagun were already rendering service to the company when they were made to undergo apprenticeship (as established by the evidence) renders the apprenticeship agreements irrelevant as far as the four are concerned. This reality is highlighted by the CA finding that the respondents occupied positions such as machine operator, scaleman and extruder operator – tasks that are usually necessary and desirable in Atlanta’s usual business or trade as manufacturer of plastic building materials. These tasks and their nature characterized the four as regular employees under Article 280 of the Labor Code. Thus, when they were dismissed without just or authorized cause, without notice, and without the opportunity to be heard, their dismissal was illegal under the law. Even if we recognize the company’s need to train its employees through apprenticeship, the Court can only consider the first apprenticeship agreement for the purpose. With the expiration of the first agreement and the retention of the employees, Atlanta had, to all intents and purposes, recognized the completion of their training and their acquisition of a regular employee status. To foist upon them the second apprenticeship agreement for a second skill which was not even mentioned in the agreement itself, is a violation of the Labor Code’s implementing rules and is an act manifestly unfair to the employees, to say the least. This the Court cannot allow. (Atlanta Industries, Inc. vs. Sebolino, et. al., G.R. No. 187320, January 26, 2011)

Resignation

x x x it is the employer who terminates the services of the employee found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to the health of his co-employees. It does not contemplate a situation where it is the employee who severs his or her employment ties. This is precisely the reason why Section 8, Rule 1, Book VI of the Omnibus Rules Implementing the Labor Code, directs that an employer shall not terminate the services of the employee unless there is a certification by a competent public health authority that the disease is of such nature or at such a stage that it cannot be cured within a period of six (6) months even with proper medical treatment.

Resignation is defined as the voluntary act of an employee who finds himself in a situation where he believes that personal reasons cannot be sacrificed in favor of the exigency of the service and he has no other choice but to disassociate himself from his employment.
It may not be amiss to point out at this juncture that aside from Article 284 of the Labor Code, the award of separation pay is also authorized in the situations dealt with in Article 283 of the same Code and under Section 4 (b), Rule I, Book VI of the Implementing Rules and Regulations of the said Code where there is illegal dismissal and reinstatement is no longer feasible. By way of exception, this Court has allowed grants of separation pay to stand as “a measure of social justice” where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. However, there is no provision in the Labor Code which grants separation pay to voluntarily resigning employees. In fact, the rule is that an employee who voluntarily resigns from employment is not entitled to separation pay, except when it is stipulated in the employment contract or CBA, or it is sanctioned by established employer practice or policy.

x x x The foregoing notwithstanding, this Court, in a number of cases, has granted financial assistance to separated employees as a measure of social and compassionate justice and as an equitable concession. (Villaruel vs. Yeo Han Guan, G.R. No. 169191, June 1, 2011)

Res Judicata

The issues regarding the validity of respondent Coquia’s dismissal and the correctness of the award of separation pay have been barred by the principle of res judicata by virtue of a final and executor judgment rendered in CA G.R. SP No. 83883 involving the same parties, issues and cause of action. x x x. In its concept as a bar by prior judgment under Section 47(b) of Rule 39 of the Rules of Court, res judicata dictates that a judgment on the merits rendered by a court of competent jurisdiction operates as an absolute bar to a subsequent action involving the same cause of action since that judgment is conclusive not only as to the matters offered and received to sustain it but also as to any other matter which might have been offered for that purpose and which could have been adjudged therein. To apply this doctrine, the following essential requisites should be satisfied: (1) finality of the former judgment; (2) the court which rendered the judgment had jurisdiction over the subject matter and the parties; (3) it must be a judgment on the merits; and (4) there must be, between the first and second actions, identity of parties, subject matter and causes of action. As mentioned, the judgment rendered in CA-G.R. SP No. 83883 has already become final and executory. It was rendered based on the merits by a court which has jurisdiction thereon. The parties involved in that case and in the present petition are the same as well as the subject matter and cause of action, which revolves around the validity of respondent Coquia’s termination from employment and the propriety of the award of separation pay in his favor. Clearly, then, this Court may not pass upon the same issues which had been finally adjudicated since a final and executory judgment can no longer be attacked by any of the parties or be modified, directly or indirectly, even by the Supreme Court. This principle of immutability of final judgment renders it unalterable as nothing further can be done except to execute it. A judgment must be final at some definite time as it is only proper to allow the case to take its rest on grounds of public policy and sound practice. Although there are recognized exceptions to this fundamental principle, such as nunc pro tunc entries, void judgments and cases which would not cause any prejudice to any party, none of these exceptions obtain in the case at bench. (BPI vs. Coquia, Jr., G.R. No. 167518, March 23, 2011)

Under Article 283 of the Labor Code, there are three (3) basic requisites for a valid retrenchment, namely: (a) proof that the retrenchment is necessary to prevent losses or impending losses; (b) service of written notices to the employees and to the DOLE at least one (1) month prior to the intended date of retrenchment; and (c) payment of separation pay equivalent to one (1) month pay, or at least one-half (1/2) month pay for every year of service, whichever is higher. We see no reason to reverse the NLRC and CA findings that no documentary evidence exists in the records to substantiate the claimed business losses; in fact, the petitioners also failed to show its financial conditions prior to and at the time GICI enforced its retrenchment program. In the absence of any attendant grave abuse of discretion, these findings are entitled not only to respect but to our final recognition in this appellate review. (Genuino Ice Company, Inc., et. al. vs. Lava and Sodela, G.R. No. 190001, March 23, 2011)

Record of the Petition

In Mariners Polytechnic Colleges Foundation, Inc. v. Arturo J. Garchitorena where the Court addressed essentially the same issue arising from Section 2(d), Rule 42 of the Rules of Court, the Court held that the phrase “of the pleadings and other material portions of the record xxx as would support the allegation of the petition clearly contemplates the exercise of discretion on the part of the petitioner in the selection of documents that are deemed to be relevant to the petition. The crucial issue to consider then is whether or not the documents accompanying the petition sufficiently supported the allegations therein.” As in Mariners, the Court found that the documents attached to the petition sufficiently support the petitioners’ allegations. The accompanying CA decision and resolution, as well as those of the labor arbiter and the NLRC, referred to the parties’ position papers and even to their replies and rejoinders. Significantly, the CA decision narrates the factual antecedents, defines the complainants’ cause of action, and cites the arguments, including the evidence the parties adduced. If any, the defect in the petition lies in the petitioners’ failure to provide legible copies of some of the material documents mentioned, especially several pages in the decisions of the labor arbiter and of the NLRC. This defect, however, is not fatal as the challenged CA decision clearly summarized the labor tribunal’s rulings. (Atlanta Industries, Inc. vs. Sebolino, et. al., G.R. No. 187320, January 26, 2011)

Retrenchment

Article 283 of the Labor Code recognizes retrenchment to prevent losses as a right of the management to meet clear and continuing economic threats or during periods of economic recession to prevent losses. There is no need for the employer to wait for substantial losses to materialize before exercising ultimate and drastic option to prevent such losses. (Plastimer Industrial Corporation and Teo Kee Bin vs. Gopo, et. al., G.R. No. 183390, February 16, 2011)

Separation Pay

In FF Marine Corporation v. NLRC, we ruled that an illegally dismissed employee is entitled to reinstatement without loss of seniority rights and to other established employment privileges, and to his full backwages. In the event, reinstatement is no longer feasible, the employer must pay him his separation pay. In the present case, the respondents were illegally dismissed as the employer failed to prove that their dismissal was for a duly authorized cause. The CA was thus correct in awarding them full backwages and separation pay in lieu of reinstatement since the positions the respondents formerly held no longer exist. We must however modify the CA decision to reflect the correct monetary award due to the respondents. The dispositive portion of the CA decision is incomplete as it failed to specify the separation pay to be awarded to the respondents as well as the reckoning point for the computation of the backwages. FF Marine Corporation tells us that the separation pay shall be computed at one (1) month pay (for those with one year or less of service), or one-half (1/2) month pay for every year of service (for those with more than a year of service), whichever is higher, a fraction of at least six (6) months being considered one whole year. The backwages shall be computed from the date of termination of service (September 30, 2005) until the finality of this Court’s decision. (Genuino Ice Company, Inc., et. al. vs. Lava and Sodela, G.R. No. 190001, March 23, 2011)

Reno Foods, Inc. v. Nagkakaisang Lakas ng Manggagawa (NLM))-Katipunan explains the propriety of granting separation pay in termination cases in this wise:

The law is clear. Separation pay is only warranted when the cause for termination is not attributable to the employee’s fault, such as those provided in Articles 283 and 284 of the Labor Code, as well as in cases of illegal dismissal in which reinstatement is no longer feasible. It is not allowed when an employee is dismissed for just cause, such as serious misconduct.

x x x x

It is true that there have been instances when the Court awarded financial assistance to employees who were terminated for just causes, on grounds of equity and social justice. The same, however, has been curbed and rationalized in Philippine Long Distance Telephone Company v. National Labor Relations Commission. In that case, we recognized the harsh realities faced by employees that forced them, despite their good intentions, to violate company policies, for which the employer can rightly terminate their employment. For these instances, the award of financial assistance was allowed. But, in clear and unmistakable language, we also held that the award of financial assistance shall not be given to validly terminated employees, whose offenses are iniquitous or reflective of some depravity in their moral character. When the employee commits an act ofdishonesty, depravity, or iniquity, the grant of financial assistance is misplaced compassion. It is tantamount not only to condoning a patently illegal or dishonest act, but an endorsement thereof. It will be an insult to all the laborers who despite their economic difficulties, strive to maintain good values and moral conduct.

In fact, in the recent case of Toyota Motors Philippines, Corp. Workers Association (TMPCWA) v. National Labor Relations Commission, we ruled that separation pay shall not be granted to all employees who are dismissed on any of the four grounds provided in Article 282 of the Labor Code. Such ruling was reiterated and further explained in Central Philippines Bandag Retreaders, Inc. v. Diasnes:

To reiterate our ruling in Toyota, labor adjudicatory officials and the CA must demur the award of separation pay based on social justice when an employee’s dismissal is based on serious misconduct or wilful disobedience; gross and habitual neglect of duty; fraud or wilful breach of trust; or commission of a crime against the person of the employer or his immediate family─grounds under Art. 282 of the Labor Code that sanction dismissals of employees. They must be most judicious and circumspect in awarding separation pay or financial assistance as the constitutional policy to provide full protection to labor is not meant to be an instrument to oppress the employers. The commitment of the Court to the cause of labor should not embarrass us from sustaining the employers when they are right, as assistance to the undeserving and those who are unworthy of the liberality of the law. (italics in the original, emphasis and underscoring supplied)

Bascon v. Court of Appeals outlines the elements of gross insubordination as follows:

As regards the appellate court’s finding that petitioners were justly terminated for gross insubordination or wilful disobedience, Article 282 of the Labor Code provides in part:

An employer may terminate an employment for any of the following causes:

(a) Serious misconduct or wilful disobedience by the employee of the lawful orders of his employer or representative in connection with his work.

However, wilful disobedience of the employer’s lawful orders, as a just cause for dismissal of an employee, envisages the concurrence of at least two requisites: (1) the employee’s assailed conduct must have been wilful, 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. (emphasis and underscoring supplied) (Apacible vs. Multimed Industries, Inc., G.R. No. 178903, May 30, 2011

Solidarily Liability

Although we find no error on the part of the NLRC and the CA in declaring the dismissal of respondent illegal, we, however, are not in accord with the ruling that petitioner Rosit should be held solidarily liable with petitioner Harpoon for the payment of respondent’s backwages and separation pay.

As held in the case of MAM Realty Development Corporation v. National Labor Relations Commission, “obligations incurred by [corporate officers], acting as such corporate agents, are not theirs but the direct accountabilities of the corporation they represent.” As such, they should not be generally held jointly and solidarily liable with the corporation. The Court, however, cited circumstances when solidary liabilities may be imposed, as exceptions:

When directors and trustees or, in appropriate cases, the officers of a corporation – vote for or assent to [patently] unlawful acts of the corporation; act in bad faith or with gross negligence in directing the corporate affairs; are guilty of conflict of interest to the prejudice of the corporation, its stockholders or members, and other persons.

When the director or officer has consented to the issuance of watered stock or who, having knowledge thereof, did not forthwith file with the corporate secretary his written objection thereto.

When a director, trustee or officer has contractually agreed or stipulated to hold himself personally and solidarily liable with the corporation.

When a director, trustee or officer is made, by specific provision of law, personally liable for his corporate action.

The general rule is grounded on the theory that a corporation has a legal personality separate and distinct from the persons comprising it. To warrant the piercing of the veil of corporate fiction, the officer’s bad faith or wrongdoing “must be established clearly and convincingly” as “[b]ad faith is never presumed.”

In the case at bench, the CA’s basis for petitioner Rosit’s liability was that he acted in bad faith when he approached respondent and told him that the company could no longer afford his salary and that he will be paid instead his separation pay and accrued commissions. This finding, however, could not substantially justify the holding of any personal liability against petitioner Rosit. The records are bereft of any other satisfactory evidence that petitioner Rosit acted in bad faith with gross or inexcusable negligence, or that he acted outside the scope of his authority as company president. Indeed, petitioner Rosit informed respondent that the company wishes to terminate his services since it could no longer afford his salary. Moreover, the promise of separation pay, according to petitioners, was out of goodwill and magnanimity. At the most, petitioner Rosit’s actuations only show the illegality of the manner of effecting respondent’s termination from service due to absence of just or valid cause and non-observance of procedural due process but do not point to any malice or bad faith on his part. Besides, good faith is still presumed. In addition, liability only attaches if the officer has assented to patently unlawful acts of the corporation. (Harpoon Marine Services, Inc. vs. Francisco, G.R. No. 167751, March 2, 2011)

Suspension vs. Dismissal

Indeed, petitioners’ suspension cannot be categorized as dismissal, considering that there was no intent on the part of respondent to sever the employer-employee relationship between him and petitioners. In fact, it was made clear that petitioners could put an end to the suspension if they only pay their recent arrears. As it was, the suspension dragged on for years because of petitioners’ stubborn refusal to pay. It would have been different if petitioners complied with the condition and respondent still refused to readmit them to work. Then there would have been a clear act of dismissal. But such was not the case. Instead of paying, petitioners even filed a complaint for illegal dismissal against respondent. Respondent’s policy of suspending drivers who fail to remit the full amount of the boundary was fair and reasonable under the circumstances. Respondent explained that he noticed that his drivers were getting lax in remitting their boundary payments and, in fact, herein petitioners had already incurred a considerable amount of arrears. He had to put a stop to it as he also relied on these boundary payments to raise the full amount of his monthly amortizations on the jeepneys. Demonstrating their obstinacy, petitioners, on the days immediately following the implementation of the policy, incurred deficiencies in their boundary remittances. (Caong, Jr., et. al. vs. Regualos, G.R. No. 179428, January 26, 2011).

Strike

There is no necessity to conduct a proceeding to determine the participants in the illegal strike or those who refused to heed the return to work order because the ambiguity can be cured by reference to the body of the decision and the pleadings filed. (Airline Pilots Association of the Philippines vs. PAL, G.R. No. 168382, June 6, 2011)

Strikes, Picketing and Lockouts

Article 263 of the Labor Code enumerates the requisites for holding a strike:

Art. 263. Strikes, picketing, and lockouts. – (a) x x x.

x x x x.

(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 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. (Leyte Geothermal Power Progressive Employees Union-ALU-TUCP vs. Philippine National Oil Company-Energy Development Corporation, G.R. No. 170351, March 30, 2011)

Social Justice

The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense. Compassion for the poor is an imperative of every humane society but only when the recipient is not a rascal claiming an undeserved privilege. Social justice cannot be permitted to be refuge of scoundrels any more than can equity be an impediment to the punishment of the guilty. Those who invoke social justice may do so only if their hands are clean and their motives blameless and not simply because they happen to be poor. This great policy of our Constitution is not meant for the protection of those who have proved they are not worthy of it, like the workers who have tainted the cause of labor with the blemishes of their own character. (Samahan ng mga Mangagawa sa Hyatt vs. Hon. Magsalin, et. al., G.R. No. 164939, June 6, 2011)

Unfair Labor Practice

The concept of unfair labor practice is provided in Article 247 of the Labor Code which states:

Article 247. Concept of unfair labor practice and procedure for prosecution thereof. ¬¬¬¬– Unfair labor practices violate the constitutional right of workers and employees to self-organization, are inimical to the legitimate interest of both labor and management, including their right to bargain collectively and otherwise deal with each other in an atmosphere of freedom and mutual respect, disrupt industrial peace and hinder the promotion of healthy and stable labor-management relations.

In the past, the Court had ruled that “unfair labor practice refers to ‘acts that violate the workers’ right to organize.’ The prohibited acts are related to the workers’ right to self-organization and to the observance of a CBA.” The Court had likewise declared that “there should be no dispute that all the prohibited acts constituting unfair labor practice in essence relate to the workers’ right to self-organization.” Thus, an employer may only be held liable for unfair labor practice if it can be shown that his acts affect in whatever manner the right of his employees to self-organize. According to jurisprudence, “basic is the principle that good faith is presumed and he who alleges bad faith has the duty to prove the same.” By imputing bad faith to the actuations of ETPI, Culili has the burden of proof to present substantial evidence to support the allegation of unfair labor practice. Culili failed to discharge this burden and his bare allegations deserve no credit. (Culili vs. Eastern Telecommunications Philippines, Inc., et. al., G.R. No. 165381, February 9, 2011).

The transfer of work assignments of A, B, C, D, E, F, and G to LT was designed by PTI and X as a subterfuge to foil the former’s right to organize themselves into a union. Under Article 248 (a) and (e) of the Labor Code, an employer is guilty of unfair labor practice if it interferes with, restrains or coerces its employees in the exercise of their right to self-organization or if it discriminates in regard to wages, hours of work and other terms and conditions of employment in order to encourage or discourage membership in any labor organization. Indeed, evidence of PTI and X’s unfair labor practice is shown by the established fact that, after A, B, C, D, E, F, and G’s transfer to LT, PTI and X left them high and dry insofar as the operations of LT was concerned. PTI and X “withheld the necessary financial and logistic support such as spare parts, and repair and maintenance of the transferred buses until only two units remained in running condition.” This left A, B, C, D, E, F, and G virtually jobless. (Prince Transport, Inc. vs. Garcia, et. al., G.R. No. 167291, January 12, 2011)

In Pari Delicto Doctrine in Labor Cases

The in pari delicto doctrine in labor cases is not novel. It has been applied in the case of Philippines Inter-Fashion, Inc. v NLRC (1982), where the Court held:

The Solicitor General has correctly stated in his comment that “from these facts are derived the following conclusions which are likewise undisputed: that petitioner engaged in an illegal lockout while the NAFLU engaged in an illegal strike; that the unconditional offer of the 150 striking employees to return to work and to withdraw their complaint of illegal lockout against petitioner constitutes condonation of the illegal lock-out; and that the unqualified acceptance of the offer of the 150 striking employees by petitioner likewise constitutes condonation of the illegal strike insofar as the reinstated employees are concerned.”

The issues at bar arise, however, from respondent commission’s approval of its commissioner’s conclusions that (1) petitioner must be deemed to have waived its right to pursue the case of illegal strike against the 114 employees who were not reinstated and who pursued their illegal lockout claim against petitioner; and (2) the said 114 employees are entitled to reinstatement with three months’ backwages.

The Court approves the stand taken by the Solicitor General that there was no clear and unequivocal waiver on the part of petitioner and on the contrary the record shows that it tenaciously pursued its application for their dismissal, but nevertheless in view of the undisputed findings of illegal strike on the part of the 114 employees and illegal lockout on petitioner’s part, both parties are in pari delicto and such situation warrants the restoration of the status quo ante and bringing the parties back to the respective positions before the illegal strike and illegal lockout through the reinstatement of the said 114 employees, as follows:

The Bisaya case (102 Phil. 438) is inapplicable to the present case, because in the former, there were only two strikers involved who were both reinstated by their employer upon their request to return to work. However, in the present case, there were more than 200 strikers involved, of which 150 who desired to return to work were reinstated. The rest were not reinstated because they did not signify their intention to return to work. Thus, the ruling cited in the Bisaya case that the employer waives his defense of illegality of the strike upon reinstatement of strikers is applicable only to strikers who signified their intention to return to work and were accepted back …

Truly, it is more logical and reasonable for condonation to apply only to strikers who signified their intention to return and did return to work. The reason is obvious. These strikers took the initiative in normalizing relations with their employer and thus helped promote industrial peace. However, as regards the strikers who decided to pursue with the case, as in the case of the 114 strikers herein, the employer could not be deemed to have condoned their strike, because they had not shown any willingness to normalize relations with it. So, if petitioner really had any intention to pardon the 114 strikers, it would have included them in its motion to withdraw on November 17, 1980. The fact that it did not, but instead continued to pursue the case to the end, simply means that it did not pardon the 114 strikers.

The finding of illegal strike was not disputed. Therefore, the 114 strikers employees who participated therein are liable for termination (Liberal Labor Union v. Phil. Can Co., 91 Phil. 72; Insurefco Employees Union v. Insurefco, 95 Phil. 761). On the other hard, the finding of illegal lockout was likewise not disputed. Therefore, the 114 employees affected by the lockout are also subject to reinstatement. Petitioner, however, contends that the application for readmission to work by the 150 strikers constitutes condonation of the lockout which should likewise bind the 114 remaining strikers. Suffice it to say that the 150 strikers acted for themselves, not on behalf of the 114 remaining strikers, and therefore the latter could not be deemed to have condoned petitioner’s lockout.

The findings show that both petitioner and the 114 strikers are in pari delicto, a situation which warrants the maintenance of the status quo. This means that the contending parties must be brought back to their respective positions before the controversy; that is, before the strike. Therefore, the order reinstating the 114 employees is proper.

With such restoration of the status quo ante it necessarily follows, as likewise submitted by the Solicitor General, that the petition must be granted insofar as it seeks the setting aside of the award of three months’ backwages to the 114 employees ordered reinstated on the basis of the general rule that strikers are not entitled to backwages (with some exceptions not herein applicable, such as where the employer is guilty of oppression and union-busting activities and strikers ordered reinstated are denied such reinstatement and therefore are declared entitled to backwages from the date of such denial). More so, is the principle of “no work, no pay” applicable to the case at bar, in view of the undisputed finding of illegality of the strike.

Likewise, the in pari delicto doctrine was applied in the case of First City Interlink Transportation Co. Inc. v The Honorable Secretary (1997), thus:

“3) Petitioner substantially complied with the Return to Work Order. The medical examination, NBI, Police and Barangay Clearances as well as the driver’s and conductor’s/conductress licenses and photographs required as conditions for reinstatement were reasonable management prerogatives. However, the other requirements imposed as condition for reinstatement were unreasonable considering that the employees were not being hired for the first time, although the imposition of such requirements did not amount to refusal on the part of the employer to comply with the Return to Work Order or constitute illegal lockout so as to warrant payment of backwages to the strikers. If at all, it is the employees’ refusal to return to work that may be deemed a refusal to comply with the Return to Work Order resulting in loss of their employment status. As both the employer and the employees were, in a sense, at fault or in pari delicto, the nonreturning employees, provided they did not participate in illegal acts; should be considered entitled to reinstatement. But since reinstatement is no longer feasible, they should be given separation pay computed up to March 8, 1988 (the date set for the return of the employees) in lieu of reinstatement.” [Emphases and underscoring supplied].

Thus, in case both the employer and the union are at fault or in pari delicto, they should be restored to their respective positions prior to the illegal strike and illegal lockout. Nonetheless, if reinstatement is no longer feasible, the concerned employees should be given separation pay up to the date set for the return of the complaining employees in lieu of reinstatement. (See also Automotive Engine Rebuilders, Inc., et. al. vs. Progresibong Unyon ng mga Manggagawa sa AER, et. al., G.R. No. 160138, July 13, 2011)

Union Security Clause

Another cause for termination is dismissal from employment due to the enforcement of the union security clause in the CBA. Termination of employment by virtue of a union security clause embodied in a CBA is recognized and accepted in our jurisdiction. This practice strengthens the union and prevents disunity in the bargaining unit within the duration of the CBA. By preventing member disaffiliation with the threat of expulsion from the union and the consequent termination of employment, the authorized bargaining representative gains more numbers and strengthens its position as against other unions which may want to claim majority representation.

In terminating the employment of an employee by enforcing the union security clause, the employer needs only to determine and prove that: (1) the union security clause is applicable; (2) the union is requesting for the enforcement of the union security provision in the CBA; and (3) there is sufficient evidence to support the union’s decision to expel the employee from the union. These requisites constitute just cause for terminating an employee based on the CBA’s union security provision. (See Alabang Country Club, Inc. vs. NLRC, et. al., G.R. No. 170287, February 14, 2008; See also Inguillom, et. al. vs. First Philippine Scales, Inc., et. al., G.R. No. 165407, June 5, 2009)

In Rance v. National Labor Relations Commission, 246 Phil. 287 (1988), the Court ruled that:

It is the policy of the state to assure the right of workers to “security of tenure” (Article XIII, Sec. 3 of the New Constitution, Section 9, Article II of the 1973 Constitution). 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 an employee except for a just cause or when authorized by” the Code. x x x (Emphasis supplied.)

The Court had also previously held that the fundamental guarantee of security of tenure and due process dictates that no worker shall be dismissed except for a just and authorized cause provided by law and after due process is observed (Cosep v. NLRC, 353 Phil. 148 [1988]). Even as we now recognize the right to continuous, unbroken employment of workers who are absorbed into a new company pursuant to a merger, it is but logical that their employment may be terminated for any causes provided for under the law or in jurisprudence without violating their right to security of tenure. As Justice Carpio discussed in his dissenting opinion, it is well-settled that termination of employment by virtue of a union security clause embodied in a CBA is recognized in our jurisdiction. In Del Monte Philippines, Inc. v. Saldivar, G.R. No. 158620, October 11, 2006, the Court explained the rationale for this policy in this wise:

Article 279 of the Labor Code ordains that “in cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by [Title I, Book Six of the Labor Code].” Admittedly, the enforcement of a closed-shop or union security provision in the CBA as a ground for termination finds no extension within any of the provisions under Title I, Book Six of the Labor Code. Yet jurisprudence has consistently recognized, thus: “It is State policy to promote unionism to enable workers to negotiate with management on an even playing field and with more persuasiveness than if they were to individually and separately bargain with the employer. For this reason, the law has allowed stipulations for ‘union shop’ and ‘closed shop’ as means of encouraging workers to join and support the union of their choice in the protection of their rights and interests vis-a-vis the employer.” (Emphasis supplied.)

Although it is accepted that non-compliance with a union security clause is a valid ground for an employee’s dismissal, jurisprudence dictates that such a dismissal must still be done in accordance with due process. This much the Court decreed in General Milling Corporation v. Casio, G.R. No. 149552, March 10, 2010, to wit:

The Court reiterated in Malayang Samahan ng mga Manggagawa sa M. Greenfield v. Ramos that:

While respondent company may validly dismiss the employees expelled by the union for disloyalty under the union security clause of the collective bargaining agreement upon the recommendation by the union, this dismissal should not be done hastily and summarily thereby eroding the employees’ right to due process, self-organization and security of tenure. The enforcement of union security clauses is authorized by law provided such enforcement is not characterized by arbitrariness, and always with due process. Even on the assumption that the federation had valid grounds to expel the union officers, due process requires that these union officers be accorded a separate hearing by respondent company.

The twin requirements of notice and hearing constitute the essential elements of procedural due process. The law requires the employer to furnish the employee sought to be dismissed with two written notices before termination of employment can be legally effected: (1) a written notice apprising the employee of the particular acts or omissions for which his dismissal is sought in order to afford him an opportunity to be heard and to defend himself with the assistance of counsel, if he desires, and (2) a subsequent notice informing the employee of the employer’s decision to dismiss him. This procedure is mandatory and its absence taints the dismissal with illegality.

Irrefragably, GMC cannot dispense with the requirements of notice and hearing before dismissing Casio, et al. even when said dismissal is pursuant to the closed shop provision in the CBA. The rights of an employee to be informed of the charges against him and to reasonable opportunity to present his side in a controversy with either the company or his own union are not wiped away by a union security clause or a union shop clause in a collective bargaining agreement. x x x (Emphases supplied.) (BPI vs. BPI Employees Union-Davao Chapter-Federation of Unions in BPI Unibank, G.R. No. 164301, October 19, 2011)

Wages: Reinstatement Pending Appeal

The core issue to be resolved in this case is similar to the one determined in Garcia v. Philippine Airlines Inc., that is, whether respondents may collect their wages during the period between the Labor Arbiter’s order of reinstatement pending appeal and the NLRC Resolution overturning that of the Labor Arbiter.

In order to provide a thorough discussion of the present case, an overview of Garcia is proper.

In Garcia, petitioners therein were dismissed by Philippine Airlines Inc. (PAL) after they were allegedly caught in the act of sniffing shabu during a raid at the PALTechnicalCenter’s Toolroom Section. They thus filed a complaint for illegal dismissal. In the meantime, PAL was placed under an interim rehabilitation receivership because it was then suffering from severe financial losses. Thereafter, the Labor Arbiter ruled in petitioners’ favor and ordered PAL to immediately comply with the reinstatement aspect of the decision. PAL appealed to the NLRC. The NLRC reversed the Labor Arbiter’s Decision and dismissed petitioners’ complaint for lack of merit. As petitioners’ Motion for Reconsideration thereto was likewise denied, the NLRC issued an Entry of Judgment. Notably, PAL’s Interim Rehabilitation Receiver was replaced by a Permanent Rehabilitation Receiver during the pendency of its appeal with the NLRC. A writ of execution with respect to the reinstatement aspect of the Labor Arbiter’s Decision was then issued and pursuant thereto, a Notice of Garnishment was likewise issued. To stop this, PAL filed an Urgent Petition for Injunction with the NLRC. While the NLRC suspended and referred the action to the rehabilitation receiver, it however, likewise affirmed the validity of the writ so that PAL appealed to the CA. Fortunately for PAL, the CA nullified the assailed NLRC Resolutions on the grounds that (1) a subsequent finding of a valid dismissal removes the basis for the reinstatement aspect of a labor arbiter’s decision and, (2) the impossibility to comply with the reinstatement order due to corporate rehabilitation justifies PAL’s failure to exercise the options under Article 223 of the Labor Code. When the case reached this Court, we partially granted the petition in a Decision dated August 29, 2007 and effectively reinstated the NLRC Resolutions insofar as it suspended the proceedings. But as PAL later manifested that the rehabilitation proceedings have already been terminated, the court proceeded to determine the remaining issue, which is, as earlier stated, whether petitioners therein may collect their wages during the period between the Labor Arbiter’s order of reinstatement pending appeal and the NLRC Resolution overturning that of the Labor Arbiter.

In resolving the case, the Court examined its conflicting rulings with respect to the application of paragraph 3 of Article 223 of the Labor Code, viz:

At the core of the seeming divergence is the application of paragraph 3 of Article 223 of the Labor Code which reads:

‘In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is concerned, shall immediately be executory, pending appeal. The employee shall either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation or, at the option of the employer, merely reinstated in the payroll. The posting of a bond by the employer shall not stay the execution for reinstatement provided herein.’

The view as maintained in a number of cases is that:

‘x x x [E]ven if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the dismissed employee during the period of appeal until reversal by the higher court. On the other hand, if the employee has been reinstated during the appeal period and such reinstatement order is reversed with finality, the employee is not required to reimburse whatever salary he received for he is entitled to such, more so if he actually rendered services during the period.

The opposite view is articulated in Genuino which states:

‘If the decision of the labor arbiter is later reversed on appeal upon the finding that the ground for dismissal is valid, then the employer has the right to require the dismissed employee on payroll reinstatement to refund the salaries s/he received while the case was pending appeal, or it can be deducted from the accrued benefits that the dismissed employee was entitled to receive from his/her employer under existing laws, collective bargaining agreement provisions, and company practices. However, if the employee was reinstated to work during the pendency of the appeal, then the employee is entitled to the compensation received for actual services rendered without need of refund.

x x x x’

It has thus been advanced that there is no point in releasing the wages to petitioners since their dismissal was found to be valid, and to do so would constitute unjust enrichment.” (Emphasis, italics and underscoring in the original; citations omitted.)

The Court then stressed that as opposed to the abovementioned Genuino v. National Labor Relations Commission, the social justice principles of labor law outweigh or render inapplicable the civil law doctrine of unjust enrichment. It then went on to examine the precarious implication of the “refund doctrine” as enunciated in Genuino, thus:

[T]he “refund doctrine” easily demonstrates how a favorable decision by the Labor Arbiter could harm, more than help, a dismissed employee. The employee, to make both ends meet, would necessarily have to use up the salaries received during the pendency of the appeal, only to end up having to refund the sum in case of a final unfavorable decision. It is mirage of a stop-gap leading the employee to a risky cliff of insolvency.

Advisably, the sum is better left unspent. It becomes more logical and practical for the employee to refuse payroll reinstament and simply find work elsewhere in the interim, if any is available. Notably, the option of payroll reinstatement belongs to the employer, even if the employee is able and raring to return to work. Prior to Genuino, it is unthinkable for one to refuse payroll reinstatement. In the face of the grim possibilities, the rise of concerned employees declining payroll reinstatement is on the horizon.

In view of this, the Court held this stance in Genuino as a stray posture and realigned the proper course of the prevailing doctrine on reinstatement pending appeal vis-à-vis the effect of a reversal on appeal, that is, even if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the dismissed employee during the period of appeal until reversal by the higher court or tribunal. It likewise settled the view that the Labor Arbiter’s order of reinstatement is immediately executory and the employer has to either re-admit them to work under the same terms and conditions prevailing prior to their dismissal, or to reinstate them in the payroll, and that failing to exercise the options in the alternative, employer must pay the employee’s salaries.

The discussion, however, did not stop there. The court went on to declare that after the Labor Arbiter’s decision is reversed by a higher tribunal, the employee may be barred from collecting the accrued wages, if it is shown that the delay in enforcing the reinstatement pending appeal was without fault on the part of the employer. It then provided for the two-fold test in determining whether an employee is barred from recovering his accrued wages, to wit: (1) there must be actual delay or that the order of reinstatement pending appeal was not executed prior to its reversal; and (2) the delay must not be due to the employer’s unjustified act or omission. If the delay is due to the employer’s unjustified refusal, the employer may still be required to pay the salaries notwithstanding the reversal of the Labor Arbiter’s Decision. In Garcia, after it had been established that there was clearly a delay in the execution of the reinstatement order, the court proceeded to ascertain whether same was due to PAL’s unjustified act or omission. In so doing, it upheld the CA’s finding that the peculiar predicament of a corporate rehabilitation rendered it impossible for PAL, under the circumstances, to exercise its option under Article 223 of the Labor Code. The suspension of claims dictated by rehabilitation procedure therefore constitutes a justification for PAL’s failure to exercise the alternative options of actual reinstatement or payroll reinstatement. Because of this, the Court held that PAL’s obligation to pay the salaries pending appeal, as the normal effect of the non-exercise of the options, did not attach. Simply put, petitioners cannot anymore collect their accrued salaries during the period between the Labor Arbiter’s order of reinstatement pending appeal and the NLRC Resolution overturning that of the Labor Arbiter because PAL’s failure to actually reinstate them or effect payroll reinstatement was justified by the latter’s situation of being under corporate rehabilitation.

As previously mentioned, the vital question that needs to be answered in the case at bar is: Can respondents collect their accrued salaries for the period between the Labor Arbiter’s order of reinstatement pending appeal and the NLRC Resolution overturning that of the Labor Arbiter? If in the affirmative, the assailed CA Decision and Resolution which affirmed the June 3, 2004 Order of Labor Arbiter Castillon denying the Motion to Quash Writ of Execution and ordering the break-open of petitioner’s premises as well as the issuance of the subject Writ of Execution itself, have to be upheld. Otherwise, they need to be set aside as what petitioner would want us to do.

To come up with the answer to said question, we shall apply the two-fold test used in Garcia.

Was there an actual delay or was the order of reinstatement pending appeal executed prior to its reversal? As can be recalled, Labor Arbiter Gan issued his Decision ordering respondents’ reinstatement on December 21, 2001, copy of which was allegedly received by petitioner on February 21, 2002. On March 4, 2002, petitioner appealed said decision to the NLRC. A few days later or on March 11, 2002, respondents filed an Ex-Parte Motion for Issuance of Writ of Execution relative to the implementation of the reinstatement aspect of the decision. On April 22, 2002, a Writ of Execution was issued by Labor Arbiter Gan. However, until the issuance of the September 5, 2002 NLRC Resolution overturning Labor Arbiter Gan’s Decision, petitioner still failed to reinstate respondents or effect payroll reinstatement in accordance with Article 223 of the Labor Code. This was what actually prompted respondents to file an Ex-Parte Motion to Set Case for Conference with Motion wherein they also prayed for the issuance of a computation of the award of backwages and Alias Writ of Execution for its enforcement. It cannot therefore be denied that there was an actual delay in the execution of the reinstatement aspect of the Decision of Labor Arbiter Gan prior to the issuance of the NLRC Resolution overturning the same.

Now, the next question is: Was the delay not due to the employer’s unjustified act or omission? Unlike in Garcia where PAL, as the employer, was then under corporate rehabilitation, Islriz Trading here did not undergo rehabilitation or was under any analogous situation which would justify petitioner’s non-exercise of the options provided under Article 223 of the Labor Code. Notably, what petitioner gave as reason in not immediately effecting reinstatement after he was served with the Writ of Execution dated April 22, 2002 was that he would first refer the matter to his counsel as he could not effectively act on the order of execution without the latter’s advice. He gave his word that upon conferment with his lawyer, he will inform the Office of the Labor Arbiter of his action on the writ. Petitioner, however, without any satisfactory reason, failed to fulfill this promise and respondents remained to be not reinstated until the NLRC resolved petitioner’s appeal. Evidently, the delay in the execution of respondents’ reinstatement was due to petitioner’s unjustified refusal to effect the same.

Hence, the conclusion is that respondents have the right to collect their accrued salaries during the period between the Labor Arbiter’s Decision ordering their reinstatement pending appeal and the NLRC Resolution overturning the same because petitioner’s failure to reinstate them either actually or through payroll was due to petitioner’s unjustified refusal to effect reinstatement. In order to enforce this, Labor Arbiter Castillon thus correctly issued the Writ of Execution dated March 9, 2004 as well as the Order dated June 3, 2004 denying petitioner’s Motion to Quash Writ of Execution and granting respondents’ Urgent Motion for Issuance of Break-Open Order. Consequently, we find no error on the part of the CA in upholding these issuances and in dismissing the petition for certiorari before it.

Having settled this, we find it unnecessary to discuss further the issues raised by petitioner except the one with respect to the computation of respondents’ accrued salaries.

Petitioner contends that respondents’ accrued salaries in the total amount of P1,110,665.60 have no factual and legal bases. This is because of his obstinate belief that the NLRC’s reversal of Labor Arbiter Gan’s Decision has effectively removed the basis for such award.

Although we do not agree with petitioner’s line of reasoning, we, however, find incorrect the computation made by Fiscal Examiner Trinchera.

In Kimberly Clark (Phils.), Inc., v. Facundo, we held that:

[T]he Labor Arbiter’s order of reinstatement was immediately executory. After receipt of the Labor Arbiter’s decision ordering private respondents’ reinstatement, petitioner has to either re-admit them to work under the same terms and conditions prevailing prior to their dismissal, or to reinstate them in the payroll. Failing to exercise the options in the alternative, petitioner must pay private respondents’ salaries which automatically accrued from notice of the Labor Arbiter’s order of reinstatement until its ultimate reversal of the NLRC.

x x x x

x x x [S]ince private respondent’s reinstatement pending appeal was effective only until its reversal by the NLRC on April 28, 1999, they are no longer entitled to salaries from May 1, 1999 to March 15, 2001, as ordered by the Labor Arbiter.

To clarify, respondents are entitled to their accrued salaries only from the time petitioner received a copy of Labor Arbiter Gan’s Decision declaring respondents’ termination illegal and ordering their reinstatement up to the date of the NLRC Resolution overturning that of the Labor Arbiter. This is because it is only during said period that respondents are deemed to have been illegally dismissed and are entitled to reinstatement pursuant to Labor Arbiter Gan’s Decision which was the one in effect at that time. Beyond that period, the NLRC Resolution declaring that there was no illegal dismissal is already the one prevailing. From such point, respondents’ salaries did not accrue not only because there is no more illegal dismissal to speak of but also because respondents have not yet been actually reinstated and have not rendered services to petitioner.

Fiscal Examiner Trinchera’s computation of respondents’ accrued salaries covered the period January 1, 2002 to January 30, 2004. As there was no showing when petitioner actually received a copy of Labor Arbiter Gan’s decision except for petitioner’s self-serving claim that he received the same on February 21, 2002, we are at a loss as to how Fiscal Examiner Trinchera came up with January 1, 2002 as the reckoning point for computing respondents’ accrued wages. We likewise wonder why it covered the period up to January 30, 2004 when on September 5, 2002, the NLRC already promulgated its Resolution reversing that of the Labor Arbiter. Hence, we deem it proper to remand the records of this case to the Labor Arbiter for the correct computation of respondents’ accrued wages which shall commence from petitioner’s date of receipt of the Labor Arbiter’s Decision ordering reinstatement up to the date of the NLRC Resolution reversing the same. Considering, however, that petitioner’s levied properties have already been awarded to respondents and as alleged by the latter, have also already been sold to third persons, respondents are ordered to make the proper restitution to petitioner for whatever excess amount received by them based on the correct computation.

As a final note, since it appears that petitioner still failed to reinstate respondents pursuant to the final and executory Resolution of the NLRC, respondents’ proper recourse now is to move for the execution of the same. It is worthy to note that Labor Arbiter Castillon stated in her questioned Order of June 3, 2004 that the Writ of Execution she issued is for the sole purpose of enforcing the wages accruing to respondents by reason of Labor Arbiter Gan’s order of reinstatement. Indeed, the last paragraph of said writ provides only for the enforcement of said monetary award and nothing on reinstatement. (Islriz Trading/Victor Hugo Lu vs. Capada, et. al., G.R. No. 168501, January 31, 2011).

Wages: Supplements vs. Facilities

On whether the value of the facilities should be included in the computation of the “wages” received by private respondents, 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 employee’s 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.

The Court, at this point, makes a distinction between “facilities” and “supplements.” 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. In the case of Atok-Big Wedge Assn. v. Atok-Big Wedge Co., the two terms were distinguished from one another in this wise:

In short, 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.

For said reason, the cases of Agabon and Glaxo are inapplicable in this case. At any rate, these were cases of dismissal with just and authorized causes. The present case involves the matter of the failure of the petitioners to comply with the payment of the prescribed minimum wage. (SLL International Cables Specialist vs. NLRC, et. al., G.R. No. 172161, March 2, 2011)

Termination By Employer

Article 282 of the Labor Code enumerates the just causes for which an employer may terminate the services of an employee, to wit:

ARTICLE 282. Termination by employer. – An employer may terminate an employment for any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work;

(b) Gross and habitual neglect by the employee of his duties;

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;

(d) Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representative; and

(e) Other causes analogous to the foregoing. [Emphasis supplied]

The offense of willful disobedience requires the concurrence of two (2) 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.

Let it be noted at this point that the Court finds nothing unlawful in the directive of Sumulong to prepare checks in payment of LREI’s obligations. The availability or unavailability of sufficient funds to cover the check is immaterial in the physical preparation of the checks.

Pacia’s initial reluctance to prepare the checks, however, which was seemingly an act of disrespect and defiance, was for honest and well intentioned reasons. Protecting LREI and Sumulong from liability under the Bouncing Checks Law was foremost in her mind. It was not wrongful or willful. Neither can it be considered an obstinate defiance of company authority. The Court takes into consideration that Pacia, despite her initial reluctance, eventually did prepare the checks on the same day she was tasked to do it.

The Court also finds it difficult to subscribe to LREI and Sumulongs’s contention that the reason for Pacia’s initial reluctance to prepare the checks was a mere afterthought considering that “check no. 0000737527 under one of the check vouchers she reluctantly prepared, bounced when it was deposited.” Pacia’s apprehension was justified when the check was dishonored. This clearly affirms her assertion that she was just being cautious and circumspect for the company’s sake. Thus, her actuation should not be construed as improper conduct.

In finding for Pacia, the Court is guided by the time-honored principle that if doubt exists between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter. The rule in controversies between a laborer and his master distinctly states that doubts reasonably arising from the evidence, or in the interpretation of agreements and writing, should be resolved in the former’s favor. (Lores Realty Enterprises, Inc. vs. Pacia, G.R. No. 171189, March 9, 2011)

Waivers and Quitclaims

The Court has ruled that a waiver or quitclaim is a valid and binding agreement between the parties, provided that it constitutes a credible and reasonable settlement, and that the one accomplishing it has done so voluntarily and with a full understanding of its import. (Plastimer Industrial Corporation and Teo Kee Bin vs. Gopo, et. al., G.R. No. 183390, February 16, 2011)

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2011 Supreme Court Decision (Labor )

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Wip's Blog

2011 Supreme Court Decision (Labor )

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