Labor Law Article - Karen Jimeno

LABOR LAws ASSECUNDUM RATIONEM t
AND SECUNDUM CARITATEM:

2
APPLYING SOCIAL JUSTICE WITHOUT CAUSING AN INJUSTICE
'There mqy be cases where the
circumstances warrant favoring labor
over the interests of management but
never should the scale be tilted if the
result is an injustice to the emplqyer."
'The Court must take care,
however, that in the contest between
labor and capital, the results achieved
arefair and in conformirywith rules."
1 Latin, meaning "according to reason".
2 Latin, meaning "according to charitable heart"; Courts have held that labor law determinations
are not only secundum rationem but secundum caritatem in Philippine Air Lines Inc. v. Philippine Air
Lines Employees Association (pALEA), G.R. No. 24626,57 SCRA 489, J une 28, 1974; Almira et aI. v.
B.F. Goodrich Philippines, Inc. et aI., G.R. No. 34974, 58 SCRA 120, J uly 25, 1974; Progressive
Workers' Union etc. v. Aguas et al., G.R. Nos. 59711-12, 150SCRA 429, May 29,1987 .
Associate, Quisumbing Torres Law Firm. LL:B., Cum Lmde, University of the Philippines (2005).
A.B. Humanities, Magna Cum Laude, University of Asia and the Pacific.
3 Philippine Geothermal Inc. v. National Labor Relations Commission, G.R. No. 106370, 236
SCRA 371, Sept. 8, 1994.
4 Reliance Surety and Insurance Co. Inc. v. National Labor Relations Commission, G.R. Nos.
86917-18,193 SCRA 365, J an. 25, 1991.
ApPLYING SOCIAL J USTICE
WITHOUT CAUSING AN INJ USTICE
As long as men undertook such works only as a singleperson
could finish, and stuck to such arts asdid not require the joint
endeavors of several hands, they lived freely, healthy, honest,
and happy, asmuch astheir nature would admit, and continued
to enjoy with each other all pleasures of an independent
intercourse; but from the moment one man began to stand in
need for another's assistance, fromthe moment it appeared an
advantage for one man to possess the quantity of provisions
requisite for two, all equaliry vanished; property started up; labor
became necessary; and boundless forests became smiling fields,
whichit wasfound necessaryto water withhuman sweat, and in
which slaveryandmiserywereseento sprout out andgrowwith
thefruitsof theearth...
5
Such is the bleak picture that Rousseau depicts in explaining how
and why the concept of labor emerged. Nonetheless, the concept of labor
is one which has continued to subsist since time immemorial.
In its limited concept, the term 'labor' refers to physical or mental
exertion necessary to produce goods. In its broad concept it may include
the labor force who are employed or those who are able and willing to work
but are temporarily or involuntarily unemployed.
6
It is a truism that because of the economic superiority of capital,
labor, as a factor of production, is weak and helpless and fmds itself easily
in trouble without the necessary succor from the State.? The historical
experience of numerous countries over the world has shown the
importance of labor to the stability, not only of the economic, but the social
and political order as well. Professor Daugherty, in his study of the
development of labor in Western Civilization, observed that it is during
times of prolonged or severe unemployment that stability of an existing
organization is most likely to be threatened by revolutionary movements.
S
J obless wage-earners may become easy preys to radical doctrihes because of
5 J ean J acques Rousseau, DISCOURSE ON TIlE ORIGIN AND FOUNDATION OF 11-IE INEQUALITY
OF MANKIND at 52 (1754).
6 Wilbert Moore, INDUSTRIAL RELATIONS AND TIlE SOCIAL ORDER at 55-456 (1951).
7 Salvador Poquiz, NEW PHILIPPINE CONSTITUTION at 16 (1979).
8 I Carroll Daugherty, LABOR PROBLEMS IN AMERICAN INDUSTRY at 42 (1952).
an abusive and unfair existing economic order. Their resentment may ignite
social tension which may causerevolution or civil war.
9
In the Philippines, the role of labor has also been recognized and
givenprimacy. In one case, the Supreme Court emphatically declared:
The SupremeCourt reaffirmsitsconcernfor thelowlyworker
who, often at hisemployer'smercy,must lookupto thelawfor
hisprotection. Thelawregardshimwithtendernessand even
favor andalways!Pithjaith' and hope in his capacity to help in shaping
the nation's jutun. How society treats him determines whether the knife in
his hands shall be a caring tool for beauty and progrm or an anl/Y weapon
of defiance and nvenge. If wecherishhimaswe should, wemust
resolveto lighten 'the weight of centuries of exploitation and disdain that
bends his back but does not bow his head.'10 (emphasissupplied)
Thus, the supreme law of the Philippines "affirms labor as a
primary social economic force" and guarantees "to protect the rights of
workers and promote their welfare."l1 This, says the constitutionalist Fr.
J oaquin Bernas, is arecognition of the reality that, in asituation of extreme
mass poverty, political rights, no matter how strongly guaranteed by the
constitution, become largely rights enjoyed by the upper and middles class
and are a myth for the underprivileged. Without the improvement of
economic conditions, there can be no real enhancement of the political
rights of the people.
12
But it should not be deduced that the basic policy of
the State is to favor labor to prejudice capital. The plain reality is that both
sectors need each other. They are interdependent--one is inutile without
the other. Hence the better understanding is that the basic policy is to
balance or to coordinate the rights of both labor and capital.
13
What follows here is an analysisof how the policy of balancing or
coordinating the rights of labor and capital iscarried out, if at all.
9 Salvador Poquiz, LABOR LAw AND SOCIAL LEGISLATION at 4 (1983).
10 Cebu Royal Plant v. Minister of Labor, G.R. No. 58639, Aug. 12, 1987.
It CONST. art. II, 18.
11J oaquin Bernas, THE CONSTITtrTION OF TIlE PHILIPPINES: A COMMENTARY at 470 (1988).
13I Ces Azucena, THE LABOR CODE wrm COMMENTS AND CASESat 17 (1999).
Analyzinghowto balancetherightsof labor andcapital necessarily
entailsadiscussion of the statepolicyon labor, its basis and justification.
Given the wide spectrum of the field of labor law, the analysis will
concentrate on the area of employment termination, particularly on the
issueof dismissalsand thepayment of backwages.A comparative study of
the laws on termination of other countries is also included to provide a
basisfor somerecommendations for reform.
For purposes of simplicity, the employees referred to in the
discussion are those employedin aregular employment as defmed by the
Labor Code.
14
As used here, an employer includesany person actingin the
interest of anemployer, directlyor indirectly.Thetermshall not includeany
labor organization or any of its officers or agents except when acting as
employer
1S
while emplqyee includes any person in the employ of an
employer.
16
Under the poliry oj socialjustice,
the law bends over backward to
accommodate the interests oj the
working class on the humane
justification that those with less
privileges in life should have more
privileges in law.
14 As defined in Article 280 of the LABORCODE, 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 tmde of the employer, except where the employment has been fixed for aspecific
project or undertaking the completion or tennination of which has been detennined at the time of the
engagement of the employee or where the work or service to be performed isseasonal in nature and the
employment is for the duration of the season.
IS LABORCODE, art.212 (e).
I.LABORCODE, art.212 ().
17 Philippine Air Lines v. Santos, G.R. No. 77875, 218 SCRi\ 415, Feb. 4, 1993.
Social J ustice has been defined in the landmark case of Calalangv.
Williams as "neither communism nor despotism, nor atomism, nor anarchy,
but the humanization of laws and the equalization of social and economic
forces by the State so that justice in its rational and objectively secular
conception may at least be approximated."18
In Antamok Goldfields Mining Co. v. CIR, the Supreme Court
explained the backdrop against which the policy of social justice was first
incorporated in the 1935 Constitution-
Our Constitution was adopted in the midst of surgingunrest
and dissatisfactionresulting fromeconomic and social distress
which was threatening the stabilityof governments the world
over. Alive to the social and economic forces at work, the
framers of our Constitution boldly met the problems and
difficultieswhichfacedthemandendeavoredto crystallize,with
more or less fidelity, the political, social, and economic
propositions of their age. Embodying the spirit of the present
epoch, general provisions were inserted in the Constitution
which were intended to bring about the needed social and
economic equilibriumbetween component elements of society
through the application of what may be. termed as justitia
communis advocatedbyGrotiusandLeibnitsmanyyearsagoto
besecuredthrough thecounterbalancingof economicand social
forces and opportunities which should be regulated, if not
controlled, by the State or placed, as it were, in custodia
societatis. 'The promotion of social justiceto insure the well-
beingand economic securityof all thepeople' wasthusinserted
as vital principle in our Constitution. And in order that this
declaration of principle may not just be an empty medley of
words, the Constitutioninvarioussectionsthereof hasprovided
themeanstowardsitsrealization.J
9
(emphasissupplied)
Thus, as early as 1935, the Constitution included the guarantee that
the State shall afford protection to labor, especially to working women, and
18 Calalangv. Williams, G.R. No. 47800,70 Phil. 726, Dec. 2, 1940.
'9Antamok Goldfields Mining Co. v. Court of Industrial Relations, 70 Phil 340, J une 28, 1940.
minors, andshall regulatetherelationsbetweenlabor andcapital inindustry
andinagriculture.
20
The 1987 Constitution gives fundamental significance to social
justice.
21
The Declaration of State Policies provides "the State shall
promote social justice in all phases of national development."22 The
Constitution devotes an entire article to "Social J ustice and Human
Rights."23 In particular reference to labor, Section 3 saysthat "the State
shall affordfull protection to labor."24To underscore the obligation of the
State to promote social justice the constitution directs that labor be
accorded protection.
25
The courts and administrativetribunals have time
andagaininvoked thismandatetojustifyadecisioninfavor oflabor.
26
For
labor, by reason of its economic dependence on capital, is deemed the
weaker of the two and needs the protection of the State.
27
Constitutional
Commissioner Vicente Foz has characterized the 1987 Constitution as
"especially pro-labor," for the rights of workers and employees have
acquired new dimensions while some concepts have been
constitutionalized.28
Like other laws initiated by Congress, the Labor Code is an
instrument to carryout constitutional mandates.
29
Asannounced initstitle,
the Labor Code was enacted "to afford protection to labor, promote
employment andhuman resourcesdevelopment andinsureindustrial peace
basedon social justice."30Accordingto thenLabor Minister BIasOple, the
Labor Code can be summed up in one sentence-"it represents the
updating of all our labor laws to make them more responsive to
20 CONSf. (1935), art. XN, 6.
21 Azucena, slljJra note 13, at 9.
22 CONSf. art. II, to.
23 CONSf. art. XIII.
24 CONST. art. XIII, 3.
25 Biscara v. Workmen's Compensation Commission, G.R. No. 43425, 95 SCRA 248, J an. 22,
1980.
u; Samson S. Alcantara, PHIUPPINE LABORANDSOCIALLEGISLATIONat 11(1994).
27 Dagupan Bus Co Inc. v. National Labor Relations Commission, G.R. No. 94291, 191 SCRA
328, Nov. 9, 1990.
28 Vicente B. Foz, THE 1987 CONSTITUTION:ITSIMPLICATIONSON EMPWYMENT ANDLABOR
RELATIONSat 158 (1987).
29 Azucena, slljJra note 13, at 10.
30 Pres. Dec. No. 442.
development and employment as well as social justice."31 The aim and the
reason and, therefore, the justification oflabor laws is social justice.
32
"SurelY, the socialjustice poliry rf
the State should not be interpreted to
mean the shielding rf one and the
oppressionrf the other."
In spite of overwhelming support granted by the social justice
provisions of the Constitution in favor of labor, the Constitution has not
overlooked the rights of capital. It provides that "the State recognizes the
indispensable role of the private sector, encourages private enterprise, and
provides incentives to needed investments."34 The State is mandated to
regulate the relations between workers and employers, recognizing the right
of labor to its just share in the fruits of production and the right of
enterprise to reasonable returns on investment and to expansion and
growth.3
5
In a decision penned by J ustice Kapunan, the Supreme Court
declared:
The fundamental lawitself guarantees, even during the process
of tilting the scalesof justice towards workers and employees,
the right of enterprises to reasonablereturns of investment and
to expansion andgrowth. To hold otherwisewould not onlybe
oppressive and inhuman, but also counterproductive and
ultimately subversiveof thenation's thrust towardsaresurgence
II BIas Ople, in his speech "Freedom of Initiative, Dignity of Labor", delivered before the Manila
Rotary Club, May 2, 1974.
l2Azucena, srpra note 13.
IIJ u,sticeTuason, quoting the decision of the Court of Industrial Relations in Dy Pac & Co. Inc. v.
Kaisahan ng Manggagawa saKahoy saPilipinas, Case No. 73-V(2), Order of J an. 16, 1948; Kaisahan ng
mga Manggagawa sa Kahoy sa Filipinas (CLO) v. Court of Industrial Relations, G.R. Nos. 1970-72,81
Phil 566, Oct. 2, 1948.
14 CONST. art. II, 20.
lSAzucena, srpra note 13, at 12.
in our economy whichwouldultimatelybenefit the majority of
our people.
36
In 1940, J ustice Laurel explained the scope of social justice as
extendingtoall thepeoplewithout discrimination, thus-
Social justicemeansthepromotion of thewelfareof all the people,
the adoption by the Government of measures calculated to
insure economic stability of all the competent elements of sociery,
through the maintenance of a proper economic and social
equilibrium in the interrelations of the members of the
community, constitutionally, through the adoption of measures
legallyjustifiable, or extra-constitutionally,through the exercise
of powers underlying the existenceof all governments on the
time-honoredprincipleof saluspopuli est suprema lex. Social justice,
therefore, must be founded on the recognition of the necessiry of
interdependence among divers and diverse units of a sociery and of the
protection that shouldbeequalfy and evenfy extended to all groups asa
combined forcein our social and economic life, consistent with
the fundamental and paramount objective of the state of
promoting the health, comfort, and quiet of all persons, and of
bringing about "the greatest good to the greatest number.37
(emphasissupplied)
Forty yearsafter the definition of social justicewas laid down in
Calalang v. William:f,Justice Santosmadetheobservation that:
acursorystudyof thelonglineof decisionson social justicewill
readily reveal that the concept has been fleshed out-the
principle, conceptualized-as J ustice Laurel enjoined in the
celebrated case of Calalang v. Williams-not thru mistaken
sympathy for or misplaced antipathy against any group-
whether laborer or capital-but even-handedly and fairly, thru
theobservanceof theprinciple'equal justiceunder thelaw,' for
all andeachandeveryelementof thebodypolitic.
38
The Supreme Court recognizesthat management also has its own
rightswhich, assuch, areentitledtorespect andenforcement in theinterest
36 Balbalec v. National Labor Relations Commission, G.R. No. 107756,251 SCRA 398, Dec. 19,
1995.
37 Calalang v. Williams, 70 Phil. 726, Dec. 2, 1940.
38 Cabatan v. Court of Appeals, G.R. No. 44375, 95 SCRA 323, J an. 22, 1980.
of simple fair play. Out of its concern for those who have less in life, the
Court has inclined more often than not toward the worker and upheld his
cause in his conflicts with the employer. Such favoritism, however, as
J ustice Regalado said, "has not blinded the Court to the rule that justice is
in every case for the deserving, to be dispensed in the light of the
established facts and the applicable lawand doctrine."39
Social justice, therefore, does not champion division of property or
equality of economic status. What it and the Constitution do guarantee are
equality of opportunity, equality of political rights, equality before the law,
equality between values given and received, equitable sharing of the social
and material goods on the basis of efforts exerted in their production. It is
a command to devise social measures, but it cannot be used to trample
upon the rights of others.
40
III. A CONFLICT BETWEEN RIGHTS: SECURITY OF TENURE VS.
MANAGEMENT PREROGATIVES
"If the emplqyer can compel the
emplqyee to work against the latter's
will, this is servitude. If the emplqyee
can compel the emplqyer to give him
work against the emplqyer'swill, this is
oppression."
'The law, in protecting the rights
oj laborers, authorizes neither
oppression nor se!f-destruction oj the
employer."
39 National Sugar Refineries Corp. v. National Labor Relations Commission, G.R. No. 101761,
220 SCRA 452, Mar. 24, 1993.
40 Guido v. Rural Progress Administration, G.R. No. 2089, 84Phil 847, Oct. 31, 1949.
41 Grand Motors Corp. v. Minister of Labor and Employment, G.R. No. 58958, 130 SCRA 436,
J uly 16, 1984.
ApPLYING SOClAL]USTICE
While social justice is the raison d'etre of labor laws, their basis or
foundation is the police power of the State. It is the power of Government
to enact laws, within constitutional limits, to promote the order, safety,
health, morals and general welfare of society.43 Thus, the right of every
person to pursue a business is subject to the paramount right of the
government as a part of its police power to impose such restrictions and
regulations as the protection of the public may require. However, the
exercise of the police power must violate the constitutional safeguards of
individual rights only so far asis necessary to accomplish purposes justified
by the public evil to be removed or the public good to be achieved.
44
The 1987 Constitution has at least nineteen (19) separate clusters of
provisions that guarantee the rights of workers, protect their special
interest, or promote their general welfare.
45
One of the basic rights of
workers guaranteed by the Constitution is the right to security of tenure.
46
The guaranty is an act of social justice.
47
At the other end of the sphere, the
right of an employer to regulate all aspects of employment is well settled.
This right, aptly called management prerogative, gives employers the
freedom to regulate, according to their discretion and best judgment, all
aspects and incidents of business, including work assignment, working
methods, processes to be followed, working regulations, transfers of
employees, work supervision, lay-off of workers and the discipline, dismissal
and recall of workers.
48
The spirit of free enterprise that pervades our
economy gives to the employer or management of any establishment full
control of its internal or administration affairs.
49
This prerogative flows
from the established rule that labor laws do not authorize substitution of
judgment of the employer in the conduct of his business.
50
Verily,
underlying the employer-employee relationship is the principle of
managerial control of the business, flowing from ownership of property and
the rationale of business enterprise, which is maximization of profits.
42 Manila Trading & Supply Co. v. Zulueta, G.R. No. 46853, 69 Phil 485, J an. 30, 1940.
43 People v. Vera Reyes, G.R. No. 45748, 67 Phil 187, Apr. 5, 1939.
44 Albion Taylor, LABORPROBLEMSANDLABORLAwat 10 (1950).
45 Azucena, .rupra note 13, at 10.
46 CONST. art. XIII, 3.
47 Rance et al. v. National Labor Relations Commission, G.R. No. 68147, 163 SCRA 279, J une 30,
1988.
48 Deles v. National Labor Relations Commission, G.R. No. 121348, 327 SCRA 540, Mar. 9, 2000.
49 Emiliano Morabe, THE LAWONDismissal at 55 (1962).
50 Great Pacific Employees Union v. Great Pacific Life Insurance, G.R. No. 126717,303 SCRA
113, Feb. 11, 1999.
Managerial control of personnel servicesincludesthepower of terminating
the same either permanently, through dismissals, or temporarily, through
lay-offsor suspensions.51
Traditionally, themanagerial prerogativeto fire, suspend, or lay-off
employeeswas subject to few, if any, restrictions. Today, however, thisis
no longer the case. The right of an employer to freelyselect or discharge
his employeesis subject to regulationby the Statebasicallyin the exercise
of its paramount police power.
52
The Civil Code explicitlyprovides that
"the dismissal of laborers shall be subject to the supervision of the
Government under special law."53The great mass of the population is
almost wholly dependent on their employment for their livelihood. The
alternativeof returning or turning to farmingasasecondary occupation is
no longer feasible. When a worker losses his job, his family faces
deprivation, if not starvation. Hence, the demand for job security.
Responding to popular demand, the Constitutional Convention has
expresslyprovided for Staterecognitionof theright of workers to security
of tenure.54Thisisfurther implementedthrough theprovisionsinBook VI
of theLabor Code, regulatingtheemployer'Sright to terminatetheservices
of theworker, aswell astheemployee'sright toquit.
55
There is therefore an effort to balance what may seem as
competinginterests betweenlabor andmanagement. Under thedueprocess
clauseof the Constitution, no person maybedeprivedof property without
dueprocess of law.
56
The right of aperson to hislabor isdeemedproperty
within the meaning of constitutional guarantees,57However, the business
of an employer is also his property, hence equallyentitled to protection.
The State affords the constitutional blanket of rendering protection to
labor, but it must alsoprotect the right of employersto exercisewhat are
51 Perfecto V. Fernandez, THE LAwOF EMPWYEE DISMISSALat 1(1976).
52 San Miguel Brewery Inc. v. Zulueta, 69 Phil 485; Manila Trading &Supply Co. v. PLU, 71Phil
53 CIVILCODE, art. 1710.
54 CONST. (1973), art. II, 9.
55 Fernandez, .rupra note 51.
56 CONST. art. III, 1.
57 Offshore Industries Inc. v. National Labor Relations Commission, G.R. No. 83108, 177 SCRA
50, Aug. 29, 1989.
clearlymanagement prerogatives, solongastheexerciseiswithout abuseof
discretion.58
Understanding the environment
59
in which particular rules or
institutions have developed is seen as the key to understanding their
operation and effect.
60
The evolutionof Philippinelabor laws,particularly
in reference to the law on dismissal is outlined here to gain an
understanding of itsoperationandeffect andhowit hasdevelopedto what
it istoday.
Prior to 1935, thepolicyof theStatewasoneof non-intervention
inprivatematters. The fieldof labor and theemployment relationshipwas
consideredasbeingwithinthisrealmandwasthusnot regulatedheavilyby
the Stateand wasleft mainlyto market forces. The genesisof the lawon
employment termination in thePhilippinesdatesback to or evolvesfrom
the express provision of Article 302 of the Code of Commerce which
states: ''Where the contract of employment does not havea fixedperiod,
anyone of the parties may terminate it upon giving one month advance
noticethereof to theother."61
Under theabovecodal provisionthecourts, includingtheCourt of
Industrial Relations awarded a month's payor mesada not only to
commercial employees as contemplated by the Code of Commerce, but
eventoindustrial employeesor laborers. In theabsenceof acontract fixing
the period of employment, the employeemay quit at any time and the
employermaydismisshimat anytime,ineither caseevenwithout cause, by
58 Panttanco North Express Inc. v. National Labor Relations Commission, G.R. No. 106516,314
SCRA 740, Sept. 21, 1999.
59 The 'environmental' context in which laws and institutions develop is the totality of a nation's
historical, cultural, political, economic and social setting which profoundly influence its industrial
relations and labor lawsystems, and these factors are inevitably taken into account in major case studies.
This is the defmition adopted by Stephen Deery and Richard Mitchell in their comparative lawstudy of
Labor Industrial Relations inAsia.
60 Stephen Deery & Richard Mitchell, LABOURANDINDUSTRIALRELATIONSINAsIA at 1(1992).
61 COM. CODE, art. 302.
givingone month notice in advance. In the absenceof such anotice, the
employeelaid-off or dismissedisentidedto onemonth pay.62
The assumption in office of President Manuel Quezon in 1935
illuminatedtheplight of laborersfromeconomicbondage. Heenergetically
instituted changes and reforms to nourish the young and developing
Republic, such as championing the cause of the workingmen with his
revolutionary social justiceprograms.
63
The legislature, in enactingthe New Civil Code inJ une 18, 1949,
which repealed the Code of Commerce, failed to provide a substitute
provision for Article302.
64
TheCivil Codemerelyprovided that "dismissal
of laborers shall be subject to the supervision of the government under
special law."65 Congress felt that in the absence of a contract of
employment for fixed period, employees and laborers dismissed without
causebeginning1950wereno longer entidedto mesoda, evenintheabsence
of notice of dismissal or lay-off-thus precipitating the enactment of
RepublicAct No. 1052in 1954.
66
In enactingthislaw, otherwisecalledthe
"Employment Termination Law", Congress unequivocally acknowledged
and recognized the right of the employer to dismisshis employeewithout
cause. Under Section 1 of Republic Act No. 1052, "in cases of
employment without a definite period, in a commercial, industrial or
agricultural establishment or enterprise, the employer or the employeemay
terminateat anytimethe employeewithjust cause, or without just causein
the caseof an employeeby servingwrittep noticeon theemployer at least
one month in advanceor one-half month for everyyear of serviceof the
employee,whichever islonger."
To dissipateanylingeringdoubt about therecognition byRepublic
Act No. 1052 of theright of theemployer to dismissanemployeewithout
cause, reference canbemadeto thelegislativeproceedingsin both Houses
of Congress when the Act in the form of a bill was discussed. Senator
Sumulongmadethefollowingremarks:
62 National Labor Union v. Berg Department Store, 96 Phil 742, J an. 19, 1959.
63 Poquiz, slI/Jra note 7.
Cornelio R. Besinga, PHIUPPINE LAw ON EMPWYEE DISMISSALat 4 (1979); Lara v. Del
Rosario, G.R. No. 6339, 94 Phil 778, Apr. 20, 1954.
65 CIVILCODE, art. 1710.
66 Cresenciano B. Trajano, THE LAw, PROCEDURESAND PROBLEMSIN TERMINATION OF
EMPWYMENT INTIlE PHIUPPINESat 77 (1986).
The general principleis that when acontract of employment is
without afixedperiod, in theabsenceof astatuteregardinghow
it can be terminated by either side, the contract can be terminated at
a'!Y time without need of showing cause.
67
(emphasissupplied)
Republic Act No. 1052 never meant or intended to give the
employer a new right, which he never had before-that of dismissing an
employee without cause-because the employer all along always had that
traditional right,68 Republic Act No. 1052did nothing more than recognize
that right and saved to the employee the right of the mesada which he lost by
repeal of Article 302 of the Code of Commerce.
69
By its very nature, Republic Act No. 1052 was a regulatory
measure, not asubstantive law, ameasure intended to provide protection to
the workingmen, and in away, the employers aswell, specifically in cases of
employments with indefinite period of duration, by requiring an employer
or the employee as the case mtly be, before terminating the employment, to
give unto the other notice thereof in advance, non-observance of which by
the employer, subjects him to payment of a sum equivalent to the
employee's compensation for amonth.?o The period of notice is only thirty
(30) days irrespective of the employee's years of service to the employer.
Termination of employment became more specific under the
amendment introduced by Republic Act No. 1787 in 1957. This law was
known as the "Termination Pay Law" because under it, the maximum
benefit an unjustly or whimsically dismissed worker could get was
termination pay. In the first place, termination of employment was
classified into two: (1) those for just cause and (2) those without, the lawin
itself providing what constitutes just cause for severance of employment.
In determining the period of notice or the corresponding compensation to
which a dismissed employee shall be entitled, the length of service to the
employer is taken into consideration.?!
67 Congressional Record, Senate, Vol. I, No. 24, at 320.
68 National Labor Union v. Berg Department Store, G.R. No. 6953, 96 Phil 742, Mar. 31, 1955.
(Montemayor,]., disJenling).
69 Besinga, Jupra note 64, at 9.
70 Abe v. Foster Wheeler Corp., G.R. No.14785, 110Phil 198, Nov. 29, 1960.
71 Perez v. Court of Appeals, 13SCRA 137, J an. 30, 1965.
The SupremeCourt inPerez v. Court of Appeals
72
andininterpreting
the provisions of Republic Act 1052, as amended by Republic Act 1787,
laid down two doctrines concerning separation pay and moral damages.
Firsdy, the Court laid down the doctrine that: "An employee for an
indefIniteperiod who hasrendered servicefor lessthan six(6) months and
whose employment is terminated without just cause, is entided to one (1)
month's notice, or one (1) month's separation pay in lieuof saidnotice."
The second doctrine laiddown isasfollows: "In anaction byan employee
for unpaid salaries,moral damagesarenot to beawardedwherethereisno
fIndingthat the non-payment of saidsalarieswasmalicious, fraudulent, or
inbadfaith."73
Under Republic Act No. 1052, asamended, it isnot the causefor
dismissal but the employer's failureto servenoticeupon the employeethat
renders the employer answerable to. the employee for termination pay.
There isan impliedrecognition of theright of theemployer to dismis~his
employees(hiredwithout defIniteperiod) whether for just cause, or without
it. If thereisjust cause, theemployerisnot requiredto serveanynoticeof
dischargenor to disburseterminationpayto theemployee. If thedismissal
be without just cause, the employer must serve timely notice to the
employee. It is onlywhen the employer failsto servesuch notice that he
becomes obliged to give termination pay.74J ust as an employee in a
commercial or industrial establishment may quit any time, singly or
collectively,with or without just causes, so the employer can dismiss any
employeeat anytimewithor without just cause. Thisright of theemployer
is commonly referred to ashisright to hire and fttehis employeesin the
sameway that the employeecan stop working by himself or go on strike
withhisfellowemployees,75
In casethe contract of employment isfor adef1n1teperiod, thereis
no need of notice becauseboth partiesknowthat upon acertain date the
employment will terminate. The employeecanprepare to look for another
employment before theexpirydate,76Theemployermayalsoterminatethe
employeeeven before the expirationof the stipulatedperiod should there
72 [d.
73 [d.
74 Besinga, slljJra note 64, at 18.
75 Gutierrez v. Bachrach Motor Co. Inc., G.R. No. 11298,105 PhiI9,jan. 19,1959.
76 Besinga, slljJra note 64, at 24.
ApPLYING SOCIAL]USTICE
be asubstantial breach of the obligations by the employee,77in which case
the latter isnot entided to advance notice or separation pay.7
8
The need to codify all existing labor and social legislations was
given impetus with the signing on May 1, 1974 of Presidential Decree 442
(the Labor Code). The application of Republic Act No. 1052, as amended,
ended when the Labor Code was enacted. It abolished the almost absolute
employer's prerogative to terminate at any time the services' of any of his
employees. In the words of Dr. Democrito Mendoza, President of the
Trade Union Congress of the Philippines, "the code was shaped against the
backdrops of national emergency, the government's national development
program and the sad history of Philippine organized labor in the fifty's."79
The enacting clause provided "a decree instituting a Labor Code thereby
revising and consolidating labor and social'laws to afford protection to labor ...
and insure industrial peace based on socialjustice."so Under the Code, an employer
cannot terminate aregular employee or one who has been engaged for an
indefinite period, except for just cause. If such a worker is dismissed
without just cause, he is entided to reinstatement to his former position
without loss of seniority and to backwages. In addition, the Rules
implementing the Labor Code require the employer to apply for clearance
to dismiss employees with the Labor Regional Office having jurisdiction
over the work place at least ten (10) days before the intended date of
dismissal. Any dismissal without prior clearance shall be conclusively
presumed to be termination of employment without just cause.
On August 17, 1981, Batas Pambansa 130 was promulgated,
amending the Labor Code. Among other things, it abolished the clearance
requirement. The Labor Code, as amended, guaranteed workers in regular
employment in all establishments or undertakings, whether for profit or
not
8
!,their security of tenure.
82
It enjoins employers from terminating such
employees except for just cause or when authorized by law. An employee
n Pabalan v. Valez, G.R No. 5953, 22 Phil 29, Feb. 24, 1912; Gonzalez v. Haberer, G.R. No.
22604, 47 Phil 380, Feb. 3, 1925.
78 Marcaida v. Philippine Education Company, G.R. No. 9960, 101Phil 657, May 29,1957.
79 Democrito Mendoza, Five Years '!f the Labor Code: An Assessment, 4PHIL. LABOR REv. No.3, at 1
(1980).
80 Pres. Dec. No. 442.
81 LABOR CODE, art. 278.
82 LABOR CODE, art. 279.
who isunjusdy dismissed fromwork isassured reinstatement without loss
of seniorityandwith backwages.
Under the Labor Code, the following are just causes for
termination of employment:
-Seriousmisconduct or willful disobedienceof thelawful orders of
theemployer or-hisrepresentativeinconnectionwithwork;
-Fraud or willful breach of trust reposed in the employee by his
employer or dulyauthorized representative;
-Commission of a crime or offense by the employee against the
person of his employer or anyimmediatemember of his familyor his duly
authorized representative;
-dosing or cessation of operation of the establishment or
undertaking;84
83 LABORCODE, art. 282.
85 LABORCODE, art. 284. In this case it must be shown that the continued employment of the sick
employee isprohibited by lawor isprejudicial to his health aswell as the health of his co-employees and
When termination is due to installation of labor saving devices or
redundancy, the affected worker is entitled to separation pay equivalent to
at least one month's payor one month's pay for every year of service
whichever is higher, based on his latest salary rate.
86
In all other authorized
causes, separation pay shall be equivalent to one month's payor one-half
month's pay for every year of service, whichever is greater.
87
Separation
from work for just cause does not entitle an employee to termination pay
but he may not be deprived of the rights, benefits and privileges that have
accrued under applicable or collective agreements or from voluntary
employer policy or practice.
Any employer who seeks to dismiss aworker is required to serve a
written notice stating the particular acts or omissions constituting grounds
for dismissal. If the ground is retrenchment or reduction of personnel,
notice shall be served at least one month before the intended lay-off date.
\Vithin a reasonable period from receipt of such notice, the worker/ s may
answer the allegations against him or refute the causes for retrenchment.
The employer shall also afford the worker ample opportunity to be heard
and to defend himself if he so desires.
88
If after the notice, answer and hearing, the employer still decides to
dismiss the worker, notice of the decision shall be served on him giving
reasons for it. The decision's legality or validity can however be contested
by the worker by filing acomplaint with the regional branch of the National
Labor Relations Commission. The case shall be decided by the Labor
Arbiter within twenty (20) working days from the date of submission for
decision. The Labor Arbiter's decision is appealable to the National Labor
Relations Commission.
Thus, the requisites of a valid dismissal are (1) the dismissal must
be for any of the just or authorized causes of the Labor Code, and (2) the
employee must be given an opportunity to be heard and defend himself.
The employer must furnish the employees with two written notices before
the termination of employment can be effected: (a) the first apprises the
that the disease isof such anature or at such astage that it cannot be cured within sixmonths even with
proper medical treatment.
83 Metro Port Service Inc. v. National Labor Relations Commission, G.R. No. 71632, 171 SeRA
190, Mar. 9, 1989.
employee of the employer's intention to dismiss him (b) the second
apprises the employee of the employer's decision to dismiss him. The
requirement of a hearing, on the other hand, is complied with as long as
there was an opportunity to be heard, and not necessarily that an actual
hearing was conducted.
89
The Court has stated in some cases that neither
of these two requirements can be dispensed with without running afoul of
the due process requirement of the Constitution.
90
The consequences of termination of employment vary as to
whether the termination is legal or illegal. The legality depends on whether
there is a valid reason and valid procedure in dismissing the employee.
Dismissal may give rise to reinstatement, the payment by the employer of
separation pay, backwages, damages, indemnity, and attorney's fees.
91
For the purpose of this paper, the discussion will be limited only to
the issue of backwages as a consequence of dismissal. However, the
distinction between backwages and separation pay will fIrst be clarifIed.
The distinction between separation pay and backwages was
exhaustively discussed in Santos v. National Labor Relations Commission.
92
As
the term suggests, separation pqy is the amount that an employee receives at
the time of his severance from the service and is designed to provide the
employee with "the wherewithal during the period that he is looking for
another employment." The grant of separation pay is not intended to be
relieved by the remedy of backwages, that is, the loss of earnings that would
have accrued to the dismissed employee during the period between
dismissal and reinstatement.
93
Payment of backwages is a form of relief that
restores the income that was lost by reason of unlawful dismissal. Separation
89 Maneja v. National Labor Relations Commission, G.R. No. 124013, 290 SCRA 603, J une 5,
1998.
90 Century Textile Mills Ine. v. National Labor Relations Commisison, G.R. No. 77859, 161SCRA
528, May 25, 1988.
91 II Ces Azucena, LABORCODE WITH COMMENTSANDCASESat 672 (2001).
92 G.R. No. 76721, 154 SCRA 166, Sept. 21, 1987.
9'[d.
ApPLYING SOCIALjUSTICE
pay, in contrast, is oriented towards the immediate future, the transitional
period the dismissed employee must undergo before locating areplacement
job.
94
The basis for computing the two are different, separation pay being
usually computed from the length of the employee's service, and backwages
from the actual period when the employee was unlawfully prevented from
working. 95
Under the present law and jurisprudence, separation pay may be
viewed in four ways or contexts:
a. separation pay as an employer's statutory obligation in cases of
legal termination due to authorized causes under Article 283 or 284. Only
in these two articles does the Labor Code explicitly mention "separation
pay." Termination under these cases is legal but since those causes are not
faults of the employee but exigencies of the business (except disease), it is
only fair that the employer give separation pay.96
b. separation pay as financial assistance, as an act of social justice,
even in cases of legal dismissal under Article 282. This kind of separation
pay is not a statutory requirement. It is an exception crafted by the court to
clothe with compassion a stiff and indiscriminate dismissal action based on
just causes.
97
c. separation pay in lieu of reinstatement. Where there is an illegal
dismissal there should ordinarily be an order to reinstate the employee.
When reinstatement is neither possible nor advisable, payment of
separation pay may be ordered asan alternative relief to reinstatement.
d. separation pay as an employee benefit. Separation pay in this
situation is in the form of a perquisite or employment benefit whose
demandability depends on the terms of its grant through a collective
bargaining agreement or voluntary company policy or established practice.
98
94 Torillo v. Leogardo, G.R. No. 77205, 197SCRA 471, May 27,1991.
95 Limv. National Labor Relations Commission, G.R. No. 79907, 171SCRA 328, Mar. 16,1989.
96 Azucena, Jupra note 91, at 673.
97 Philippine Long Distance Telephone Co. v. National Labor Relations Commission, G.R. No.
80609,164 SCRA 671, Aug. 23, 1988.
98 Philippine Overseas-Drilling and Oil Development Corporation v. Ministry of Labor, G.R. No.
55703,146 SCRA 79, Nov. 27, 1986.
VII. THE ISSUE OF BACKWAGES-IS THERE ROOM FOR J UDICIAL
INTERPRETATION?
The Supreme Court in several cases has explained the nature of the
award of backwages. However, the characterization by the Court as to the
nature of backwages has differed from time to time.
According to the Supreme Court in one case, the award of
backwages is not private compensation or damages but is in furtherance
and effectuation of the public objectives of the Labor Code. Even though
the practical effect is the enrichment of the individual, the award of
backwages is not in redress of aprivate right, but, rather, is in the nature of a
command upon the emplqyer to make public reparation for his violation of the
Labor Code, such as the dismissal of an employee due to the unlawful act
of the employer or the latter's bad faith.
99
Backwages may also be viewed as a form of damages as it is only
granted, in general, on grounds of equity for earnings which a worker has
lost due to his illegal dismissal.
lOo
As a general rule, an employee is entitled
to backwages only where his dismissal is due to the unlawful act of the
employer or to the latter's bad faith.
101
In yet another case, the Supreme Court stated that backwages
represent mmpensation that should be earned but not collected because of the
99 Imperial Tcxtile Mills Inc. v. National Labor Relations Commission, G.R. No. 101527, 217
SCRA 237,J an. 19, 1993.
"" Indophil Acrylic Manufacturing Corporation v. National Labor Relations Commission, G.R.
No. 96488, 226 SCRA 723, Scpt. 27, 1993.
'0' Rcyes v. Minister of Labor, G.R. No. 48705, 170SCRA 134, Feb. 9, 1989.
unjust dismissal of the employee.
lo2
Payment of backwages is a form of
relief that restores the income that was lost by reason of unlawful
dismissa1.
103
Backwages refer to earnings lost after illegal dismissa1.l
4
The Supreme Court has enunciated in one case that backwages
have to be paid by the employer as part of the price or penalry he has to pay for
illegallydismissing his employee.
lOS
Perhaps more controversial than the differing characterizations of
the Supreme Court as to the nature of the award of backwages is the
different approaches adopted by the Supreme Court in computing the
amount of backwages to be awarded.
Under Republic Act No. 1052, an employer may discharge at will
an employee, irrespective of whether or not there is a fixed term of
employment. lOG There were, however, exceptions
l07
to this rule.
108
In cases
falling under the exceptions, the employer is required to pay back wages
and/or reinstate the employee. However, when employees are entitled to
backwages during their enforced separation, the amounts which they have
or could have earned during the period should be deducted. The Supreme
102 Sweet Lines Ine. v. National Labor Relations Commission, G.R. No. 79975, 171 SCRA 328,
Mar. 16, 1989.
103 Torillo v. Leogardo, G.R. No. 77205, 197SCRA 471, May 27,1991.
104 General Baptist Bible College v. National Labor Relations Commission, G.R. No. 85534, 219
SCRA 549, Mar. 5, 1993.
105 Bustamante v. National Labor Relations Commission, G. R. No. 111651,265 SCRA 61, Nov.
28,1996.
106 Rep. Act No. 1052 (1954); Rep. Act No. 1787 (1957); Monteverde v. Casino Espanol, G.R. No.
11365, 103Phil 377, Apr. 18, 1958.
107 The exceptions to Rep. Act No. 1052 are: (a) Dismissal of an employee for union activity-this
being considered an unfair labor practice (Rep. Act No.875); (b) Dismissal of an employee for
complaints under the Minimum Wage Law (Rep. Act No. 602); (c) Dismissal for the purpose of
avoiding obligations under the Maternity Leave Privilege Law (Rep. Act No. 679).
108 Gutierrez v. Bachrach Motor Co., G.R. No. 11298, 105Phil9,]an. 19, 1959.
Court declared that the law abhors double compensation and the law
requires that the employees should mitigate and diminish his 10ss.109The
employer can claim the deductions after the legality of the dismissal has
been finally decided.
l1O
After the enactment of the Labor Code, the rule generally applied
was for the payment of backwages corresponding to the entire period of the
employee's lay-off minus wages actually earned by the employee from
employment during the period of his separation, or the wages which he may
have earned elsewhere had he been diligent enough to find a job. The
employer was allowed to adduce evidence on these matters.
111
But such
rule, according to the Supreme Court, tended to breed idleness on the part
of a discharged employee who would "with folded arms remain inactive in
the expectation that awindfall would come to him."112 And on the part of
the employer, the principle afforded it further opportunity to delay payment
of the award as determination of the actual earnings of the employee during
his lay-off requires further proceedings and in some cases induce the latter
to agree to an unconscionable setdement of the award.
l13
It was in the case of Mercury D 1 7Ig Co. Inc. v. Court of Industrial
Relations
1 1 4
decided in 1974, that the Supreme Court formally adopted the
formula or principle of fixing the amount of backwages for a maximum
period of three (3) years without qualification and deduction.
Then J ustice Teehankee in his concurring and dissenting opinion
made the following disquisition:
This newprincipleformallyadopted by the Court nowin fIxing
the amount of backwages at a reasonable level without
109 Republic Savings Bank v. Court of Industrial Relations, G.R. No. 20303,21 SCRA 226, Sept.
27,1967.
110 Philippine Air Lines v. PALFEA, 60 OG 8269 (1966).
111 Mariners Polytechnic School v. Leogardo J r., G.R. No. 74271, 171SCRA 597, Mar. 31, 1989.
112 Itogon-Suyoc Mines Inc. v. Sangilo-Itogon Workers Union, G.R. No. 24189, 133Phil 919, Aug.
30,1968.
113[d.
114 G.R. No. 23357, 56 SeRA 694, Apr. 30, 1974.
qualificationand deduction so asto relievethe employeesfrom
proving their earnings during their lay-offs and the employer
fromsubmittingcounter-proofs, and thus obviatethe twinevils
of idlenesson thepart of theemployeesandattritionandundue
delayin satisfyingtheawardon thepart of theemployer isthus
to be hailed as a realistic, reasonable and mutually beneficial
solution. NormallY, the trial of the case and resolution of the appeal should
begiven preference and terminated within a period of threeyears (oneyear for
trial and decision in the industrial court and two years for briifs, etc., and
decision in this Court). Hence, an award of back wages equivalent to three
years (where the case is not terminated sooner) should serve as the basefigure
for such awards without deduction, subject to deduction where there
aremitigatingcircumstancesinfavor of theemployerbut subject
to increase by way of exemplary damages where there are
aggravatingcircumstances (e.g. oppression or dilatory appeals)
ontheemployer'spart.
l1S
(emphasissupplied)
This doctrine enabled the Court to exercise discretion in
determining the amount of backwages to be awarded, as can be gleaned
from the following pronouncements-
Where the employeewas separatedand therewas delay on his
part of two (2) yearsand fifteen (15) daysin the filingof his
Unfair Labor Practice charge, backwagesequivalent to one (1)
year, eleven (11) months and fifteen (15) days should be
awarded.116
Considering that a total of eleven (11) yearshad elapsed from
the date of the commencement of the backwages, that
injunctions were issued restraining the enforcement of the
return-to-work order issuedbytheindustrial court, that complex
and novel legal issues had to be resolved, and that the
respondent isaneducational institution, backwagesequivalentto
three(3)yearsisdeemedreasonable.
1l7
Whereatotal of eighteen(18)yearshadelapsedfromthedateof
the commencement of the backwages, and considering the
IISId
116 Mercury Drug Inc. Y. Court of Industrial Relations, G.R. No. 23357, 56 SCRA 694 Apr. 3D,
1974.
117 FEATI University Faculty Club v. FEAT! University, G.R. No. 31563, 58 SCRA 395, Aug. 15,
1974.
lengthy procedural and technical manipulations of the parties,
the delay in the resolution of the casein the court below, the
complexity of the issues raised by the parties, the fixing and
limitationof thebackwagesto their equivalent of three (3) years
isfullyjustified.
118
In a case, however, where the employer was found by fInal
judgment of the industrial court to have committed grave unfair labor
practices by pretending to close down its factory to evade its obligation to
complainant union and that furthermore the management committed acts
of interference, harassment and discrimination culminating in the lockout
of the complainants who were deprived of their just dues for along period
of seventeen (17) years, an award of fIve (5) years of backwages without
qualifIcation was held to be fair and reasonable for all concerned, even if
this amount exceeded the maximum three (3) year period prescribed by the
Mercury drug rule.
119
Republic Act No. 6715, which took effect on March 21, 1989,
amended Article 279 of the Labor Code, in part, to entitle an illegally
dismissed employee to "full backwages."12o After this amendment, the
employee was awarded full backwages computed from the time his
compensation was withheld from him up to the time of his actual
reinstatement.
121
On the question of whether the amounts earned
elsewhere by an illegally dismissed employee during the period of his illegal
termination may be deducted from the award of full backwages, the
Supreme Court ruled that:
118 Insular Life Assurance Co. Ltd. Employees Association v. Insular Life Assurance Co. Ltd., G.R.
No. 25291, 76 SCRA 50, March 10, 1977; Among the cases where backwages for three (3) years were
awarded are Bustillos v. Inciong, G.R. No. 45396, 120SCRA 262, J an. 27, 1983; Oliva v. National Labor
Relations Commission, G.R. No. 57865, 121 SCRA 827, Apr. 28, 1983; Dosch v. National Labor
Relations Commission, G.R. No. 51182, 123 SCRA 296, J uly 5, 1983; Flexo Manufacturing Corp. v.
NLRC, G.R. No. 55971, 135 SCRA 145, Feb. 28, 1985; Remerco Garments Manufacturing v. Hon.
Minister of Labor, G.R. No. 5617, 135SCRA 167, Feb. 28, 1985.
119 New Manila Candy Workers Union v. Court of Industrial Relations, G.R. No. 29728, 86 SCRA
37, Oct. 30, 1978.
121\ Azucena, s'ra note 91, at 686.
121 Maranaw Hotels and Resorts Corporation v. Court of Appeals, G.R. No. 103215,215 SCRA
501, Nov. 6, 1992; Panday v. National Labor Relations Commission, G.R. No. 67664, 209 SCRA 122,
May 20, 1992; Medina v. Consolidated Broadcasting System, G.R. No. 99054, 222 SCRA 707, May 28,
1993.
An illegallydismissed employee may now be paid his back
wages, allowances, and other benefits for the entire period he
was out of work subject to the rule enunciated before the
Mercury Drug Rule, whichis that the employer may, however,
deduct anyamount whichtheemployeemayhaveearnedduring
theperiod of hisillegal termination.
122
Computation of full back
wagesand presentation of proof asto incomeearned elsewhere
by the illegallydismissed employee after his termination and
before actual reinstatement shouldbeventilatedintheexecution
proceedingsbeforetheLabor Arbiter concordant withSection3,
Rule 8 of the 1990 new Rules of Procedure of the National
Labor RelationsComnllssion.
123
In the subsequent case of Pines Ciry Educational Center v. National
Labor Relations Commission,124 however, in a dissenting opinion, J ustice
Padilla expressed the viewthat the interim earnings should not be deducted
from the awarded backwages. He reasoned out that:
Theamendment toArticle279of theLabor Codeintroduced by
Republic Act No. 6715 inserted the qualification 'full' to the
word 'backwages.' Theintent of thelawseemsto beclear. The
plain words of the statute provide that an employee who is
unjustlydismissedisentitledto FULL backwagesfromthe time
of his dismissal to actual reinstatement. The lawprovides no
qualification nor does it state that income earned by the
employee during the period between his unjust dismissal and
reinstatement shouldbe deducted fromsuchbackwages. When
the law does not provide, the Court should not improvise.125 (emphasis
supplied)
J ustice Padilla's dissent in the Pines City case became the Supreme
Court's unanimous view in 1996 in the case of Osmalik Bustamante v.
I"East Asiatic Company, Ltd. vs. Court of Industrial Relations, G.R. No. 29068, 40 SCRA 521
Aug. 31, 1971.
mFerrer v. National Labor Relations Commission, G.R. No. 100898,224 SCRA 410,]uly 5, 1993.
124 G.R. No. 96779, 227 SCRA 655, Nov. to, 1993.
125 [d.
National Labor Relations Commission.
1 26
In its en banc resolution, penned by
J ustice Padilla himself, the Court declared:
Conformably with theevident legislativeintent, backwagesto be
awarded to an illegallydismissed employee, should not, as a
general rule, be diminished or reduced by the earningsderived
by himelsewhereduring theperiod of hisillegal dismissal. The
underlying reason for this ruling is that the employee, while
litigatingthe legalityof his dismissal, must still earn a livingto
support himself and family,whilefull backwageshavetobepaid
by the employer aspart of thepriceor penaltyhehas to pay for
illegallydismissinghis employee. The clear legislativeintent of
the amendment in Republic Act No. 6715 is to give more
benefits to workers than was previously given them under the
MercuryDrug Rule. Theprovisioncallingfor 'full backwages' to
illegally dismissed employees is clear, plain and free from
ambiguity and, therefore, must be appliedwithout attempted or
strainedinterpretation.
127
The Bustamante ruling was reiterated in Ala Mode Garments, Inc. v.
National Labor Relations Commission
128
and other cases and continues to be
applied to date.
Another area which has been the subject of so much controversy is
the issue of when the payment of backwages may be imposed upon the
employer. Even if the decisions of the Supreme Court differ in defining the
nature of the award of backwages, a common thread which these
definitions share is the f:lct that backwages may only be imposed when the
dismissal isillegal.129
126 G.R. No. 111651,265 SCRA 61, Nov. 28, 1996.
127ld
128 G.R. No. 122165,268 SCRA 497, Feb. 17,1997.
129 Imperial Textile Mills Inc. v. National Labor Relations Commission, et al, G.R. No. 101527,
217 SCRA 237, J an. 19,1993; Indophil Acrylic Manufacturing Corporation v. National Labor Relations
Commission, et al., G.R. No. 96488, 226 SCRA 723, Sept. 27, 1993; Reyes v. Minister of Labor, G.R.
No. 48705, 170 SCRA 134, Feb. 9, 1989; Sweet Lines Inc. v. National Labor Relations Commission,
G.R. No. 79975, Mar. 16,1989; General Baptist Bible College v. National Labor Relations Commission,
G.R. No. 85534, Mar. 5, 1993; Bustamante v. National Labor Relations Commission, G. R. No. 111651,
Nov. 28, 1996.
The provision of the law which authorizes the payment of
backwages states that:
the employer shall not terminate the services of an employee
except for a just cause or when authorized by this Title. An
employeewho isuo/ust!y dismimd fromwork shall be entitled to
reinstatement without lossof seniorityrightsandother privileges
andtohisfull backwage.r.
1 30
It is when the termination of employment is declared illegal that
reinstatement and full backwages are mandated under Article 279.
131
To
dismiss an employee, the lawrequires not only the existence of a just and
valid cause but also enjoins the employer to give the employee the
opportunity to be heard and to defend himself.
132
If the dismissal is based
on an authorized cause, the employer must give the employee and the
Department of Labor and Employment written notice thirty (30) days prior
to effectivity of his separation.
133
From the foregoing rules, four possible
situations may be derived: (1) the dismissal is for a just cause under Article
282 of the Labor Code or for an authorized cause under Article 283, or for
health reasons under Article 284, and due process was observed; (2) the
dismissal is without just or authorized cause but due process was observed;
(3) the dismissal is without just or authorized cause and there was no due
process; and (4) the dismissal is for a just or authorized cause but due
process was not observed.
134
According to the Supreme Court, in the first situation, the dismissal
is undoubtedly valid and the employer will not suffer any liability while in
the second and third situations, the dismissals are illegal and Article 279
mandates that the employee is entitled to reinstatement without loss of
seniority rights and other privileges and full backwages.
135
It isin the fourth
situation where the Court has failed to find unanimity in its decisions. If
the dismissal is for a just or authorized cause but due process was not
observed, i.e., no notice was given or the procedure for dismissal was not
130 LABORCODE, art. 279 (asamended).
m Agabon v. National Labor Relations Commission, G. R. No. 158693,442 SCRA 573, Nov. 17,
2004.
132 Santos v. San Miguel Corporation, G.R. No. 149416,399 SCRA 172, Mar. 14,2003.
134 Agabon v. National Labor Relations Commission, G. R. No. 158693,442 SCRA 573, Nov. 17,
2004.
135Id
followed, is the dismissal considered illegal? In such. a case will the
employer be liable for payment of backwages?
Under Republic Act No. 1787, which amended Republic Act No.
1052, the remedy given to an employee, upon whom no proper notice was
served in case of termination of his employment without just cause, is the
right to compensation from the date of said termination in an amount
equivalent to the salaries or wages corresponding to the required period of
notice. Republic Act No. 1787 omitted the alternative recourse of the
employer to give the employee terminal pay in lieu of notice. Thus the law
specifically enjoins the service of written notice on the employee. Failure to
serve such notice will make the employer liable to pay the employee
compensation from the date of termination of his employment in an
amount equivalent to his salaries or wages corresponding to the required
period of notice. Under Republic Act No. 1787, the only protection of the
employee who has been dismissed without just cause or without the
required notice is entidement to compensation equivalent to his salaries or
wages corresponding to the required period of notice-not reinstatement
with back pay.136
Prior to 1989, the rule was that a dismissal or termination is illegal
if the employee was not given any notice. The long standing policy was that
even though the dismissal is based on a just cause or the termination of
employment is for an authorized cause, the dismissal or termination is
illegal if effected without notice to the employee.
The shift in doctrine took place in 1989 in Wenphil Corporation v.
National Labor Relations Commission.137In announcing the change, the
Supreme Court said:
136 Morabe, supra note 49, at 137.
137 G.R. No. 80587, 170SeRA 69, Feb. 8, 1989.
The policy of ordering the reinstatement to the serviceof an
employeewithout lossof seniorityandthepayment of hiswages
duringtheperiodof hisseparationuntil hisactual reinstatement
but not exceeding three (3) years without qualification or
deduction, when it appears he was not afforded due process,
althoughhis dismissal wasfound to be for just and authorized
cause, should be re-examined. It will be high!J prdudicial to the
interests of the emplqyer to impose on him the services of an emplqyee who
has been shown to be guil!J of the charges that warranted his dismissal from
emplqyment. Indeed, it will demoralize the rank and file if the undeseroing,
if not undesirable, remains in the seroice.
138
(emphasissupplied)
The Court, however, also stated that the employer "must
nevertheless be held to account for failure to extend to private respondent
(the employee dismissed) his right to an investigation before causing his
dismissal. The rule is explicit. The dismissal of an employee must be for
just or authorized cause and after due process."139 The Court found that
the employer committed an infraction of the second requirement. Thus, it
imposed a sanction for its failure to give a formal notice and conduct an
investigation as required by law before dismissing the employee.
Considering the circumstances of the case, the Court required the employer
to indemnify the employee in the amount of One Thousand Pesos
(pl,OOO.OO). The measure of this award, according to the Court, depends on
the facts of each case and the gravity of the omission committed by the
employer.
While the Court was unanimous in upholding the dismissal of the
employee for cause, there were diverging opinions as to what sanction to
impose on the employer for failing to comply with the employee'S right to
due process and what the nature of this sanction was.
InJ ustice Padilla's concurring and dissenting opinion, he expressed
the belief that the dismissed employee should begiven aseparation pay. He
writes:
I amof theview, however, that for theemployer'somissionhe
shouldbemadeto paytheseparatedemployeeaseparationpay
(instead of indemnity) in the amount of Pl,OOO.OO. 'Indemni(j
1:18 Id.
139Id.
may connote the obligation of aperson to make good any loss
or damage another has incurred or may-incur by acting at his
request or for his benefit. That which is given to a person to
prevent his suffering a damage
140
while 'separation ptg' is pay
given to an employee on the occasion of his separation from
employment inorder to assuageevenalittletheeffectsof lossof
employment.
141
On the other hand, J ustice Irene Cortes, in her concurring and
dissentingopinion, wasof theviewthat:
my reading of the caserevealsno denial of due process, hence
there is no basis for the award of ONE THOUSAND PESOS
(p1,OOO.OO) asindemnity in favor of privaterespondent. On the
other hand, if the P1,OOO.OO is imposed as a sanction in the form of
administrative penalty for failure of petitioner to comply strictly
with duly promulgated regulations implementing the Labor
Code, the amount if authorized, should formpart of the public
fundsof thegovemment.
142
(emphasissupplied)
Like J ustice Cortes it is my view that private respondent-
employee has not been denied due process. But even if
petitioner-employer had failedto comply with the requirements
of investigation and hearing, I believewithJ ustice Padillathat it
is not an indemnity that petitioner should be made to pqy but rather
separation pqy in such amount as m? bejustified under the circumstances of
the case, not out of right, but to cushton the impact of his loss of empl'!Yment.
In fact, this is the practice presently being followed by the
National Labor RelationsCommission.
143
(emphasissupplied)
These unresolved differences in opinion notwithstanding, the
majority opinion became known astheWenphil Doctrine and was applied
bytheSupremeCourt insubsequent cases.
140 Mill Supply Co. v. Central Azucarera del Danao, 44037-R, Dec. 19,1979; tited in Philippine Law
Dictionary, 3rd Ed., F.B. Moreno, p. 463.
141 G.R. No. 80587, 170 SCRA 69, Feb. 8, 1989.
142 Jd
1 43 Jd
In Sebuguero v. National Labor Relations Commission,l44 J ustice Davide
J r., made this clear pronouncement:
It is now settled that where the dismissal of an employeeisin
fact for ajust and validcauseand is so proven to be but he is
not accordedhisright to dueprocess, i.e., hewasnot furnished
thetwinrequirementsof noticeandtheopportunity to beheard,
the dismissal shall be upheld but the emp~er must be sanctionedfor non-
compliance with the requirements of orftr failure to obseroedue process. The
sanction, in the nature of indemnification or penalty, depends on thefacts of
each case and the gravi!J of the omission committed I?J the emplqyer.
1 45
(emphasissupplied)
1bis ruling was later reiterated by J ustice Puno in Nath v. National
Labor Relations Commission.
l46
Although confusingly, J ustice Puno stated that
failure to comply with the requirements "taints the dismissal with illegality"
and in the same breath upheld the legality of the dismissal by saying that the
employee can be dismissed for just cause. He wrote:
The rulesrequirethe employer to furnishtheworker sought to
be dismissed with two written notices before termination of
employment can be legallyeffected. Failure to complY with the
requirements taints the dismissal with illegality_Be that as it m'!Y, private
respondent can dismiss petitioner ftr just cause.
147
(emphasissupplied)
J ustice Puno's statement notwithstanding, it was ruled that even if
the employee was not given due process, the failure did not operate to
eradicate the just causes for dismissal. The dismissal being for just cause,
albeit without due process, did not entitle the employee to reinstatement,
backwages, damages and attorney's fees.
148
Also, in Camua v. National Labor Relations Commission
149
the Supreme
Court, through J ustice Mendoza, decreed-
144 G.R. No. 115394,248 SCRA 532, Sept. 27, 1995.
145 Jd.
146 G.R. No. 122866,274 SCRA 379,]une 19, 1997.
1 47 Jd
148 Jd.
149 G.R. No. 116473,279 SCRA 45, Sept. 12, 1997.
No writtennoticeof thechargeshadbeengivento petitioner by
the respondent company. Accordingly, in accordance with the
well-settled rule, private respondents should pay petitioner
PI ,000.00asindemnityfor violationof hisright todueprocess.
Thus, under the law and jurisprudence, non-observance of the
procedural requirements caused the employer to be penalized by way of
paying damages to the employee the amounts of which fluctuated through
the years. For just causes the indemnity ranged from One Thousand Pesos
(pl,OOO.OO) to Ten Thousand Pesos (pI0,OOO.OO).150 For authorized causes,
the award ranged from Two Thousand Pesos (p2,OOO.OO) to Five Thousand
Pesos (pS,OOO.OO).151
In a case for illegal dismissal ftled by a retrenched employee who
was not given the required notice by his employer, the Supreme Court, after
eleven years of applying the \Venphil Doctrine, declared that there was a
need to re-examine such doctrine.
152
In a decision penned by J ustice
Mendoza, it was explained that:
Today, we once again consider the question of appropriate
sanctionsfor violationsof thenoticerequirement inlight of our
experience during the last decade or so with the Wenphil
15" Shoemart, Inc. v. National Labor Relations Commission, G.R. No. 74229, 176 SCRA 385, Aug.
11, 1989- The employee was found to have abandoned his job but for failure to observe the notice
requirement, the employer was fined P1,000.00; Pacific Mills, Inc. v. Alonzo, G.R. No. 78090, 199
SCRA 617,]uly 26, 1991- The employee violated company rules and regulations but because of
procedural lapse the company was fined P1,000.00; Aurelio v. National Labor Relations Commission,
G.R. No. 99034, 221SCRA 432, Apr. 12,1993- The managerial employee breached the trust and
confidence of his employer but for failure to observe the notice requirement the company was fined
P1,000.00; Worldwide Papermills Inc. v. National Labor Relations Commission, G.R. No. 113081,244
SCRA 125, May 12, 1995- The employee was found guilty of gross and habitual neglect of his duties
and of excessive absences. For failure to comply with the notice requirement the company was fined
P5,000.00; Reta v. National Labor Relations Commission, G.R. No. 112100,232 SCRA 613, May 27,
1994- The employee was guilty of inefficiency, negligence and insubordination but the company was
fined P10,000.00 for failure to observe the notice requirement.
151 Sebuguero v. National Labor Relations Commission, G.R. No. 115394,248 SCRA 532, Sept.
27,1995- The employees were retrenched in order to prevent further losses but the company failed to
observe the notice requirement, hence was fmed P2,OOO.00for each employee; Balbalec et al. v. National
Labor Relations Commission, G.R. No. 107756,251 SCRA 358, Dec. 19,1995- The employees were
retrenched to prevent business losses but the company was fmed P5,000.00 for each employee for
failure to observe the notice requirement.
IS! Serrano v. National Labor Relations Commission, G.R. No. 117040,323 SCRA 445,]an. 27,
2000.
doctrine. The number of cases involving dismissals without the
requisite notice to the employee, although effected for just or
authorized causes, suggests that the imposition of fine for
violation of the notice requirement has not been effective in
deterring violations of the notice requirement. We agree with our
esteemed colleagues, J ustices Puno and Panganiban, that we
should rethink the sanction of flne for an employer's disregard
of the notice requirement. We do not agree, however, that
disregard of this requirement by an employer renders the
dismissal or termination of employment null and void. Such rule
was abandoned in \'V'enphil because it is really unjust to require
an employer to keep in his service one who is guilty, for
example, of an attempt on the life of the employer or the latter's
family, or when the employer is precisely retrenching in order to
prevent losses. The need is for a rule which, while recogni~ng the
emplqyee's right to notice before he is dismissed or laid riff, at the same time
acknowledges the right of the emplqyer to dismiss for a'!)l of thejust causes or
to terminate emplqyment for a'!)l of the authorized causes. If the Wenphil
rule imposing a flne on an employer who is found to have
dismissed an employee for cause without prior notice is deemed
ineffective in deterring employer violations of the notice
requiremen t, the reme4Y is not to declarethe dismissal void if there arejust
or valid grounds for such dismissal or if the termination isfor an authorized
cause. That would be to uphold the right of the emplqyee but de'!)l the right of
the emplqyer to dismiss for cause. Rother, the reme4Y is to order the pqyment
to the emplqyee of full backwages from the time of his dismissal until the
coult finds that the dismissal was for a just cause. But, otherwise, his
dismissal must be upheld and he should not be reinstated. This is
because his dismissal is ineffectua/.
1
S3
Thus, in the process of replacing the \Venphil Doctrine, the
Supreme Court introduced anew type of dismissal-that which is iniffedual.
According to the Court, an ineffectual dismissal is not void. Yet, the
consequences of such a dismissal is similar to an illegal dismissal to the
extent that the employer is required to give the dismissed employee full
backwages from the time of dismissal until the court finds that the dismissal
is for cause. The only difference between the two types of dismissals is that
when the dismissal is ineffectual, the employer is not required to reinstate
the dismissed employee. In requiring the employer to pay the dismissed
employee full backwages, the majority opinion and the separate opinions of
J ustice Puno and Panganiban proceed from different rationales.
J ustice Puno argues that an employer's failure to comply with the
notice requirement constitutes a denial of the employee's right to due
process. Prescinding from this premise, he quotes the statement of Chief
J ustice Concepcion in V da. de Cuqycong v. V da. de Sengbengco
1 54
that "acts of
Congress, as well as of the Executive, can deny due process only under the
pain of nullity, and judicial proceedings suffering from the same flaw are
subject to the same sanction, any statutory provision to the contrary
notwithstanding." J ustice Puno concludes that the dismissal of an employee
without notice and hearing, even if for a just cause or for an authorized
cause, is a nullity. Hence, even if just or authorized causes exist, the
employee should be reinstated with full back pay. On the other hand,
J ustice Panganiban quotes from the statement in People v. Bocar
55
that
"where the denial of the fundamental right of due process is apparent, a
decision rendered in disregard of that right isvoid for lack of jurisdiction."
The majority opinion, however, explained that not all notice
requirements are requirements of due process. Some are simply part of a
procedure to be followed before aright granted to aparty can be exercised.
Others are simply an application of the J ustinian precept, embodied in the
Civil Code, to act with justice, give everyone his due, and observe honesty
and good faith toward one's fellowmen.
156
The majority said that such is the
notice requirement in Articles 282-283.
In declaring that the notice requirement was not a requirement of
due process, the majority stated:
We hold, therefore, that, with respect to Art. 283 of the Labor
Code, the employer's failure to comply with the notice
requirement does not constitute a denial of due process but a
mere failure to observe a procedure for the termination of
employment which makes the termination of employment
merely ineffectual. It is similar to the failure to observe the
provisions of Art. 1592, in relation to Art. 1191, of the Civil
154 G.R. No. 11837, 110 Phil. 113, Nov. 29, 1960.
t55 G.R. No. 27935, 138 SCRA 166, Aug. 16, 1985.
156 CIVIL CODE, art. 19.
Code in rescinding a contract for the sale of immovable
property.157(emphasissupplied)
The majority opinion construed Article 279 of the Labor Code,
which Article supposedly defines what dismissals are illegal, as not covering
situations where the dismissal is for a just or authorized cause without
compliance with the procedural requirements. It was explained therefore
that:
Indeed, under theLabor Code, only theabsenceof ajust cause
for theterminationof employmentcanmakethedismissal of an
employeeillegal.Thus, onlY if the termination oj emplqyment is not for
a'!Y oj the causes provided I?JIlaw is it illegal and, therefore, the emplqyee
should be reinstated and paid backwages. To contend, as Justices Puno and
Panganiban do, that even if the termination is for ajust or authorized cause
the emplqyee concernedshould be reinstated and paid backwages would be to
amend Art. 279 I?JIadding another ground for considering a dismissal
illegal. What ismore, it wouldignorethefact that under Art. 285,
if it is the employeewho failsto giveawritten notice to the
employer that he isleavingthe serviceof thelatter, at least one
month in advance, his failure to comply with the legal
requirement does not result in makinghis resignationvoid but
only in making him liable for damages. This dispariry in legal
treatment, which would resultfrom the adoption oj the theory oj the minoriry
cannot simplY be explained I?JIinvoking President Ramon MagsCfYscry's
motto that 'he who has less in life should have more in law. ~58(emphasis
supplied)
\V'hat seems contradictory in the majority opinion's logic, however,
was that while it stated that: "to contend, asJ ustices Puno and Panganiban
do, that even if the termination is for a just or authorized cause the
employee concerned should be reinstated and paid backwages would be to
amend Art. 279 by adding another ground for considering a dismissal
illegal," the majority nevertheless decreed "if it is shown that the employee
was dismissed for any of the just causes, then, he should not be reinstated.
However, he must be paid backwages from the time his employment was
terminated until it is determined that the termination of employment is for
157 Serrano v. National Labor Relations Commission, G.R. No. 117040,323 SCRA 445, J an. 27,
2000.
158 Id.
a just cause because the failure to hear him bifore he is dismissed renders the
termination of his emplqyment without legal ejfect."159
However, going back to Article 279 of the Labor Code, it seems
that the imposition of backwages is limited to situations where the
employee is illegally dismissed. Said article provides: "An employee who is
u,yust!y dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to hisfull backwages."16o Therefore,
had the majority intended not to "amend", as it were, Article 279 of the
Labor Code by adding as another ground for considering a dismissal illegal
the lack of notice even if the dismissal is for ajust or authorized cause, then
the Court should have refrained from imposing the payment of full
backwages by the employer.
A justification in imposing full backwages while upholding the
legality of the dismissal may perhaps be made out in another part of the
decision, wherein the majority stated that the notice requirement in Articles
282-283 is simply an application of the J ustinian precept, embodied in the
Civil Code, to act with justice, give everyone his due, and observe honesty
and good faith toward one's fellowmen. The majority further stated that
"the consequence of the failure either of the employer or the employee to
live up to this precept is to make him liable in damages, not to render his
act (dismissal or resignation, as the case may be) void. The measure of damages
is the amount of wages the emplqyee should have receivedwere it not for the termination of
his emplqyment without prior notice. If warranted, nominal and moral damages
may also be awarded."161However, in another part of the same decision,
the majority did not seem to characterize the payment of backwages as
damages, but rather as a form of penalty. In the early part of the decision,
J ustice Mendoza thus wrote: "Today, we once again consider the question
of appropriate sanctions for violations of the notit'e requirement ... If the Wenphil rule
imposing a fine on an employer who is found to have dismissed an
employee for cause without prior notice is deemed ineffective in deterring
employer violations of the notice requirement, the remedy is not to declare
the dismissal void if there are just or valid grounds for such dismissal or if
the termination is for an authorized cause. Rather, the reme4Y is to order the
IS? [d.
160 LABORCODE, art. 279 (asamended).
161 Serrano v. National Labor Relations Commission, G.R. No. 117040, 323 SCRA 445, J an. 27,
2000.
pcryment to the emplqyee of full backwages from the time of his dismissal until the ,"our!
finds that the dismissal was for ajust cause. "162
The characterization of the payment of backwages as a form of
damages or as a penalty is not merely academic since such characterization
has significant consequences. If backwages were characterized as a form of
damages, then pursuant to the Civil Code and established jurisprudence,
generally there must be a fmding of malice or bad faith to justify the award
of damages or even if there is no malice or bad faith, the amount of
damages may be mitigated or must be considered in light of the peculiar
circumstances surrounding each case.
163
If, on the other hand, backwages is
imposed as apenalty, then that penalty may be imposed upon the violation
of the notice requirement and such amount may be uniform in all cases.
In any case, the Supreme Court in the case of the employee
Serrano, required the employer Isetann Department Store to pay the former
separation pay equivalent to one (1) month pay for every year of service, his
unpaid salary, and his proportionate 13th month pay and, in addition, full
backwages from the time his employment was terminated on October 11,
1991 up to the time the decision became final in J anuary 27, 2000. The
employer was thus required to pay the employee backwages (either as
damages or as penalty) the employee'S wage equivalent to nine (9) years, for
failing to comply with the notice requirement.
Four years after the Serrano Doctrine was laid down, the Court
again found occasion to re-examine its previous ruling in a case for illegal
dismissal fJ led by employees who were dismissed for a just cause without
receiving the required notice. The Court, this time in a decision penned by
J ustice Ynares-Santiago, stated that:
Webelieve, however, that the rulingin Serrano didnot consider
the full meaning of Article 279 of the Labor Code. The
termination is illegal only if it isnot for any of the justifiedor
authorizedcausesprovidedbylaw. Pqyment of backwages and other
162 fd.
163 Reyes v. Minister of Labor, G.R. No. 48705, 170 SCRA 134, Feb. 9, 1989; Savellano v.
Northwest Airlines, G.R. No. 151783,405 SCRA 416, J uly 8, 2003.
benefits, including reinstatement, isjustified onfy if the empl'!}ee was u'!Justfy
dismissed. The fact that the Serrano ruling can cause unfairness and
injustice which elicited strong dissent has prompted us to revisit
the doctrine. After carefully analyzing the consequences of the
divergent doctrines in the law on employment termination, we
believe that in cases involving dismissals for cause but without
observance of the twin requirements of notice and hearing, the
better rule is to abandon the Serrano doctrine and to follow
Wenphilby holding that the dismissal was for just cause but
imposing sanctions on the employer. 1M (emphasis supplied)
The Court, thus, abolished the concept of an ineffectual dismissal
previously introduced by the Serrano Doctrine and explained the rationale
behind this:
The unfairness of declaring illegal or ineffectual dismissals for
valid or authorized causes but not complying with statutory due
process may have far-reaching consequences. This would
encourage frivolous suits, where even the most notorious
violators of company policy are rewarded by invoking due
process. This also creates absurd situations where there is ajust
or authorized cause for dismissal but a procedural infirmity
invalidates the termination. Invalidating the dismissal would not
serve public interest. It could also discourage investments that
can generate employment in the local economy.165 (emphasis
supplied)
The Court also found occasion to clarify what the remedy was for
situations where the dismissal was for cause but there was failure to comply
with the notice requirement:
Where the dismissal is for ajust cause, asin the instant .case, the
lack of statutory due process should not nullify the dismissal, or
render it illegal, or ineffectual. However, the employer should
indemnify the employee for the violation of his statutory rights,
as ruled in Reta v. National Labor Relations Commission.
166
The
indemnity to be imposed should be stiffer to discourage the
abhorrent practice of "dismiss now, pay later," which we sought
to deter in the Serrano ruling. The sanction should be in the nature of
164 Agabon Y. National Labor Relations Commission, G. R. No. 158693,442 SeRA 573, Nov. 17,
2004.
165 [d.
166 G.R. No. 112100,232 SCRA 613, May 27,1994.
indemnification or penalty and should depend on the facts of each case,
taking into special consideration the gravity of the due process violation of the
employer. The violationof the petitioners' right to statutory due
process by the private respondent warrants the pqyment of
indemnity in the form of nominal damages. The amount of such
damagesisaddressedto thesounddiscretionof thecourt, taking
into account the relevant circumstances. Considering the ,prevailing
circumstances in the case at bar, we deem it pro,per to fix it at P30, 000. 00.
Webelievethisformof damageswouldservetodeter employers
from future violations of the statutory due process rights of
employees. At the very least, it provides a vindicatiQn or
recognition of thisfundamental right granted to thelatter under
the Labor Code and its Implementing Rules.
IG7
(emphasis
supplied)
The Supreme Court stated that failure to comply with the due proms
requirements of notice and hearing under Articles 282-283 and the
Implementing Rules of the Labor Code violate the Labor Code and
constitutes failure to comply with statutory due process, not constitutional due
process. Constitutional due process protects the individual from the government
and assures him of his rights in criminal, civil or administrative proceedings
while statutory due process found in the Labor Code and Implementing Rules
protects employees from being unjustly terminated without just cause after
notice and hearing.
IG8
The Supreme Court, in determining what to impose on the
employer for violating the employee's right to statutory due process, used as
basis the Civil Code provision on nominal damages.
169
It also cited the
decision of the Court in Viernes v. National Labor Relations Commissions,170
where it was enunciated that an employer is liable to pay indemnity in the
form of nominal damages to an employee who has been dismissed if, in
effecting such dismissal, the employer failsto comply with the requirements
of due process. It was held in that case that this indemnity is intended not
1 67 [d.
1 68 [d.
169 Under Article 2221 of the CIVIL CODE, nominal damages isadjudicated in order that aright of
the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and
not for the purpose of indemnifying the plaintiff for any loss suffered by him.
170 G.R. No. 108405,400 SCRA 557, Apr. 4, 2003 ,ilillg Kwibvay Engineering Works v. National
Labor Relations Commission, G.R. No. 85014, 195SCRA 526, Mar. 22, 1991; Aurelio v. National Labor
Relations Commission, G.R. No. 99034,221 SCRA 432, Apr. 12, 1993; and Sampaguita Garments
Corporation v. National Labor Relations Commission, G.R. No. 102406,233 SCRA 260,]une 17, 1994.
to penalize the employer but to vindicate or recognize the employee's right
to statutory due process which was violated by the employer.
l7l
In declaring that the sanction should be in the form of nominal
damages, the Court included the caveat that: "Such sanctions, however,
must be stiffer than that imposed in Wenphil."172
Adding that "By doing so, this Court would be able to achieve a
fair result by dispensing justice not just to employees, but to employers as
well"173as if admitting that the previous ruling did not dispense justice to
the employers.
VIII. INTERNATIONAL PRACTICE ON TERMINATION: A GLOBAL
PERSPECTIVE
The Philippines is not the only country which has prescribed the
procedure on termination by legislation. Governments are interested in the
development of these termination standards as ameans of minimizing the
causes for the disturbances in the economic process and of public order in
their respective countries.
174
In the recent case of Agabon v. National Labor Relations CQmmission,175
which overturned a doctrine on dismissal which has been applied for four
(4) years, the Supreme Court took into account the public interest and the
effect of the ruling on potential investments. It held that: "Invalidating the
dismissal would not serve public interest. It could also discourage
investments that can generate employment in the local economy."176 It
cannot be denied that the increasing trend towards globalization has
become a factor in formulating government policies and legislation and in
interpreting and applying such policies and legislation in an attempt to place
the Philippines at a globally competitive position. A discussion of the law
171 Jd. citing Better Buildings, Inc. v. National Labor Relations Commission, G.R. No. 10'1714,283
SCRA 242, Dec. 15,1997; Iran v. National Labor Relations Commission, G.R. No. 121'127,28'1 SCRA
433, Apr. 22, 19'18.
2004.
173 Jd
174 Morabe, .rupra note 49, at 242.
m Agabon v. National Labor Relations Commission, G. R. No. 158693,442 SCRA 573, Nov. 17,
2004.
176 Jd
and practices on termination of other countries is thus included here but
only for the purpose of showing what the other countries are doing, and
perhaps provide ideas as to what improvements may be implemented in the
Philippine setting.
In his authoritative article on comparative law, Kahn-Freund
argued that the comparative study of laws and institutions could serve a
number of important purposes, including research and education.
177
But he
also expressed one major caveat on the use of comparative study-it could
not serve unamditiona//y as ameans whereby anation could bring about legal
or institutional change within its own boundaries: no country could expect
to solve its legal, institutional or social problems by borrowing the laws,
institutions and practices of another.
178
Comparative law is sought to be
applied here only for research and education.
In Germany, a dismissal that is socially unwarranted is without
effect. This principle is set out in an Act to provide protection against
unwarranted dismissal, dated 10 August 1951, which is applicable only to
workers aged twenty (20) years or over who have been continuously
employed in the same establishment or undertaking for more than six (6)
months and only to undertakings or offices normally employing more than
five (5) workers, excluding apprentices.
179
A socially unwarranted dismissal
is defined by the Act as meaning "any dismissal not based on reasons
connected with the person or the conduct of the employee or on pressing
operational requirements which preclude his continued employment in the
undertaking."l80 According to the great number of labor court decisions
which have interpreted this provision, reasons connected with the person of
the employee would be, for instance, insufficient physical or mental ability,
177 Otto Kahn Freund, On Uses and Misll.res qfComparalive LAw, 37 MODERN L. REv. 8-10 (1974).
178 Dagupan Bus Co Inc. v. National Labor Relations Commission, G.R. No. 94291, 191SCRA
328, Nov. 9, 1990.
179 Law of August 10, 1951, An act to provide protection against unwarranted dismissals, BGII
499, translated in 1951I.L.O. Legislative Series 1951Ger. F.R. 4. (1951).
180 Law of August 10, 1951, An act to provide protection against unwarranted dismissals, BGII
499, translated in 1951I.LO. Legislative Series 1951Ger. F.R. 4. (1951).
lack of skill, inability to absorb the training required for the job, and certain
cases of sickness. Reasons connected with the conduct of the worker might
include unreliability, negligence and misbehavior. Reasons based on
pressing operation needs are, for example, lack of orders or raw materials,
scarcity of coal or electricity, rationalization measures, change in production
methods or closing of departments. Section 66 of the Workers
Constitution Act of 1952 stipulates that the employer must also inform the
"works council" (abody of elected workers' representatives in the plant) of
every intended dismissal and of the reasons for it and must ask for its
opinion within areasonable period of time. The purpose of aconsultation
of this kind is to bring about a discussion between management and
workers' representatives with aview to examining and weighing the various
aspects of the case. The employer is, however, not bound by the opinion
of the works council.
181
Section 28 of Book I of the Labor Code of France states that
abusive termination of the employment relationship by one of the parties
may give rise to damages. In the absence of a legal definition of what
would be an "abusive" dismissal, the courts have established a body of
precedents both as regards those reasons which render a dismissal abusive
and those which do not. Reasons of the latter type include reduction of
personnel as a consequence of reorganization, closing of establishment,
serious misconduct, occupational inaptitude, prolonged illness, and other
analogous circumstances. An ordinance enacted on 24 May 1945 prescribes
that dismissals must be authorized by the manpower service of the area.
Although this service may only consider the probable economic effect of
the proposed dismissal, its authorization must be requested in all dismissal
cases, including those for reasons connected with the person or the conduct
of the worker concerned.
Under the Netherlands Civil Code, a worker may be awarded
damages or, under certain conditions, reinstatement if he has been
dismissed in amanner which is manifestly unreasonable. According to the
provisions of the law a dismissal may be regarded as manifestly
ApPLYING SOCIALJ USTICE
unreasonable, if among other things, no reasons are stated if apretext or a
false reason is given, if the consequences to the worker of the dismissal
outweigh the advantage of such dismissal to the employer, or if the worker
is dismissed in contravention of alegislative provision or custom relating to
staff composition or seniority rules, and if there isno serious reason for not
complying with these rules.
182
In practice the intervention of the manpower
service, which must authorize dismissals and therefore is empowered to
investigate the reasons on which such a proposed measure is based, has a
great effect on preventing unjustified dismissals.
In Italy, where under the general legislation in force, the employer
is not obliged to justify a dismissal, an agreement restricts unjustified
individual dismissals. This agreement was concluded on 18 October 1950
between the central organizations of employers and workers and given
force of lawby a Presidential Decree. It applies only to undertakings with
more than thirty five (35) workers, and provides that aworker who is of the
opinion that his dismissal is unjustified may request the intervention of his
trade union in a conciliation and arbitration procedure. During these
proceedings the conciliation and arbitration committees may investigate the
justification of the reasons for dismissal advanced by the employer and may
make a final award.
183
In the United Kingdom, the principle that dismissals must be
justified is not set out in legislation. It has neither been established by
common lawnor has it to any extent been included in collective agreement
clauses. But in practice, avery important brake on arbitrary or discretionary
dismissal is the very presence of a union. In many industries and
undertakings, the employer's power to dismiss is restrained by fear of
repercussion in the form of strikes or other economic pressures <1nthe part
of the trade unions.
182 NE1HERLANDS CIVIL CODE, 1639 (asamended in 1953).
183 Pres. Dec. of J uly 14, 1960.
6. UNITED STATES: General Prohibition v. Dismissal without
cause
The concept that a dismissal must be based on a reason justifying
such action is also widely accepted in the United States. This is largely the
case under collective bargaining agreements. Under the provisions of
typical collective agreements, proposed dismissals must meet the test of just
cause. Dismissals usually implies atermination of employment relationship
resulting from reasons attributable to the worker himself and in cases of
reduction of personnel for reasons connected with the operation of the
undertaking, the typical procedure under collective agreements for dismissal
may be simply a general formula prohibiting dismissals if there is no just
cause. A worker may challenge the employer's dismissal decision through
his union by recourse to the grievance procedure established by the
collective agreement which usually provides as a last step for a binding
decision by an independent arbitrator. Reasons constituting just cause
generally include cases of serious misconduct, incompetence, disability or
violation of work rules.
In Singapore, employment is characterized as a contract of
service
184
185 Under their law, there is no requirement that a contract of
service must provide for the termination of it. The Employment Act
determines the manner and procedure for terminating employment.
Section 9 thereof provides that acontract may be terminated at the end of a
specified period or after completion of a specified piece of work for which
the contract was made. Under Section 10, either party to a contract may
terminate it by giving the other party notice in writing of his intention.
Length of notice shall be the same for both employee and employer. If no
provision for notice occurs in the contract, its period shall be not less than:
one (1) day's notice for employees with less than twenty six (26) weeks'
service; one (1) week's notice for employees with twenty six (26) weeks to
two (2) years' service; two (2) weeks' notice for employees with two (2) to
five (5) years' service; and four (4) weeks' notice for employees with five (5)
18~A contract of service isdefined asan agreement, whether written or oral, express or implied,
whereby one person agrees to employ another asan employee and that other person agrees to sen'e his
employer asan employee.
,.5Lai tat Yuen, THE LAWAND PRACTICE IN TERMINATION OF EMPLOYMENT IN Sinb>aporeat 91
(1986).
ApPLYINGSOCIALJ USTICE
WITHOUTCAUSINGANINJ USTICE
years' service or more. Section 11provides that either party may terminate
a contract without notice by paying the other party an indemnity in lieu.
Contracts may also be terminated without notice if the other party has
willfully broken a condition of the contract.
186
If the dismissed employee
considers that his termination was not in good faith, the aggrieved
employee may, within one month of such dismissal, make by himself or
through his union, representations in writing to the Minister of Labor to be
reinstated in his former employment.
187
The officers in the Ministry of
Labor acting on behalf of the Minister would have to find out the facts. In
the process, they may initiate conciliation to settle the dispute. If no
settlement is achieved, the matter must be referred to the Minister for a
decision. The Minister's decision is final and cannot be challenged in any
court of lawor the Industrial Arbitration Court.
188
In Thailand, to terminate or dismiss an employee the employer
must see whether he is justified under Section 47 of the Labor Protection
Law and Section 583 of the Civil and Commercial Code (Book III Specific
Contracts, Title VI Hire of Service). The valid grounds for termination are:
performing the duty dishonestly or intentionally committing a criminal
offense against the employer; intentionally causing damage to the employer;
violating regulations or rules concerning work or lawful orders of the
employer after written caution has been given by the employer (in serious
cases, the employer is not required to give caution); neglecting duty for
three consecutive working days without justifiable reason; being imprisoned
by final judgment of imprisonment. Under these conditions, the employer
is not required to make severance pay. When the employee has not
provided valid grounds for termination, the employer is required to give
advance notice and provide severance pay. If the duration of the contract is
not fixed, either party can terminate it by giving notice. But no more than
three (3) months notice need be given. The employer can, on giving such
notice, immediately dismiss the employee by paying him his remuneration
up to the expiration of the notice.
189
'86 Employment Act of Sing:lpore.
187 Employment Act of Sing:lpore, 14(2); and Industrial Relations Act of Singapore, 53 (2).
'88 Lai Tat Yuen, .rpra note 185, at 93.
'89 CIVIL AND COMMERCIAL CODE of Thailand, 582.
In addition to advance notice or remuneration in lieu, the employer
must pay severance pay to a regular employee according to his length of
service. The severance pay rates are as follows:
l90
Length of service: Severance Pay
Equivalent to:
120 days- 1year 30 days
1- 3years 90 days
More than 3years 180 days
In Malaysia, it isrequired that in every written contract of service, a
clause shall be included setting out the manner in which it may be
terminated by either party. All contracts for specified periods of more than
amonth shall be in writing. Either party to acontract may at any time give
to the other party notice of his intention to terminate it. The length of
notice period shall be the same for both employer and employee. It is
normally determined by the parties and made inwriting.
191
However, where
there is no such contract or when it is not written down, the notice period
shall not be less than:
-four (4) weeks' notice if the employee has been so employed for
less than two (2) years on the date on which the notice isgiven;
-six (6) weeks' notice if he has been so employed for between two
(2) and five (5) years on such date;
-eight (8) weeks' notice if he has been so employed for more than
five (5) years.
Both parties are free to waive their respective right to notice.
Either party can terminate it without notice on payment of wages in lieu of
notice, the amount payable being the wages for the appropriate term of
"" Labor Protection Law of Thailand, 46.
'91 B. Nithiananthan, Tr IE LAW AND PRACfICE IN TERl\UNATION OF EMPLOY:\lENT IN M.~L\YSL\
at 51(1986).
notice. Either party can also terminate the contract due to willful breach by
the other party of acontracted condition.
l92
Labor Courts have been established to permit employees to seek
redress quickly and cheaply without incurring the court fees or legal
impediments normally associated with judicial courts. They are also
designed for quick disposal of cases and to relieve the civil courts of the
burden of hearing such disputes.
Section 69 of the Employment Act empowers a gazetted Labor
Officer to hear a labor case and to decide any dispute between any
employee and his employer relating to wages due arising out of any term in
the contract of service. He is also empowered to order payment of money
as he deems just, with no limitation on the amount. Among the complaints
that the Labor Officer may entertain are wrongful dismissals (claiming
indemnity in lieu of notice). A worker can also seek the assistance of his
own union in cases where his services have been terminated. Unions can
raise "trade disputes" on behalf of any of their members,193 Once adispute
on termination is raised with the Industrial Relations Department, the
matter will be conciliated by Industrial Relations Officers. The goal is an
amicable settlement. If conciliation proves unsuccessful, the matter can be
referred by the Minister to the Industrial Court for adjudication.
194
In the majority of countries the institutions set up to hear dismissal
cases do not differ from the general procedures followed in settling
individual disputes arising out of the employment relationship because
dismissal regulations are considered as one aspect of the conditions of
employment. A few countries have established special channels for solving
dismissal disputes either entirely independent of or in some way or other
connected with the worker's ordinary redress procedures. The following are
examples of institutions set up by different countries to address labor
related problems, particularly those related to termination of employment.
InEmployment Act of Malaysia (Acr 265).
193 Industrial Relations Act (1967) of Malaysia.
194 Nithiananthan, .I'upra note 191, at 54.
In a number of countries the body which is competent to decide
ultimately on cases of unjustified dismissal is the ordinary law court. That
is, for instance the case in Cuba, Libya, Netherlands, Norway, Turkey,
United Arab Republic and Russia. In other countries, the ordinary court
may intervene only when the settlement efforts of joint conciliation
committees at the level of the undertaking are unsuccessful.
Some countries have set up by legislation a special branch of the
judiciary such as labor courts (e.g, Argentina, Bolivia, Brazil, Colombia,
Costa Rica, Dominican Republic, Germany, Guatemala, Honduras, Spain,
Venezuela), or conciliation authorities (Austria), or conciliation and
arbitration boards (Mexico), or "conseils deprod' homes'? as afirst instance
of the general judiciary (e.g. Belgium, Cameroun, Central African Republic,
Chad, Congo, Dahomey, France, Gabon, Ivory Coast, Malagasy Republic,
Niger, Senegal, Togo).
In other countries, casesof allegedlyunjustified dismissals aredecided
outside the statutory courts system by special bodies or through special
proceedings established by agreement between the parties. Mention may be
made in this connection of the grievance and arbitration process embodied in
most of the collective agreements in Canada, in the United States, of the
Swedish Labor Market Board and of the special joint conciliation and
arbitration committees created by the Italian agreement on individual
dismissals.
195
IX. RECOMMENDATIONS
A. SHARED RESPONSIBILITY
Because termination affects security of tenure it is avery sensitive
area. In a country where there is high unemployment and under-
employment, workers and unions react strongly to actual and potential
195 Report VII (1) Termination of Employment, International Labor Conference 4th Sessions, 7th
Item on the Agenda, International Labor Organization, 1961.
dismissals, especially when these are coupled with unfair labor practices.
There is a strong need therefore for the parties, specially the workers, to
understand the fmancial and other problems of industry. Workers have to
be taken into management's confidence asto what isgoing on and for plans
for recovery if their cooperation and understanding are to be expected.
Unilateral decisions by management affecting the jobs of union members
can easily be misunderstood and can often lead to work stoppages.
l96
Slow resolution of cases is another significant concern. It is often
pointed out that, since termination cases involve the very' sotii'ce 'of
workers' livelihood, they should be resolved expeditiously. Del~ys mer:ely
promote gave injustice. And while the major cause of delay isthe clogged'
dockets at the Courts and the Department of Labor, it cannot be denied
that excessive legalism and unscrupulous misuse of elaborate rules and
procedures are also important causes.
197
Earlier in this paper, examples of
institutions established in different countries which handle cases of
employment termination have been enumerated. Perhaps the Philippines
should explore the possibility and viability of establishing new agencies or
bodies to resolve labor cases, particularly cases on employment termination
which undoubtedly constitute majority of the labor cases fJ led each year.
Opening new avenues, especially those involving conciliation and grievance
and arbitration processes, may ultimately relieve the clogged dockets of the
Department of Labor and the Supreme Court, with respect to the labor
cases fJ led.
As illustrated earlier in the varying and inconsistent
pronouncements by the Supreme Court concerning the issue of dismissal
and the consequences of failing to comply with the requirements of
effecting such dismissal, there isaneed to provide for specific rules in cases
when the dismissal is for a just and valid cause and the procedural
requirements are not complied with in order to avoid judicial interpretation.
196 Trajano, supra note 66, at 79.
,., Trajano, .rupra note 66, at 81.
The dangers of leaving such matters to judicial interpretation cannot be
underestimated. In overturning the doctrine laid down in Serrano v.
NLRC,1 98 the Court stated that in implementing the new doctrine, "the
Court would be able to achieve afair result by dispensing justice not just to
employees, but to employers aswell"199implying that the previous doctrine
resulted in unfair results to the employer.
In other countries the regulations in force have established more or
less specific rules for the calculation of the compensation or award to be
paid a dismissed employee. Elsewhere, the regulations have fixed a
minimum and a maximum, leaving it to the discretion of the court or
arbitrator to determine the exact number amount. This is, for instance, the
case in Italy, where the agreement provides that the compensation upon
dismissal must amount to at least five (5) and at most eight (8) months'
remuneration. The regulations simply set a maximum in some countries,
e.g. twelve (12) months' wages in Germany and in Spain, and from six (6)
months to three (3) years' wages, according to the length of service, in
Norway. Under the Danish agreement, the indemnity for unreasonable
dismissal may not exceed the amount of thirteen (13) weeks' wages,
calculated on the basis of the average earnings of the worker during the
previous years. Regulations sometimes specify the factors which have to be
taken into account when assessing the compensation in cases of dismissal.
In Norway, for example, the law prescribes that the worker's loss of
earnings, length of service, remuneration, prospects of obtaining new
employment in the same or in another occupation, his personal situation
and all other relevant circumstances should be taken into account. Similar
provisions are also included in German, Moroccan, and Spanish legislation.
There are also countries where the exact amount of the compensation is
fixed by legislation. In Turkey, the compensation to be paid to aworker
whose dismissal is amanifest abuse of the employer'S right to terminate the
contract of employment must be equal to three (3) times the remuneration
in respect of the term of notice.
2OO
198 Serrano v. National Labor Relations Commission, G.R. No. 117040, 323 SCRA 445, J an. 27,
2000.
199 Id.
'''' .rllpra notc 195.
ApPLYING SOCWJ J USTICE
WITI-IOUT CAUSING AN INJ USTICE
Some of the recommendations made by J ustice Bellosillo in his
separate opinion in the case of Serrano v. NLRDol may prove to be helpful.
First, J ustice Bellosillo proposed a change in the terminology used to refer
to the sanction imposed. He explains that since Wenphil Corporation v.
NLRDo2 the Court has already recognized the necessity of imposing a
sanction in the form of indemnity or even damages, when proper, not
specifically provided by any law, upon employers who failed to comply with
the twin-notice requirement. At the very least, he proposed merely achange
in the terminology used, i.e., from "sanction," "indemnity," "damages" or
"penalty," to "disturbance compensation" as he believed to be the more
appropriate term to accurately describe the lamentable situation of the
displaced employees.
203
Regardless of whether this term really accurately
describes the situation of the employees or not, it is submitted that the
proposal of J ustice Bellosillo to change the terminology would be helpful if
only to remove the legal connotations of the different terms so loosely
employed by the Supreme Court. The nature of damages, for example, is
different from penalty and the conditions upon which either of them may
be applied differ at certain points.
Second, J ustice Bellosillo observed that with regard to the
indemnity or penalty, the Court has awarded varying amounts depending on
the circumstances of each case and the gravity of the commission. He then
proposed that the amount of the award be uniform and rational and not
arbitrary. The reason, according to him, for the proposal or modification is
that in their non-compliance with the notice requirement the erring
employers, regardless of the peculiar circumstances of each case, commit
the infraction only by the single act of not giving any notice to their
workers. It cannot be gainfully said that the infraction in one case is heavier
than in the other as the non-observance constitutes one single act.
,All Serrano v. National Labor Relations Commission, G.R. No. 117040,323 SCRA 445, J an. 27,
2000.
202 G.R. No. 80587, 170 SCRA 69, Feb. 8, 1989.
203 Serrano v. National Labor Relations Commission, G.R. No. 117040,323 SCRA 445, J an. 27,
2000.
-If the dismissal is illegal, i.e., there is no just or authorized cause, a
disturbance compensation in the amount of Pl0,OOO.OOmay be considered
reasonable.
-If the dismissal is for ajust cause but without notice, a disturbance
compensation in the amount P5,OOO.OOmay be given.
-In termination for an authorized cause and the notice requirement
was not complied with, we distinguish further:
-If it is to save the employer from imminent bankruptcy or
business losses, the disturbance compensation to be given is P5,OOO.OO.
-If the authorized cause was intended for the employer to earn
more profits, the amount of disturbance compensation is Pl0,OOO.OO.
He strongly recommended that this disturbance compensation
should be given to the dismissed employee at the ftrst instance, the moment
it is shown that his employer has committed the infraction - of not
complying with the notice requirement - to tide him over during his
economic dislocation.
204
''lAbor laws, like human resource
management, have human and economic ends.
Thry must support, if not propel, productive
perftrmance of the enterprisewhileprotecting, if
not providing, human digniry and necessities.
In relation to capital, labor laws must respect
the logic,thefairness and the needfOr realiifng
reasonablereturn on investment. In relation to
labor, labor laws must safeguard the logic,
fairness and the need fOr rewarding one's
contribution to the harvest of the investment.
Indeed, labor laws should support two
2M Ie/.
2D 5 Latin phrase meaning: "J ustice isto be denied to none."
Such Supreme Court pronouncements like- ''We do not lose sight
of the fact that under our laws and the policies of our government, the
labor laws should be construed liberally in favor of the laborer, but on the
other hand the fundamental principle of due process of law should be
sternly applied alike on both the poor and the rich in order to attain proper
justice"207is reflective of the effort of the government to strike a balance
between the interests of the worker and the employer. It presents a
guaranty against the feared abolition of free enterprise and democratic
capitalism in this country, while at the same time it gives assurance to the
onward march of the liberal policy of the government toward the
economically weaker segment of the country's population.
2GB
The effort to strike a balance is a duty which the Supreme Court
has especially taken upon itself to carry out. The Court has held that if it is
clearly shown that in the exercise of management prerogatives by the
employer there has been an abuse to the prejudice of the laborers and that
such act is patently inimical to the interest of the State, the Court will not
hesitate to interfere.
209
However, there has been a little confusion and
haphazardness in the application or interpretation of labor laws, which have
resulted at times in unfair or unjust results either for the employees or for
the employers. Based on the constitutional mandate on protection to' labor,
the courts and labor tribunals have dispensed with what they call
"compassionate justice", disregarding rigid rules and giving due weight to all
the equities of the case.
210
However, in dispensing compassionate justice in
favor of labor, no injustice should be caused to the employer nor should the
clear provisions of the labor lawbe disregarded. In one case, the Supreme
Court, in assailing a decision of the labor tribunal stated: "there is another
reason to strike down the NLRC's 'new judgment' and that is, that in
206 AZUCENA, supra note 13, at 6.
"'7 Magalona &Co. v. Workmen's Compensation Commission and Pedro Genonca, G.R. No.
10338, Apr. 30, 1957.
208 Morabe, supra note 49, at 268.
2lJ 9 LaUnion Labor Union v. Church &Co., Case No. 247-V, Decision, Apr. 3, 1950.
210 Philippine National Construction Corporation v. National Labor Relations Commission, G.R.
No. 83320, 170SCRA 207, Feb. 9, 1989; De Vera v. National Labor Relations Commission, G.R. No.
93221, Nov. 22, 1990; Chua v. National Labor Relations Commission, G.R. No. 105775, 218 SCRA 545,
Feb. 8, 1993.
disregard of the relevant provisiOns of the law, it is made to rest on
'considerations of equity and social justice.' This is impermissible ... Equity
has been defIned as justice outside law. It is grounded on the precepts of
conscience and not on any sanction of positive law. Hence, it cannot
prevail against the expressed provision of the labor laws."211
The role of the judiciary in attaining the proper balance between
labor and management cannot be overemphasized. As illustrated in the
cases of Wenphil, Serrano and Agabon, the Court wields enough power to
interpret what may seem as a clear provision of law, such as Article 279 of
the Labor Code, and impose sanctions as severe as full backwages
equivalent to as much as a decade from the time of the dismissal up to the
fInality of the decision of the Court. In overturning the doctrine laid down
in the case of Serrano, however, the Court did not admit any mistake on its
part but instead looked to the nature of social justice to justify a change in
its ruling. The Court held thus-"This is not to say that the Court was
wrong when it ruled the way it did in Wenphil, Serrano and related cases.
Social justice is not based on rigid formulas set in stone. It has to allow for
changing times and circumstances."212
The Court should take care, however, that in dispensing social
justice they do not engage in judicial legislation. As J ustice Holmes once
said, it is never the job of the judge to render justice, but to apply the law.
J ustice in a larger sense, justice according to morality, is for Congress and
the President to administer, if they see fIt, through the creation of new
law.
213
The Constitution's Social J ustice provisions were meant to be
realized through majoritarian legislation and not through judicial fIat.
214
Thus, sympathy for labor should not be the criterion in deciding a case
involving employers and workers.
215
That the Court has a tendency to
apply social preconceptions in what purport to be interpretations of the law
and the Constitution
216
cannot be denied. In one case where the Court
211 Manning International Corp. v. National Labor Relations Commission, G.R. No. 116629. J an.
16,1991.
212 Agabon v. National Labor Relations Commission, G. R. No. 158693, 442 SCRA 573, Nov. 17,
2004.
213 Hohri v. United States, 793 F.2d 304, D.C. Gr. (1986).
214 Alberto Muyot, Social fUJ/ice and the 1987ConJ/i/li/ion: AimingJor Utopia?, 70 PHIL. L. J . 310
(1996).
2t5 Magalona &Co. v. Workmen's Compensation Commission and Pedro Genonca, G.R. No.
10338, Apr. 30, 1957.
216 Thomas Grey, The ConJ/i/li/ion a.rStrip/lire, 37 STAN.L. REv. 1,24 (1984).
ApPLYING SOCIALJ USTICE
seemed to over extend the application of aConstitutional provision, J ustice
Panganiban, in his dissenting opinion made the following critique:
The majoritycontends theConstitution shouldbeinterpreted to
mean that, after a bidding process is concluded, the losing
Filipino bidder should be given the right to equal the highest
foreign bid, and thus win. However, the Constitution (Sec.
10(2), Article XII) simply states that 'in the grant of
rights... covering national economy and patrimony, the State
shall give preference to qualified Filipinos.' The majority
concedes that there is no lawdefining the extent or degree of
such preference. Specifically, no statute empowers a losing
Filipinobidder to increasehisbidandequal that of thewinning
foreigner. In the absence of such empowering law, the mcgoriry's strained
interpretation, I respectfullY submit, constitutes unadulterated judicial
legis/ation.
21 7
(emphasissupplied)
Applying social justice to attain the proper balance between labor
and capital gains all the more importance with the impact of globalization.
As one author writes-
It isabundantly clear that therearemany socio-economic issues
that the social sectors should raisein relation to the continuing
globalizationand liberalizationof the economy. These should
include how to protect labor rights in the face of the natural
searchof capital to havelabor market flexibility,whichiswidely
defined to mean casualization and sacrificeof job and wage
securityof workers. The realityisthat industry canonlysurvive
global competition if it upgrades and comes up with a lean
operation. Hence, the popularity of reengineering and
downsizingexercises, which, on the other hand, threaten hard-
won labor rightsand benefits. What shouldbe the appropriate
development approach to such issues and what should be tlle
right balance between worker's demand for job and wage
security and capital's search for flexibility and
competitiveness?218
217 Manila Prince I late! v. Government Service Insurance System, G.R. No. 122156,267 SeRA
408, Feb. 3, 1997-
2'. Rene Ofreneo, NOTESON Gl.Olli\UZATIO:-J at 53 (1996).
J ustice Isagani Cruz strongly asserts the need to apply a balanced
approach to labor-management relations and dispense justice with an even
hand in every case:
We have repeatedly stressed that social justice- or any justice
for that matter - isfor thedeserving,whether hebeamillionaire
inhismansion or apauper inhishovel. It istruethat, incaseof
reasonabledoubt, weareto tilt thebalancein favor of thepoor
to whom the Constitution fittingly extends its sympathy and
compassion. But never is it justified to givepreference to the
poor simply because they are poor, or reject the rich simply
because they arerich, for justicemust alwaysbe served for the
poor andtherichalike,accordingtothemandateof thelaw.
219
As interdependent and indispensable partners in nation-building,
labor and management need each other to foster productivity and economic
growth, hence, the need to weigh and balance the rights and welfare of both
the employee and employer. 220
In view of the present administration's effort to provide ahealthier
climate for industrialization and the creation of more employment
opportunities, it would do well for the legislators to develop labor standards
in light of the country's general economic background or for the judiciary
to apply labor laws practically and rationally. The development of such
labor standards and the application of labor laws should not be on the basis
that we need to keep up with the modern or prevailing trend in the United
States and other highly advanced countries. Rather, it should be more on
the basis of what our people basically need and what our country can
afford. Of course, there is always the beacon of light of human justice to
guide and direct us, and the lessons and mistakes of other nations tQ
forewarn us. After all, the field of human relations is so wide and open to
accommodate the good and the bad, the proper and improper, the failures
and the successes. The field of selection for the intelligent humanity is
indeed great and vast. The margin of error can be minimized as time
marches on and as experience accumulates.
221
219 Gelos v. Court of Appeals, G.R. No. 86186,208 SCRA 608, May 8, 1992.
2004.
221 Morabe, Jllpra note 49, at 269.

Labor Law Article - Karen Jimeno

Uploaded by

Copyright:

Available Formats

Labor Law Article - Karen Jimeno

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Labor Law Article - Karen Jimeno

Uploaded by

Copyright:

Available Formats

LABOR LAws ASSECUNDUM RATIONEM t

AND SECUNDUM CARITATEM:

You might also like