G.R. No.

167614

March 24, 2009

ANTONIO M. SERRANO, Petitioner,

vs.
Gallant MARITIME SERVICES, INC. and MARLOW
NAVIGATION CO., INC., Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
For decades, the toil of solitary migrants has helped lift entire
families and communities out of poverty. Their earnings have built
houses, provided health care, equipped schools and planted the
seeds of businesses. They have woven together the world by
transmitting ideas and knowledge from country to country. They
have provided the dynamic human link between cultures,
societies and economies. Yet, only recently have we begun to
understand not only how much international migration impacts
development, but how smart public policies can magnify this
effect.
United Nations Secretary-General Ban Ki-Moon
Global Forum on Migration and Development
Brussels, July 10, 20071
For Antonio Serrano (petitioner), a Filipino seafarer, the last
clause in the 5th paragraph of Section 10, Republic Act (R.A.) No.
8042,2 to wit:
Sec. 10. Money Claims. - x x x In case of termination of overseas
employment without just, valid or authorized cause as defined by
law or contract, the workers shall be entitled to the full
reimbursement of his placement fee with interest of twelve
percent (12%) per annum, plus his salaries for the unexpired
portion of his employment contract or for three (3) months for
every year of the unexpired term, whichever is less.

x x x x (Emphasis and underscoring supplied)

does not magnify the contributions of overseas Filipino workers
(OFWs) to national development, but exacerbates the hardships
borne by them by unduly limiting their entitlement in case of illegal
dismissal to their lump-sum salary either for the unexpired portion
of their employment contract "or for three months for every year
of the unexpired term, whichever is less" (subject clause).
Petitioner claims that the last clause violates the OFWs'
constitutional rights in that it impairs the terms of their contract,
deprives them of equal protection and denies them due process.
By way of Petition for Review under Rule 45 of the Rules of
Court, petitioner assails the December 8, 2004 Decision3 and
April 1, 2005 Resolution4 of the Court of Appeals (CA), which
applied the subject clause, entreating this Court to declare the
subject clause unconstitutional.
Petitioner was hired by Gallant Maritime Services, Inc. and
Marlow Navigation Co., Ltd. (respondents) under a Philippine
Overseas Employment Administration (POEA)-approved Contract
of Employment with the following terms and conditions:
Duration of contract

12 months

Position

Chief Officer

Basic monthly salary

US$1,400.00

Hours of work

48.0 hours per week

Overtime

US$700.00 per month

Vacation leave with pay 7.00 days per month5

On March 19, 1998, the date of his departure, petitioner was
constrained to accept a downgraded employment contract for the
position of Second Officer with a monthly salary of US$1,000.00,

upon the assurance and representation of respondents that he

would be made Chief Officer by the end of April 1998.6

01/30,
1998

Respondents did not deliver on their promise to make petitioner

Chief Officer.7 Hence, petitioner refused to stay on as Second
Officer and was repatriated to the Philippines on May 26, 1998.8

Oct.
01/31,
1998

2,590.00

Nov.
01/30,
1998

2,590.00

Dec.
01/31,
1998

2,590.00

Jan.
01/31,
1999

2,590.00

Feb.
01/28,
1999

2,590.00

Mar.
1/19,
1999
(19
days)
incl.
leave
pay

1,640.00

Petitioner's employment contract was for a period of 12 months or

from March 19, 1998 up to March 19, 1999, but at the time of his
repatriation on May 26, 1998, he had served only two (2) months
and seven (7) days of his contract, leaving an unexpired portion
of nine (9) months and twenty-three (23) days.
Petitioner filed with the Labor Arbiter (LA) a Complaint9 against
respondents for constructive dismissal and for payment of his
money claims in the total amount of US$26,442.73, broken down
as follows:
May
27/31,
1998 (5
days)
incl.
Leave
pay

US$ 413.90

June
01/30,
1998

2,590.00

July
01/31,
1998

2,590.00

August
01/31,
1998

2,590.00

Sept.

2,590.00

-------------------------------------------------------------------------------25,382.23
Amount
adjusted
to chief
mate's
salary

(March
19/31,
1998 to
April
1/30,
1998) +

TOTAL
CLAIM

1,060.5010

are hereby ordered to pay the complainant, jointly and

severally, in Philippine Currency, at the exchange rate
prevailing at the time of payment, the complainants
(petitioner's) claim for attorneys fees equivalent to ten
percent (10%) of the total amount awarded to the
aforesaid employee under this Decision.

---------------------------------------------------------------------------------------------The claims of the complainant for moral and exemplary

damages are hereby DISMISSED for lack of merit.
11
US$ 26,442.73
All other claims are hereby DISMISSED.

as well as moral and exemplary damages and attorney's

fees.
The LA rendered a Decision dated July 15, 1999,
declaring the dismissal of petitioner illegal and awarding
him monetary benefits, to wit:
WHEREFORE, premises considered, judgment is hereby
rendered declaring that the dismissal of the complainant
(petitioner) by the respondents in the above-entitled case
was illegal and the respondents are hereby ordered to
pay the complainant [petitioner], jointly and severally, in
Philippine Currency, based on the rate of exchange
prevailing at the time of payment, the amount of EIGHT
THOUSAND SEVEN HUNDRED SEVENTY U.S.
DOLLARS (US $8,770.00), representing the
complainants salary for three (3) months of the
unexpired portion of the aforesaid contract of
employment.
1avv phi1

The respondents are likewise ordered to pay the

complainant [petitioner], jointly and severally, in Philippine
Currency, based on the rate of exchange prevailing at the
time of payment, the amount of FORTY FIVE U.S.
DOLLARS (US$ 45.00),12 representing the complainants
claim for a salary differential. In addition, the respondents

SO ORDERED.13 (Emphasis supplied)

In awarding petitioner a lump-sum salary of US$8,770.00,
the LA based his computation on the salary period of
three months only -- rather than the entire unexpired
portion of nine months and 23 days of petitioner's
employment contract - applying the subject clause.
However, the LA applied the salary rate of US$2,590.00,
consisting of petitioner's "[b]asic salary,
US$1,400.00/month + US$700.00/month, fixed overtime
pay, + US$490.00/month, vacation leave pay =
US$2,590.00/compensation per month."14
Respondents appealed15 to the National Labor Relations
Commission (NLRC) to question the finding of the LA that
petitioner was illegally dismissed.
Petitioner also appealed16 to the NLRC on the sole issue
that the LA erred in not applying the ruling of the Court
in Triple Integrated Services, Inc. v. National Labor
Relations Commission17 that in case of illegal dismissal,
OFWs are entitled to their salaries for the unexpired
portion of their contracts.18

In a Decision dated June 15, 2000, the NLRC modified

the LA Decision, to wit:
WHEREFORE, the Decision dated 15 July 1999 is
MODIFIED. Respondents are hereby ordered to pay
complainant, jointly and severally, in Philippine currency,
at the prevailing rate of exchange at the time of payment
the following:
1. Three (3) months salary
$1,400 x 3

US$4,200.00

2. Salary differential

45.00

In a Decision dated December 8, 2004, the CA affirmed the

NLRC ruling on the reduction of the applicable salary rate;
however, the CA skirted the constitutional issue raised by
petitioner.25
His Motion for Reconsideration26 having been denied by the
CA,27 petitioner brings his cause to this Court on the following
grounds:
I

US$4,245.00
3. 10% Attorneys fees 424.50
TOTAL

initially dismissing the petition on a technicality, the CA eventually

gave due course to it, as directed by this Court in its Resolution
dated August 7, 2003 which granted the petition for certiorari,
docketed as G.R. No. 151833, filed by petitioner.

US$4,669.50

The other findings are affirmed.

SO ORDERED.19
The NLRC corrected the LA's computation of the lump-sum
salary awarded to petitioner by reducing the applicable salary rate
from US$2,590.00 to US$1,400.00 because R.A. No. 8042 "does
not provide for the award of overtime pay, which should be
proven to have been actually performed, and for vacation leave
pay."20
Petitioner filed a Motion for Partial Reconsideration, but this time
he questioned the constitutionality of the subject clause.21 The
NLRC denied the motion.22
Petitioner filed a Petition for Certiorari23 with the CA, reiterating
the constitutional challenge against the subject clause.24 After

The Court of Appeals and the labor tribunals have decided the
case in a way not in accord with applicable decision of the
Supreme Court involving similar issue of granting unto the
migrant worker back wages equal to the unexpired portion of his
contract of employment instead of limiting it to three (3) months
II
In the alternative that the Court of Appeals and the Labor
Tribunals were merely applying their interpretation of Section 10
of Republic Act No. 8042, it is submitted that the Court of Appeals
gravely erred in law when it failed to discharge its judicial duty to
decide questions of substance not theretofore determined by the
Honorable Supreme Court, particularly, the constitutional issues
raised by the petitioner on the constitutionality of said law, which
unreasonably, unfairly and arbitrarily limits payment of the award
for back wages of overseas workers to three (3) months.
III

Even without considering the constitutional limitations [of] Sec. 10

of Republic Act No. 8042, the Court of Appeals gravely erred in
law in excluding from petitioners award the overtime pay and
vacation pay provided in his contract since under the contract
they form part of his salary.28

of US$25,382.23, equivalent to his salaries for the entire nine

months and 23 days left of his employment contract, computed at
the monthly rate of US$2,590.00.31

On February 26, 2008, petitioner wrote the Court to withdraw his

petition as he is already old and sickly, and he intends to make
use of the monetary award for his medical treatment and
medication.29 Required to comment, counsel for petitioner filed a
motion, urging the court to allow partial execution of the
undisputed monetary award and, at the same time, praying that
the constitutional question be resolved.30

Petitioner contends that the subject clause is unconstitutional

because it unduly impairs the freedom of OFWs to negotiate for
and stipulate in their overseas employment contracts a
determinate employment period and a fixed salary package.32 It
also impinges on the equal protection clause, for it treats OFWs
differently from local Filipino workers (local workers) by putting a
cap on the amount of lump-sum salary to which OFWs are
entitled in case of illegal dismissal, while setting no limit to the
same monetary award for local workers when their dismissal is
declared illegal; that the disparate treatment is not reasonable as
there is no substantial distinction between the two groups;33 and
that it defeats Section 18,34 Article II of the Constitution which
guarantees the protection of the rights and welfare of all Filipino
workers, whether deployed locally or overseas.35

Considering that the parties have filed their respective

memoranda, the Court now takes up the full merit of the petition
mindful of the extreme importance of the constitutional question
raised therein.
On the first and second issues
The unanimous finding of the LA, NLRC and CA that the
dismissal of petitioner was illegal is not disputed. Likewise not
disputed is the salary differential of US$45.00 awarded to
petitioner in all three fora. What remains disputed is only the
computation of the lump-sum salary to be awarded to petitioner
by reason of his illegal dismissal.
Applying the subject clause, the NLRC and the CA computed the
lump-sum salary of petitioner at the monthly rate of US$1,400.00
covering the period of three months out of the unexpired portion
of nine months and 23 days of his employment contract or a total
of US$4,200.00.
Impugning the constitutionality of the subject clause, petitioner
contends that, in addition to the US$4,200.00 awarded by the
NLRC and the CA, he is entitled to US$21,182.23 more or a total

The Arguments of Petitioner

Moreover, petitioner argues that the decisions of the CA and the

labor tribunals are not in line with existing jurisprudence on the
issue of money claims of illegally dismissed OFWs. Though there
are conflicting rulings on this, petitioner urges the Court to sort
them out for the guidance of affected OFWs.36
Petitioner further underscores that the insertion of the subject
clause into R.A. No. 8042 serves no other purpose but to benefit
local placement agencies. He marks the statement made by the
Solicitor General in his Memorandum, viz.:
Often, placement agencies, their liability being solidary, shoulder
the payment of money claims in the event that jurisdiction over
the foreign employer is not acquired by the court or if the foreign
employer reneges on its obligation. Hence, placement agencies
that are in good faith and which fulfill their obligations are

unnecessarily penalized for the acts of the foreign employer. To

protect them and to promote their continued helpful contribution in
deploying Filipino migrant workers, liability for money claims was
reduced under Section 10 of R.A. No. 8042. 37(Emphasis
supplied)
Petitioner argues that in mitigating the solidary liability of
placement agencies, the subject clause sacrifices the well-being
of OFWs. Not only that, the provision makes foreign employers
better off than local employers because in cases involving the
illegal dismissal of employees, foreign employers are liable for
salaries covering a maximum of only three months of the
unexpired employment contract while local employers are liable
for the full lump-sum salaries of their employees. As petitioner
puts it:
In terms of practical application, the local employers are not
limited to the amount of backwages they have to give their
employees they have illegally dismissed, following wellentrenched and unequivocal jurisprudence on the matter. On the
other hand, foreign employers will only be limited to giving the
illegally dismissed migrant workers the maximum of three (3)
months unpaid salaries notwithstanding the unexpired term of the
contract that can be more than three (3) months.38
Lastly, petitioner claims that the subject clause violates the due
process clause, for it deprives him of the salaries and other
emoluments he is entitled to under his fixed-period employment
contract.39
The Arguments of Respondents
In their Comment and Memorandum, respondents contend that
the constitutional issue should not be entertained, for this was
belatedly interposed by petitioner in his appeal before the CA,
and not at the earliest opportunity, which was when he filed an
appeal before the NLRC.40

The Arguments of the Solicitor General

The Solicitor General (OSG)41 points out that as R.A. No. 8042
took effect on July 15, 1995, its provisions could not have
impaired petitioner's 1998 employment contract. Rather, R.A. No.
8042 having preceded petitioner's contract, the provisions thereof
are deemed part of the minimum terms of petitioner's
employment, especially on the matter of money claims, as this
was not stipulated upon by the parties.42
Moreover, the OSG emphasizes that OFWs and local workers
differ in terms of the nature of their employment, such that their
rights to monetary benefits must necessarily be treated
differently. The OSG enumerates the essential elements that
distinguish OFWs from local workers: first, while local workers
perform their jobs within Philippine territory, OFWs perform their
jobs for foreign employers, over whom it is difficult for our courts
to acquire jurisdiction, or against whom it is almost impossible to
enforce judgment; and second, as held in Coyoca v. National
Labor Relations Commission43 and Millares v. National Labor
Relations Commission,44 OFWs are contractual employees who
can never acquire regular employment status, unlike local
workers who are or can become regular employees. Hence, the
OSG posits that there are rights and privileges exclusive to local
workers, but not available to OFWs; that these peculiarities make
for a reasonable and valid basis for the differentiated treatment
under the subject clause of the money claims of OFWs who are
illegally dismissed. Thus, the provision does not violate the equal
protection clause nor Section 18, Article II of the Constitution.45
Lastly, the OSG defends the rationale behind the subject clause
as a police power measure adopted to mitigate the solidary
liability of placement agencies for this "redounds to the benefit of
the migrant workers whose welfare the government seeks to
promote. The survival of legitimate placement agencies helps
[assure] the government that migrant workers are properly
deployed and are employed under decent and humane
conditions."46

The Court's Ruling

The Court sustains petitioner on the first and second issues.
When the Court is called upon to exercise its power of judicial
review of the acts of its co-equals, such as the Congress, it does
so only when these conditions obtain: (1) that there is an actual
case or controversy involving a conflict of rights susceptible of
judicial determination;47 (2) that the constitutional question is
raised by a proper party48 and at the earliest opportunity;49 and (3)
that the constitutional question is the very lis mota of the
case,50otherwise the Court will dismiss the case or decide the
same on some other ground.51
Without a doubt, there exists in this case an actual controversy
directly involving petitioner who is personally aggrieved that the
labor tribunals and the CA computed his monetary award based
on the salary period of three months only as provided under the
subject clause.
The constitutional challenge is also timely. It should be borne in
mind that the requirement that a constitutional issue be raised at
the earliest opportunity entails the interposition of the issue in the
pleadings before acompetent court, such that, if the issue is not
raised in the pleadings before that competent court, it cannot be
considered at the trial and, if not considered in the trial, it cannot
be considered on appeal.52 Records disclose that the issue on the
constitutionality of the subject clause was first raised, not in
petitioner's appeal with the NLRC, but in his Motion for Partial
Reconsideration with said labor tribunal,53 and reiterated in his
Petition forCertiorari before the CA.54 Nonetheless, the issue is
deemed seasonably raised because it is not the NLRC but the CA
which has the competence to resolve the constitutional issue. The
NLRC is a labor tribunal that merely performs a quasi-judicial
function its function in the present case is limited to determining
questions of fact to which the legislative policy of R.A. No. 8042 is
to be applied and to resolving such questions in accordance with
the standards laid down by the law itself;55 thus, its foremost

function is to administer and enforce R.A. No. 8042, and not to

inquire into the validity of its provisions. The CA, on the other
hand, is vested with the power of judicial review or the power to
declare unconstitutional a law or a provision thereof, such as the
subject clause.56Petitioner's interposition of the constitutional
issue before the CA was undoubtedly seasonable. The CA was
therefore remiss in failing to take up the issue in its decision.
The third condition that the constitutional issue be critical to the
resolution of the case likewise obtains because the monetary
claim of petitioner to his lump-sum salary for the entire unexpired
portion of his 12-month employment contract, and not just for a
period of three months, strikes at the very core of the subject
clause.
Thus, the stage is all set for the determination of the
constitutionality of the subject clause.
Does the subject clause violate Section 10,
Article III of the Constitution on non-impairment
of contracts?
The answer is in the negative.
Petitioner's claim that the subject clause unduly interferes with
the stipulations in his contract on the term of his employment and
the fixed salary package he will receive57 is not tenable.
Section 10, Article III of the Constitution provides:
No law impairing the obligation of contracts shall be passed.
The prohibition is aligned with the general principle that laws
newly enacted have only a prospective operation,58and cannot
affect acts or contracts already perfected;59 however, as to laws
already in existence, their provisions are read into contracts and
deemed a part thereof.60 Thus, the non-impairment clause under

Section 10, Article II is limited in application to laws about to be

enacted that would in any way derogate from existing acts or
contracts by enlarging, abridging or in any manner changing the
intention of the parties thereto.
As aptly observed by the OSG, the enactment of R.A. No. 8042 in
1995 preceded the execution of the employment contract
between petitioner and respondents in 1998. Hence, it cannot be
argued that R.A. No. 8042, particularly the subject clause,
impaired the employment contract of the parties. Rather, when
the parties executed their 1998 employment contract, they were
deemed to have incorporated into it all the provisions of R.A. No.
8042.
But even if the Court were to disregard the timeline, the subject
clause may not be declared unconstitutional on the ground that it
impinges on the impairment clause, for the law was enacted in
the exercise of the police power of the State to regulate a
business, profession or calling, particularly the recruitment and
deployment of OFWs, with the noble end in view of ensuring
respect for the dignity and well-being of OFWs wherever they
may be employed.61 Police power legislations adopted by the
State to promote the health, morals, peace, education, good
order, safety, and general welfare of the people are generally
applicable not only to future contracts but even to those already in
existence, for all private contracts must yield to the superior and
legitimate measures taken by the State to promote public
welfare.62
Does the subject clause violate Section 1,
Article III of the Constitution, and Section 18,
Article II and Section 3, Article XIII on labor
as a protected sector?
The answer is in the affirmative.
Section 1, Article III of the Constitution guarantees:

No person shall be deprived of life, liberty, or property without due

process of law nor shall any person be denied the equal
protection of the law.
Section 18,63 Article II and Section 3,64 Article XIII accord all
members of the labor sector, without distinction as to place of
deployment, full protection of their rights and welfare.
To Filipino workers, the rights guaranteed under the foregoing
constitutional provisions translate to economic security and parity:
all monetary benefits should be equally enjoyed by workers of
similar category, while all monetary obligations should be borne
by them in equal degree; none should be denied the protection of
the laws which is enjoyed by, or spared the burden imposed on,
others in like circumstances.65
Such rights are not absolute but subject to the inherent power of
Congress to incorporate, when it sees fit, a system of
classification into its legislation; however, to be valid, the
classification must comply with these requirements: 1) it is based
on substantial distinctions; 2) it is germane to the purposes of the
law; 3) it is not limited to existing conditions only; and 4) it applies
equally to all members of the class.66
There are three levels of scrutiny at which the Court reviews the
constitutionality of a classification embodied in a law: a) the
deferential or rational basis scrutiny in which the challenged
classification needs only be shown to be rationally related to
serving a legitimate state interest;67 b) the middle-tier or
intermediate scrutiny in which the government must show that the
challenged classification serves an important state interest and
that the classification is at least substantially related to serving
that interest;68 and c) strict judicial scrutiny69 in which a legislative
classification which impermissibly interferes with the exercise of a
fundamental right70 or operates to the peculiar disadvantage of a
suspect class71 is presumed unconstitutional, and the burden is
upon the government to prove that the classification is necessary

to achieve a compelling state interest and that it is the least

restrictive means to protect such interest.72
Under American jurisprudence, strict judicial scrutiny is triggered
by suspect classifications73 based on race74 or gender75 but not
when the classification is drawn along income categories.76
It is different in the Philippine setting. In Central Bank (now
Bangko Sentral ng Pilipinas) Employee Association, Inc. v.
Bangko Sentral ng Pilipinas,77 the constitutionality of a provision
in the charter of the Bangko Sentral ng Pilipinas (BSP), a
government financial institution (GFI), was challenged for
maintaining its rank-and-file employees under the Salary
Standardization Law (SSL), even when the rank-and-file
employees of other GFIs had been exempted from the SSL by
their respective charters. Finding that the disputed provision
contained a suspect classification based on salary grade, the
Court deliberately employed the standard of strict judicial scrutiny
in its review of the constitutionality of said provision. More
significantly, it was in this case that the Court revealed the broad
outlines of its judicial philosophy, to wit:
Congress retains its wide discretion in providing for a valid
classification, and its policies should be accorded recognition and
respect by the courts of justice except when they run afoul of the
Constitution. The deference stops where the classification
violates a fundamental right, or prejudices persons accorded
special protection by the Constitution. When these violations
arise, this Court must discharge its primary role as the vanguard
of constitutional guaranties, and require a stricter and more
exacting adherence to constitutional limitations. Rational basis
should not suffice.
Admittedly, the view that prejudice to persons accorded special
protection by the Constitution requires a stricter judicial scrutiny
finds no support in American or English jurisprudence.
Nevertheless, these foreign decisions and authorities are not per
se controlling in this jurisdiction. At best, they are persuasive and

have been used to support many of our decisions. We should not

place undue and fawning reliance upon them and regard them as
indispensable mental crutches without which we cannot come to
our own decisions through the employment of our own
endowments. We live in a different ambience and must decide
our own problems in the light of our own interests and needs, and
of our qualities and even idiosyncrasies as a people, and always
with our own concept of law and justice. Our laws must be
construed in accordance with the intention of our own lawmakers
and such intent may be deduced from the language of each law
and the context of other local legislation related thereto. More
importantly, they must be construed to serve our own public
interest which is the be-all and the end-all of all our laws. And it
need not be stressed that our public interest is distinct and
different from others.
xxxx
Further, the quest for a better and more "equal" world calls for the
use of equal protection as a tool of effective judicial intervention.
Equality is one ideal which cries out for bold attention and action
in the Constitution. The Preamble proclaims "equality" as an ideal
precisely in protest against crushing inequities in Philippine
society. The command to promote social justice in Article II,
Section 10, in "all phases of national development," further
explicitated in Article XIII, are clear commands to the State to
take affirmative action in the direction of greater equality. x x x
[T]here is thus in the Philippine Constitution no lack of doctrinal
support for a more vigorous state effort towards achieving a
reasonable measure of equality.
Our present Constitution has gone further in guaranteeing vital
social and economic rights to marginalized groups of society,
including labor. Under the policy of social justice, the law bends
over backward to accommodate the interests of the working class
on the humane justification that those with less privilege in life
should have more in law. And the obligation to afford protection to

labor is incumbent not only on the legislative and executive

branches but also on the judiciary to translate this pledge into a
living reality. Social justice calls for 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.
xxxx
Under most circumstances, the Court will exercise judicial
restraint in deciding questions of constitutionality, recognizing the
broad discretion given to Congress in exercising its legislative
power. Judicial scrutiny would be based on the "rational basis"
test, and the legislative discretion would be given deferential
treatment.
But if the challenge to the statute is premised on the denial of a
fundamental right, or the perpetuation of prejudice against
persons favored by the Constitution with special protection,
judicial scrutiny ought to be more strict. A weak and watered
down view would call for the abdication of this Courts solemn
duty to strike down any law repugnant to the Constitution and the
rights it enshrines. This is true whether the actor committing the
unconstitutional act is a private person or the government itself or
one of its instrumentalities. Oppressive acts will be struck down
regardless of the character or nature of the actor.
xxxx
In the case at bar, the challenged proviso operates on the basis
of the salary grade or officer-employee status. It is akin to a
distinction based on economic class and status, with the higher
grades as recipients of a benefit specifically withheld from the
lower grades. Officers of the BSP now receive higher
compensation packages that are competitive with the industry,
while the poorer, low-salaried employees are limited to the rates
prescribed by the SSL. The implications are quite disturbing: BSP

rank-and-file employees are paid the strictly regimented rates of

the SSL while employees higher in rank - possessing higher and
better education and opportunities for career advancement - are
given higher compensation packages to entice them to stay.
Considering that majority, if not all, the rank-and-file employees
consist of people whose status and rank in life are less and
limited, especially in terms of job marketability, it is they - and not
the officers - who have the real economic and financial need for
the adjustment . This is in accord with the policy of the
Constitution "to free the people from poverty, provide adequate
social services, extend to them a decent standard of living, and
improve the quality of life for all." Any act of Congress that runs
counter to this constitutional desideratum deserves strict scrutiny
by this Court before it can pass muster. (Emphasis supplied)
Imbued with the same sense of "obligation to afford protection to
labor," the Court in the present case also employs the standard of
strict judicial scrutiny, for it perceives in the subject clause a
suspect classification prejudicial to OFWs.
Upon cursory reading, the subject clause appears facially neutral,
for it applies to all OFWs. However, a closer examination reveals
that the subject clause has a discriminatory intent against, and an
invidious impact on, OFWs at two levels:
First, OFWs with employment contracts of less than one
year vis--vis OFWs with employment contracts ofone
year or more;
Second, among OFWs with employment contracts of
more than one year; and
Third, OFWs vis--vis local workers with fixed-period
employment;
OFWs with employment contracts of less than one year vis-vis OFWs with employment contracts of one year or more

As pointed out by petitioner,78 it was in Marsaman Manning

Agency, Inc. v. National Labor Relations Commission79 (Second
Division, 1999) that the Court laid down the following rules on the
application of the periods prescribed under Section 10(5) of R.A.
No. 804, to wit:
A plain reading of Sec. 10 clearly reveals that the choice of
which amount to award an illegally dismissed overseas
contract worker, i.e., whether his salaries for the unexpired
portion of his employment contract or three (3) months
salary for every year of the unexpired term, whichever is
less, comes into play only when the employment contract
concerned has a term of at least one (1) year or more. This is
evident from the words "for every year of the unexpired
term" which follows the words "salaries x x x for three
months."To follow petitioners thinking that private respondent is
entitled to three (3) months salary only simply because it is the
lesser amount is to completely disregard and overlook some
words used in the statute while giving effect to some. This is
contrary to the well-established rule in legal hermeneutics that in
interpreting a statute, care should be taken that every part or
word thereof be given effect since the law-making body is
presumed to know the meaning of the words employed in the
statue and to have used them advisedly. Ut res magis valeat
quam pereat.80 (Emphasis supplied)
In Marsaman, the OFW involved was illegally dismissed two
months into his 10-month contract, but was awarded his salaries
for the remaining 8 months and 6 days of his contract.
Prior to Marsaman, however, there were two cases in which the
Court made conflicting rulings on Section 10(5). One was Asian
Center for Career and Employment System and Services v.
National Labor Relations Commission(Second Division, October
1998),81 which involved an OFW who was awarded a two-year
employment contract,but was dismissed after working for one
year and two months. The LA declared his dismissal illegal and
awarded him SR13,600.00 as lump-sum salary covering eight

months, the unexpired portion of his contract. On appeal, the

Court reduced the award to SR3,600.00 equivalent to his three
months salary, this being the lesser value, to wit:
Under Section 10 of R.A. No. 8042, a worker dismissed from
overseas employment without just, valid or authorized cause is
entitled to his salary for the unexpired portion of his employment
contract or for three (3) months for every year of the unexpired
term, whichever is less.
In the case at bar, the unexpired portion of private respondents
employment contract is eight (8) months. Private respondent
should therefore be paid his basic salary corresponding to three
(3) months or a total of SR3,600.82
Another was Triple-Eight Integrated Services, Inc. v. National
Labor Relations Commission (Third Division, December
1998),83 which involved an OFW (therein respondent Erlinda
Osdana) who was originally granted a 12-month contract, which
was deemed renewed for another 12 months. After serving for
one year and seven-and-a-half months, respondent Osdana was
illegally dismissed, and the Court awarded her salaries for the
entire unexpired portion of four and one-half months of her
contract.
The Marsaman interpretation of Section 10(5) has since been
adopted in the following cases:
Case Title

Contract
Period

Period of
Service

Unexpired
Period

Period
the C
of the

Skippers v.
Maguad84

6 months

2 months

4 months

Bahia Shipping

9 months

8 months

4 months

v. Reynaldo
Chua 85
Centennial
Transmarine v.
dela Cruz l86

9 months

4 months

5 months

Talidano v.
Falcon87

12 months

3 months

9 months

Univan v. CA88

12 months

3 months

9 months

Oriental v. CA89

12 months

more than 2
months

PCL v. NLRC90

12 months

more than 2
months

Olarte v.
Nayona91

12 months

21 days

JSS v.Ferrer92

12 months

16 days

Pentagon v.
Adelantar93

12 months

9 months and
7 days

Phil. Employ v.
Paramio, et
al.94

12 months

10 months

Flourish
Maritime v.
Almanzor 95

2 years

26 days

Athenna
Manpower v.
Villanos 96

1 year, 10
months and
28 days

1 month

As the foregoing matrix readily shows, the subject clause

classifies OFWs into two categories. The first category includes
OFWs with fixed-period employment contracts of less than one
year; in5 case
of illegal dismissal, they are entitled to their salaries
months
for the entire unexpired portion of their contract. The second
category consists of OFWs with fixed-period employment
contracts of one year or more; in case of illegal dismissal, they
3 months
are entitled
to monetary award equivalent to only 3 months of the
unexpired portion of their contracts.

3 months
The disparity in the treatment of these two groups cannot be
discounted.
In Skippers, the respondent OFW worked for only 2
10 months
3 months
months out of his 6-month contract, but was awarded his salaries
for the remaining 4 months. In contrast, the respondent OFWs
more or less 9 in Oriental
3 months
and PCL who had also worked for about 2 months out
of their 12-month contracts were awarded their salaries for only 3
months
months of the unexpired portion of their contracts. Even the
11 months and 9 OFWs 3involved
monthsin Talidano and Univan who had worked for a
days
longer period of 3 months out of their 12-month contracts before
being illegally dismissed were awarded their salaries for only 3
11 months and
3 months
months.
24 days
even more vividly, the Court assumes a
2 months and 23 To 2illustrate
months the
anddisparity
23
hypothetical
OFW-A
with
an employment contract of 10 months at
days
days
a monthly salary rate of US$1,000.00 and a hypothetical OFW-B
2 months
Unexpired
portion contract of 15 months with the same monthly
with
an employment
salary rate of US$1,000.00. Both commenced work on the same
day and under the same employer, and were illegally dismissed
after one month of work. Under the subject clause, OFW-A will be
23 months and 4 entitled
6 months
or 3
to US$9,000.00,
equivalent to his salaries for the
days
months for each
remaining 9 months of his contract, whereas OFW-B will be
year to
of only
contract
entitled
US$3,000.00, equivalent to his salaries for 3
months
of
the
unexpired
portion of his contract, instead of
1 year, 9 months
6 months or 3
US$14,000.00
for
the
unexpired
portion of 14 months of his
and 28 days
months for each
contract,
the US$3,000.00 is the lesser amount.
year ofascontract
The disparity becomes more aggravating when the Court takes
into account jurisprudence that, prior to the effectivity of R.A.

No. 8042 on July 14, 1995,97 illegally dismissed OFWs, no

matter how long the period of their employment contracts, were
entitled to their salaries for the entire unexpired portions of their
contracts. The matrix below speaks for itself:
Case Title

Contract
Period

Period of
Service

Unexpired
Period

ATCI v. CA, et
al.98

2 years

2 months

22 months

Phil. Integrated
v. NLRC99

2 years

7 days

23 months
and 23 days

JGB v. NLC100

2 years

9 months

15 months

Agoy v.
NLRC101

2 years

2 months

22 months

EDI v. NLRC,
et al.102

2 years

5 months

19 months

Barros v.
NLRC, et al.103

12 months

4 months

8 months

Philippine
Transmarine v.
Carilla104

12 months

6 months
and 22 days

5 months and
18 days

illegally dismissed OFWs based on their employment periods, in

the process singling out one category whose contracts have an
unexpired portion of one year or more and subjecting them to the
peculiar disadvantage of having their monetary awards limited to
their salaries for 3 months or for the unexpired portion thereof,
whichever is less, but all the while sparing the other category
Period
Applied
in the simply because the latter's unexpired
from such
prejudice,
Computation
of
theof one year.
contracts fall short
Monetary Award
Among
OFWs With Employment Contracts of More Than One
22 months
Year
23 months
23
Upon
closerand
examination
of the terminology employed in the
days
subject clause, the Court now has misgivings on the accuracy of
the Marsaman interpretation.
15 months

It is plain that prior to R.A. No. 8042, all OFWs, regardless of

contract periods or the unexpired portions thereof, were treated
alike in terms of the computation of their monetary benefits in
case of illegal dismissal. Their claims were subjected to a uniform
rule of computation: their basic salaries multiplied by the entire
unexpired portion of their employment contracts.

The 22
Court
notes that the subject clause "or for three (3) months
months
for every year of the unexpired term, whichever is less" contains
the qualifying phrases "every year" and "unexpired term." By its
19 months
ordinary
meaning, the word "term" means a limited or definite
extent of time.105 Corollarily, that "every year" is but part of an
"unexpired term" is significant in many ways: first, the unexpired
months
term 8must
be at least one year, for if it were any shorter, there
would be no occasion for such unexpired term to be measured by
year;
second, the original term must be more than one
5 every
months
andand
18 days
year, for otherwise, whatever would be the unexpired term thereof
will not reach even a year. Consequently, the more decisive
factor in the determination of when the subject clause "for three
(3) months forevery year of the unexpired term, whichever is less"
shall apply is not the length of the original contract period as held
in Marsaman,106 but the length of the unexpired portion of the
contract period -- the subject clause applies in cases when the
unexpired portion of the contract period is at least one year,
which arithmetically requires that the original contract period be
more than one year.

The enactment of the subject clause in R.A. No. 8042 introduced

a differentiated rule of computation of the money claims of

Viewed in that light, the subject clause creates a sub-layer of

discrimination among OFWs whose contract periods are for more

than one year: those who are illegally dismissed with less than
one year left in their contracts shall be entitled to their salaries for
the entire unexpired portion thereof, while those who are illegally
dismissed with one year or more remaining in their contracts shall
be covered by the subject clause, and their monetary benefits
limited to their salaries for three months only.
To concretely illustrate the application of the foregoing
interpretation of the subject clause, the Court assumes
hypothetical OFW-C and OFW-D, who each have a 24-month
contract at a salary rate of US$1,000.00 per month. OFW-C is
illegally dismissed on the 12th month, and OFW-D, on the 13th
month. Considering that there is at least 12 months remaining in
the contract period of OFW-C, the subject clause applies to the
computation of the latter's monetary benefits. Thus, OFW-C will
be entitled, not to US$12,000,00 or the latter's total salaries for
the 12 months unexpired portion of the contract, but to the lesser
amount of US$3,000.00 or the latter's salaries for 3 months out of
the 12-month unexpired term of the contract. On the other hand,
OFW-D is spared from the effects of the subject clause, for there
are only 11 months left in the latter's contract period. Thus, OFWD will be entitled to US$11,000.00, which is equivalent to his/her
total salaries for the entire 11-month unexpired portion.
OFWs vis--vis Local Workers
With Fixed-Period Employment
As discussed earlier, prior to R.A. No. 8042, a uniform system of
computation of the monetary awards of illegally dismissed OFWs
was in place. This uniform system was applicable even to local
workers with fixed-term employment.107
The earliest rule prescribing a uniform system of computation was
actually Article 299 of the Code of Commerce (1888),108 to wit:
Article 299. If the contracts between the merchants and their shop
clerks and employees should have been made of a fixed period,

none of the contracting parties, without the consent of the other,

may withdraw from the fulfillment of said contract until the
termination of the period agreed upon.
Persons violating this clause shall be subject to indemnify the
loss and damage suffered, with the exception of the provisions
contained in the following articles.
In Reyes v. The Compaia Maritima,109 the Court applied the
foregoing provision to determine the liability of a shipping
company for the illegal discharge of its managers prior to the
expiration of their fixed-term employment. The Court therein held
the shipping company liable for the salaries of its managers for
the remainder of their fixed-term employment.
There is a more specific rule as far as seafarers are concerned:
Article 605 of the Code of Commerce which provides:
Article 605. If the contracts of the captain and members of the
crew with the agent should be for a definite period or voyage,
they cannot be discharged until the fulfillment of their contracts,
except for reasons of insubordination in serious matters, robbery,
theft, habitual drunkenness, and damage caused to the vessel or
to its cargo by malice or manifest or proven negligence.
Article 605 was applied to Madrigal Shipping Company, Inc. v.
Ogilvie,110 in
which the Court held the shipping company liable for the salaries
and subsistence allowance of its illegally dismissed employees
for the entire unexpired portion of their employment contracts.
While Article 605 has remained good law up to the
present,111 Article 299 of the Code of Commerce was replaced by
Art. 1586 of the Civil Code of 1889, to wit:

Article 1586. Field hands, mechanics, artisans, and other laborers

hired for a certain time and for a certain work cannot leave or be
dismissed without sufficient cause, before the fulfillment of the
contract. (Emphasis supplied.)
Citing Manresa, the Court in Lemoine v. Alkan112 read the
disjunctive "or" in Article 1586 as a conjunctive "and" so as to
apply the provision to local workers who are employed for a time
certain although for no particular skill. This interpretation of Article
1586 was reiterated in Garcia Palomar v. Hotel de France
Company.113 And in both Lemoine and Palomar, the Court
adopted the general principle that in actions for wrongful
discharge founded on Article 1586, local workers are entitled to
recover damages to the extent of the amount stipulated to be paid
to them by the terms of their contract. On the computation of the
amount of such damages, the Court in Aldaz v. Gay114 held:

provisions of the Civil Code do not expressly provide for the

remedies available to a fixed-term worker who is illegally
discharged. However, it is noted that in Mackay Radio &
Telegraph Co., Inc. v. Rich,117 the Court carried over the
principles on the payment of damages underlying Article 1586 of
the Civil Code of 1889 and applied the same to a case involving
the illegal discharge of a local worker whose fixed-period
employment contract was entered into in 1952, when the new
Civil Code was already in effect.118

The doctrine is well-established in American jurisprudence, and

nothing has been brought to our attention to the contrary under
Spanish jurisprudence, that when an employee is wrongfully
discharged it is his duty to seek other employment of the same
kind in the same community, for the purpose of reducing the
damages resulting from such wrongful discharge. However, while
this is the general rule, the burden of showing that he failed to
make an effort to secure other employment of a like nature, and
that other employment of a like nature was obtainable, is upon
the defendant. When an employee is wrongfully discharged under
a contract of employment his prima facie damage is the amount
which he would be entitled to had he continued in such
employment until the termination of the period. (Howard vs. Daly,
61 N. Y., 362; Allen vs. Whitlark, 99 Mich., 492; Farrell vs. School
District No. 2, 98 Mich., 43.)115 (Emphasis supplied)

More significantly, the same principles were applied to cases

involving overseas Filipino workers whose fixed-term employment
contracts were illegally terminated, such as in First Asian Trans &
Shipping Agency, Inc. v. Ople,119involving seafarers who were
illegally discharged. In Teknika Skills and Trade Services, Inc. v.
National Labor Relations Commission,120 an OFW who was
illegally dismissed prior to the expiration of her fixed-period
employment contract as a baby sitter, was awarded salaries
corresponding to the unexpired portion of her contract. The Court
arrived at the same ruling in Anderson v. National Labor
Relations Commission,121 which involved a foreman hired in 1988
in Saudi Arabia for a fixed term of two years, but who was illegally
dismissed after only nine months on the job -- the Court awarded
him salaries corresponding to 15 months, the unexpired portion of
his contract. In Asia World Recruitment, Inc. v. National Labor
Relations Commission,122 a Filipino working as a security officer in
1989 in Angola was awarded his salaries for the remaining period
of his 12-month contract after he was wrongfully discharged.
Finally, in Vinta Maritime Co., Inc. v. National Labor Relations
Commission,123 an OFW whose 12-month contract was illegally
cut short in the second month was declared entitled to his
salaries for the remaining 10 months of his contract.

On August 30, 1950, the New Civil Code took effect with new
provisions on fixed-term employment: Section 2 (Obligations with
a Period), Chapter 3, Title I, and Sections 2 (Contract of Labor)
and 3 (Contract for a Piece of Work), Chapter 3, Title VIII, Book
IV.116 Much like Article 1586 of the Civil Code of 1889, the new

In sum, prior to R.A. No. 8042, OFWs and local workers with
fixed-term employment who were illegally discharged were
treated alike in terms of the computation of their money claims:
they were uniformly entitled to their salaries for the entire
unexpired portions of their contracts. But with the enactment of

R.A. No. 8042, specifically the adoption of the subject clause,

illegally dismissed OFWs with an unexpired portion of one year or
more in their employment contract have since been differently
treated in that their money claims are subject to a 3-month cap,
whereas no such limitation is imposed on local workers with fixedterm employment.

overseas x x x. By limiting the liability to three months [sic],

Filipino seafarers have better chance of getting hired by foreign
employers." The limitation also protects the interest of local
placement agencies, which otherwise may be made to shoulder
millions of pesos in "termination pay."128
The OSG explained further:

The Court concludes that the subject clause contains a

suspect classification in that, in the computation of the
monetary benefits of fixed-term employees who are illegally
discharged, it imposes a 3-month cap on the claim of OFWs
with an unexpired portion of one year or more in their
contracts, but none on the claims of other OFWs or local
workers with fixed-term employment. The subject clause
singles out one classification of OFWs and burdens it with a
peculiar disadvantage.
There being a suspect classification involving a vulnerable sector
protected by the Constitution, the Court now subjects the
classification to a strict judicial scrutiny, and determines whether it
serves a compelling state interest through the least restrictive
means.
What constitutes compelling state interest is measured by the
scale of rights and powers arrayed in the Constitution and
calibrated by history.124 It is akin to the paramount interest of the
state125 for which some individual liberties must give way, such as
the public interest in safeguarding health or maintaining medical
standards,126 or in maintaining access to information on matters of
public concern.127

Often, placement agencies, their liability being solidary, shoulder

the payment of money claims in the event that jurisdiction over
the foreign employer is not acquired by the court or if the foreign
employer reneges on its obligation. Hence, placement agencies
that are in good faith and which fulfill their obligations are
unnecessarily penalized for the acts of the foreign employer. To
protect them and to promote their continued helpful contribution in
deploying Filipino migrant workers, liability for money
are reduced under Section 10 of RA 8042.
This measure redounds to the benefit of the migrant workers
whose welfare the government seeks to promote. The survival of
legitimate placement agencies helps [assure] the government that
migrant workers are properly deployed and are employed under
decent and humane conditions.129 (Emphasis supplied)
However, nowhere in the Comment or Memorandum does the
OSG cite the source of its perception of the state interest sought
to be served by the subject clause.

In the present case, the Court dug deep into the records but
found no compelling state interest that the subject clause may
possibly serve.

The OSG locates the purpose of R.A. No. 8042 in the speech of
Rep. Bonifacio Gallego in sponsorship of House Bill No. 14314
(HB 14314), from which the law originated;130 but the speech
makes no reference to the underlying reason for the adoption of
the subject clause. That is only natural for none of the 29
provisions in HB 14314 resembles the subject clause.

The OSG defends the subject clause as a police power measure

"designed to protect the employment of Filipino seafarers

On the other hand, Senate Bill No. 2077 (SB 2077) contains a
provision on money claims, to wit:

Sec. 10. Money Claims. - Notwithstanding any provision of law to

the contrary, the Labor Arbiters of the National Labor Relations
Commission (NLRC) shall have the original and exclusive
jurisdiction to hear and decide, within ninety (90) calendar days
after the filing of the complaint, the claims arising out of an
employer-employee relationship or by virtue of the complaint, the
claim arising out of an employer-employee relationship or by
virtue of any law or contract involving Filipino workers for
overseas employment including claims for actual, moral,
exemplary and other forms of damages.
The liability of the principal and the recruitment/placement agency
or any and all claims under this Section shall be joint and several.
Any compromise/amicable settlement or voluntary agreement on
any money claims exclusive of damages under this Section shall
not be less than fifty percent (50%) of such money
claims: Provided, That any installment payments, if applicable, to
satisfy any such compromise or voluntary settlement shall not be
more than two (2) months. Any compromise/voluntary agreement
in violation of this paragraph shall be null and void.
Non-compliance with the mandatory period for resolutions of
cases provided under this Section shall subject the responsible
officials to any or all of the following penalties:
(1) The salary of any such official who fails to render his
decision or resolution within the prescribed period shall
be, or caused to be, withheld until the said official
complies therewith;
(2) Suspension for not more than ninety (90) days; or
(3) Dismissal from the service with disqualification to hold
any appointive public office for five (5) years.

Provided, however, That the penalties herein provided shall be

without prejudice to any liability which any such official may have
incurred under other existing laws or rules and regulations as a
consequence of violating the provisions of this paragraph.
But significantly, Section 10 of SB 2077 does not provide for any
rule on the computation of money claims.
A rule on the computation of money claims containing the subject
clause was inserted and eventually adopted as the 5th paragraph
of Section 10 of R.A. No. 8042. The Court examined the rationale
of the subject clause in the transcripts of the "Bicameral
Conference Committee (Conference Committee) Meetings on the
Magna Carta on OCWs (Disagreeing Provisions of Senate Bill
No. 2077 and House Bill No. 14314)." However, the Court finds
no discernible state interest, let alone a compelling one, that is
sought to be protected or advanced by the adoption of the subject
clause.
In fine, the Government has failed to discharge its burden of
proving the existence of a compelling state interest that would
justify the perpetuation of the discrimination against OFWs under
the subject clause.
Assuming that, as advanced by the OSG, the purpose of the
subject clause is to protect the employment of OFWs by
mitigating the solidary liability of placement agencies, such
callous and cavalier rationale will have to be rejected. There can
never be a justification for any form of government action that
alleviates the burden of one sector, but imposes the same burden
on another sector, especially when the favored sector is
composed of private businesses such as placement agencies,
while the disadvantaged sector is composed of OFWs whose
protection no less than the Constitution commands. The idea that
private business interest can be elevated to the level of a
compelling state interest is odious.

Moreover, even if the purpose of the subject clause is to lessen

the solidary liability of placement agencies vis-a-vis their foreign
principals, there are mechanisms already in place that can be
employed to achieve that purpose without infringing on the
constitutional rights of OFWs.
The POEA Rules and Regulations Governing the Recruitment
and Employment of Land-Based Overseas Workers, dated
February 4, 2002, imposes administrative disciplinary measures
on erring foreign employers who default on their contractual
obligations to migrant workers and/or their Philippine agents.
These disciplinary measures range from temporary
disqualification to preventive suspension. The POEA Rules and
Regulations Governing the Recruitment and Employment of
Seafarers, dated May 23, 2003, contains similar administrative
disciplinary measures against erring foreign employers.
Resort to these administrative measures is undoubtedly the less
restrictive means of aiding local placement agencies in enforcing
the solidary liability of their foreign principals.
Thus, the subject clause in the 5th paragraph of Section 10 of
R.A. No. 8042 is violative of the right of petitioner and other
OFWs to equal protection.
1avv phi 1

Further, there would be certain misgivings if one is to approach

the declaration of the unconstitutionality of the subject clause
from the lone perspective that the clause directly violates state
policy on labor under Section 3,131Article XIII of the Constitution.
While all the provisions of the 1987 Constitution are presumed
self-executing,132 there are some which this Court has
declared not judicially enforceable, Article XIII being
one,133 particularly Section 3 thereof, the nature of which, this
Court, in Agabon v. National Labor Relations Commission,134 has
described to be not self-actuating:

Thus, the constitutional mandates of protection to labor and

security of tenure may be deemed as self-executing in the sense
that these are automatically acknowledged and observed without
need for any enabling legislation. However, to declare that the
constitutional provisions are enough to guarantee the full exercise
of the rights embodied therein, and the realization of ideals
therein expressed, would be impractical, if not unrealistic. The
espousal of such view presents the dangerous tendency of being
overbroad and exaggerated. The guarantees of "full protection to
labor" and "security of tenure", when examined in isolation, are
facially unqualified, and the broadest interpretation possible
suggests a blanket shield in favor of labor against any form of
removal regardless of circumstance. This interpretation implies an
unimpeachable right to continued employment-a utopian notion,
doubtless-but still hardly within the contemplation of the framers.
Subsequent legislation is still needed to define the parameters of
these guaranteed rights to ensure the protection and promotion,
not only the rights of the labor sector, but of the employers' as
well. Without specific and pertinent legislation, judicial bodies will
be at a loss, formulating their own conclusion to approximate at
least the aims of the Constitution.
Ultimately, therefore, Section 3 of Article XIII cannot, on its
own, be a source of a positive enforceable rightto stave off
the dismissal of an employee for just cause owing to the failure to
serve proper notice or hearing. As manifested by several framers
of the 1987 Constitution, the provisions on social justice require
legislative enactments for their enforceability.135 (Emphasis
added)
Thus, Section 3, Article XIII cannot be treated as a principal
source of direct enforceable rights, for the violation of which the
questioned clause may be declared unconstitutional. It may
unwittingly risk opening the floodgates of litigation to every worker
or union over every conceivable violation of so broad a concept
as social justice for labor.

It must be stressed that Section 3, Article XIII does not directly

bestow on the working class any actual enforceable right, but
merely clothes it with the status of a sector for whom the
Constitution urges protection through executive or legislative
action and judicial recognition. Its utility is best limited to being
an impetus not just for the executive and legislative departments,
but for the judiciary as well, to protect the welfare of the working
class. And it was in fact consistent with that constitutional agenda
that the Court in Central Bank (now Bangko Sentral ng Pilipinas)
Employee Association, Inc. v. Bangko Sentral ng
Pilipinas, penned by then Associate Justice now Chief Justice
Reynato S. Puno, formulated the judicial precept that when the
challenge to a statute is premised on the perpetuation of
prejudice against persons favored by the Constitution with special
protection -- such as the working class or a section thereof -- the
Court may recognize the existence of a suspect classification and
subject the same to strict judicial scrutiny.
The view that the concepts of suspect classification and strict
judicial scrutiny formulated in Central Bank Employee
Association exaggerate the significance of Section 3, Article XIII
is a groundless apprehension. Central Bank applied Article XIII in
conjunction with the equal protection clause. Article XIII, by itself,
without the application of the equal protection clause, has no life
or force of its own as elucidated in Agabon.
Along the same line of reasoning, the Court further holds that the
subject clause violates petitioner's right to substantive due
process, for it deprives him of property, consisting of monetary
benefits, without any existing valid governmental purpose.136
The argument of the Solicitor General, that the actual purpose of
the subject clause of limiting the entitlement of OFWs to their
three-month salary in case of illegal dismissal, is to give them a
better chance of getting hired by foreign employers. This is plain
speculation. As earlier discussed, there is nothing in the text of
the law or the records of the deliberations leading to its
enactment or the pleadings of respondent that would indicate that

there is an existing governmental purpose for the subject clause,

or even just a pretext of one.
The subject clause does not state or imply any definitive
governmental purpose; and it is for that precise reason that the
clause violates not just petitioner's right to equal protection, but
also her right to substantive due process under Section
1,137 Article III of the Constitution.
The subject clause being unconstitutional, petitioner is entitled to
his salaries for the entire unexpired period of nine months and 23
days of his employment contract, pursuant to law and
jurisprudence prior to the enactment of R.A. No. 8042.
On the Third Issue
Petitioner contends that his overtime and leave pay should form
part of the salary basis in the computation of his monetary award,
because these are fixed benefits that have been stipulated into
his contract.
Petitioner is mistaken.
The word salaries in Section 10(5) does not include overtime and
leave pay. For seafarers like petitioner, DOLE Department Order
No. 33, series 1996, provides a Standard Employment Contract
of Seafarers, in which salary is understood as the basic wage,
exclusive of overtime, leave pay and other bonuses; whereas
overtime pay is compensation for all work "performed" in excess
of the regular eight hours, and holiday pay is compensation for
any work "performed" on designated rest days and holidays.
By the foregoing definition alone, there is no basis for the
automatic inclusion of overtime and holiday pay in the
computation of petitioner's monetary award, unless there is
evidence that he performed work during those periods. As the
Court held in Centennial Transmarine, Inc. v. Dela Cruz,138

However, the payment of overtime pay and leave pay should be

disallowed in light of our ruling in Cagampan v. National Labor
Relations Commission, to wit:
The rendition of overtime work and the submission of sufficient
proof that said was actually performed are conditions to be
satisfied before a seaman could be entitled to overtime pay which
should be computed on the basis of 30% of the basic monthly
salary. In short, the contract provision guarantees the right to
overtime pay but the entitlement to such benefit must first be
established.
In the same vein, the claim for the day's leave pay for the
unexpired portion of the contract is unwarranted since the same
is given during the actual service of the seamen.
WHEREFORE, the Court GRANTS the Petition. The subject
clause "or for three months for every year of the unexpired term,
whichever is less" in the 5th paragraph of Section 10 of Republic
Act No. 8042 is DECLAREDUNCONSTITUTIONAL; and the
December 8, 2004 Decision and April 1, 2005 Resolution of the
Court of Appeals are MODIFIED to the effect that petitioner
is AWARDED his salaries for the entire unexpired portion of his
employment contract consisting of nine months and 23 days
computed at the rate of US$1,400.00 per month.
No costs.
SO ORDERED.
G.R. No. 111870 June 30, 1994
AIR MATERIAL WING SAVINGS AND LOAN ASSOCIATION,
INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, et
al., respondents.

Jerry D. Banares for petitioner.

Perdrelito Q. Aquino for private respondent.

CRUZ, J.:
Private respondent Luis S. Salas was appointed "notarial and
legal counsel" for petitioner Air Material Wings Savings and Loan
Association (AMWSLAI) in 1980. The appointment was renewed
for three years in an implementing order dated January 23, 1987,
reading as follows:
SUBJECT: Implementing Order on the
Reappointment of the Legal Officer
TO: ATTY. LUIS S. SALAS
Per approval of the Board en banc in a regular
meeting held on January 21, 1987, you are
hereby reappointed as Notarial and Legal
Counsel of this association for a term of three (3)
years effective March 1, 1987, unless sooner
terminated from office for cause or as may be
deemed necessary by the Board for the interest
and protection of the association.
Aside from notarization of loan & other legal
documents, your duties and responsibilities are
hereby enumerated in the attached sheet, per
Articles IX, Section 1-d of the by-laws and those
approved by the Board en banc.
Your monthly compensation/retainer's fee remains
the same.

This shall form part of your 201 file.

&
BY
AU
TH
OR
ITY
OF
TH
E
BO
AR
D:

C
h
i
e
f
o
f

L
U
V
I
N
S
.
On January 9, 1990, the petitioner issued another order
reminding
Salas of the approaching termination of his legal
M
services
under their contract. This prompted Salas to lodge a
A
complaint
against AMWSLAI for separation pay, vacation and
N
sickAleave benefits, cost of living allowances, refund of SSS
premiums,
moral and exemplary damages, payment of notarial
Y
services rendered from February 1, 1980 to March 2, 1990, and
attorney's
fees.
P
r
Instead
e of filing an answer, AMWSLAI moved to dismiss for lack
of jurisdiction.
s
It averred that there was no employer-employee
relationship
i
between it and Salas and that his monetary claims
properly
d
fell within the jurisdiction of the regular courts. Salas
opposed
e
the motion and presented documentary evidence to
show
n that he was indeed an employee of AMWSLAI.
t

t
h
e
B
o
a
r
d

The motion was denied and both parties were required to submit
their position papers. AMWSLAI filed a motion for
reconsideration ad cautelam, which was also denied. The parties
were again ordered to submit their position papers but AMWSLAI
did not comply. Nevertheless, most of Salas' claims were
dismissed by the labor arbiter in his decision dated November 21,
1991. 1
It was there held that Salas was not illegally dismissed and so not
entitled to collect separation benefits. His claims for vacation
leave, sick leave, medical and dental allowances and refund of
SSS premiums were rejected on the ground that he was a
managerial employee. He was also denied moral and exemplary
damages for lack of evidence of bad faith on the part of
AMWSLAI. Neither was he allowed to collect his notarial fees
from 1980 up to 1986 because the claim therefor had already
prescribed. However, the petitioner was ordered to pay Salas his
notarial fees from 1987 up to March 2, 1990, and attorney's fee
equivalent to 10% of the judgment award.
On appeal, the decision was affirmed in toto by the respondent
Commission, prompting the petitioner to seek relief in this Court. 2
The threshold issue in this case is whether or not Salas can be
considered an employee of the petitioner company.
We have held in a long line of decisions that the elements of an
employer-employee relationship are: (1) selection and
engagement of the employee; (2) payment of wages; (3) power of
dismissal; and (4) employer's own power to control employee's
conduct. 3
The existence of such a relationship is essentially a factual
question. The findings of the NLRC on this matter are accorded
great respect and even finality when the same are supported by
substantial evidence. 4

The terms and conditions set out in the letter-contract entered

into by the parties on January 23, 1987, clearly show that Salas
was an employee of the petitioner. His selection as the company
counsel was done by the board of directors in one of its regular
meetings. The petitioner paid him a monthly
compensation/retainer's fee for his services. Though his
appointment was for a fixed term of three years, the petitioner
reserved its power of dismissal for cause or as it might deem
necessary for its interest and protection. No less importantly,
AMWSLAI also exercised its power of control over Salas by
defining his duties and functions as its legal counsel, to wit:
1. To act on all legal matters pertinent to his
Office.
2. To seek remedies to effect collection of
overdue accounts of members without prejudice
to initiating court action to protect the interest of
the association.
3. To defend by all means all suit against the
interest of the Association. 5
In the earlier case of Hydro Resources Contractors Corp. v.
Pagalilauan, 6 this Court observed that:
A lawyer, like any other professional, may very
well be an employee of a private corporation or
even of the government. It is not unusual for a big
corporation to hire a staff of lawyers as its inhouse counsel, pay them regular salaries, rank
them in its table of organization, and otherwise
treat them like its other officers and employees. At
the same time, it may also contract with a law firm
to act as outside counsel on a retainer basis. The
two classes of lawyers often work closely together
but one group is made up of employees while the

other is not. A similar arrangement may exist as to

doctors, nurses, dentists, public relations
practitioners and other professionals.
We hold, therefore, that the public respondent committed no
grave abuse of discretion in ruling that an employer-employee
relationship existed between the petitioner and the private
respondent.
We must disagree with the NLRC, however, on Salas' claims for
notarial fees.
The petitioner contends that the public respondents are not
empowered to adjudicate claims for notarial fees. On the other
hand, the Solicitor General believes that the NLRC acted
correctly when it took cognizance of the claim because it arose
out of Salas' employment contract with the petitioner which
assigned him the duty to notarize loan agreements and other
legal documents. Moreover, Section 9 of Rule 141 of the Rules of
Court does not restrict or prevent the labor arbiter and the NLRC
from determining claims for notarial fees.
Labor arbiters have the original and exclusive jurisdiction over
money claims of workers when such claims have some
reasonable connection with the employer-employee relationship.
The money claims of workers referred to in paragraph 3 of Article
217 of the Labor Code are those arising out of or in connection
with the employer-employee relationship or some aspect or
incident of such relationship.
Salas' claim for notarial fees is based on his employment as a
notarial officer of the petitioner and thus comes under the
jurisdiction of the labor arbiter.
The public respondents agreed that Salas was entitled to collect
notarial fees from 1987 to 1990 by virtue of his having been

assigned as notarial officer. We feel, however, that there is no

substantial evidence to support this finding.
The letter-contract of January 23, 1987, does not contain any
stipulation for the separate payment of notarial fees to Salas in
addition to his basic salary. On the contrary, it would appear that
his notarial services were part of his regular functions and were
thus already covered by his monthly compensation. It is true that
the notarial fees were paid by members-borrowers of the
petitioner for its own account and not of Salas. However, this is
not a sufficient basis for his claim to such fees in the absence of
any agreement to that effect.
ACCORDINGLY, the appealed judgment of the NLRC is
AFFIRMED, with the modification that the award of notarial fees
and attorney's fees is disallowed. It is so ordered.
Davide, Jr., Bellosillo, Quiason and Kapunan, JJ., concu
G.R. No. 73887 December 21, 1989
GREAT PACIFIC LIFE ASSURANCE
CORPORATION, petitioner,
vs.
HONORATO JUDICO and NATIONAL LABOR RELATIONS
COMMISSION, respondents.
G.A. Fortun and Associates for petitioner.
Corsino B. Soco for private respondent.

PARAS J.:
Before us is a Petition for certiorari to review the decision of the
National Labor Relations Commission (NLRC, for brevity) dated

September 9, 1985 reversing the decision of Labor Arbiter Vito J.

Minoria, dated June 9, 1983, by 1) ordering petitioner insurance
company, Great Pacific Life Assurance Corporation (Grepalife, for
brevity) to recognize private respondent Honorato Judico, as its
regular employee as defined under Art. 281 of the Labor Code
and 2) remanding the case to its origin for the determination of
private respondent Judico's money claims.
The records of the case show that Honorato Judico filed a
complaint for illegal dismissal against Grepalife, a duly organized
insurance firm, before the NLRC Regional Arbitration Branch No.
VII, Cebu City on August 27, 1982. Said complaint prayed for
award of money claims consisting of separation pay, unpaid
salary and 13th month pay, refund of cash bond, moral and
exemplary damages and attorney's fees.
Both parties appealed to the NLRC when a decision was
rendered by the Labor Arbiter dismissing the complaint on the
ground that the employer-employee relations did not exist
between the parties but ordered Grepalife to pay complainant the
sum of Pl,000.00 by reason of Christian Charity.
On appeal, said decision was reversed by the NLRC ruling that
complainant is a regular employee as defined under Art. 281 of
the Labor Code and declaring the appeal of Grepalife questioning
the legality of the payment of Pl,000.00 to complainant moot and
academic. Nevertheless, for the purpose of revoking the
supersedeas bond of said company it ruled that the Labor Arbiter
erred in awarding Pl,000.00 to complainant in the absence of any
legal or factual basis to support its payment.
Petitioner company moved to reconsider, which was denied,
hence this petition for review raising four legal issues to wit:
I. Whether the relationship between insurance
agents and their principal, the insurance
company, is that of agent and principal to be

governed by the Insurance Code and the Civil

Code provisions on agency, or one of employeremployee, to be governed by the Labor Code.
II. Whether insurance agents are entitled to the
employee benefits prescribed by the Labor Code.
III. Whether the public respondent NLRC has
jurisdiction to take cognizance of a controversy
between insurance agent and the insurance
company, arising from their agency relations.
IV. Whether the public respondent acted correctly
in setting aside the decision of Labor Arbiter Vito
J. Minoria and in ordering the case remanded to
said Labor Arbiter for further proceedings.(p. 159,
Rollo)
The crux of these issues boil down to the question of whether or
not employer-employee relationship existed between petitioner
and private respondent.
Petitioner admits that on June 9, 1976, private respondent Judico
entered into an agreement of agency with petitioner Grepalife to
become a debit agent attached to the industrial life agency in
Cebu City. Petitioner defines a debit agent as "an insurance
agent selling/servicing industrial life plans and policy holders.
Industrial life plans are those whose premiums are payable either
daily, weekly or monthly and which are collectible by the debit
agents at the home or any place designated by the policy holder"
(p. 156, Rollo). Such admission is in line with the findings of
public respondent that as such debit agent, private respondent
Judico had definite work assignments including but not limited to
collection of premiums from policy holders and selling insurance
to prospective clients. Public respondent NLRC also found out
that complainant was initially paid P 200. 00 as allowance for
thirteen (13) weeks regardless of production and later a certain

percentage denominated as sales reserve of his total collections

but not lesser than P 200.00. Sometime in September 1981,
complainant was promoted to the position of Zone Supervisor and
was given additional (supervisor's) allowance fixed at P110.00
per week. During the third week of November 1981, he was
reverted to his former position as debit agent but, for unknown
reasons, not paid so-called weekly sales reserve of at least P
200.00. Finally on June 28, 1982, complainant was dismissed by
way of termination of his agency contract.
Petitioner assails the findings of the NLRC that private
respondent is an employee of the former. Petitioner argues that
Judico's compensation was not based on any fixed number of
hours he was required to devote to the service of petitioner
company but rather it was the production or result of his efforts or
his work that was being compensated and that the so-called
allowance for the first thirteen weeks that Judico worked as debit
agent, cannot be construed as salary but as a subsidy or a way of
assistance for transportation and meal expenses of a new debit
agent during the initial period of his training which was fixed for
thirteen (13) weeks. Stated otherwise, petitioner contends that
Judico's compensation, in the form of commissions and bonuses,
was based on actual production, (insurance plans sold and
premium collections).
Said contentions of petitioner are strongly rejected by private
respondent. He maintains that he received a definite amount as
his Wage known as "sales reserve" the failure to maintain the
same would bring him back to a beginner's employment with a
fixed weekly wage of P 200.00 regardless of production. He was
assigned a definite place in the office to work on when he is not in
the field; and in addition to canvassing and making regular
reports, he was burdened with the job of collection and to make
regular weekly report thereto for which an anemic performance
would mean dismissal. He earned out of his faithful and
productive service, a promotion to Zone Supervisor with
additional supervisor's allowance, (a definite or fixed amount of
P110.00) that he was dismissed primarily because of anemic

performance and not because of the termination of the contract of

agency substantiate the fact that he was indeed an employee of
the petitioner and not an insurance agent in the ordinary meaning
of the term.
That private respondent Judico was an agent of the petitioner is
unquestionable. But, as We have held in Investment Planning
Corp. vs. SSS, 21 SCRA 294, an insurance company may have
two classes of agents who sell its insurance policies: (1) salaried
employees who keep definite hours and work under the control
and supervision of the company; and (2) registered
representatives who work on commission basis. The agents who
belong to the second category are not required to report for work
at anytime, they do not have to devote their time exclusively to or
work solely for the company since the time and the effort they
spend in their work depend entirely upon their own will and
initiative; they are not required to account for their time nor submit
a report of their activities; they shoulder their own selling
expenses as well as transportation; and they are paid their
commission based on a certain percentage of their sales. One
salient point in the determination of employer-employee
relationship which cannot be easily ignored is the fact that the
compensation that these agents on commission received is not
paid by the insurance company but by the investor (or the person
insured). After determining the commission earned by an agent
on his sales the agent directly deducts it from the amount he
received from the investor or the person insured and turns over to
the insurance company the amount invested after such deduction
is made. The test therefore is whether the "employer" controls or
has reserved the right to control the "employee" not only as to the
result of the work to be done but also as to the means and
methods by which the same is to be accomplished.
Applying the aforementioned test to the case at bar, We can
readily see that the element of control by the petitioner on Judico
was very much present. The record shows that petitioner Judico
received a definite minimum amount per week as his wage known
as "sales reserve" wherein the failure to maintain the same would

bring him back to a beginner's employment with a fixed weekly

wage of P 200.00 for thirteen weeks regardless of production. He
was assigned a definite place in the office to work on when he is
not in the field; and in addition to his canvassing work he was
burdened with the job of collection. In both cases he was required
to make regular report to the company regarding these duties,
and for which an anemic performance would mean a dismissal.
Conversely faithful and productive service earned him a
promotion to Zone Supervisor with additional supervisor's
allowance, a definite amount of P110.00 aside from the regular P
200.00 weekly "allowance". Furthermore, his contract of services
with petitioner is not for a piece of work nor for a definite period.
On the other hand, an ordinary commission insurance agent
works at his own volition or at his own leisure without fear of
dismissal from the company and short of committing acts
detrimental to the business interest of the company or against the
latter, whether he produces or not is of no moment as his salary
is based on his production, his anemic performance or even dead
result does not become a ground for dismissal. Whereas, in
private respondent's case, the undisputed facts show that he was
controlled by petitioner insurance company not only as to the kind
of work; the amount of results, the kind of performance but also
the power of dismissal. Undoubtedly, private respondent, by
nature of his position and work, had been a regular employee of
petitioner and is therefore entitled to the protection of the law and
could not just be terminated without valid and justifiable cause.
Premises considered, the appealed decision is hereby
AFFIRMED in toto.

G.R. No. L-21278

December 27, 1966

FEATI UNIVERSITY, petitioner,

vs.
HON. JOSE S. BAUTISTA, Presiding Judge of the Court of
Industrial Relations and FEATI UNIVERSITY FACULTY CLUBPAFLU, respondents.
---------------------------------------G.R. No. L-21462

December 27, 1966

FEATI UNIVERSITY, petitioner-appellant,

vs.
FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondentappellee.
---------------------------------------G.R. No. L-21500

December 27, 1966

FEATI UNIVERSITY, petitioner-appellant,

vs.
FEATI UNIVERSITY FACULTY CLUB-PAFLU, respondentappellee.
Rafael Dinglasan for petitioner.
Cipriano Cid and Associates for respondents.
ZALDIVAR, J.:

SO ORDERED.
Melencio-Herrera (Chairperson), Padilla, Sarmiento and
Regalado, JJ ., concur.

This Court, by resolution, ordered that these three cases be

considered together, and the parties were allowed to file only one
brief for the three cases.
On January 14, 1963, the President of the respondent Feati
University Faculty Club-PAFLU hereinafter referred to as

Faculty Club wrote a letter to Mrs. Victoria L. Araneta,

President of petitioner Feati University hereinafter referred to
as University informing her of the organization of the Faculty
Club into a registered labor union. The Faculty Club is composed
of members who are professors and/or instructors of the
University. On January 22, 1963, the President of the Faculty
Club sent another letter containing twenty-six demands that have
connection with the employment of the members of the Faculty
Club by the University, and requesting an answer within ten days
from receipt thereof. The President of the University answered
the two letters, requesting that she be given at least thirty days to
study thoroughly the different phases of the demands. Meanwhile
counsel for the University, to whom the demands were referred,
wrote a letter to the President of the Faculty Club demanding
proof of its majority status and designation as a bargaining
representative. On February 1, 1963, the President of the Faculty
Club again wrote the President of the University rejecting the
latter's request for extension of time, and on the same day he
filed a notice of strike with the Bureau of Labor alleging as reason
therefor the refusal of the University to bargain collectively. The
parties were called to conferences at the Conciliation Division of
the Bureau of Labor but efforts to conciliate them failed. On
February 18, 1963, the members of the Faculty Club declared a
strike and established picket lines in the premises of the
University, resulting in the disruption of classes in the University.
Despite further efforts of the officials from the Department of
Labor to effect a settlement of the differences between the
management of the University and the striking faculty members
no satisfactory agreement was arrived at. On March 21, 1963, the
President of the Philippines certified to the Court of Industrial
Relations the dispute between the management of the University
and the Faculty Club pursuant to the provisions of Section 10 of
Republic Act No. 875.

hereinafter referred to as CIR. The three cases now before this

Court stemmed from those cases that were filed with the CIR.

In connection with the dispute between the University and the

Faculty Club and certain incidents related to said dispute, various
cases were filed with the Court of Industrial Relations

CIR Case No. 41-IPA, relates to the case in connection with the
strike staged by the members of the Faculty Club. As we have
stated, the dispute between the University and the Faculty Club
was certified on March 21, 1963 by the President of the

CASE NO. G.R. NO. L-21278

On May 10, 1963, the University filed before this Court a "petition
for certiorari and prohibition with writ of preliminary injunction",
docketed as G.R. No. L-21278, praying: (1) for the issuance of
the writ of preliminary injunction enjoining respondent Judge Jose
S. Bautista of the CIR to desist from proceeding in CIR Cases
Nos. 41-IPA, 1183-MC, and V-30; (2) that the proceedings in
Cases Nos. 41-IPA and 1183-MC be annulled; (3) that the orders
dated March 30, 1963 and April 6, 1963 in Case No. 41-IPA, the
order dated April 6, 1963 in Case No. 1183-MC, and the order
dated April 29, 1963 in Case No. V-30, all be annulled; and (4)
that the respondent Judge be ordered to dismiss said cases Nos.
41-IPA, 1183-MC and V-30 of the CIR.
On May 10, 1963, this Court issued a writ of preliminary
injunction, upon the University's filing a bond of P1,000.00,
ordering respondent Judge Jose S. Bautista as Presiding Judge
of the CIR, until further order from this Court, "to desist and
refrain from further proceeding in the premises (Cases Nos. 41IPA, 1183-MC and V-30 of the Court of Industrial Relations)."1 On
December 4, 1963, this Court ordered the injunction bond
increased to P100,000.00; but on January 23, 1964, upon a
motion for reconsideration by the University, this Court reduced
the bond to P50,000.00.
A brief statement of the three cases CIR Cases 41-IPA, 1183MC and V-30 involved in the Case G.R. No. L-21278, is here
necessary.

Philippines to the CIR. On the strength of the presidential

certification, respondent Judge Bautista set the case for hearing
on March 23, 1963. During the hearing, the Judge endeavored to
reconcile the part and it was agreed upon that the striking faculty
members would return to work and the University would readmit
them under a status quo arrangement. On that very same day,
however, the University, thru counsel filed a motion to dismiss the
case upon the ground that the CIR has no jurisdiction over the
case, because (1) the Industrial Peace Act is not applicable to the
University, it being an educational institution, nor to the members
of the Faculty Club, they being independent contractors; and (2)
the presidential certification is violative of Section 10 of the
Industrial Peace Act, as the University is not an industrial
establishment and there was no industrial dispute which could be
certified to the CIR. On March 30, 1963 the respondent Judge
issued an order denying the motion to dismiss and declaring that
the Industrial Peace Act is applicable to both parties in the case
and that the CIR had acquired jurisdiction over the case by virtue
of the presidential certification. In the same order, the respondent
Judge, believing that the dispute could not be decided promptly,
ordered the strikers to return immediately to work and the
University to take them back under the last terms and conditions
existing before the dispute arose, as per agreement had during
the hearing on March 23, 1963; and likewise enjoined the
University, pending adjudication of the case, from dismissing any
employee or laborer without previous authorization from the CIR.
The University filed on April 1, 1963 a motion for reconsideration
of the order of March 30, 1963 by the CIRen banc, and at the
same time asking that the motion for reconsideration be first
heard by the CIR en banc. Without the motion for reconsideration
having been acted upon by the CIR en banc, respondent Judge
set the case for hearing on the merits for May 8, 1963. The
University moved for the cancellation of said hearing upon the
ground that the court en banc should first hear the motion for
reconsideration and resolve the issues raised therein before the
case is heard on the merits. This motion for cancellation of the
hearing was denied. The respondent Judge, however, cancelled
the scheduled hearing when counsel for the University

manifested that he would take up before the Supreme Court, by a

petition for certiorari, the matter regarding the actuations of the
respondent Judge and the issues raised in the motion for
reconsideration, specially the issue relating to the jurisdiction of
the CIR. The order of March 30, 1963 in Case 41-IPA is one of
the orders sought to be annulled in the case, G.R. No. L-21278.
Before the above-mentioned order of March 30, 1963 was issued
by respondent Judge, the University had employed professors
and/or instructors to take the places of those professors and/or
instructors who had struck. On April 1, 1963, the Faculty Club
filed with the CIR in Case 41-IPA a petition to declare in contempt
of court certain parties, alleging that the University refused to
accept back to work the returning strikers, in violation of the
return-to-work order of March 30, 1963. The University filed, on
April 5,1963, its opposition to the petition for contempt, denying
the allegations of the Faculty Club and alleging by way of special
defense that there was still the motion for reconsideration of the
order of March 30, 1963 which had not yet been acted upon by
the CIR en banc. On April 6, 1963, the respondent Judge issued
an order stating that "said replacements are hereby warned and
cautioned, for the time being, not to disturb nor in any manner
commit any act tending to disrupt the effectivity of the order of
March 30,1963, pending the final resolution of the same."2 On
April 8, 1963, there placing professors and/or instructors
concerned filed, thru counsel, a motion for reconsideration by the
CIR en banc of the order of respondent Judge of April 6, 1963.
This order of April 6, 1963 is one of the orders that are sought to
be annulled in case G.R. No. L-21278.
CIR Case No. 1183-MC relates to a petition for certification
election filed by the Faculty Club on March 8, 1963 before the
CIR, praying that it be certified as the sole and exclusive
bargaining representative of all the employees of the University.
The University filed an opposition to the petition for certification
election and at the same time a motion to dismiss said petition,
raising the very same issues raised in Case No. 41-IPA, claiming
that the petition did not comply with the rules promulgated by the

CIR; that the Faculty Club is not a legitimate labor union; that the
members of the Faculty Club cannot unionize for collective
bargaining purposes; that the terms of the individual contracts of
the professors, instructors, and teachers, who are members of
the Faculty Club, would expire on March 25 or 31, 1963; and that
the CIR has no jurisdiction to take cognizance of the petition
because the Industrial Peace Act is not applicable to the
members of the Faculty Club nor to the University. This case was
assigned to Judge Baltazar Villanueva of the CIR. Before Judge
Villanueva could act on the motion to dismiss, however, the
Faculty Club filed on April 3, 1963 a motion to withdraw the
petition on the ground that the labor dispute (Case No. 41-IPA)
had already been certified by the President to the CIR and the
issues raised in Case No. 1183-MC were absorbed by Case No.
41-IPA. The University opposed the withdrawal, alleging that the
issues raised in Case No. 1183-MC were separate and distinct
from the issues raised in Case No. 41-IPA; that the questions of
recognition and majority status in Case No. 1183-MC were not
absorbed by Case No. 41-IPA; and that the CIR could not
exercise its power of compulsory arbitration unless the legal issue
regarding the existence of employer-employee relationship was
first resolved. The University prayed that the motion of the Faculty
Club to withdraw the petition for certification election be denied,
and that its motion to dismiss the petition be heard. Judge
Baltazar Villanueva, finding that the reasons stated by the Faculty
Club in the motion to withdraw were well taken, on April 6, 1963,
issued an order granting the withdrawal. The University filed, on
April 24, 1963, a motion for reconsideration of that order of April
6, 1963 by the CIR en banc. This order of April 6, 1963 in Case
No. 1183-MC is one of the orders sought to be annulled in the
case, G.R. No. L-21278, now before Us.
CIR Case No. V-30 relates to a complaint for indirect contempt of
court filed against the administrative officials of the University.
The Faculty Club, through the Acting Chief Prosecutor of the CIR,
filed with the CIR a complaint docketed as Case No. V-30,
charging President Victoria L. Araneta, Dean Daniel Salcedo,
Executive Vice-President Rodolfo Maslog, and Assistant to the

President Jose Segovia, as officials of the University, with indirect

contempt of court, reiterating the same charges filed in Case No.
41-IPA for alleged violation of the order dated March 30, 1963.
Based on the complaint thus filed by the Acting Chief Prosecutor
of the CIR, respondent Judge Bautista issued on April 29, 1963
an order commanding any officer of the law to arrest the above
named officials of the University so that they may be dealt with in
accordance with law, and the same time fixed the bond for their
release at P500.00 each. This order of April 29, 1963 is also one
of the orders sought to be annulled in the case, G.R. No. L-2l278.
The principal allegation of the University in its petition
for certiorari and prohibition with preliminary injunction in Case
G.R. No. L-21278, now before Us, is that respondent Judge Jose
S. Bautista acted without, or in excess of, jurisdiction, or with
grave abuse of discretion, in taking cognizance of, and in issuing
the questioned orders in, CIR Cases Nos. 41-IPA 1183-MC and
V-30. Let it be noted that when the petition for certiorari and
prohibition with preliminary injunction was filed on May 10, 1963
in this case, the questioned order in CIR Cases Nos. 41-IPA,
1183-MC and V-30 were still pending action by the CIR en
banc upon motions for reconsideration filed by the University.
On June 10, 1963, the Faculty Club filed its answer to the petition
for certiorari and prohibition with preliminary injunction, admitting
some allegations contained in the petition and denying others,
and alleging special defenses which boil down to the contentions
that (1) the CIR had acquired jurisdiction to take cognizance of
Case No. 41-IPA by virtue of the presidential certification, so that
it had jurisdiction to issue the questioned orders in said Case No.
41-IPA; (2) that the Industrial Peace Act (Republic Act 875) is
applicable to the University as an employer and to the members
of the Faculty Club as employees who are affiliated with a duly
registered labor union, so that the Court of Industrial Relations
had jurisdiction to take cognizance of Cases Nos. 1183-MC and
V-30 and to issue the questioned orders in those two cases; and
(3) that the petition for certiorari and prohibition with preliminary
injunction was prematurely filed because the orders of the CIR

sought to be annulled were still the subjects of pending motions

for reconsideration before the CIR en banc when said petition
for certiorari and prohibition with preliminary injunction was filed
before this Court.
CASE G.R. NO. L-21462
This case, G.R. No. L-21462, involves also CIR Case No. 1183MC. As already stated Case No. 1183-MC relates to a petition for
certification election filed by the Faculty Club as a labor union,
praying that it be certified as the sole and exclusive bargaining
representative of all employees of the University. This petition
was opposed by the University, and at the same time it filed a
motion to dismiss said petition. But before Judge Baltazar
Villanueva could act on the petition for certification election and
the motion to dismiss the same, Faculty Club filed a motion to
withdraw said petition upon the ground that the issue raised in
Case No. 1183-MC were absorbed by Case No. 41-IPA which
was certified by the President of the Philippines. Judge Baltazar
Villanueva, by order April 6, 1963, granted the motion to
withdraw. The University filed a motion for reconsideration of that
order of April 6, 1963 by the CIR en banc. That motion for
reconsideration was pending action by the CIR en banc when the
petition forcertiorari and prohibition with preliminary injunction in
Case G.R. no. L-21278 was filed on May 10, 1963. As earlier
stated this Court, in Case G.R. No. L-21278, issued a writ of
preliminary injunction on May 10, 1963, ordering respondent
Judge Bautista, until further order from this Court, to desist and
refrain from further proceeding in the premises (Cases Nos. 41IPA, 1183-MC and V-30 of the Court of Industrial Relations).
On June 5, 1963, that is, after this Court has issued the writ of
preliminary injunction in Case G.R. No. L-21278, the CIR en
banc issued a resolution denying the motion for reconsideration
of the order of April 6, 1963 in Case No. 1183-MC.

CIR en banc, dated June 5, 1963, denying the motion for

reconsideration of the order of April 6, 1963 in Case No. 1183MC. This petition was docketed as G.R. No. L-21462. In its
petition for certiorari, the University alleges (1) that the resolution
of the Court of Industrial Relations of June 5, 1963 was null and
void because it was issued in violation of the writ of preliminary
injunction issued in Case G.R. No. L-21278; (2) that the issues of
employer-employee relationship, the alleged status as a labor
union, majority representation and designation as bargaining
representative in an appropriate unit of the Faculty Club should
have been resolved first in Case No. 1183-MC prior to the
determination of the issues in Case No. 41-IPA and therefore the
motion to withdraw the petition for certification election should not
have been granted upon the ground that the issues in the first
case have been absorbed in the second case; and (3) the lower
court acted without or in excess of jurisdiction in taking
cognizance of the petition for certification election and that the
same should have been dismissed instead of having been
ordered withdrawn. The University prayed that the proceedings in
Case No. 1183-MC and the order of April 6, 1963 and the
resolution of June 5, 1963 issued therein be annulled, and that
the CIR be ordered to dismiss Case No. 1183-MC on the ground
of lack of jurisdiction.
The Faculty Club filed its answer, admitting some, and denying
other, allegations in the petition for certiorari; and specially
alleging that the lower court's order granting the withdrawal of the
petition for certification election was in accordance with law, and
that the resolution of the court en banc on June 5, 1963 was not a
violation of the writ of preliminary injunction issued in Case G.R.
No. L-21278 because said writ of injunction was issued against
Judge Jose S. Bautista and not against the Court of Industrial
Relations, much less against Judge Baltazar Villanueva who was
the trial judge of Case No. 1183-MC.
CASE G.R. NO. L-21500

On July 8, 1963, the University filed before this Court a petition

for certiorari, by way of an appeal from the resolution of the

This case, G.R. No. L-21500, involves also CIR Case No. 41-IPA.
As earlier stated, Case No. 41-IPA relates to the strike staged by
the members of the Faculty Club and the dispute was certified by
the President of the Philippines to the CIR. The University filed a
motion to dismiss that case upon the ground that the CIR has no
jurisdiction over the case, and on March 30, 1963 Judge Jose S.
Bautista issued an order denying the motion to dismiss and
declaring that the Industrial Peace Act is applicable to both
parties in the case and that the CIR had acquired jurisdiction over
the case by virtue of the presidential certification; and in that
same order Judge Bautista ordered the strikers to return to work
and the University to take them back under the last terms and
conditions existing before the dispute arose; and enjoined the
University from dismissing any employee or laborer without
previous authority from the court. On April 1, 1963, the University
filed a motion for reconsideration of the order of March 30, 1963
by the CIR en banc. That motion for reconsideration was pending
action by the CIR en banc when the petition for certiorari and
prohibition with preliminary injunction in Case G.R. No. L-21278
was filed on May 10, 1963. As we have already stated, this Court
in said case G.R. No. L-21278, issued a writ of preliminary
injunction on May 10, 1963 ordering respondent Judge Jose S.
Bautista, until further order from this Court, to desist and refrain
from further proceeding in the premises (Cases Nos. 41-IPA,
1183-MC and V-30 of the Court of Industrial Relations).
On July 2, 1963, the University received a copy of the resolution
of the CIR en banc, dated May 7, 1963 but actually received and
stamped at the Office of the Clerk of the CIR on June 28, 1963,
denying the motion for reconsideration of the order dated March
30, 1963 in Case No. 41-IPA.
On July 23, 1963, the University filed before this Court a petition
for certiorari, by way of an appeal from the resolution of the Court
of Industrial Relations en banc dated May 7, 1963 (but actually
received by said petitioner on July 2, 1963) denying the motion
for reconsideration of the order of March 30, 1963 in Case No.
41-IPA. This petition was docketed as G.R. No. L-21500. In its

petition for certiorari the University alleges (1) that the resolution
of the CIR en banc, dated May 7, 1963 but filed with the Clerk of
the CIR on June 28, 1963, in Case No. 41-IPA, is null and void
because it was issued in violation of the writ of preliminary
injunction issued by this Court in G.R. No. L-21278; (2) that the
CIR, through its Presiding Judge, had no jurisdiction to take
cognizance of Case No. 41-IPA and the order of March 30, 1963
and the resolution dated May 7, 1963 issued therein are null and
void; (3) that the certification made by the President of the
Philippines is not authorized by Section 10 of Republic Act 875,
but is violative thereof; (4) that the Faculty Club has no right to
unionize or organize as a labor union for collective bargaining
purposes and to be certified as a collective bargaining agent
within the purview of the Industrial Peace Act, and consequently it
has no right to strike and picket on the ground of petitioner's
alleged refusal to bargain collectively where such duty does not
exist in law and is not enforceable against an educational
institution; and (5) that the return-to-work order of March 30, 1963
is improper and illegal. The petition prayed that the proceedings
in Case No. 41-IPA be annulled, that the order dated March 30,
1963 and the resolution dated May 7, 1963 be revoked, and that
the lower court be ordered to dismiss Case 41-IPA on the ground
of lack of jurisdiction.
On September 10, 1963, the Faculty Club, through counsel, filed
a motion to dismiss the petition for certiorari on the ground that
the petition being filed by way of an appeal from the orders of the
Court of Industrial Relations denying the motion to dismiss in
Case No. 41-IPA, the petition for certiorari is not proper because
the orders appealed from are interlocutory in nature.
This Court, by resolution of September 26, 1963, ordered that
these three cases (G.R. Nos. L-21278, L-21462 and L-21500) be
considered together and the motion to dismiss in Case G.R. No.
L-21500 be taken up when the cases are decided on the merits
after the hearing.

Brushing aside certain technical questions raised by the parties in

their pleadings, We proceed to decide these three cases on the
merits of the issues raised.
The University has raised several issues in the present cases, the
pivotal one being its claim that the Court of Industrial Relations
has no jurisdiction over the parties and the subject matter in CIR
Cases 41-IPA, 1183-MC and V-30, brought before it, upon the
ground that Republic Act No. 875 is not applicable to the
University because it is an educational institution and not an
industrial establishment and hence not an "employer" in
contemplation of said Act; and neither is Republic Act No. 875
applicable to the members of the Faculty Club because the latter
are independent contractors and, therefore, not employees within
the purview of the said Act.
In support of the contention that being an educational institution it
is beyond the scope of Republic Act No. 875, the University cites
cases decided by this Court: Boy Scouts of the Philippines vs.
Juliana Araos, L-10091, Jan. 29, 1958; University of San Agustin
vs. CIR, et al., L-12222, May 28, 1958; Cebu Chinese High
School vs. Philippine Land-Air-Sea Labor Union, PLASLU, L12015, April 22, 1959; La Consolacion College, et al. vs. CIR, et
al., L-13282, April 22, 1960; University of the Philippines, et al. vs.
CIR, et al., L-15416, April 8, 1960; Far Eastern University vs. CIR,
L-17620, August 31, 1962. We have reviewed these cases, and
also related cases subsequent thereto, and We find that they do
not sustain the contention of the University. It is true that this
Court has ruled that certain educational institutions, like the
University of Santo Tomas, University of San Agustin, La
Consolacion College, and other juridical entities, like the Boy
Scouts of the Philippines and Manila Sanitarium, are beyond the
purview of Republic Act No. 875 in the sense that the Court of
Industrial Relations has no jurisdiction to take cognizance of
charges of unfair labor practice filed against them, but it is
nonetheless true that the principal reason of this Court in ruling in
those cases that those institutions are excluded from the
operation of Republic Act 875 is that those entities are not

organized, maintained and operated for profit and do not declare

dividends to stockholders. The decision in the case of University
of San Agustin vs. Court of Industrial Relations, G.R. No. L12222, May 28, 1958, is very pertinent. We quote a portion of the
decision:
It appears that the University of San Agustin, petitioner
herein, is an educational institution conducted and
managed by a "religious non-stock corporation duly
organized and existing under the laws of the Philippines."
It was organized not for profit or gain or division of the
dividends among its stockholders, but solely for religious
and educational purposes. It likewise appears that the
Philippine Association of College and University
Professors, respondent herein, is a non-stock association
composed of professors and teachers in different colleges
and universities and that since its organization two years
ago, the university has adopted a hostile attitude to its
formation and has tried to discriminate, harass and
intimidate its members for which reason the association
and the members affected filed the unfair labor practice
complaint which initiated this proceeding. To the
complaint of unfair labor practice, petitioner filed an
answer wherein it disputed the jurisdiction of the Court of
Industrial Relations over the controversy on the following
grounds:
"(a) That complainants therein being college
and/or university professors were not "industrial"
laborers or employees, and the Philippine
Association of College and University Professors
being composed of persons engaged in the
teaching profession, is not and cannot be a
legitimate labor organization within the meaning of
the laws creating the Court of Industrial Relations
and defining its powers and functions;

"(b) That the University of San Agustin,

respondent therein, is not an institution
established for the purpose of gain or division of
profits, and consequently, it is not an "industrial"
enterprise and the members of its teaching staff
are not engaged in "industrial" employment
(U.S.T. Hospital Employees Association vs. Sto.
Tomas University Hospital, G.R. No. L-6988, 24
May 1954; and San Beda College vs. Court of
Industrial Relations and National Labor Union,
G.R. No. L-7649, 29 October 1955; 51 O.G. (Nov.
1955) 5636-5640);
"(c) That, as a necessary consequence, alleged
controversy between therein complainants and
respondent is not an "industrial" dispute, and the
Court of Industrial Relations has no
jurisdiction, notonly on the parties but also over
the subject matter of the complaint."
The issue now before us is: Since the University of San
Agustin is not an institution established for profit or gain,
nor an industrial enterprise, but one established
exclusively for educational purposes, can it be said that
its relation with its professors is one of employer and
employee that comes under the jurisdiction of the Court of
Industrial Relations? In other words, do the provisions of
the Magna Carta on unfair labor practice apply to the
relation between petitioner and members of respondent
association?
The issue is not new. Thus, in the case of Boy Scouts of
the Philippines v. Juliana V. Araos, G.R. No. L-10091,
promulgated on January 29, 1958, this Court, speaking
thru Mr. Justice Montemayor, answered the query in the
negative in the following wise:

"The main issue involved in the present case is

whether or not a charitable institution or one
organized not for profit but for more elevated
purposes, charitable, humanitarian, etc., like the
Boy Scouts of the Philippines, is included in the
definition of "employer" contained in Republic Act
875, and whether the employees of said institution
fall under the definition of "employee" also
contained in the same Republic Act. If they are
included, then any act which may be considered
unfair labor practice, within the meaning of said
Republic Act, would come under the jurisdiction of
the Court of Industrial Relations; but if they do not
fall within the scope of said Republic Act,
particularly, its definitions of employer and
employee, then the Industrial Court would have
no jurisdiction at all.
xxx

xxx

xxx

"On the basis of the foregoing considerations,

there is every reason to believe that our labor
legislation from Commonwealth Act No. 103,
creating the Court of Industrial Relations, down
through the Eight-Hour Labor Law, to the
Industrial Peace Act, was intended by the
Legislature to apply only to industrial employment
and to govern the relations between employers
engaged in industry and occupations for purposes
of profit and gain, and their industrial employees,
but not to organizations and entities which are
organized, operated and maintained not for profit
or gain, but for elevated and lofty purposes, such
as, charity, social service, education and
instruction, hospital and medical service, the
encouragement and promotion of character,
patriotism and kindred virtues in youth of the
nation, etc.

"In conclusion, we find and hold that Republic Act

No. 875, particularly, that portion thereof
regarding labor disputes and unfair labor practice,
does not apply to the Boy Scouts of the
Philippines, and consequently, the Court of
Industrial Relations had no jurisdiction to entertain
and decide the action or petition filed by
respondent Araos. Wherefore, the appealed
decision and resolution of the CIR are hereby set
aside, with costs against respondent."
There being a close analogy between the relation and
facts involved in the two cases, we cannot but conclude
that the Court of Industrial Relations has no jurisdiction to
entertain the complaint for unfair labor practice lodged by
respondent association against petitioner and, therefore,
we hereby set aside the order and resolution subject to
the present petition, with costs against respondent
association.
The same doctrine was confirmed in the case of University of
Santo Tomas v. Hon. Baltazar Villanueva, et al., G.R. No. L13748, October 30, 1959, where this Court ruled that:
In the present case, the record reveals that the petitioner
University of Santo Tomas is not an industry organized for
profit but an institution of learning devoted exclusively to
the education of the youth. The Court of First Instance of
Manila in its decision in Civil Case No. 28870, which has
long become final and consequently the settled law in the
case, found as established by the evidence adduced by
the parties therein (herein petitioner and respondent labor
union) that while the University collects fees from its
students, all its income is used for the improvement and
enlargement of the institution. The University declares no
dividend, and the members of the corporation who
founded it, as ordained in its articles of incorporation,
receive no material compensation for the time and

sacrifice they render to the University and its students.

The respondent union itself in a case before the Industrial
Court (Case No. 314-MC) has averred that "the University
of Santo Tomas, like the San Beda College, is an
educational institution operated not for profit but for the
sole purpose of educating young men." (See Annex "B" to
petitioner's motion to dismiss.). It is apparent, therefore,
that on the face of the record the University of Santo
Tomas is not a corporation created for profit but an
educational institution and therefore not an industrial or
business organization.
In the case of La Consolacion College, et al. vs. CIR, et al., G.R.
No. L-13282, April 22, 1960, this Court repeated the same ruling
when it said:
The main issue in this appeal by petitioner is that the
industry trial court committed an error in holding that it
has jurisdiction to act in this case even if it involves unfair
labor practice considering that the La Consolacion
College is not a business enterprise but an educational
institution not organized for profit.
If the claim that petitioner is an educational institution not
operated for profit is true, which apparently is the case,
because the very court a quo found that it has no
stockholder, nor capital . . . then we are of the opinion that
the same does not come under the jurisdiction of the
Court of Industrial Relations in view of the ruling in the
case of Boy Scouts of the Philippines v. Juliana V. Araos,
G.R. No. L-10091, decided on January 29, 1958.
It is noteworthy that the cases of the University of San Agustin,
the University of Santo Tomas, and La Consolacion College, cited
above, all involve charges of unfair labor practice under Republic
Act No. 875, and the uniform rulings of this Court are that the
Court of Industrial Relations has no jurisdiction over the charges
because said Act does not apply to educational institutions that

are not operated or maintained for profit and do not declare

dividends. On the other hand, in the cases of Far Eastern
University v. CIR, et al., G.R. No. L-17620, August 31, 1962, this
Court upheld the decision of the Court of Industrial Relations
finding the Far Eastern University, also an educational institution,
guilty of unfair labor practice. Among the findings of fact in said
case was that the Far Eastern University made profits from the
school year 1952-1953 to 1958-1959. In affirming the decision of
the lower court, this Court had thereby ratified the ruling of the
Court of Industrial Relations which applied the Industrial Peace
Act to educational institutions that are organized, operated and
maintained for profit.
It is also noteworthy that in the decisions in the cases of the Boy
Scouts of the Philippines, the University of San Agustin, the
University of Sto. Tomas, and La Consolacion College, this Court
was not unanimous in the view that the Industrial Peace Act
(Republic Act No. 875) is not applicable to charitable,
eleemosynary or non-profit organizations which include
educational institutions not operated for profit. There are
members of this Court who hold the view that the Industrial Peace
Act would apply also to non-profit organizations or entities the
only exception being the Government, including any political
subdivision or instrumentality thereof, in so far as governmental
functions are concerned. However, in the Far Eastern University
case this Court is unanimous in supporting the view that an
educational institution that is operated for profit comes within the
scope of the Industrial Peace Act. We consider it a settled
doctrine of this Court, therefore, that the Industrial Peace Act is
applicable to any organization or entity whatever may be its
purpose when it was created that is operated for profit or gain.
Does the University operate as an educational institution for
profit? Does it declare dividends for its stockholders? If it does
not, it must be declared beyond the purview of Republic Act No.
875; but if it does, Republic Act No. 875 must apply to it. The
University itself admits that it has declared dividends.3 The CIR in
its order dated March 30, 1963 in CIR Case No. 41-IPA which

order was issued after evidence was heard also found that the
University is not for strictly educational purposes and that "It
realizes profits and parts of such earning is distributed as
dividends to private stockholders or individuals (Exh. A and also 1
to 1-F, 2-x 3-x and 4-x)"4 Under this circumstance, and in
consonance with the rulings in the decisions of this Court, above
cited, it is obvious that Republic Act No. 875 is applicable to
herein petitioner Feati University.
But the University claims that it is not an employer within the
contemplation of Republic Act No. 875, because it is not an
industrial establishment. At most, it says, it is only a lessee of the
services of its professors and/or instructors pursuant to a contract
of services entered into between them. We find no merit in this
claim. Let us clarify who is an "employer" under the Act. Section
2(c) of said Act provides:
Sec. 2. Definitions.As used in this Act
(c) The term employer include any person acting in the
interest of an employer, directly or indirectly, but shall not
include any labor organization (otherwise than when
acting as an employer) or any one acting in the capacity
or agent of such labor organization.
It will be noted that in defining the term "employer" the Act uses
the word "includes", which it also used in defining "employee".
[Sec. 2 (d)], and "representative" [Sec. 2(h)]; and not the word
"means" which the Act uses in defining the terms "court" [Sec.
2(a)], "labor organization" [Sec. 2(e)], "legitimate labor
organization [Sec. 2(f)], "company union" [Sec. 2(g)], "unfair labor
practice" [Sec. 2(i)], "supervisor" [Sec. 2(k)], "strike" [Sec. 2(l)]
and "lock-out" [Sec. 2(m)]. A methodical variation in terminology
is manifest. This variation and distinction in terminology and
phraseology cannot be presumed to have been the
inconsequential product of an oversight; rather, it must have been
the result of a deliberate and purposeful act, more so when we
consider that as legislative records show, Republic Act No. 875

had been meticulously and painstakingly drafted and deliberated

upon. In using the word "includes" and not "means", Congress did
not intend to give a complete definition of "employer", but rather
that such definition should be complementary to what is
commonly understood as employer. Congress intended the term
to be understood in a broad meaning because, firstly, the
statutory definition includes not only "a principal employer but
also a person acting in the interest of the employer"; and,
secondly, the Act itself specifically enumerated those who are not
included in the term "employer", namely: (1) a labor organization
(otherwise than when acting as an employer), (2) anyone acting
in the capacity of officer or agent of such labor organization [Sec.
2(c)], and (3) the Government and any political subdivision or
instrumentality thereof insofar as the right to strike for the purpose
of securing changes or modifications in the terms and conditions
of employment is concerned (Section 11). Among these statutory
exemptions, educational institutions are not included; hence, they
can be included in the term "employer". This Court, however, has
ruled that those educational institutions that are not operated for
profit are not within the purview of Republic Act No. 875.5
As stated above, Republic Act No. 875 does not give a
comprehensive but only a complementary definition of the term
"employer". The term encompasses those that are in ordinary
parlance "employers." What is commonly meant by "employer"?
The term "employer" has been given several acceptations. The
lexical definition is "one who employs; one who uses; one who
engages or keeps in service;" and "to employ" is "to provide work
and pay for; to engage one's service; to hire." (Webster's New
Twentieth Century Dictionary, 2nd ed., 1960, p. 595). The
Workmen's Compensation Act defines employer as including
"every person or association of persons, incorporated or not,
public or private, and the legal representative of the deceased
employer" and "includes the owner or lessee of a factory or
establishment or place of work or any other person who is
virtually the owner or manager of the business carried on in the
establishment or place of work but who, for reason that there is
an independent contractor in the same, or for any other reason, is

not the direct employer of laborers employed there." [Sec. 39(a)

of Act No. 3428.] The Minimum Wage Law states that "employer
includes any person acting directly or indirectly in the interest of
the employer in relation to an employee and shall include the
Government and the government corporations". [Rep. Act No.
602, Sec. 2(b)]. The Social Security Act defines employer as "any
person, natural or juridical, domestic or foreign, who carries in the
Philippines any trade, business, industry, undertaking, or activity
of any kind and uses the services of another person who is under
his orders as regards the employment, except the Government
and any of its political subdivisions, branches or instrumentalities,
including corporations owned or controlled by the Government."
(Rep. Act No. 1161, Sec. 8[c]).
This Court, in the cases of the The Angat River Irrigation System,
et al. vs. Angat River Workers' Union (PLUM), et al., G.R. Nos. L10934 and L-10944, December 28, 1957, which cases involve
unfair labor practices and hence within the purview of Republic
Act No. 875, defined the term employer as follows:
An employer is one who employs the services of others;
one for whom employees work and who pays their wages
or salaries (Black Law Dictionary, 4th ed., p. 618).
An employer includes any person acting in the interest of
an employer, directly or indirectly (Sec. 2-c, Rep. Act
875).
Under none of the above definitions may the University be
excluded, especially so if it is considered that every professor,
instructor or teacher in the teaching staff of the University, as per
allegation of the University itself, has a contract with the latter for
teaching services, albeit for one semester only. The University
engaged the services of the professors, provided them work, and
paid them compensation or salary for their services. Even if the
University may be considered as a lessee of services under a
contract between it and the members of its Faculty, still it is
included in the term "employer". "Running through the word

`employ' is the thought that there has been an agreement on the

part of one person to perform a certain service in return for
compensation to be paid by an employer. When you ask how a
man is employed, or what is his employment, the thought that he
is under agreement to perform some service or services for
another is predominant and paramount." (Ballentine Law
Dictionary, Philippine ed., p. 430, citing Pinkerton National
Detective Agency v. Walker, 157 Ga. 548, 35 A. L. R. 557, 560,
122 S.E. Rep. 202).
To bolster its claim of exception from the application of Republic
Act No. 875, the University contends that it is not state that the
employers included in the definition of 2 (c) of the Act. This
contention can not be sustained. In the first place, Sec. 2 (c) of
Republic Act No. 875 does not state that the employers included
in the definition of the term "employer" are only and exclusively
"industrial establishments"; on the contrary, as stated above, the
term "employer" encompasses all employers except those
specifically excluded by the Act. In the second place, even the
Act itself does not refer exclusively to industrial establishments
and does not confine its application thereto. This is patent
inasmuch as several provisions of the Act are applicable to nonindustrial workers, such as Sec. 3, which deals with "employees'
right to self-organization"; Sections 4 and 5 which enumerate
unfair labor practices; Section 8 which nullifies private contracts
contravening employee's rights; Section 9 which relates to
injunctions in any case involving a labor dispute; Section 11
which prohibits strikes in the government; Section 12 which
provides for the exclusive collective bargaining representation for
labor organizations; Section 14 which deals with the procedure
for collective bargaining; Section 17 which treats of the rights and
conditions of membership in labor organizations; Sections 18, 19,
20 and 21 which provide respectively for the establishment of
conciliation service, compilation of collective bargaining contracts,
advisory labor-management relations; Section 22 which
empowers the Secretary of Labor to make a study of labor
relations; and Section 24 which enumerates the rights of labor
organizations. (See Dissenting Opinion of Justice Concepcion in

Boy Scouts of the Philippines v. Juliana Araos, G.R. No. L-10091,

January 29, 1958.)
This Court, in the case of Boy Scouts of the Philippines v.
Araos, supra, had occasion to state that the Industrial Peace Act
"refers only to organizations and entities created and operated for
profits, engaged in a profitable trade, occupation or industry". It
cannot be denied that running a university engages time and
attention; that it is an occupation or a business from which the
one engaged in it may derive profit or gain. The University is not
an industrial establishment in the sense that an industrial
establishment is one that is engaged in manufacture or trade
where raw materials are changed or fashioned into finished
products for use. But for the purposes of the Industrial Peace Act
the University is an industrial establishment because it is
operated for profit and it employs persons who work to earn a
living. The term "industry", for the purposes of the application of
our labor laws should be given a broad meaning so as to cover all
enterprises which are operated for profit and which engage the
services of persons who work to earn a living.
The word "industry" within State Labor Relations Act
controlling labor relations in industry, cover labor
conditions in any field of employment where the objective
is earning a livelihood on the one side and gaining of a
profit on the other. Labor Law Sec. 700 et seq. State
Labor Relations Board vs. McChesney, 27 N.Y.S. 2d 866,
868." (Words and Phrases, Permanent Edition, Vol. 21,
1960 edition p. 510).
The University urges that even if it were an employer, still there
would be no employer-employee relationship between it and the
striking members of the Faculty Club because the latter are not
employees within the purview of Sec. 2(d) of Republic Act No.
875 but are independent contractors. This claim is untenable.
Section 2 (d) of Republic Act No. 875 provides:

(d) The term "employee" shall include any employee and

shall not be limited to the employee of a particular
employer unless the act explicitly states otherwise and
shall include any individual whose work has ceased as a
consequence of, or in connection with, any current labor
dispute or because of any unfair labor practice and who
has not obtained any other substantially equivalent and
regular employment.
This definition is again, like the definition of the term "employer"
[Sec. 2(c)], by the use of the term "include", complementary. It
embraces not only those who are usually and ordinarily
considered employees, but also those who have ceased as
employees as a consequence of a labor dispute. The term
"employee", furthermore, is not limited to those of a particular
employer. As already stated, this Court in the cases of The Angat
River Irrigation System, et al. v. Angat River Workers' Union
(PLUM), et al., supra, has defined the term "employer" as "one
who employs the services of others; one for whom employees
work and who pays their wages or salaries. "Correlatively, an
employee must be one who is engaged in the service of another;
who performs services for another; who works for salary or
wages. It is admitted by the University that the striking professors
and/or instructors are under contract to teach particular courses
and that they are paid for their services. They are, therefore,
employees of the University.
In support of its claim that the members of the Faculty Club are
not employees of the University, the latter cites as authority
Francisco's Labor Laws, 2nd ed., p. 3, which states:
While the term "workers" as used in a particular statute,
has been regarded as limited to those performing physical
labor, it has been held to embrace stenographers and
bookkeepers. Teachers are not included, however.
It is evident from the above-quoted authority that "teachers" are
not to be included among those who perform "physical labor", but

it does not mean that they are not employees. We have checked
the source of the authority, which is 31 Am. Jur., Sec. 3, p. 835,
and the latter cites Huntworth v. Tanner, 87 Wash 670, 152 P.
523, Ann Cas 1917 D 676. A reading of the last case confirms
Our view.
That teachers are "employees' has been held in a number of
cases (Aebli v. Board of Education of City and County of San
Francisco, 145 P. 2d 601, 62 Col. App 2.d 706; Lowe & Campbell
Sporting Goods Co. v. Tangipahoa Parish School Board, La.
App., 15 So. 2d 98, 100; Sister Odelia v. Church of St. Andrew,
263 N. W. 111, 112, 195 Minn. 357, cited in Words and Phrases,
Permanent ed., Vol. 14, pp. 806-807). This Court in the Far
Eastern University case, supra, considered university instructors
as employees and declared Republic Act No. 875 applicable to
them in their employment relations with their school. The
professors and/or instructors of the University neither ceased to
be employees when they struck, for Section 2 of Rep. Act 875
includes among employees any individual whose work has
ceased as consequence of, or in connection with a current labor
dispute. Striking employees maintain their status as employees of
the employer. (Western Cartridge Co. v. NLRB, C.C.A. 7, 139
F2d 855, 858).
The contention of the University that the professors and/or
instructors are independent contractors, because the University
does not exercise control over their work, is likewise untenable.
This Court takes judicial notice that a university controls the work
of the members of its faculty; that a university prescribes the
courses or subjects that professors teach, and when and where
to teach; that the professors' work is characterized by regularity
and continuity for a fixed duration; that professors are
compensated for their services by wages and salaries, rather
than by profits; that the professors and/or instructors cannot
substitute others to do their work without the consent of the
university; and that the professors can be laid off if their work is
found not satisfactory. All these indicate that the university has
control over their work; and professors are, therefore, employees

and not independent contractors. There are authorities in support

of this view.
The principal consideration in determining whether a
workman is an employee or an independent contractor is
the right to control the manner of doing the work, and it is
not the actual exercise of the right by interfering with the
work, but the right to control, which constitutes the test.
(Amalgamated Roofing Co. v. Travelers' Ins. Co., 133
N.E. 259, 261, 300 Ill. 487, quoted in Words and Phrases,
Permanent ed., Vol. 14, p. 576).
Where, under Employers' Liability Act, A was instructed
when and where to work . . . he is an employee, and not a
contractor, though paid specified sum per square. (Heine
v. Hill, Harris & Co., 2 La. App. 384, 390, in Words and
Phrases, loc, cit.) .
Employees are those who are compensated for their labor
or services by wages rather than by profits. (People vs.
Distributors Division, Smoked Fish Workers Union Local
No. 20377, Sup. 7 N. Y. S. 2d 185, 187 in Words and
Phrases, loc, cit.)
Services of employee or servant, as distinguished from
those of a contractor, are usually characterized by
regularity and continuity of work for a fixed period or one
of indefinite duration, as contrasted with employment to
do a single act or a series of isolated acts; by
compensation on a fixed salary rather than one regulated
by value or amount of work; . . . (Underwood v.
Commissioner of Internal Revenue, C.C.A., 56 F. 2d 67,
71 in Words and Phrases, op. cit., p. 579.)
Independent contractors can employ others to work and
accomplish contemplated result without consent of
contractee, while "employee" cannot substitute another in

his place without consent of his employer. (Luker Sand &

Gravel Co. v. Industrial Commission, 23 P. 2d 225, 82
Utah, 188, in Words and Phrases, Vol. 14, p. 576).
Moreover, even if university professors are considered
independent contractors, still they would be covered by Rep. Act
No. 875. In the case of the Boy Scouts of the Philippines v.
Juliana Araos, supra, this Court observed that Republic Act No.
875 was modelled after the Wagner Act, or the National Labor
Relations Act, of the United States, and this Act did not exclude
"independent contractors" from the orbit of "employees". It was in
the subsequent legislation the Labor Management Relation Act
(Taft-Harley
Act) that "independent contractors" together with agricultural
laborers, individuals in domestic service of the home, supervisors,
and others were excluded. (See Rothenberg on Labor Relations,
1949, pp. 330-331).
It having been shown that the members of the Faculty Club are
employees, it follows that they have a right to unionize in
accordance with the provisions of Section 3 of the Magna Carta
of Labor (Republic Act No. 875) which provides as follows:
Sec. 3. Employees' right to self-organization.Employees
shall have the right to self-organization and to form, join
or assist labor organizations of their own choosing for the
purpose of collective bargaining through representatives
of their own choosing and to engage in concerted
activities for the purpose of collective bargaining and
other mutual aid or protection. . . .
We agree with the statement of the lower court, in its order of
March 30, 1963 which is sought to be set aside in the instant
case, that the right of employees to self-organization is
guaranteed by the Constitution, that said right would exist even if
Republic Act No. 875 is repealed, and that regardless of whether
their employers are engaged in commerce or not. Indeed, it is
Our considered view that the members of the faculty or teaching

staff of private universities, colleges, and schools in the

Philippines, regardless of whether the university, college or
school is run for profit or not, are included in the term
"employees" as contemplated in Republic Act No. 875 and as
such they may organize themselves pursuant to the abovequoted provision of Section 3 of said Act. Certainly, professors,
instructors or teachers of private educational institutions who
teach to earn a living are entitled to the protection of our labor
laws and one such law is Republic Act No. 875.
The contention of the University in the instant case that the
members of the Faculty Club can not unionize and the Faculty
Club can not exist as a valid labor organization is, therefore,
without merit. The record shows that the Faculty Club is a duly
registered labor organization and this fact is admitted by counsel
for the University.5a
The other issue raised by the University is the validity of the
Presidential certification. The University contends that under
Section 10 of Republic Act No. 875 the power of the President of
the Philippines to certify is subject to the following conditions,
namely: (1) that here is a labor dispute, and (2) that said labor
dispute exists in an industry that is vital to the national interest.
The University maintains that those conditions do not obtain in
the instant case. This contention has also no merit.
We have previously stated that the University is an establishment
or enterprise that is included in the term "industry" and is covered
by the provisions of Republic Act No. 875. Now, was there a labor
dispute between the University and the Faculty Club?
Republic Act No. 875 defines a labor dispute as follows:
The term "labor dispute" includes any controversy
concerning terms, tenure or conditions of employment, or
concerning the association or representation of persons in
negotiating, fixing, maintaining, changing, or seeking to

arrange terms or conditions of employment regardless of

whether the disputants stand in proximate relation of
employer and employees.
The test of whether a controversy comes within the definition of
"labor dispute" depends on whether the controversy involves or
concerns "terms, tenure or condition of employment" or
"representation." It is admitted by the University, in the instant
case, that on January 14, 1963 the President of the Faculty Club
wrote to the President of the University a letter informing the latter
of the organization of the Faculty Club as a labor union, duly
registered with the Bureau of Labor Relations; that again on
January 22, 1963 another letter was sent, to which was attached
a list of demands consisting of 26 items, and asking the President
of the University to answer within ten days from date of receipt
thereof; that the University questioned the right of the Faculty
Club to be the exclusive representative of the majority of the
employees and asked proof that the Faculty Club had been
designated or selected as exclusive representative by the vote of
the majority of said employees; that on February 1, 1963 the
Faculty Club filed with the Bureau of Labor Relations a notice of
strike alleging as reason therefor the refusal of the University to
bargain collectively with the representative of the faculty
members; that on February 18, 1963 the members of the Faculty
Club went on strike and established picket lines in the premises
of the University, thereby disrupting the schedule of classes; that
on March 1, 1963 the Faculty Club filed Case No. 3666-ULP for
unfair labor practice against the University, but which was later
dismissed (on April 2, 1963 after Case 41-IPA was certified to the
CIR); and that on March 7, 1963 a petition for certification
election, Case No. 1183-MC, was filed by the Faculty Club in the
CIR.6 All these admitted facts show that the controversy between
the University and the Faculty Club involved terms and conditions
of employment, and the question of representation. Hence, there
was a labor dispute between the University and the Faculty Club,
as contemplated by Republic Act No. 875. It having been shown
that the University is an institution operated for profit, that is an
employer, and that there is an employer-employee relationship,

between the University and the members of the Faculty Club, and
it having been shown that a labor dispute existed between the
University and the Faculty Club, the contention of the University,
that the certification made by the President is not only not
authorized by Section 10 of Republic Act 875 but is violative
thereof, is groundless.
Section 10 of Republic Act No. 875 provides:
When in the opinion of the President of the Philippines
there exists a labor dispute in an industry indispensable to
the national interest and when such labor dispute is
certified by the President to the Court of Industrial
Relations, said Court may cause to be issued a
restraining order forbidding the employees to strike or the
employer to lockout the employees, and if no other
solution to the dispute is found, the Court may issue an
order fixing the terms and conditions of employment.
This Court had occasion to rule on the application of the abovequoted provision of Section 10 of Republic Act No. 875. In the
case of Pampanga Sugar Development Co. v. CIR, et al., G.R.
No. L-13178, March 24, 1961, it was held:
It thus appears that when in the opinion of the President a
labor dispute exists in an industry indispensable to
national interest and he certifies it to the Court of
Industrial Relations the latter acquires jurisdiction to act
thereon in the manner provided by law. Thus the court
may take either of the following courses: it may issue an
order forbidding the employees to strike or the employer
to lockout its employees, or, failing in this, it may issue an
order fixing the terms and conditions of employment. It
has no other alternative. It can not throw the case out in
the assumption that the certification was erroneous.
xxx

xxx

xxx

. . . The fact, however, is that because of the strike

declared by the members of the minority union which
threatens a major industry the President deemed it wise
to certify the controversy to the Court of Industrial
Relations for adjudication. This is the power that the law
gives to the President the propriety of its exercise being a
matter that only devolves upon him. The same is not the
concern of the industrial court. What matters is that by
virtue of the certification made by the President the case
was placed under the jurisdiction of said court. (Emphasis
supplied)
To certify a labor dispute to the CIR is the prerogative of the
President under the law, and this Court will not interfere in, much
less curtail, the exercise of that prerogative. The jurisdiction of the
CIR in a certified case is exclusive (Rizal Cement Co., Inc. v.
Rizal Cement Workers Union (FFW), et al., G.R. No. L-12747,
July 30, 1960). Once the jurisdiction is acquired pursuant to the
presidential certification, the CIR may exercise its broad powers
as provided in Commonwealth Act 103. All phases of the labor
dispute and the employer-employee relationship may be threshed
out before the CIR, and the CIR may issue such order or orders
as may be necessary to make effective the exercise of its
jurisdiction. The parties involved in the case may appeal to the
Supreme Court from the order or orders thus issued by the CIR.
And so, in the instant case, when the President took into
consideration that the University "has some 18,000 students and
employed approximately 500 faculty members", that `the
continued disruption in the operation of the University will
necessarily prejudice the thousand of students", and that "the
dispute affects the national interest",7and certified the dispute to
the CIR, it is not for the CIR nor this Court to pass upon the
correctness of the reasons of the President in certifying the labor
dispute to the CIR.
The third issue raised by the University refers to the question of
the legality of the return-to-work order (of March 30, 1963 in Case

41-IPA) and the order implementing the same (of April 6, 1963). It
alleges that the orders are illegal upon the grounds: (1) that
Republic Act No. 875, supplementing Commonwealth Act No.
103, has withdrawn from the CIR the power to issue a return-towork order; (2) that the only power granted by Section 10 of
Republic Act No. 875 to the CIR is to issue an order forbidding
the employees to strike or forbidding the employer to lockout the
employees, as the case may be, before either contingency had
become a fait accompli; (3) that the taking in by the University of
replacement professors was valid, and the return-to-work order of
March 30, 1963 constituted impairment of the obligation of
contracts; and (4) the CIR could not issue said order without
having previously determined the legality or illegality of the strike.
The contention of the University that Republic Act No. 875 has
withdrawn the power of the Court of Industrial Relations to issue a
return-to-work order exercised by it under Commonwealth Act No.
103 can not be sustained. When a case is certified by the
President to the Court of Industrial Relations, the case thereby
comes under the operation of Commonwealth Act No. 103, and
the Court may exercise the broad powers and jurisdiction granted
to it by said Act. Section 10 of Republic Act No. 875 empowers
the Court of Industrial Relations to issue an order "fixing the
terms of employment." This clause is broad enough to authorize
the Court to order the strikers to return to work and the employer
to readmit them. This Court, in the cases of the Philippine Marine
Officers Association vs. The Court of Industrial Relations,
Compania Maritima, et al.; and Compaia Martima, et al. vs.
Philippine Marine Radio Officers Association and CIR, et al., G.R.
Nos. L-10095 and L-10115, October 31, 1957, declared:
We cannot subscribe to the above contention. We agree
with counsel for the Philippine Radio Officers' Association
that upon certification by the President under Section 10
of Republic Act 875, the case comes under the operation
of Commonwealth Act 103, which enforces compulsory
arbitration in cases of labor disputes in industries
indispensable to the national interest when the President

certifies the case to the Court of Industrial Relations. The

evident intention of the law is to empower the Court of
Industrial Relations to act in such cases, not only in the
manner prescribed under Commonwealth Act 103, but
with the same broad powers and jurisdiction granted by
that act. If the Court of Industrial Relations is granted
authority to find a solution to an industrial dispute and
such solution consists in the ordering of employees to
return back to work, it cannot be contended that the Court
of Industrial Relations does not have the power or
jurisdiction to carry that solution into effect. And of what
use is its power of conciliation and arbitration if it does not
have the power and jurisdiction to carry into effect the
solution it has adopted? Lastly, if the said court has the
power to fix the terms and conditions of employment, it
certainly can order the return of the workers with or
without backpay as a term or condition of employment.
The foregoing ruling was reiterated by this Court in the case
of Hind Sugar Co. v. CIR, et al., G.R. No. L-13364, July 26, 1960.
When a case is certified to the CIR by the President of the
Philippines pursuant to Section 10 of Republic Act No. 875, the
CIR is granted authority to find a solution to the industrial dispute;
and the solution which the CIR has found under the authority of
the presidential certification and conformable thereto cannot be
questioned (Radio Operators Association of the Philippines vs.
Philippine Marine Radio Officers Association, et al., L-10112,
Nov. 29, 1957, 54 O.G. 3218).
Untenable also is the claim of the University that the CIR cannot
issue a return-to-work order after strike has been declared, it
being contended that under Section 10 of Republic Act No. 875
the CIR can only prevent a strike or a lockout when either of
this situation had not yet occurred. But in the case of Bisaya Land
Transportation Co., Inc. vs. Court of Industrial Relations, et al.,
No. L-10114, Nov. 26, 1957, 50 O.G. 2518, this Court declared:

There is no reason or ground for the contention that

Presidential certification of labor dispute to the CIR is
limited to the prevention of strikes and lockouts. Even
after a strike has been declared where the President
believes that public interest demands arbitration and
conciliation, the President may certify the ease for that
purpose. The practice has been for the Court of Industrial
Relations to order the strikers to work, pending the
determination of the union demands that impelled the
strike. There is nothing in the law to indicate that this
practice is abolished." (Emphasis supplied)
Likewise untenable is the contention of the University that the
taking in by it of replacements was valid and the return-to-work
order would be an impairment of its contract with the
replacements. As stated by the CIR in its order of March 30,
1963, it was agreed before the hearing of Case 41-IPA on March
23, 1963 that the strikers would return to work under the status
quo arrangement and the University would readmit them, and the
return-to-work order was a confirmation of that agreement. This is
a declaration of fact by the CIR which we cannot disregard. The
faculty members, by striking, have not abandoned their
employment but, rather, they have only ceased from their labor
(Keith Theatre v. Vachon et al., 187 A. 692). The striking faculty
members have not lost their right to go back to their positions,
because the declaration of a strike is not a renunciation of their
employment and their employee relationship with the University
(Rex Taxicab Co. vs. CIR, et al., 40 O.G., No. 13, 138). The
employment of replacements was not authorized by the CIR. At
most, that was a temporary expedient resorted to by the
University, which was subject to the power of the CIR to allow to
continue or not. The employment of replacements by the
University prior to the issuance of the order of March 30, 1963 did
not vest in the replacements a permanent right to the positions
they held. Neither could such temporary employment bind the
University to retain permanently the replacements.

Striking employees maintained their status as employees

of the employer (Western Castridge Co. v. National Labor
Relations Board, C.C.A. 139 F. 2d 855, 858) ; that
employees who took the place of strikers do not displace
them as `employees." ' (National Labor Relations Board v.
A. Sartorius & Co., C.C.A. 2, 140 F. 2d 203, 206, 207.)
It is clear from what has been said that the return-to-work order
cannot be considered as an impairment of the contract entered
into by petitioner with the replacements. Besides, labor contracts
must yield to the common good and such contracts are subject to
the special laws on labor unions, collective bargaining, strikes
and similar subjects (Article 1700, Civil Code).
Likewise unsustainable is the contention of the University that the
Court of Industrial Relations could not issue the return-to-work
order without having resolved previously the issue of the legality
or illegality of the strike, citing as authority therefor the case
of Philippine Can Company v. Court of Industrial Relations, G.R.
No. L-3021, July 13, 1950. The ruling in said case is not
applicable to the case at bar, the facts and circumstances being
very different. The Philippine Can Company case, unlike the
instant case, did not involve the national interest and it was not
certified by the President. In that case the company no longer
needed the services of the strikers, nor did it need substitutes for
the strikers, because the company was losing, and it was
imperative that it lay off such laborers as were not necessary for
its operation in order to save the company from bankruptcy. This
was the reason of this Court in ruling, in that case, that the
legality or illegality of the strike should have been decided first
before the issuance of the return-to-work order. The University, in
the case before Us, does not claim that it no longer needs the
services of professors and/or instructors; neither does it claim that
it was imperative for it to lay off the striking professors and
instructors because of impending bankruptcy. On the contrary, it
was imperative for the University to hire replacements for the
strikers. Therefore, the ruling in the Philippine Can case that the
legality of the strike should be decided first before the issuance of

the return-to-work order does not apply to the case at bar.

Besides, as We have adverted to, the return-to-work order of
March 30, 1963, now in question, was a confirmation of an
agreement between the University and the Faculty Club during a
prehearing conference on March 23, 1963.
The University also maintains that there was no more basis for
the claim of the members of the Faculty Club to return to their
work, as their individual contracts for teaching had expired on
March 25 or 31, 1963, as the case may be, and consequently,
there was also no basis for the return-to-work order of the CIR
because the contractual relationships having ceased there were
no positions to which the members of the Faculty Club could
return to. This contention is not well taken. This argument loses
sight of the fact that when the professors and instructors struck
on February 18, 1963, they continued to be employees of the
University for the purposes of the labor controversy
notwithstanding the subsequent termination of their teaching
contracts, for Section 2(d) of the Industrial Peace Act includes
among employees "any individual whose work has ceased a
consequence of, or in connection with, any current labor dispute
or of any unfair labor practice and who has not obtained any other
substantially equivalent and regular employment."
The question raised by the University was resolved in a similar
case in the United States. In the case of Rapid Roller Co. v.
NLRB 126 F. 2d 452, we read:
On May 9, 1939 the striking employees, eighty-four in
number, offered to the company to return to their
employment. The company believing it had not committed
any unfair labor practice, refused the employees' offer
and claimed the right to employ others to take the place of
the strikers, as it might see fit. This constituted
discrimination in the hiring and tenure of the striking
employees. When the employees went out on a strike
because of the unfair labor practice of the company, their
status as employees for the purpose of any controversy

growing out of that unfair labor practice was fixed. Sec. 2

(3) of the Act. Phelps Dodge Corp. v. National Labor
Relations Board, 313 U.S. 177, 61 S. Ct. 845, 85. L. ed.
1271, 133 A.L.R. 1217.
For the purpose of such controversy they remained
employees of the company. The company contended that
they could not be their employees in any event since the
"contract of their employment expired by its own terms on
April 23, 1939."
In this we think the company is mistaken for the reason
we have just pointed out, that the status of the employees
on strike became fixed under Sec. 2 (3) of the Act
because of the unfair labor practice of the company which
caused the strike.
The University, furthermore, claims that the information for
indirect contempt filed against the officers of the University (Case
No. V-30) as well as the order of April 29, 1963 for their arrest
were improper, irregular and illegal because (1) the officers of the
University had complied in good faith with the return-to-work
order and in those cases that they did not, it was due to
circumstance beyond their control; (2) the return-to-work order
and the order implementing the same were illegal; and (3) even
assuming that the order was legal, the same was not Yet final
because there was a motion to reconsider it.
Again We find no merit in this claim of Petitioner. We have
already ruled that the CIR had jurisdiction to issue the order of
March 30, 1963 in CIR Case 41-IPA, and the return-to-work
provision of that order is valid and legal. Necessarily the order of
April 6, 1963 implementing that order of March 30, 1963 was also
valid and legal.
Section 6 of Commonwealth Act No. 103 empowers the Court of
Industrial Relations of any Judge thereof to punish direct and

indirect contempts as provided in Rule 64 (now Rule 71) of the

Rules of Court, under the same procedure and penalties provided
therein. Section 3 of Rule 71 enumerates the acts which would
constitute indirect contempt, among which is "disobedience or
resistance to lawful writ, process, order, judgment, or command
of a court," and the person guilty thereof can be punished after a
written charge has been filed and the accused has been given an
opportunity to be heard. The last paragraph of said section
provides:
But nothing in this section shall be so construed as to
prevent the court from issuing process to bring the
accused party into court, or from holding him in custody
pending such proceedings.
The provision authorizes the judge to order the arrest of an
alleged contemner (Francisco, et al. v. Enriquez, L-7058, March
20, 1954, 94 Phil., 603) and this, apparently, is the provision upon
which respondent Judge Bautista relied when he issued the
questioned order of arrest.
The contention of petitioner that the order of arrest is illegal is
unwarranted. The return-to-work order allegedly violated was
within the court's jurisdiction to issue.
Section 14 of Commonwealth Act No. 103 provides that in cases
brought before the Court of Industrial Relations under Section 4
of the Act (referring to strikes and lockouts) the appeal to the
Supreme Court from any award, order or decision shall not stay
the execution of said award, order or decision sought to be
reviewed unless for special reason the court shall order that
execution be stayed. Any award, order or decision that is
appealed is necessarily not final. Yet under Section 14 of
Commonwealth Act No. 103 that award, order or decision, even if
not yet final, is executory, and the stay of execution is
discretionary with the Court of Industrial Relations. In other
words, the Court of Industrial Relations, in cases involving strikes
and lockouts, may compel compliance or obedience of its award,

order or decision even if the award, order or decision is not yet

final because it is appealed, and it follows that any disobedience
or non-compliance of the award, order or decision would
constitute contempt against the Court of Industrial Relations
which the court may punish as provided in the Rules of Court.
This power of the Court of Industrial Relations to punish for
contempt an act of non-compliance or disobedience of an award,
order or decision, even if not yet final, is a special one and is
exercised only in cases involving strikes and lockouts. And there
is reason for this special power of the industrial court because in
the exercise of its jurisdiction over cases involving strikes and
lockouts the court has to issue orders or make decisions that are
necessary to effect a prompt solution of the labor dispute that
caused the strike or the lockout, or to effect the prompt creation of
a situation that would be most beneficial to the management and
the employees, and also to the public even if the solution may
be temporary, pending the final determination of the case.
Otherwise, if the effectiveness of any order, award, or decision of
the industrial court in cases involving strikes and lockouts would
be suspended pending appeal then it can happen that the
coercive powers of the industrial court in the settlement of the
labor disputes in those cases would be rendered useless and
nugatory.
The University points to Section 6 of Commonwealth Act No. 103
which provides that "Any violation of any order, award, or
decision of the Court of Industrial Relations shall after such order,
award or decision has become final, conclusive
and executory constitute contempt of court," and contends that
only the disobedience of orders that are final (meaning one that is
not appealed) may be the subject of contempt proceedings. We
believe that there is no inconsistency between the above-quoted
provision of Section 6 and the provision of Section 14 of
Commonwealth Act No. 103. It will be noted that Section 6
speaks of order, award or decision that is executory. By the
provision of Section 14 an order, award or decision of the Court of
Industrial Relations in cases involving strikes and lockouts are

immediately executory, so that a violation of that order would

constitute an indirect contempt of court.
We believe that the action of the CIR in issuing the order of arrest
of April 29, 1963 is also authorized under Section 19 of
Commonwealth Act No. 103 which provides as follows:
SEC. 19. Implied condition in every contract of
employment.In every contract of employment whether
verbal or written, it is an implied condition that when any
dispute between the employer and the employee or
laborer has been submitted to the Court of Industrial
Relations for settlement or arbitration pursuant to the
provisions of this Act . . . and pending award, or decision
by the Court of such dispute . . . the employee or laborer
shall not strike or walk out of his employment when so
enjoined by the Court after hearing and when public
interest so requires, and if he has already done so, that
he shall forthwith return to it, upon order of the Court,
which shall be issued only after hearing when public
interest so requires or when the dispute cannot, in its
opinion, be promptly decided or settled; and if the
employees or laborers fail to return to work, the Court
may authorize the employer to accept other employees or
laborers. A condition shall further be implied that while
such dispute . . . is pending, the employer shall refrain
from accepting other employees or laborers, unless with
the express authority of the Court, and shall permit the
continuation in the service of his employees or laborers
under the last terms and conditions existing before the
dispute arose. . . . A violation by the employer or by the
employee or laborer of such an order or the implied
contractual condition set forth in this section shall
constitute contempt of the Court of Industrial Relations
and shall be punished by the Court itself in the same
manner with the same penalties as in the case of
contempt of a Court of First Instance. . . .

We hold that the CIR acted within its jurisdiction when it ordered
the arrest of the officers of the University upon a complaint for
indirect contempt filed by the Acting Special Prosecutor of the
CIR in CIR Case V-30, and that order was valid. Besides those
ordered arrested were not yet being punished for contempt; but,
having been charged, they were simply ordered arrested to be
brought before the Judge to be dealt with according to law.
Whether they are guilty of the charge or not is yet to be
determined in a proper hearing.
Let it be noted that the order of arrest dated April 29, 1963 in CIR
Case V-30 is being questioned in Case G.R. No. L-21278 before
this Court in a special civil action for certiorari. The University did
not appeal from that order. In other words, the only question to be
resolved in connection with that order in CIR Case V-30 is
whether the CIR had jurisdiction, or had abused its discretion, in
issuing that order. We hold that the CIR had jurisdiction to issue
that order, and neither did it abuse its discretion when it issued
that order.
In Case G.R. No. L-21462 the University appealed from the order
of Judge Villanueva of the CIR in Case No. 1183-MC, dated April
6, 1963, granting the motion of the Faculty Club to withdraw its
petition for certification election, and from the resolution of the
CIR en banc, dated June 5, 1963, denying the motion to
reconsider said order of April 6, 1963. The ground of the Faculty
Club in asking for the withdrawal of that petition for certification
election was because the issues involved in that petition were
absorbed by the issues in Case 41-IPA. The University opposed
the petition for withdrawal, but at the same time it moved for the
dismissal of the petition for certification election.
It is contended by the University before this Court, in G.R. L21462, that the issues of employer-employee relationship
between the University and the Faculty Club, the alleged status of
the Faculty Club as a labor union, its majority representation and
designation as bargaining representative in an appropriate unit of
the Faculty Club should have been resolved first in Case No.

1183-MC prior to the determination of the issues in Case No. 41IPA, and, therefore, the motion to withdraw the petition for
certification election should not have been granted upon the
ground that the issues in the first case were absorbed in the
second case.
We believe that these contentions of the University in Case G.R.
No. L-21462 have been sufficiently covered by the discussion in
this decision of the main issues raised in the principal case, which
is Case G.R. No. L-21278. After all, the University wanted CIR
Case 1183-MC dismissed, and the withdrawal of the petition for
certification election had in a way produced the situation desired
by the University. After considering the arguments adduced by
the University in support of its petition for certiorari by way of
appeal in Case G.R. No. L-21278, We hold that the CIR did not
commit any error when it granted the withdrawal of the petition for
certification election in Case No. 1183-MC. The principal case
before the CIR is Case No. 41-IPA and all the questions relating
to the labor disputes between the University and the Faculty Club
may be threshed out, and decided, in that case.
In Case G.R. No. L-21500 the University appealed from the order
of the CIR of March 30, 1963, issued by Judge Bautista, and from
the resolution of the CIR en banc promulgated on June 28, 1963,
denying the motion for the reconsideration of that order of March
30, 1963, in CIR Case No. 41-IPA. We have already ruled that
the CIR has jurisdiction to issue that order of March 30, 1963, and
that order is valid, and We, therefore, hold that the CIR did not err
in issuing that order of March 30, 1963 and in issuing the
resolution promulgated on June 28, 1963 (although dated May 7,
1963) denying the motion to reconsider that order of March 30,
1963.
IN VIEW OF THE FOREGOING, the petition for certiorari and
prohibition with preliminary injunction in Case G.R. No. L-21278 is
dismissed and the writs prayed for therein are denied. The writ of
preliminary injunction issued in Case G.R. No. L-21278 is
dissolved. The orders and resolutions appealed from, in Cases

Nos. L-21462 and L-21500, are affirmed, with costs in these three
cases against the petitioner-appellant Feati University. It is so
ordered.
Concepcion, C.J., Dizon, Regala, Makalintal, Bengzon, J.P.,
Sanchez and Castro, JJ., concur.
Reyes, J.B.L., J., concurs but reserves his vote on the teacher's
right to strike.
G.R. No. L-21212

September 23, 1966

CITIZENS' LEAGUE OF FREEWORKERS AND/OR BALBINO

EPIS, NICOLAS ROJO, ET AL., petitioners,
vs.
HON. MACAPANTON ABBAS, Judge of the Court of First
Instance of Davao and TEOFILO GERONIMO and EMERITA
MENDEZ, respondents.
Carlos Dominguez, Jr. for petitioners.
C. S. Nitorreda for respondents.
DIZON, J.:
Petition for certiorari with a prayer for the issuance of a writ of
preliminary injunction filed by the Citizens' League of
Freeworkers, a legitimate labor organization, hereinafter
referred to as the Union and its members against the spouses
Teofilo Geronimo and Emerita Mendez, and the Hon.
Macapanton Abbas, as judge of the Court of First Instance of
Davao. Its purpose is to set aside the writ of preliminary injunction
issued by the latter in Civil Case No. 3966 and restrain him from
proceeding with the case, on the ground that the controversy
involves a labor dispute and is, therefore, within the exclusive
jurisdiction of the Court of Industrial Relations.

It appears that on March 11, 1963, respondents-spouses owners

and operators of auto-calesas in Davao City, filed a complaint
with the Court of First Instance of Davao (Civil Case No. 3966) to
restrain the Union and its members, who were drivers of the
spouses in said business, from interfering with its operation, from
committing certain acts complained of in connection therewith,
and to recover damages. The complaint alleged that the
defendants named therein used to lease the auto-calesas of the
spouses on a daily rental basis; that, unable to get the spouses to
recognize said defendants as employees instead of lessees and
to bargain with it on that basis, the Union declared a strike on
February 20, 1963 and since then had paralyzed plaintiffs'
business operations through threats, intimidation and violence.
The complaint also prayed for the issuance of a writ of preliminary
injunction ex-parte restraining defendants therein from committing
said acts of violence and intimidation during the pendency of the
case.
On March 11, 1963 the respondent judge granted the writ prayed
for, while deferring action on petitioners' motion to dissolve said
writ to March 20 of the same year.
Meanwhile, on March 12, 1963, petitioners filed a complaint for
unfair labor practice against the respondents-spouses with the
Court of Industrial Relations on the ground, among others, of the
latter's refusal to bargain with them.
1aw phl.nt

On March 18, 1963, petitioners filed a motion to declare the writ

of preliminary injunction void on the ground that the same had
expired by virtue of Section 9 (d) of Republic Act 875. In his order
of March 21, 1963, however, the respondent judge denied said
motion on the ground that there was no employer-employee
relationship between respondents-spouses and the individual
petitioners herein and that, consequently, the Rules of Court and
not Republic Act No. 875 applied to the matter of injunction.
Thereupon the petition under consideration was filed.

In the case of Isabelo Doce vs. Workmen's Compensation

Commission, et al. (G.R. No. L-9417, December 22, 1958), upon
a similar if not an altogether identical set of facts, We held:
This case falls squarely within our ruling in National Labor
Union v. Dinglasan, 52 O.G., No. 4, 1933, wherein this
Court held that a driver of a jeep who operates the same
under the boundary system is considered an employee
within the meaning of the law and as such the case
comes under the jurisdiction of the Court of Industrial
Relations. In that case, Benedicto Dinglasan was the
owner and operator of TPU jeepneys which were driven
by petitioner under verbal contracts that they will pay
P7.50 for 10 hours use under the so called "boundary
system." The drivers did not receive salaries or wages
from the owner. Their day's earnings were the excess
over the P7.50 they paid for the use of the jeepneys. In
the event that they did not earn more, the owner did not
have to pay them anything. In holding that the employeremployee relationship existed between the owner of the
jeepneys and the drivers even if the latter worked under
the boundary system, this Court said:
"The only features that would make the
relationship of lessor and lessee between the
respondent, owner of the jeeps, and the drivers,
members of the petitioner union, are the fact that
he does not pay them any fixed wage but their
compensation is the excess of the total amount of
fares earned or collected by them over and above
the amount of P7.50 which they agreed to pay to
the respondent, and the fact that the gasoline
burned by the jeeps is for the account of the
drivers. These two features are not, however,
sufficient to withdraw the relationship, between
them from that of employer-employee, because
the estimated earnings for fares must be over and
above the amount they agreed to pay to the

respondent for a ten-hour shift or ten-hour a day

operation of the jeeps. Not having any interest in
the business because they did not invest anything
in the acquisition of the jeeps and did not
participate in the management thereof, their
service as drivers of the jeeps being their only
contribution to the business, the relationship of
lessor and lessee cannot be sustained."
Even assuming, arguendo, that the respondent court had
jurisdiction to issue the abovementioned writ of preliminary
injunction in Civil Case No. 3966 at the time it was issued, We are
of the opinion, and so hold, that it erred in denying petitioners'
motion to set aside said writ upon expiration of the period of thirty
days from its issuance, upon the wrong ground that there was no
labor dispute between the parties and that, therefore, the
provisions of Republic Act No. 875 did not apply to the case. As
stated heretofore, there was a labor dispute between the parties
from the beginning.
Moreover, upon the filing of the unfair labor practice case on
March 12, 1963, the Court of Industrial Relations acquired
complete jurisdiction over the labor dispute and the least that
could be done in Civil Case No. 3966 is either to dismiss it or
suspend proceedings therein until the final resolution of the
former.
Wherefore, judgment is hereby rendered setting aside the writ of
preliminary injunction issued by the respondent judge in Civil
Case No. 3966 of the Court of First Instance of Davao, with costs.
Concepcion, C.J., Reyes, J.B.L., Barrera, Makalintal, Bengzon,
J.P., Zaldivar, Sanchez and Castro, JJ., concur.
Regala, J., took no part.
G.R. Nos. 83380-81 November 15, 1989

MAKATI HABERDASHERY, INC., JORGE LEDESMA and

CECILIO G. INOCENCIO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, CEFERINA J.
DIOSANA (Labor Arbiter, Department of Labor and
Employment, National Capital Region), SANDIGAN NG
MANGGAGAWANG PILIPINO (SANDIGAN)-TUCP and its
members, JACINTO GARCIANO, ALFREDO C. BASCO,
VICTORIO Y. LAURETO, ESTER NARVAEZ, EUGENIO L.
ROBLES, BELEN N. VISTA, ALEJANDRO A. ESTRABO,
VEVENCIO TIRO, CASIMIRO ZAPATA, GLORIA ESTRABO,
LEONORA MENDOZA, MACARIA G. DIMPAS, MERILYN A.
VIRAY, LILY OPINA, JANET SANGDANG, JOSEFINA
ALCOCEBA and MARIA ANGELES, respondents.
Ledesma, Saludo & Associates for petitioners.
Pablo S. Bernardo for private respondents.

FERNAN, C.J.:
This petition for certiorari involving two separate cases filed by
private respondents against herein petitioners assails the
decision of respondent National Labor Relations Commission in
NLRC CASE No. 7-2603-84 entitled "Sandigan Ng
Manggagawang Pilipino (SANDIGAN)-TUCP etc., et al. v. Makati
Haberdashery and/or Toppers Makati, et al." and NLRC CASE
No. 2-428-85 entitled "Sandigan Ng Manggagawang Pilipino
(SANDIGAN)-TUCP etc., et al. v. Toppers Makati, et al.",
affirming the decision of the Labor Arbiter who jointly heard and
decided aforesaid cases, finding: (a) petitioners guilty of illegal
dismissal and ordering them to reinstate the dismissed workers
and (b) the existence of employer-employee relationship and
granting respondent workers by reason thereof their various
monetary claims.

The undisputed facts are as follows:

Individual complainants, private respondents herein, have been
working for petitioner Makati Haberdashery, Inc. as tailors,
seamstress, sewers, basters (manlililip) and "plantsadoras". They
are paid on a piece-rate basis except Maria Angeles and Leonila
Serafina who are paid on a monthly basis. In addition to their
piece-rate, they are given a daily allowance of three (P 3.00)
pesos provided they report for work before 9:30 a.m. everyday.
Private respondents are required to work from or before 9:30 a.m.
up to 6:00 or 7:00 p.m. from Monday to Saturday and during peak
periods even on Sundays and holidays.
On July 20, 1984, the Sandigan ng Manggagawang Pilipino, a
labor organization of the respondent workers, filed a complaint
docketed as NLRC NCR Case No. 7-2603-84 for (a)
underpayment of the basic wage; (b) underpayment of living
allowance; (c) non-payment of overtime work; (d) non-payment of
holiday pay; (e) non-payment of service incentive pay; (f) 13th
month pay; and (g) benefits provided for under Wage Orders Nos.
1, 2, 3, 4 and 5. 1
During the pendency of NLRC NCR Case No. 7-2603-84, private
respondent Dioscoro Pelobello left with Salvador Rivera, a
salesman of petitioner Haberdashery, an open package which
was discovered to contain a "jusi" barong tagalog. When
confronted, Pelobello replied that the same was ordered by
respondent Casimiro Zapata for his customer. Zapata allegedly
admitted that he copied the design of petitioner Haberdashery.
But in the afternoon, when again questioned about said barong,
Pelobello and Zapata denied ownership of the same.
Consequently a memorandum was issued to each of them to
explain on or before February 4, 1985 why no action should be
taken against them for accepting a job order which is prejudicial
and in direct competition with the business of the company. 2 Both
respondents allegedly did not submit their explanation and did not
report for work. 3 Hence, they were dismissed by petitioners on

February 4, 1985. They countered by filing a complaint for illegal

dismissal docketed as NLRC NCR Case No. 2-428-85 on February
5, 1985. 4

On June 10, 1986, Labor Arbiter Ceferina J. Diosana rendered

judgment, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in
NLRC NCR Case No. 2-428-85 finding
respondents guilty of illegal dismissal and
ordering them to reinstate Dioscoro Pelobello and
Casimiro Zapata to their respective or similar
positions without loss of seniority rights, with full
backwages from July 4, 1985 up to actual
reinstatement. The charge of unfair labor practice
is dismissed for lack of merit.
In NLRC NCR Case No. 7-26030-84, the
complainants' claims for underpayment re
violation of the minimum wage law is hereby
ordered dismissed for lack of merit.
Respondents are hereby found to have violated
the decrees on the cost of living allowance,
service incentive leave pay and the 13th Month
Pay. In view thereof, the economic analyst of the
Commission is directed to compute the monetary
awards due each complainant based on the
available records of the respondents retroactive
as of three years prior to the filing of the instant
case.
SO ORDERED. 5
From the foregoing decision, petitioners appealed to the NLRC.
The latter on March 30, 1988 affirmed said decision but limited

the backwages awarded the Dioscoro Pelobello and Casimiro

Zapata to only one (1) year. 6
After their motion for reconsideration was denied, petitioners filed
the instant petition raising the following issues:
I
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED
THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTS
BETWEEN PETITIONER HABERDASHERY AND
RESPONDENTS WORKERS.
II
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED
THAT RESPONDENTS WORKERS ARE ENTITLED TO
MONETARY CLAIMS DESPITE THE FINDING THAT THEY ARE
NOT ENTITLED TO MINIMUM WAGE.
III
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED
THAT RESPONDENTS PELOBELLO AND ZAPATA WERE
ILLEGALLY DISMISSED. 7
The first issue which is the pivotal issue in this case is resolved in
favor of private respondents. We have repeatedly held in
countless decisions that the test of employer-employee
relationship is four-fold: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal;
and (4) the power to control the employee's conduct. It is the so
called "control test" that is the most important element. 8 This
simply means the determination of whether the employer controls or
has reserved the right to control the employee not only as to the
result of the work but also as to the means and method by which the
same is to be accomplished. 9

The facts at bar indubitably reveal that the most important

requisite of control is present. As gleaned from the operations of
petitioner, when a customer enters into a contract with the
haberdashery or its proprietor, the latter directs an employee who
may be a tailor, pattern maker, sewer or "plantsadora" to take the
customer's measurements, and to sew the pants, coat or shirt as
specified by the customer. Supervision is actively manifested in
all these aspects the manner and quality of cutting, sewing and
ironing.
Furthermore, the presence of control is immediately evident in
this memorandum issued by Assistant Manager Cecilio B.
Inocencio, Jr. dated May 30, 1981 addressed to Topper's Makati
Tailors which reads in part:
4. Effective immediately, new procedures shall be
followed:
A. To follow instruction and orders from the
undersigned Roger Valderama, Ruben Delos
Reyes and Ofel Bautista. Other than this person
(sic) must ask permission to the above mentioned
before giving orders or instructions to the tailors.
B. Before accepting the job orders tailors must
check the materials, job orders, due dates and
other things to maximize the efficiency of our
production. The materials should be checked (sic)
if it is matched (sic) with the sample, together with
the number of the job order.
C. Effective immediately all job orders must be
finished one day before the due date. This can be
done by proper scheduling of job order and if you
will cooperate with your supervisors. If you have
many due dates for certain day, advise Ruben or

Ofel at once so that they can make necessary

adjustment on due dates.
D. Alteration-Before accepting alteration person
attending on customs (sic) must ask first or must
advise the tailors regarding the due dates so that
we can eliminate what we call 'Bitin'.
E. If there is any problem regarding supervisors or
co-tailor inside our shop, consult with me at once
settle the problem. Fighting inside the shop is
strictly prohibited. Any tailor violating this
memorandum will be subject to disciplinary action.
For strict compliance. 10
From this memorandum alone, it is evident that petitioner has
reserved the right to control its employees not only as to the
result but also the means and methods by which the same are to
be accomplished. That private respondents are regular
employees is further proven by the fact that they have to report
for work regularly from 9:30 a.m. to 6:00 or 7:00 p.m. and are
paid an additional allowance of P 3.00 daily if they report for work
before 9:30 a.m. and which is forfeited when they arrive at or after
9:30 a.m. 11
Since private respondents are regular employees, necessarily the
argument that they are independent contractors must fail. As
established in the preceding paragraphs, private respondents did
not exercise independence in their own methods, but on the
contrary were subject to the control of petitioners from the
beginning of their tasks to their completion. Unlike independent
contractors who generally rely on their own resources, the
equipment, tools, accessories, and paraphernalia used by private
respondents are supplied and owned by petitioners. Private
respondents are totally dependent on petitioners in all these
aspects.

Coming now to the second issue, there is no dispute that private

respondents are entitled to the Minimum Wage as mandated by
Section 2(g) of Letter of Instruction No. 829, Rules Implementing
Presidential Decree No. 1614 and reiterated in Section 3(f), Rules
Implementing Presidential Decree 1713 which explicitly states
that, "All employees paid by the result shall receive not less than
the applicable new minimum wage rates for eight (8) hours work
a day, except where a payment by result rate has been
established by the Secretary of Labor. ..." 12 No such rate has been
established in this case.

But all these notwithstanding, the question as to whether or not

there is in fact an underpayment of minimum wages to private
respondents has already been resolved in the decision of the
Labor Arbiter where he stated: "Hence, for lack of sufficient
evidence to support the claims of the complainants for alleged
violation of the minimum wage, their claims for underpayment re
violation of the Minimum Wage Law under Wage Orders Nos. 1,
2, 3, 4, and 5 must perforce fall." 13
The records show that private respondents did not appeal the
above ruling of the Labor Arbiter to the NLRC; neither did they file
any petition raising that issue in the Supreme Court. Accordingly,
insofar as this case is concerned, that issue has been laid to rest.
As to private respondents, the judgment may be said to have
attained finality. For it is a well-settled rule in this jurisdiction that
"an appellee who has not himself appealed cannot obtain from
the appellate court-, any affirmative relief other than the ones
granted in the decision of the court below. " 14
As a consequence of their status as regular employees of the
petitioners, they can claim cost of living allowance. This is
apparent from the provision defining the employees entitled to
said allowance, thus: "... All workers in the private sector,
regardless of their position, designation or status, and irrespective
of the method by which their wages are paid. " 15

Private respondents are also entitled to claim their 13th Month

Pay under Section 3(e) of the Rules and Regulations
Implementing P.D. No. 851 which provides:
Section 3. Employers covered. The Decree
shall apply to all employers except to:
xxx xxx xxx
(e) Employers of those who are paid on purely
commission, boundary, or task basis, and those
who are paid a fixed amount for performing a
specific work, irrespective of the time consumed
in the performance thereof, except where the
workers are paid on piece-rate basis in which
case the employer shall be covered by this
issuance insofar as such workers are
concerned. (Emphasis supplied.)
On the other hand, while private respondents are entitled to
Minimum Wage, COLA and 13th Month Pay, they are not entitled
to service incentive leave pay because as piece-rate workers
being paid at a fixed amount for performing work irrespective of
time consumed in the performance thereof, they fall under one of
the exceptions stated in Section 1(d), Rule V, Implementing
Regulations, Book III, Labor Code. For the same reason private
respondents cannot also claim holiday pay (Section 1(e), Rule IV,
Implementing Regulations, Book III, Labor Code).
With respect to the last issue, it is apparent that public
respondents have misread the evidence, for it does show that a
violation of the employer's rules has been committed and the
evidence of such transgression, the copied barong tagalog, was
in the possession of Pelobello who pointed to Zapata as the
owner. When required by their employer to explain in a
memorandum issued to each of them, they not only failed to do
so but instead went on AWOL (absence without official leave),

waited for the period to explain to expire and for petitioner to

dismiss them. They thereafter filed an action for illegal dismissal
on the far-fetched ground that they were dismissed because of
union activities. Assuming that such acts do not constitute
abandonment of their jobs as insisted by private respondents,
their blatant disregard of their employer's memorandum is
undoubtedly an open defiance to the lawful orders of the latter, a
justifiable ground for termination of employment by the employer
expressly provided for in Article 283(a) of the Labor Code as well
as a clear indication of guilt for the commission of acts inimical to
the interests of the employer, another justifiable ground for
dismissal under the same Article of the Labor Code, paragraph
(c). Well established in our jurisprudence is the right of an
employer to dismiss an employee whose continuance in the
service is inimical to the employer's interest. 16
In fact the Labor Arbiter himself to whom the explanation of
private respondents was submitted gave no credence to their
version and found their excuses that said barong tagalog was the
one they got from the embroiderer for the Assistant Manager who
was investigating them, unbelievable.
Under the circumstances, it is evident that there is no illegal
dismissal of said employees. Thus, We have ruled that:
No employer may rationally be expected to
continue in employment a person whose lack of
morals, respect and loyalty to his employer,
regard for his employer's rules, and appreciation
of the dignity and responsibility of his office, has
so plainly and completely been bared.
That there should be concern, sympathy, and
solicitude for the rights and welfare of the working
class, is meet and proper. That in controversies
between a laborer and his master, doubts
reasonably arising from the evidence, or in the
interpretation of agreements and writings should

be resolved in the former's favor, is not an

unreasonable or unfair rule. But that disregard of
the employer's own rights and interests can be
justified by that concern and solicitude is unjust
and unacceptable. (Stanford Microsystems, Inc. v.
NLRC, 157 SCRA 414-415 [1988] ).
The law is protecting the rights of the laborer authorizes neither
oppression nor self-destruction of the employer.17 More
importantly, while the Constitution is committed to the policy of social
justice and the protection of the working class, it should not be
supposed that every labor dispute will automatically be decided in
favor of labor. 18

Finally, it has been established that the right to dismiss or

otherwise impose discriplinary sanctions upon an employee for
just and valid cause, pertains in the first place to the employer, as
well as the authority to determine the existence of said cause in
accordance with the norms of due process. 19
There is no evidence that the employer violated said norms. On
the contrary, private respondents who vigorously insist on the
existence of employer-employee relationship, because of the
supervision and control of their employer over them, were the
very ones who exhibited their lack of respect and regard for their
employer's rules.
Under the foregoing facts, it is evident that petitioner
Haberdashery had valid grounds to terminate the services of
private respondents.
WHEREFORE, the decision of the National Labor Relations
Commission dated March 30, 1988 and that of the Labor Arbiter
dated June 10, 1986 are hereby modified. The complaint filed by
Pelobello and Zapata for illegal dismissal docketed as NLRC
NCR Case No. 2-428-85 is dismissed for lack of factual and legal
bases. Award of service incentive leave pay to private
respondents is deleted.

SO ORDERED.
Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.
G.R. No. L-72654-61 January 22, 1990
ALIPIO R. RUGA, JOSE PARMA, ELADIO CALDERON,
LAURENTE BAUTU, JAIME BARBIN, NICANOR FRANCISCO,
PHILIP CERVANTES and ELEUTERIO BARBIN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and DE
GUZMAN FISHING ENTERPRISES and/or ARSENIO DE
GUZMAN, respondents.
J.C. Espinas & Associates for petitioners.
Tomas A. Reyes for private respondent.

FERNAN, C.J.:
The issue to be resolved in the instant case is whether or not the
fishermen-crew members of the trawl fishing vessel 7/B
Sandyman II are employees of its owner-operator, De Guzman
Fishing Enterprises, and if so, whether or not they were illegally
dismissed from their employment.
Records show that the petitioners were the fishermen-crew
members of 7/B Sandyman II, one of several fishing vessels
owned and operated by private respondent De Guzman Fishing
Enterprises which is primarily engaged in the fishing business
with port and office at Camaligan, Camarines Sur. Petitioners
rendered service aboard said fishing vessel in various capacities,
as follows: Alipio Ruga and Jose Parma patron/pilot; Eladio
Calderon, chief engineer; Laurente Bautu, second engineer;

Jaime Barbin, master fisherman; Nicanor Francisco, second

fisherman; Philip Cervantes and Eleuterio Barbin, fishermen.
For services rendered in the conduct of private respondent's
regular business of "trawl" fishing, petitioners were paid on
percentage commission basis in cash by one Mrs. Pilar de
Guzman, cashier of private respondent. As agreed upon, they
received thirteen percent (13%) of the proceeds of the sale of the
fish-catch if the total proceeds exceeded the cost of crude oil
consumed during the fishing trip, otherwise, they received ten
percent (10%) of the total proceeds of the sale. The patron/pilot,
chief engineer and master fisherman received a minimum income
of P350.00 per week while the assistant engineer, second
fisherman, and fisherman-winchman received a minimum income
of P260.00 per week. 1
On September 11, 1983 upon arrival at the fishing port,
petitioners were told by Jorge de Guzman, president of private
respondent, to proceed to the police station at Camaligan,
Camarines Sur, for investigation on the report that they sold some
of their fish-catch at midsea to the prejudice of private
respondent. Petitioners denied the charge claiming that the same
was a countermove to their having formed a labor union and
becoming members of Defender of Industrial Agricultural Labor
Organizations and General Workers Union (DIALOGWU) on
September 3, 1983.
During the investigation, no witnesses were presented to prove
the charge against petitioners, and no criminal charges were
formally filed against them. Notwithstanding, private respondent
refused to allow petitioners to return to the fishing vessel to
resume their work on the same day, September 11, 1983.
On September 22, 1983, petitioners individually filed their
complaints for illegal dismissal and non-payment of 13th month
pay, emergency cost of living allowance and service incentive
pay, with the then Ministry (now Department) of Labor and
Employment, Regional Arbitration Branch No. V, Legaspi City,

Albay, docketed as Cases Nos. 1449-83 to 1456-83. 2 They

uniformly contended that they were arbitrarily dismissed without
being given ample time to look for a new job.

On October 24, 1983, private respondent, thru its operations

manager, Conrado S. de Guzman, submitted its position paper
denying the employer-employee relationship between private
respondent and petitioners on the theory that private respondent
and petitioners were engaged in a joint venture. 3
After the parties failed to reach an amicable settlement, the Labor
Arbiter scheduled the case for joint hearing furnishing the parties
with notice and summons. On December 27, 1983, after two (2)
previously scheduled joint hearings were postponed due to the
absence of private respondent, one of the petitioners herein,
Alipio Ruga, the pilot/captain of the 7/B Sandyman II, testified,
among others, on the manner the fishing operations were
conducted, mode of payment of compensation for services
rendered by the fishermen-crew members, and the circumstances
leading to their dismissal. 4
On March 31, 1984, after the case was submitted for resolution,
Labor Arbiter Asisclo S. Coralde rendered a joint
decision 5 dismissing all the complaints of petitioners on a finding
that a "joint fishing venture" and not one of employer-employee
relationship existed between private respondent and petitioners.

From the adverse decision against them, petitioners appealed to

the National Labor Relations Commission.
On May 30, 1985, the National Labor Relations Commission
promulgated its resolution 6 affirming the decision of the labor
arbiter that a "joint fishing venture" relationship existed between
private respondent and petitioners.

Hence, the instant petition.

Petitioners assail the ruling of the public respondent NLRC that

what exists between private respondent and petitioners is a joint
venture arrangement and not an employer-employee relationship.
To stress that there is an employer-employee relationship
between them and private respondent, petitioners invite attention
to the following: that they were directly hired by private
respondent through its general manager, Arsenio de Guzman,
and its operations manager, Conrado de Guzman; that, except for
Laurente Bautu, they had been employed by private respondent
from 8 to 15 years in various capacities; that private respondent,
through its operations manager, supervised and controlled the
conduct of their fishing operations as to the fixing of the schedule
of the fishing trips, the direction of the fishing vessel, the volume
or number of tubes of the fish-catch the time to return to the
fishing port, which were communicated to the patron/pilot by radio
(single side band); that they were not allowed to join other outfits
even the other vessels owned by private respondent without the
permission of the operations manager; that they were
compensated on percentage commission basis of the gross sales
of the fish-catch which were delivered to them in cash by private
respondent's cashier, Mrs. Pilar de Guzman; and that they have
to follow company policies, rules and regulations imposed on
them by private respondent.
Disputing the finding of public respondent that a "joint fishing
venture" exists between private respondent and petitioners,
petitioners claim that public respondent exceeded its jurisdiction
and/or abused its discretion when it added facts not contained in
the records when it stated that the pilot-crew members do not
receive compensation from the boat-owners except their share in
the catch produced by their own efforts; that public respondent
ignored the evidence of petitioners that private respondent
controlled the fishing operations; that public respondent did not
take into account established jurisprudence that the relationship
between the fishing boat operators and their crew is one of direct
employer and employee.

Aside from seeking the dismissal of the petition on the ground

that the decision of the labor arbiter is now final and executory for
failure of petitioners to file their appeal with the NLRC within 10
calendar days from receipt of said decision pursuant to the
doctrine laid down in Vir-Jen Shipping and Marine
Services, Inc. vs. NLRC, 115 SCRA 347 (1982), the Solicitor
General claims that the ruling of public respondent that a "joint
fishing venture" exists between private respondent and
petitioners rests on the resolution of the Social Security System
(SSS) in a 1968 case, Case No. 708 (De Guzman Fishing
Enterprises vs. SSS), exempting De Guzman Fishing Enterprises,
private respondent herein, from compulsory coverage of the SSS
on the ground that there is no employer-employee relations
between the boat-owner and the fishermen-crew members
following the doctrine laid down in Pajarillo vs. SSS, 17 SCRA
1014 (1966). In applying to the case at bar the doctrine
in Pajarillo vs. SSS, supra, that there is no employer-employee
relationship between the boat-owner and the pilot and crew
members when the boat-owner supplies the boat and equipment
while the pilot and crew members contribute the corresponding
labor and the parties get specific shares in the catch for their
respective contribution to the venture, the Solicitor General
pointed out that the boat-owners in the Pajarillo case, as in the
case at bar, did not control the conduct of the fishing operations
and the pilot and crew members shared in the catch.
We rule in favor of petitioners.
Fundamental considerations of substantial justice persuade Us to
decide the instant case on the merits rather than to dismiss it on a
mere technicality. In so doing, we exercise the prerogative
accorded to this Court enunciated in Firestone Filipinas
Employees Association, et al. vs. Firestone Tire and Rubber
Co. of the Philippines, Inc., 61 SCRA 340 (1974), thus "the wellsettled doctrine is that in labor cases before this Tribunal, no
undue sympathy is to be accorded to any claim of a procedural
misstep, the idea being that its power be exercised according to
justice and equity and substantial merits of the controversy."

Circumstances peculiar to some extent to fishermen-crew

members of a fishing vessel regularly engaged in trawl fishing, as
in the case of petitioners herein, who spend one (1) whole week
or more 7 in the open sea performing their job to earn a living to
support their families, convince Us to adopt a more liberal attitude in
applying to petitioners the 10-calendar day rule in the filing of
appeals with the NLRC from the decision of the labor arbiter.

Records reveal that petitioners were informed of the labor

arbiter's decision of March 31, 1984 only on July 3,1984 by their
non-lawyer representative during the arbitration proceedings,
Jose Dialogo who received the decision eight (8) days earlier, or
on June 25, 1984. As adverted to earlier, the circumstances
peculiar to petitioners' occupation as fishermen-crew members,
who during the pendency of the case understandably have to
earn a living by seeking employment elsewhere, impress upon Us
that in the ordinary course of events, the information as to the
adverse decision against them would not reach them within such
time frame as would allow them to faithfully abide by the 10calendar day appeal period. This peculiar circumstance and the
fact that their representative is a non-lawyer provide equitable
justification to conclude that there is substantial compliance with
the ten-calendar day rule of filing of appeals with the NLRC when
petitioners filed on July 10, 1984, or seven (7) days after receipt
of the decision, their appeal with the NLRC through registered
mail.
We have consistently ruled that in determining the existence of an
employer-employee relationship, the elements that are generally
considered are the following (a) the selection and engagement of
the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employer's power to control the employee
with respect to the means and methods by which the work is to
be accomplished. 8 The employment relation arises from contract of
hire, express or implied. 9 In the absence of hiring, no actual
employer-employee relation could exist.

From the four (4) elements mentioned, We have generally relied

on the so-called right-of-control test 10 where the person for whom
the services are performed reserves a right to control not only the
end to be achieved but also the means to be used in reaching such
end. The test calls merely for the existence of the right to control the
manner of doing the work, not the actual exercise of the right. 11

The case of Pajarillo vs. SSS, supra, invoked by the public

respondent as authority for the ruling that a "joint fishing venture"
existed between private respondent and petitioners is not
applicable in the instant case. There is neither light of control nor
actual exercise of such right on the part of the boat-owners in
the Pajarillo case, where the Court found that the pilots therein
are not under the order of the boat-owners as regards their
employment; that they go out to sea not upon directions of the
boat-owners, but upon their own volition as to when, how long
and where to go fishing; that the boat-owners do not in any way
control the crew-members with whom the former have no
relationship whatsoever; that they simply join every trip for which
the pilots allow them, without any reference to the owners of the
vessel; and that they only share in their own catch produced by
their own efforts.
The aforementioned circumstances obtaining in Pajarillo case do
not exist in the instant case. The conduct of the fishing operations
was undisputably shown by the testimony of Alipio Ruga, the
patron/pilot of 7/B Sandyman II, to be under the control and
supervision of private respondent's operations manager. Matters
dealing on the fixing of the schedule of the fishing trip and the
time to return to the fishing port were shown to be the prerogative
of private respondent. 12 While performing the fishing operations,
petitioners received instructions via a single-side band radio from
private respondent's operations manager who called the patron/pilot
in the morning. They are told to report their activities, their position,
and the number of tubes of fish-catch in one day. 13 Clearly thus, the
conduct of the fishing operations was monitored by private
respondent thru the patron/pilot of 7/B Sandyman II who is
responsible for disseminating the instructions to the crew members.

The conclusion of public respondent that there had been no

change in the situation of the parties since 1968 when De
Guzman Fishing Enterprises, private respondent herein, obtained
a favorable judgment in Case No. 708 exempting it from
compulsory coverage of the SSS law is not supported by
evidence on record. It was erroneous for public respondent to
apply the factual situation of the parties in the 1968 case to the
instant case in the light of the changes in the conditions of
employment agreed upon by the private respondent and
petitioners as discussed earlier.
Records show that in the instant case, as distinguished from
the Pajarillo case where the crew members are under no
obligation to remain in the outfit for any definite period as one can
be the crew member of an outfit for one day and be the member
of the crew of another vessel the next day, the herein petitioners,
on the other hand, were directly hired by private respondent,
through its general manager, Arsenio de Guzman, and its
operations manager, Conrado de Guzman and have been under
the employ of private respondent for a period of 8-15 years in
various capacities, except for Laurente Bautu who was hired on
August 3, 1983 as assistant engineer. Petitioner Alipio Ruga was
hired on September 29, 1974 as patron/captain of the fishing
vessel; Eladio Calderon started as a mechanic on April 16, 1968
until he was promoted as chief engineer of the fishing vessel;
Jose Parma was employed on September 29, 1974 as assistant
engineer; Jaime Barbin started as a pilot of the motor boat until
he was transferred as a master fisherman to the fishing vessel
7/B Sandyman II; Philip Cervantes was hired as winchman on
August 1, 1972 while Eleuterio Barbin was hired as winchman on
April 15, 1976.
While tenure or length of employment is not considered as the
test of employment, nevertheless the hiring of petitioners to
perform work which is necessary or desirable in the usual
business or trade of private respondent for a period of 8-15 years
since 1968 qualify them as regular employees within the meaning
of Article 281 of the Labor Code as they were indeed engaged to

perform activities usually necessary or desirable in the usual

fishing business or occupation of private respondent. 14
Aside from performing activities usually necessary and desirable
in the business of private respondent, it must be noted that
petitioners received compensation on a percentage commission
based on the gross sale of the fish-catch i.e. 13% of the proceeds
of the sale if the total proceeds exceeded the cost of the crude oil
consumed during the fishing trip, otherwise only 10% of the
proceeds of the sale. Such compensation falls within the scope
and meaning of the term "wage" as defined under Article 97(f) of
the Labor Code, thus:
(f) "Wage" paid to any employee shall mean the
remuneration or earnings, however designated,
capable of being expressed in terms of money,
whether fixed or ascertained on a time, task,
piece or commission basis, or other method of
calculating the same, which is payable by an
employer to an employee under a written or
unwritten contract of employment for work done or
to be done, or for services rendered or to be
rendered, and included the fair and reasonable
value, as determined by the Secretary of Labor, of
board, lodging, or other facilities customarily
furnished by the employer to the employee. . . .
The claim of private respondent, which was given credence by
public respondent, that petitioners get paid in the form of share in
the fish-catch which the patron/pilot as head of the team
distributes to his crew members in accordance with their own
understanding 15 is not supported by recorded evidence. Except that
such claim appears as an allegation in private respondent's position
paper, there is nothing in the records showing such a sharing
scheme as preferred by private respondent.

Furthermore, the fact that on mere suspicion based on the reports

that petitioners allegedly sold their fish-catch at midsea without

the knowledge and consent of private respondent, petitioners

were unjustifiably not allowed to board the fishing vessel on
September 11, 1983 to resume their activities without giving them
the opportunity to air their side on the accusation against them
unmistakably reveals the disciplinary power exercised by private
respondent over them and the corresponding sanction imposed in
case of violation of any of its rules and regulations. The virtual
dismissal of petitioners from their employment was characterized
by undue haste when less extreme measures consistent with the
requirements of due process should have been first exhausted. In
that sense, the dismissal of petitioners was tainted with illegality.
Even on the assumption that petitioners indeed sold the fishcatch at midsea the act of private respondent virtually resulting in
their dismissal evidently contradicts private respondent's theory of
"joint fishing venture" between the parties herein. A joint venture,
including partnership, presupposes generally a parity of
standing between the joint co-venturers or partners, in which
each party has an equal proprietary interest in the capital or
property contributed 16 and where each party exercises equal lights
in the conduct of the business. 17 It would be inconsistent with the
principle of parity of standing between the joint co-venturers as
regards the conduct of business, if private respondent would
outrightly exclude petitioners from the conduct of the business
without first resorting to other measures consistent with the nature of
a joint venture undertaking, Instead of arbitrary unilateral action,
private respondent should have discussed with an open mind the
advantages and disadvantages of petitioners' action with its joint coventurers if indeed there is a "joint fishing venture" between the
parties. But this was not done in the instant case. Petitioners were
arbitrarily dismissed notwithstanding that no criminal complaints
were filed against them. The lame excuse of private respondent that
the non-filing of the criminal complaints against petitioners was for
humanitarian reasons will not help its cause either.

We have examined the jurisprudence on the matter and find the

same to be supportive of petitioners' stand. InNegre vs. WCC 135
SCRA 653 (1985), we held that fishermen crew members who
were recruited by one master fisherman locally known as

"maestro" in charge of recruiting others to complete the crew

members are considered employees, not industrial partners, of
the boat-owners. In an earlier case of Abong vs. WCC, 54 SCRA
379 (1973) where petitioner therein, Dr. Agustin Abong, owner of
the fishing boat, claimed that he was not the employer of the
fishermen crew members because of an alleged partnership
agreement between him, as financier, and Simplicio Panganiban,
as his team leader in charge of recruiting said fishermen to work
for him, we affirmed the finding of the WCC that there existed an
employer-employee relationship between the boat-owner and the
fishermen crew members not only because they worked for and
in the interest of the business of the boat-owner but also because
they were subject to the control, supervision and dismissal of the
boat-owner, thru its agent, Simplicio Panganiban, the alleged
"partner" of Dr. Abong; that while these fishermen crew members
were paid in kind, or by "pakiao basis" still that fact did not alter
the character of their relationship with Dr. Abong as employees of
the latter.
In Philippine Fishing Boat Officers and Engineers Union vs. Court
of Industrial Relations, 112 SCRA 159 (1982), we held that the
employer-employee relationship between the crew members and
the owners of the fishing vessels engaged in deep sea fishing is
merely suspended during the time the vessels are drydocked or
undergoing repairs or being loaded with the necessary provisions
for the next fishing trip. The said ruling is premised on the
principle that all these activities i.e., drydock, repairs, loading of
necessary provisions, form part of the regular operation of the
company fishing business.
WHEREFORE, in view of the foregoing, the petition is
GRANTED. The questioned resolution of the National Labor
Relations Commission dated May 30,1985 is hereby REVERSED
and SET ASIDE. Private respondent is ordered to reinstate
petitioners to their former positions or any equivalent positions
with 3-year backwages and other monetary benefits under the
law. No pronouncement as to costs.

SO ORDERED.
Gutierrez, Jr., Bidin and Corts, JJ., concur.
Feliciano, J., concurs in the result.
G.R. Nos. 82823-24 July 31, 1989
AGRO COMMERCIAL SECURITY SERVICES AGENCY,
INC., petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION, HON.
LABOR ARBITER BIENVENIDO V. HERMOGENES and
MANUEL JIMENEZ. ET AL., respondents.
San Juan, Gonzalez, San Agustin & Sinense for petitioner.
Mauricio Law Office for private respondents.

GANCAYCO, J.:
Is there an employer-employee relationship between a security
agency and its security guards? Is the so-called "floating status"
of a security guard lawful and could such prolonged status
amount to illegal dismissal? These are the issues raised in this
petition for certiorari and prohibition with preliminary injunction
questioning the resolution dated January 20, 1988 of public
respondent National Labor Relations Commission (NLRC)
affirming the decision of public respondent labor arbiter
Bienvenido V. Hermogenes dated March 19, 1987 finding private
respondents to have been illegally dismissed and ordering
petitioner to pay them separation pay of one-half (1/2) month
salary for every year of service, 13th month pay for the year 1986
and the money value of their respective service incentive leave
amounting to fifteen (15) days salary each with allowances. The

petition also assails the resolution of the respondent NLRC dated

April 18, 1988 denying the motion for reconsideration filed by
petitioner.
Private respondents, numbering forty-six (46) in all, worked as
security guards and/or janitors under individual contracts with
petitioner. They were assigned to firms and offices where
petitioner had contracts providing security and janitorial services.
Their service period and last rates of salary are stated in the
decision of the labor arbiter. 1Their individual contracts of
employment provide, among others, as follows:

3.d. That the security guard, agrees to temporary

suspension of his employment completely to
include such changes in his employment status
with the Agency, in case of termination of contract
between the Agency and its Client, or reduction in
force of same;
In the early part of 1986, petitioner's service contracts with
various corporations and government agencies to which private
respondents were previously assigned had been terminated
generally due to the sequestration of the said offices by the
Presidential Commission on Good Government. Accordingly,
many of the private respondents were placed on "floating status"
on September 16, 1986. A number of them had been put on that
status even earlier. "Floating status" means an indefinite period of
time when private respondents do not receive any salary or
financial benefit provided by law. A number of them later obtained
employment in other security agencies.
On account of the uncertainty of their employment with the
petitioner, on July 25, 1986, private respondents filed a complaint
for illegal dismissal in the Arbitration Branch of the Department of
Labor and Employment against petitioner. They sought the
payment of their respective separation pay, 13th month pay for
1986 and service incentive leave pay. After due' proceedings
where the parties were required to submit their position papers

and stipulation of facts, the respondent labor arbiter ruled in favor

of the private respondents whose decision as above-related was
affirmed by the NLRC.
Hence, the herein petition alleging that the petitioner was denied
due process of law by the NLRC and it committed a grave abuse
of discretion in considering private respondents as employees of
petitioner, in ruling that the "floating status" of private respondents
amounted to an illegal dismissal, and in causing the execution of
the judgment pending a complete and full adjudication of the
issues.
Forthwith, the allegation of denial of due process is without basis.
Petitioner was afforded the opportunity to file its position paper. It
even entered into a stipulation of facts with private respondent.
As to the issue of employer-employee relationship, an
examination of the records shows that private respondents are
regular employees of petitioner. Their individual length of service
ranges from four (4) to more than ten (10) years. In accordance
with the stipulation of facts, it appears that private respondents
worked with petitioner as security guards/janitors Their
employment contracts provide, among others:
1. That the AGENCY hereby undertakes to look
for, procure, and/or furnish the services of the
SECURITY GUARD, with any individual, business
establishment, residential houses or any entity
whatsoever, and the SECURITY GUARD agrees
to supply his services, assignments, position and
undertaking, subject to the following conditions:
a) That the
SECURITY
GUARD upon
acceptance of his
position or

undertaking for
employment, shall
observe, follow
and obey all rules,
regulations, code
of conduct required
by the AGENCY
and any of its
contracted client,
in accordance with
the provisions of
RA 5487 and its
implement Rules
and Regulations;
b) That the
AGENCY shall pay
the SECURITY
GUARD a monthly
salary of P
_______/day
payable on the 5th
and 20th of the
month;
c) That the
AGENCY shall
have the exclusive
right to withdraw or
re-assign the
SECURITY
GUARD;
d) That the
SECURITY
GUARD, agrees to
temporary
suspension of his

employment
completely to
include such
changes; in bis
employment status
with the AGENCY,
in case of
termination of
contract between
the AGENCY and
its client, or
reduction in force
of same;
e) That the
AGENCY may
terminate or
dismiss the
SECURITY
GUARD, if, after
proper and due
investigation it is
shown that the
SECURITY
GUARD has
violated any rule,
regulation, code of
conduct and
discipline, imposed
by the AGENCY;
f) That the terms
and conditions
pertinent to service
and discipline
embodied in the
Agreement
executed between

the AGENCY and

any person,
establishment, or
entity with whom
the SECURITY
GUARD is going to
serve or is
assigned shall be
considered part of
this Agreement
and therefore
binding on
SECURITY
GUARD. 2
It was petitioner who determined how much private respondents
received as their monthly salary, overtime/night differential pay,
mid-year and Christmas bonus and 13th month pay, uniforms and
meal allowances and other benefits mandated by law. Private
respondents were reported by the petitioner as its employees for
purposes of social security coverage. Petitioner remitted their
withholding taxes to the Bureau of Internal Revenue and made
monthly contributions to the Pag-ibig fund for their benefit. It was
petitioner who determined and decided on the assignments,
promotions and salary increases of private respondents, their
working hours, the firearms to be issued to them and janitorial
devices and tools to be used. Likewise, it was petitioner who
imposed the appropriate disciplinary measures on private
respondents by way of reprimand, suspension and dismissal.
In determining the existence of an employee-employer
relationship, the following elements are generally considered:
1) the selection and engagement of the
employees;
2) payment of wages;

3) the power of dismissal and

4) the power to control the employees' conduct . 3
It is clear, therefore, that private respondents are petitioner's
regular employees who enjoy security of tenure and who cannot
be dismissed except for cause . 4
As to the alleged illegal dismissal of private respondents, the
records show that they filed their complaint against petitioner on
July 25, 1986. At the time they filed their complaint, most of them
were still on the job or on assignments and it was only in
September 1986 when most of them were placed on "floating
status."
Obviously, the filing of the complaint was premature. Apparently,
this issue was not raised at all and so it is deemed waived. Thus,
when the labor arbiter rendered his decision, he considered those
who have been out of work or "floating status" for a period
exceeding six (6) months to have been terminated from the
service without just cause thus entitling them to the
corresponding benefits for such separation. We agree.
Under Article 286 of the Labor Code it is provided as follows:
ART. 286. When employment not deemed
terminated. The bonafide suspension of the
operation of a business or undertaking for a
period not exceeding six months, or the fulfillment
by the employee of a military or civic duty shall
not terminate employment. In all such cases, the
employer shall reinstate the employee to his
former position without loss of seniority rights if he
indicates his desire to resume his work not later
than one month from the resumption of operations
of his employer or from his relief from the military
or civic duty.

From the foregoing it is clear that when

the bonafide suspension of the operation of a
business or undertaking exceeds six (6) months
then the employment of the employee shall be
deemed terminated. By the same token and
applying the said rule by analogy to security
guards, if they remained without work or
assignment that is in "floating status" for a period
exceeding six (6) months, then they are in effect
constructively dismissed.
The labor arbiter disagreed with the representations of petitioner
that the private respondents who accepted assignments in other
security agencies without previously resigning should be
considered to have been dismissed with just cause. In the
stipulation of facts, the parties admitted that the disciplinary rules
promulgated by petitioner for its employees provide that
acceptance by an employee of other employment without first
resigning from the agency is a cause for dismissal.
In this case, it appears that twenty-seven (27) of the private
respondents violated this rule by accepting employment in other
security agencies without previously resigning from employment
with petitioner. No doubt, this is a just cause for termination of
their services and as such they are not entitled to any separation
pay. 5
As regards the other seventeen (17) private respondents, they
admittedly remained in "floating status" for more than six (6)
months. Such a 'floating status" is not unusual for security guards
employed in security agencies as their assignments primarily
depend on the contracts entered into by the agency with third
parties. Such a stipulated status is, therefore, lawful.
The "floating status" of such an employee should last only for a
reasonable time. In this case, respondent labor arbiter correctly
held that when the "floating status" of said employees lasts for
more than six (6) months, they may be considered to have been

illegally dismissed from the service. Thus, they are entitled to the
corresponding benefits for their separation.
WHEREFORE, the petition is GRANTED insofar as the twentyseven (27) private respondents are concerned who have
accepted employment elsewhere. The questioned resolutions of
the NLRC dated January 29, 1988 and April 18, 1988 are hereby
modified as to said twenty-seven (27) private respondents in that
their complaint is hereby dismissed for lack of merit. The
questioned resolutions are hereby affirmed in all other respects
as to the other private respondents. No pronouncement as to
costs.
SO ORDERED.

(hereafter NLRC), and its 6 April 1995 Resolution 2denying the

motion to reconsider the former in NLRC-NCR-CA No. 006195-94.
The decision reversed that of the Labor Arbiter in NLRC-NCR-Case
No. 00-07-03994-92.

The parties present conflicting sets of facts.

Petitioner Alejandro Maraguinot, Jr. maintains that he was
employed by private respondents on 18 July 1989 as part of the
filming crew with a salary of P375.00 per week. About four
months later, he was designated Assistant Electrician with a
weekly salary of P400.00, which was increased to P450.00 in
May 1990. In June 1991, he was promoted to the rank of
Electrician with a weekly salary of P475.00, which was increased
to P539.00 in September 1991.

Narvasa, Cruz, Grio-Aquino and Medialdea, JJ., concur.

G.R. No. 120969 January 22, 1998

ALEJANDRO MARAGUINOT, JR. and PAULINO
ENERO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (SECOND
DIVISION) composed of Presiding Commissioner RAUL T.
AQUINO, Commissioner ROGELIO I. RAYALA and
Commissioner VICTORIANO R. CALAYCAY (Ponente), VIC
DEL ROSARIO and VIVA FIMS, respondents.

DAVIDE, JR., J.:

By way of this special civil action for certiorari under Rule 65 of
the Rules of Court, petitioners seek to annul the 10 February
1995 Decision 1 of the National Labor Relations Commission

Petitioner Paulino Enero, on his part, claims that private

respondents employed him in June 1990 as a member of the
shooting crew with a weekly salary of P375.00, which was
increased to P425.00 in May 1991, then to P475.00 on 21
December 1991. 3
Petitioners' tasks consisted of loading, unloading and arranging
movie equipment in the shooting area as instructed by the
cameraman, returning the equipment to Viva Films' warehouse,
assisting in the "fixing" of the lighting system, and performing
other tasks that the cameraman and/or director may assign. 4
Sometime in May 1992, petitioners sought the assistance of their
supervisors, Mrs. Alejandria Cesario, to facilitate their request
that private respondents adjust their salary in accordance with the
minimum wage law. In June 1992, Mrs. Cesario informed
petitioners that Mr. Vic del Rosario would agree to increase their
salary only if they signed a blank employment contract. As
petitioners refused to sign, private respondents forced Enero to
go on leave in June 1992, then refused to take him back when he
reported for work on 20 July 1992. Meanwhile, Maraguinot was
dropped from the company payroll from 8 to 21 June 1992, but

was returned on 22 June 1992. He was again asked to sign a

blank employment contract, and when he still refused, private
respondents terminated his services on 20 July 1992. 5 Petitioners
thus sued for illegal dismissal 6 before the Labor Arbiter.

On the other hand, private respondents claim that Viva Films

(hereafter VIVA) is the trade name of Viva Productions, Inc., and
that it is primarily engaged in the distribution and exhibition of
movies but not in the business of making movies; in the same
vein, private respondent Vic del Rosario is merely an executive
producer,i.e., the financier who invests a certain sum of money
for the production of movies distributed and exhibited by VIVA. 7
Private respondents assert that they contract persons called
"producers" also referred to as "associate producers" 8 to
"produce" or make movies for private respondents; and contend that
petitioners are project employees of the association producers who,
in turn, act as independent contractors. As such, there is no
employer-employee relationship between petitioners and private
respondents.

Private respondents further contend that it was the associate

producer of the film "Mahirap Maging Pogi," who hired petitioner
Maraguinot. The movie shot from 2 July up to 22 July 1992, and it
was only then that Maraguinot was released upon payment of his
last salary, as his services were no longer needed. Anent
petitioner Enero, he was hired for the movie entitled "Sigaw ng
Puso," later re-tired "Narito and Puso." He went on vacation on 8
June 1992, and by the time he reported for work on 20 July 1992,
shooting for the movie had already been completed. 9
After considering both versions of the facts, the Labor Arbiter
found as follows:
On the first issue, this Office rules that
complainants are the employees of the
respondents. The producer cannot be considered
as an independent contractor but should be

considered only as a labor-only contractor and as

such, acts as a mere agent of the real employer,
the herein respondent. Respondents even failed
to name and specify who are the producers. Also,
it is an admitted fact that the complainants
received their salaries from the respondents. The
case cited by the respondents,Rosario Brothers,
Inc. vs. Ople, 131 SCRA 72 does not apply in this
case.
It is very clear also that complainants are doing
activities which are necessary and essential to the
business of the respondents, that of moviemaking. Complainant Maraguinot worked as an
electrician while complainant Enero worked as a
crew [member]. 10
Hence, the Labor Arbiter, in his decision of 20 December
1993, decreed as follows:
WHEREFORE, judgment is hereby rendered
declaring that complainants were illegally
dismissed.
Respondents are hereby ordered to reinstate
complainant to their former positions without loss
[of] seniority rights and pay their backwages
starting July 21, 1992 to December 31, 1993
temporarily computed in the amount of
P38,000.00 for complainant Paulino Enero and
P46,000.00 for complainant Alejandro
Maraguinot, Jr. and thereafter until actually
reinstated.
Respondents are ordered to pay also attorney's
fees equivalent to ten (10%) and/or P8,400.00 on
top of the award. 11

Private respondents appealed to the NLRC (docketed as NLRC

NCR-CA No. 006195-94). In its decision 12 of 10 February 1995,
the NLRC found the following circumstances of petitioners' work
"clearly established:"

1. Complainants [petitioners herein] were hired for

specific movie projects and their employment
wasco-terminus with each movie project the
completion/termination of which are predetermined, such fact being made known to
complainants at the time of their engagement.

next scheduled working day was 28 September

1991, a gap of 18 days.
5. The extremely irregular working days and hours
of complainants' work explain the lump sum
payment for complainants' services for each
movie project. Hence, complainants were paid a
standard weekly salary regardless of the number
of working days and hours they logged in.
Otherwise, if the principle of "no work no pay" was
strictly applied, complainants' earnings for certain
weeks would be very negligible.

xxx xxx xxx

2 Each shooting unit works on one movie project
at a time. And the work of the shooting units,
which work independently from each other, are
not continuous in nature but depends on the
availability of movie projects.
3. As a consequence of the non-continuous work
of the shooting units, the total working hours
logged by complainants in a month show extreme
variations. . . For instance, complainant
Maraguinot worked for only 1.45 hours in June
1991 but logged a total of 183.25 hours in
January 1992. Complainant Enero logged a total
of only 31.57 hours in September 1991 but
worked for 183.35 hours the next month, October
1991.
4. Further shown by respondents is the irregular
work schedule of complainants on a daily basis.
Complainant Maraguinot was supposed to report
on 05 August 1991 but reported only on 30
August 1991, or a gap of 25 days. Complainant
Enero worked on 10 September 1991 and his

6. Respondents also alleged that complainants

were not prohibited from working with such movie
companies like Regal, Seiko and FPJ Productions
whenever they are not working for the
independent movie producers engaged by
respondents . . . This allegation was never
rebutted by complainants and should be deemed
admitted.
The NLRC, in reversing the Labor Arbiter, then concluded
that these circumstances, taken together, indicated that
complainants (herein petitioners) were "project
employees."
After their motion for reconsideration was denied by the NLRC in
its Resolution 13 of 6 April 1995, petitioners filed the instant petition,
claiming that the NLRC committed grave abuse of discretion
amounting to lack or excess of jurisdiction in: (1) finding that
petitioners were project employees; (2) ruling that petitioners were
not illegally dismissed; and (3) reversing the decision of the Labor
Arbiter.

To support their claim that they were regular (and not project)
employees of private respondents, petitioners cited their
performance of activities that were necessary or desirable in the

usual trade or business of private respondents and added that

their work was continuous, i.e., after one project was completed
they were assigned to another project. Petitioners thus
considered themselves part of a work pool from which private
respondents drew workers for assignment to different projects.
Petitioners lamented that there was no basis for the NLRC's
conclusion that they were project employees, while the associate
producers were independent contractors; and thus reasoned that
as regular employees, their dismissal was illegal since the same
was premised on a "false cause," namely, the completion of a
project, which was not among the causes for dismissal allowed by
the Labor Code.
Private respondents reiterate their version of the facts and stress
that their evidence supports the view that petitioners are project
employees; point to petitioners' irregular work load and work
schedule; emphasize the NLRC's finding that petitioners never
controverted the allegation that they were not prohibited from
working with other movie companies; and ask that the facts be
viewed in the context of the peculiar characteristics of the movie
industry.
The Office of the Solicitor General (OSG) is convinced that this
petition is improper since petitioners raise questions of fact,
particularly, the NLRC's finding that petitioners were project
employees, a finding supported by substantial evidence; and
submits that petitioners' reliance on Article 280 of the Labor Code
to support their contention that they should be deemed regular
employees is misplaced, as said section "merely distinguishes
between two types of employees, i.e., regular employees and
casual employees, for purposes of determining the right of an
employee to certain benefits."
The OSG likewise rejects petitioners' contention that since they
were hired not for one project, but for a series of projects, they
should be deemed regular employees. Citing Mamansag
v. NLRC, 14 the OSG asserts that what matters is that there was a
time-frame for each movie project made known to petitioners at the

time of their hiring. In closing, the OSG disagrees with petitioners'

claim that the NLRC's classification of the movie producers as
independent contractors had no basis in fact and in law, since, on
the contrary, the NLRC "took pains in explaining its basis" for its
decision.

As regards the propriety of this action, which the Office of the

Solicitor General takes issue with, we rule that a special civil
action for certiorari under Rule 65 of the Rules of Court is the
proper remedy for one who complains that the NLRC acted in
total disregard of evidence material to or decisive of the
controversy. 15 In the instant case, petitioners allege that the NLRC's
conclusions have no basis in fact and in law, hence the petition may
not be dismissed on procedural or jurisdictional grounds.

The judicious resolution of this case hinges upon, first, the

determination of whether an employer-employee relationship
existed between petitioners and private respondents or any one
of private respondents. If there was none, then this petition has
no merit; conversely, if the relationship existed, then petitioners
could have been unjustly dismissed.
A related question is whether private respondents are engaged in
the business of making motion pictures. Del Rosario is
necessarily engaged in such business as he finances the
production of movies. VIVA, on the other hand, alleges that it
does not "make" movies, but merely distributes and exhibits
motion pictures. There being no further proof to this effect, we
cannot rely on this self-serving denial. At any rate, and as will be
discussed below, private respondents' evidence even supports
the view that VIVA is engaged in the business of making movies.
We now turn to the critical issues. Private respondents insist that
petitioners are project employees of associate producers who, in
turn, act as independent contractors. It is settled that the
contracting out of labor is allowed only in case of job contracting.
Section 8, Rule VIII, Book III of the Omnibus Rules Implementing
the Labor Code describes permissible job contracting in this wise:

Sec. 8. Job contracting. There is job

contracting permissible under the Code if the
following conditions are met:
(1) The contractor
carries on an
independent
business and
undertakes the
contract work on
his own account
under his own
responsibility
according to his
own manner and
method, free from
the control and
direction of his
employer or
principal in all
matters connected
with the
performance of the
work except as to
the results thereof;
and
(2) The contractor
has substantial
capital or
investment in the
form of tools,
equipment,
machineries, work
premises, and
other materials
which are
necessary in the

conduct of his
business.
Assuming that the associate producers are job contractors, they
must then be engaged in the business of making motion pictures.
As such, and to be a job contractor under the preceding
description, associate producers must have tools, equipment,
machinery, work premises, and other materials necessary to
make motion pictures. However, the associate producers here
have none of these. Private respondents' evidence reveals that
the movie-making equipment are supplied to the producers and
owned by VIVA. These include generators, 16 cables and wooden
platforms, 17 cameras and "shooting equipment;" 18 in fact, VIVA
likewise owns the trucks used to transport the equipment. 19 It is thus
clear that the associate producer merely leases the equipment from
VIVA. 20 Indeed, private respondents' Formal Offer of Documentary
Evidence stated one of the purposes of Exhibit "148" as:

To prove further that the independent Producers

rented Shooting Unit No. 2 from Viva to finish their
films. 21
While the purpose of Exhibits "149," "149-A" and "149-B" was:
[T]o prove that the movies of Viva Films were
contracted out to the different independent
Producers who rented Shooting Unit No. 3 with a
fixed budget and time-frame of at least 30
shooting days or 45 days whichever comes first. 22
Private respondent further narrated that VIVA's generators broke
down during petitioners' last movie project, which forced the
associate producer concerned to rent generators, equipment and
crew from another company. 23 This only shows that the associate
producer did not have substantial capital nor investment in the form
of tools, equipment and other materials necessary for making a
movie. Private respondents in effect admit that their producers,

especially petitioners' last producer, are not engaged in permissible

job contracting.

If private respondents insist that the associate producers are

labor contractors, then these producers can only be "labor-only"
contractors, defined by the Labor Code as follows:

(2) The workers recruited and

placed by such person are
performing activities which are
directly related to the principal
business or operations of the
employer in which workers are
habitually employed.

Art. 106. Contractor or subcontractor. . . .

There is "labor-only" contracting where the person
supplying workers to an employer does not have
substantial capital or investment in the form of
tools, equipment, machineries, work premises,
among others, and the workers recruited and
placed by such persons are performing activities
which are directly related to the principal business
of such employer. In such cases, the person or
intermediary shall be considered merely as an
agent of the employer who shall be responsible to
the workers in the same manner and extent as if
the latter were directly employed by him.
A more detailed description is provided by Section 9, Rule
VIII, Book III of the Omnibus Rules Implementing the
Labor Code:
Sec. 9. Labor-only contracting. (a) Any person
who undertakes to supply workers to an employer
shall be deemed to be engaged in labor-only
contracting where such person:
(1) Does not have substantial
capital or investment in the form of
tools, equipment, machineries,
work premises and other
materials; and

(b) Labor-only
contracting as
defined herein is
hereby prohibited
and the person
acting as
contractor shall be
considered merely
as an agent or
intermediary of the
employer who shall
be responsible to
the workers in the
same manner and
extent as if the
latter were directly
employed by him.
(c) For cases not
falling under this
Article, the
Secretary of Labor
shall determine
through
appropriate orders
whether or not the
contracting out of
labor is permissible
in the light of the
circumstances of

each case and

after considering
the operating
needs of the
employer and the
rights of the
workers involved.
In such case, he
may prescribe
conditions and
restrictions to
insure the
protection and
welfare of the
workers.
As labor-only contracting is prohibited, the law considers the
person or entity engaged in the same a mere agent or
intermediary of the direct employer. But even by the preceding
standards, the associate producers of VIVA cannot be considered
labor-only contractors as they did not supply, recruit nor hire the
workers. In the instant case, it was Juanita Cesario, Shooting Unit
Supervisor and an employee of VIVA, who recruited crew
members from an "available group of free-lance workers which
includes the complainants Maraguinot and Enero." 24 And in their
Memorandum, private respondents declared that the associate
producer "hires the services of . . . 6) camera crew which includes (a)
cameraman; (b) the utility crew; (c) the technical staff; (d) generator
man and electrician; (e) clapper; etc. . . . ." 25 This clearly showed
that the associate producers did not supply the workers required by
the movie project.

The relationship between VIVA and its producers or associate

producers seems to be that of agency, 26 as the latter make movies
on behalf of VIVA, whose business is to "make" movies. As such, the
employment relationship between petitioners and producers is
actually one between petitioners and VIVA, with the latter being the
direct employer.

The employer-employee relationship between petitioners and

VIVA can further be established by the "control test." While four
elements are usually considered in determining the existence of
an employment relationship, namely: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employer's power to control of the
employee's conduct, the most important element is the
employer's control of the employee's conduct, not only as to the
result of the work to be done but also as to the means and
methods to accomplish the same. 27 These four elements are
present here. In their position paper submitted to the Labor Arbiter,
private respondents narrated the following circumstances:

[T]he PRODUCER has to work within the limits of

the budget he is given by the company, for as
long as the ultimate finish[ed] product is
acceptable to the company . . .
The ensure that qualify films are produced by the
PRODUCER who is an independent contractor,
the company likewise employs a Supervising
PRODUCER, a Project accountant and a
Shooting unit supervisor. The Company's
Supervising PRODUCER is Mr. Eric Cuatico, the
Project accountant varies from time to time, and
the Shooting Unit Supervisor is Ms. Alejandria
Cesario.
The Supervising PRODUCER acts as the eyes
and ears of the company and of the Executive
Producer to monitor the progress of the
PRODUCER's work accomplishment. He is there
usually in the field doing the rounds of inspection
to see if there is any problem that the
PRODUCER is encountering and to assist in
threshing out the same so that the film project will
be finished on schedule. He supervises about 3 to
7 movie projects simultaneously [at] any given

time by coordinating with each film "PRODUCER".

The Project Accountant on the other hand assists
the PRODUCER in monitoring the actual
expenses incurred because the company wants to
insure that any additional budget requested by the
PRODUCER is really justified and warranted
especially when there is a change of original
plans to suit the tast[e] of the company on how a
certain scene must be presented to make the film
more interesting and more commercially viable.
(emphasis supplied).
VIVA's control is evident in its mandate that the end result must
be a "quality film acceptable to the company." The means and
methods to accomplish the result are likewise controlled by
VIVA, viz., the movie project must be finished within schedule
without exceeding the budget, and additional expenses must be
justified; certain scenes are subject to change to suit the taste of
the company; and the Supervising Producer, the "eyes and ears"
of VIVA and del Rosario, intervenes in the movie-making process
by assisting the associate producer in solving problems
encountered in making the film.
It may not be validly argued then that petitioners are actually
subject to the movie director's control, and not VIVA's direction.
The director merely instructs petitioners on how to better comply
with VIVA's requirements to ensure that a quality film is
completed within schedule and without exceeding the budget. At
bottom, the director is akin to a supervisor who merely oversees
the activities of rank-and-file employees with control ultimately
resting on the employer.
Moreover, appointment slips 28 issued to all crew members state:
During the term of this appointment you shall
comply with the duties and responsibilities of your
position as well as observe the rules and

regulations promulgated by your superiors and by

Top Management.
The words "supervisors" and "Top Management" can only refer to
the "supervisors" and "Top Management" of VIVA. By
commanding crew members to observe the rules and regulations
promulgated by VIVA, the appointment slips only emphasize
VIVA's control over petitioners.
Aside from control, the element of selection and engagement is
likewise present in the instant case and exercised by VIVA. A
sample appointment slip offered by private respondents "to prove
that members of the shooting crew except the driver are project
employees of the Independent Producers" 29 reads as follows:
VIVA PRODUCTIONS, INC.
16 Sct. Albano St.
Diliman, Quezon City
PEDRO NICOLAS Date: June 15, 1992

APPOINTMENT SLIP
You are hereby appointed as SOUNDMAN for the
film project entitled "MANAMBIT". This
appointment shall be effective upon the
commencement of the said project and shall
continue to be effective until the completion of the
same.
For your services you shall receive the
daily/weekly/monthly compensation of P812.50.
During the term of this appointment you shall
comply with the duties and responsibilities of your

position as well as observe the rules and

regulations promulgated by your superiors and by
Top Management.
V
e
r
y
CONFORME:

t
r
u
_________________
l
Name of appointee y
y
Signed in the presence of:
o
u
___________________
r
s
Notably, nowhere in the appointment
, slip does it appear that it
was the producer or associate producer who hired the crew
members; moreover, it is VIVA's corporate
name which appears
(
on the heading of the appointment a
slip. What likewise tells
against VIVA is that it paid petitioners'
n salaries as evidenced by
vouchers, containing VIVA's letterhead, for that purpose. 30
i
All the circumstances indicate an employment
relationship
l
between petitioners and VIVA alone,
l thus the inevitable
conclusion is that petitioners are employees
only of VIVA.
e
g
The next issue is whether petitioners
i were illegally dismissed.
Private respondents contend that petitioners
were project
b
employees whose employment wasl automatically terminated with
the completion of their respective projects.
Petitioners assert that
e
they were regular employees who were illegally dismissed.
s
i

It may not be ignored, however, that private respondents PAIKOT-IKOT (addl. 1/2)
expressly admitted that petitioners were part of a work
pool; 31 and, while petitioners were initially hired possibly as project
ROCKY & ROLLY (2nd contract)
employees, they had attained the status of regular employees in
view if VIVA's conduct.
NARDONG TOOTHPICK

A project employee or a member of a work pool may acquireBAKIT

the KAY TAGAL NG SANDALI
status of a regular employee when the following concur:
BAKIT KAY TAGAL (2nd contract)
1) There is a continuous rehiring of project employees even after
HINUKAY KO NA ANG LIBINGAN
cessation of a project; 32 and
MO
2) The tasks performed by the alleged "project employee" are
MAGING SINO KA MAN
vital, necessary and indispensable to the usual business or trade
of the employer. 33
M. SINO KA MAN (2nd contract)
NOEL JUICO
However, the length of time during which the employee
was continuously re-hired is not controlling, but merely
NOEL JUICO (2nd contract)
serves as a badge of regular employment. 34
ROBIN GOOD
In the instant case, the evidence on record shows that petitioner
Enero was employed for a total of two (2) years and engaged
in KONG HOODLUM # 1
UTOL
at least eighteen (18) projects, while petitioner Maraguinot was
employed for some three (3) years and worked on at least twentyKAPUTOL NG ISANG AWIT
three (23) projects. 35 Moreover, as petitioners' tasks involved,
among other chores, the loading, unloading and
DARNA
FILM

LOVE AT FIRST SIGHT

DATE
STARTED
1/3/90

PAIKOT-IKOT

1/26/90

ROCKY & ROLLY

2/13/90

DATE
COMPLETED

DARNA (addl. 1/2)

ASSOCIATE
PRODUCER
MAGNONG
REHAS

M. REHAS (2nd contract)

2/16/90 MARIVIC ONG
HIRAM NA MUKHA
3/11/90 EDITH MANUEL
HIRAM (2nd contract)
3/29/90 M. ONG
KAHIT AKO'Y BUSABOS

3/12/90

4/3/90 E. MANUEL

4/6/90

5/20/90 M. ONG

4/4/90

5/18/90 JUN CHING

6/26/90

10/20/90 E. MANUEL

8/10/90

9/23/90 E. MANUEL

9/6/90

10/20/90 JUN CHING

10/25/90

12/8/90 SANDY STA. MARIA

12/9/90

1/22/91 SANDY S

1/29/91

3/14/90 JUN CHING

3/15/91

4/6/91 JUN CHING

5/7/91
6/23/91

6/20/91 M. ONG
8/6/91 JUN CHING

8/18/91

10/2/91 SANDY S.

10/4/91

11/18/91 E. MANUEL

11/20/91

12/12/91 E. MANUEL

12/13/91

1/27/92 BOBBY GRIMALT

1/28/92

3/12/92 B. GRIMALT

3/15/92

4/29/92 M. ONG

5/1/92

6/14/92 M. ONG

5/28/92

7/7/92 JERRY OHARA

SIGAW NG PUSO

7/1/92

SIGAW (addl. 1/2)

8/15/92

NGAYON AT KAILANMAN

9/6/92

8/4/92 M.UTOL
ONG (addl. 1/2 contract)
MANDURUGAS (2nd contract)
9/5/92 M.MAHIRAP
ONG
MAGING POGI
10/20/92 SANDY STA. MARIA

While Maraguinot was a member of Shooting Unit III, which made

the following movies (Annex "4-A" of Respondents' Position
Paper; OR, 29):
FILM
GUMAPANG KA SA LUSAK
PETRANG KABAYO
LUSAK (2nd contract)
P. KABAYO (Addl 1/2 contract)
BADBOY
BADBOY (2nd contract)
ANAK NI BABY AMA
A.B. AMA (addl 1/2)
A.B. AMA (addl 2nd 1/2)
BOYONG MANALAC
HUMANAP KA NG PANGET
H. PANGET(2nd contract)
B. MANALAC (2nd contract)
ROBIN GOOD (2nd contract)
PITONG GAMOL
P. GAMOL (2nd contract)
GREASE GUN GANG
ALABANG GIRLS (1/2 contract)
BATANG RILES
UTOL KONG HOODLUM (part 2)

5/7/92
5/25/92
7/2/92

5/29/92 B. GRIMALT
7/8/92 JERRY OHARA
8/15/92 M. ONG

arranging of movie equipment in the shooting area as

instructed by the cameramen, returning the equipment to
the Viva Films' warehouse, and assisting in the "fixing" of
the lighting system, it may not be gainsaid that these
tasks were vital, necessary and indispensable to the
usual business or trade of the employer. As regards the
underscored phrase, it has been held that this is
ascertained by considering the nature of the work
performed and its relation to the scheme of the particular
business or trade in its entirety.36

DATE
DATE
ASSOCIATE
STARTED COMPLETED
PRODUCER
1/27/90
3/12/90 JUN CHING
2/19/90
4/4/90 RUTH GRUTA
3/14/90
4/27/90 JUN CHING
A recent pronouncement of this Court anent project or work pool
4/21/90
5/13/90 RUTH GRUTA
employees who had attained the status of regular employees
6/15/90
7/29/90 EDITH MANUEL proves most instructive:
7/30/90
8/21/90 E. MANUEL
The denial by petitioners of the existence of a
9/2/90
10/16/90 RUTH GRUTA
work pool in the company because their projects
10/17/90
11/8/90 RUTH GRUTA
were not continuous is amply belied by petitioners
themselves who admit that: . . .
11/9/90
12/1/90 R. GRUTA
11/30/90
1/14/91 MARIVIC ONG
A work pool may exist although the workers in the
1/20/91
3/5/91 EDITH MANUEL
pool do not receive salaries and are free to seek
3/10/91
4/23/91 E. MANUEL
other employment during temporary breaks in the
5/22/91
7/5/91 M. ONG
business, provided that the worker shall be
available when called to report of a
7/7/91
8/20/91 M. ONG
project. Although primarily applicable to regular
8/30/91
10/13/91 M. ONG
seasonal workers, this set-up can likewise be
10/14/91
11/27/91 M. ONG
applied to project workers insofar as the effect of
12/28/91
2/10/92 E. MANUEL
temporary cessation of work is concerned. This is
beneficial to both the employer and employee for
3/4/92
3/26/92 M. ONG
it prevents the unjust situation of "coddling labor
3/9/92
3/30/92 BOBBY GRIMALT
at the expense of capital" and at the same time
3/22/92
5/6/92 B. GRIMALT
enables the workers to attain the status of regular

employees. Clearly, the continuous rehiring of the

same set of employees within the framework of
the Lao Group of Companies is strongly indicative
that private respondents were an integral part of a
work pool from which petitioners drew its workers
for its various projects.
In a final attempt to convince the Court that
private respondents were indeed project
employees, petitioners point out that the workers
were not regularly maintained in the payroll and
were free to offer their services to other
companies when there were no on-going projects.
This argument however cannot defeat the
workers' status of regularity. We apply by analogy
the vase of Industrial-Commercial-Agricultural
Workers Organization v. CIR [16 SCRA 526, 567568 (1966)] which deals with regular seasonal
employees. There we held: . . .
Truly, the cessation of construction activities at
the end of every project is a foreseeable
suspension of work. Of course, no compensation
can be demanded from the employer because the
stoppage of operations at the end of a project and
before the start of a new one is regular and
expected by both parties to the labor
relations. Similar to the case of regular seasonal
employees, the employment relation is not
severed by merely being suspended. [citing
Manila Hotel Co. v. CIR, 9 SCRA 186 (1963)] The
employees are, strictly speaking, not separated
from services but merely on leave of absence
without pay until they are reemployed. Thus we
cannot affirm the argument that non-payment of
salary or non-inclusion in the payroll and the
opportunity to seek other employment denote
project employment. 37 (emphasis supplied)

While Lao admittedly involved the construction industry, to which

Policy Instruction No. 20/Department Order No. 19 38 regarding
work pools specifically applies, there seems to be no impediment to
applying the underlying principles to industries other than the
construction industry. 39 Neither may it be argued that a substantial
distinction exists between the projects undertaken in the construction
industry and the motion picture industry. On the contrary, the raison
d' etre of both industries concern projects with a foreseeable
suspension of work.

At this time, we wish to allay any fears that this decision unduly
burdens an employer by imposing a duty to re-hire a project
employee even after completion of the project for which he was
hired. The import of this decision is not to impose a positive and
sweeping obligation upon the employer to re-hire project
employees. What this decision merely accomplishes is a judicial
recognition of the employment status of a project or work pool
employee in accordance with what is fait accompli, i.e., the
continuous re-hiring by the employer of project or work pool
employees who perform tasks necessary or desirable to the
employer's usual business or trade. Let it not be said that this
decision "coddles" labor, for as Lao has ruled, project or work
pool employees who have gained the status of regular employees
are subject to the "no work-no pay" principle, to repeat:
A work pool may exist although the workers in the pool do not
receive salaries and are free to seek other employment during
temporary breaks in the business, provided that the worker shall
be available when called to report for a project. Although primarily
applicable to regular seasonal workers, this set-up can likewise
be applied to project workers insofar as the effect of temporary
cessation of work is concerned. This is beneficial to both the
employer and employee for it prevents the unjust situation of
"coddling labor at the expense of capital" and at the same time
enables the workers to attain the status of regular employees.
The Court's ruling here is meant precisely to give life to the
constitutional policy of strengthening the labor sector,40 but, we

stress, not at the expense of management. Lest it be misunderstood,

this ruling does not mean that simply because an employee is a
project or work pool employee even outside the construction
industry, he is deemed, ipso jure, a regular employee. All that we
hold today is that once a project or work pool employee has been:
(1) continuously, as opposed to intermittently, re-hired by the same
employer for the same tasks or nature of tasks; and (2) these tasks
are vital, necessary and indispensable to the usual business or trade
of the employer, then the employee must be deemed a regular
employee, pursuant to Article 280 of the Labor Code and
jurisprudence. To rule otherwise would allow circumvention of labor
laws in industries not falling within the ambit of Policy Instruction No.
20/Department Order No. 19, hence allowing the prevention of
acquisition of tenurial security by project or work pool employees
who have already gained the status of regular employees by the
employer's conduct.

elsewhere during the period of illegal dismissal, subject however, to

the above observations.

In closing then, as petitioners had already gained the status of

regular employees, their dismissal was unwarranted, for the
cause invoked by private respondents for petitioners'
dismissal, viz.: completion of project, was not, as to them, a valid
cause for dismissal under Article 282 of the Labor Code. As such,
petitioners are now entitled to back wages and reinstatement,
without loss of seniority rights and other benefits that may have
accrued. 41 Nevertheless, following the principles of "suspension of

Bellosillo, Vitug and Kapunan, JJ., concur.

work" and "no pay" between the end of one project and the start of a
new one, in computing petitioners' back wages, the amounts
corresponding to what could have been earned during the periods
from the date petitioners were dismissed until their reinstatement
when petitioners' respective Shooting Units were not undertaking any
movie projects, should be deducted.

Petitioners were dismissed on 20 July 1992, at a time when

Republic Act No. 6715 was already in effect. Pursuant to Section
34 thereof which amended Section 279 of the Labor Code of the
Philippines and Bustamante v. NLRC,42 petitioners are entitled to
receive full back wages from the date of their dismissal up to the time
of their reinstatement, without deducting whatever earnings derived

WHEREFORE, the instant petition is GRANTED. The assailed

decision of the National Labor Relations Commission in NLRC
NCR CA No. 006195-94 dated 01 February 1995, as well as its
Resolution dated 6 April 1995, are hereby ANNULLED and SET
ASIDE for having been rendered with grave abuse of discretion,
and the decision of the Labor Arbiter in NLRC NCR Case No. 0007-03994-92 is REINSTATED, subject, however, to the
modification above mentioned in the computation of back wages.
No pronouncement as to costs.
SO ORDERED.

G.R. No. 157214

June 7, 2005

PHILIPPINE GLOBAL COMMUNICATIONS, INC., petitioner,

vs.
RICARDO DE VERA, respondent.
DECISION
GARCIA, J.:
Before us is this appeal by way of a petition for review
on certiorari from the 12 September 2002 Decision1 and the 13
February 2003 Resolution2 of the Court of Appeals in CA-G.R. SP
No. 65178, upholding the finding of illegal dismissal by the
National Labor Relations Commission against petitioner.
As culled from the records, the pertinent facts are:

Petitioner Philippine Global Communications, Inc. (PhilCom), is a

corporation engaged in the business of communication services
and allied activities, while respondent Ricardo De Vera is a
physician by profession whom petitioner enlisted to attend to the
medical needs of its employees. At the crux of the controversy is
Dr. De Veras status vis a vis petitioner when the latter terminated
his engagement.
It appears that on 15 May 1981, De Vera, via a letter dated 15
May 1981,3 offered his services to the petitioner, therein
proposing his plan of works required of a practitioner in industrial
medicine, to include the following:
1. Application of preventive medicine including periodic
check-up of employees;
2. Holding of clinic hours in the morning and afternoon for
a total of five (5) hours daily for consultation services to
employees;
3. Management and treatment of employees that may
necessitate hospitalization including emergency cases
and accidents;
4. Conduct pre-employment physical check-up of
prospective employees with no additional medical fee;
5. Conduct home visits whenever necessary;
6. Attend to certain medical administrative function such
as accomplishing medical forms, evaluating conditions of
employees applying for sick leave of absence and
subsequently issuing proper certification, and all matters
referred which are medical in nature.
The parties agreed and formalized respondents proposal in a
document denominated as RETAINERSHIP CONTRACT4 which

will be for a period of one year subject to renewal, it being made

clear therein that respondent will cover "the retainership the
Company previously had with Dr. K. Eulau" and that respondents
"retainer fee" will be at P4,000.00 a month. Said contract was
renewed yearly.5 The retainership arrangement went on from
1981 to 1994 with changes in the retainers fee. However, for the
years 1995 and 1996, renewal of the contract was only made
verbally.
The turning point in the parties relationship surfaced in
December 1996 when Philcom, thru a letter6 bearing on the
subject boldly written as "TERMINATION RETAINERSHIP
CONTRACT", informed De Vera of its decision to discontinue the
latters "retainers contract with the Company effective at the
close of business hours of December 31, 1996" because
management has decided that it would be more practical to
provide medical services to its employees through accredited
hospitals near the company premises.
On 22 January 1997, De Vera filed a complaint for illegal
dismissal before the National Labor Relations Commission
(NLRC), alleging that that he had been actually employed by
Philcom as its company physician since 1981 and was dismissed
without due process. He averred that he was designated as a
"company physician on retainer basis" for reasons allegedly
known only to Philcom. He likewise professed that since he was
not conversant with labor laws, he did not give much attention to
the designation as anyway he worked on a full-time basis and
was paid a basic monthly salary plus fringe benefits, like any
other regular employees of Philcom.
On 21 December 1998, Labor Arbiter Ramon Valentin C. Reyes
came out with a decision7 dismissing De Veras complaint for lack
of merit, on the rationale that as a "retained physician" under a
valid contract mutually agreed upon by the parties, De Vera was
an "independent contractor" and that he "was not dismissed but
rather his contract with [PHILCOM] ended when said contract
was not renewed after December 31, 1996".

On De Veras appeal to the NLRC, the latter, in a decision8 dated

23 October 2000, reversed (the word used is "modified") that of
the Labor Arbiter, on a finding that De Vera is Philcoms "regular
employee" and accordingly directed the company to reinstate him
to his former position without loss of seniority rights and privileges
and with full backwages from the date of his dismissal until actual
reinstatement. We quote the dispositive portion of the decision:
WHEREFORE, the assailed decision is modified in that
respondent is ordered to reinstate complainant to his former
position without loss of seniority rights and privileges with full
backwages from the date of his dismissal until his actual
reinstatement computed as follows:
Backwages:
a) Basic Salary
From Dec. 31, 1996 to Apr. 10, 2000
= 39.33 mos.
P44,400.00 x 39.33 mos.
13th Month Pay:
b)
1/12 of P1,750,185.00
c)

amounting to lack or excess of jurisdiction on the part of the

NLRC when it reversed the findings of the labor arbiter and
awarded thirteenth month pay and traveling allowance to De Vera
even as such award had no basis in fact and in law.
On 12 September 2002, the Court of Appeals rendered a
decision,10 modifying that of the NLRC by deleting the award of
traveling allowance, and ordering payment of separation pay to
De Vera in lieu of reinstatement, thus:
WHEREFORE, premises considered, the assailed judgment of
public respondent, dated 23 October 2000, isMODIFIED. The
award of traveling allowance is deleted as the same is hereby
DELETED. Instead of reinstatement, private respondent shall be
paid separation pay computed at one (1) month salary for every
year of service computed from the time private respondent
commenced his employment in 1981 up to the actual payment of
the backwages and separation pay. The awards of backwages
and 13th month pay STAND.

P1,750,185.00
SO ORDERED.
145,848.75
In time, Philcom filed a motion for reconsideration but was denied
by the appellate court in its resolution of 13 February 2003.11

Travelling allowance:
P1,000.00 x 39.33 mos.

39,330.00

GRAND TOTAL

P1,935,363.75

Hence, Philcoms present recourse on its main submission that -

The decision stands in other aspects.

SO ORDERED.
With its motion for reconsideration having been denied by the
NLRC in its order of 27 February 2001,9 Philcom then went to the
Court of Appeals on a petition for certiorari, thereat docketed
as CA-G.R. SP No. 65178, imputing grave abuse of discretion

THE COURT OF APPEALS ERRED IN SUSTAINING THE

DECISION OF THE NATIONAL LABOR RELATIONS
COMMISSION AND RENDERING THE QUESTIONED
DECISION AND RESOLUTION IN A WAY THAT IS NOT IN
ACCORD WITH THE FACTS AND APPLICABLE LAWS AND
JURISPRUDENCE WHICH DISTINGUISH LEGITIMATE JOB
CONTRACTING AGREEMENTS FROM THE EMPLOYEREMPLOYEE RELATIONSHIP.
We GRANT.

Under Rule 45 of the Rules of Court, only questions of law may

be reviewed by this Court in decisions rendered by the Court of
Appeals. There are instances, however, where the Court departs
from this rule and reviews findings of fact so that substantial
justice may be served. The exceptional instances are where:

Applying the four-fold test to this case, we initially find that it was
respondent himself who sets the parameters of what his duties
would be in offering his services to petitioner. This is borne by no
less than his 15 May 1981 letter16 which, in full, reads:
"May 15, 1981

"xxx xxx xxx (1) the conclusion is a finding grounded entirely on

speculation, surmise and conjecture; (2) the inference made is
manifestly mistaken; (3) there is grave abuse of discretion; (4) the
judgment is based on a misapprehension of facts; (5) the findings
of fact are conflicting; (6) the Court of Appeals went beyond the
issues of the case and its findings are contrary to the admissions
of both appellant and appellees; (7) the findings of fact of the
Court of Appeals are contrary to those of the trial court; (8) said
findings of facts are conclusions without citation of specific
evidence on which they are based; (9) the facts set forth in the
petition as well as in the petitioners main and reply briefs are not
disputed by the respondents; and (10) the findings of fact of the
Court of Appeals are premised on the supposed absence of
evidence and contradicted by the evidence on record."12
As we see it, the parties respective submissions revolve on the
primordial issue of whether an employer-employee relationship
exists between petitioner and respondent, the existence of which
is, in itself, a question of fact13 well within the province of the
NLRC. Nonetheless, given the reality that the NLRCs findings
are at odds with those of the labor arbiter, the Court, consistent
with its ruling in Jimenez vs. National Labor Relations
Commission,14 is constrained to look deeper into the attendant
circumstances obtaining in this case, as appearing on record.
In a long line of decisions,15 the Court, in determining the
existence of an employer-employee relationship, has invariably
adhered to the four-fold test, to wit: [1] the selection and
engagement of the employee; [2] the payment of wages; [3] the
power of dismissal; and [4] the power to control the employees
conduct, or the so-called "control test", considered to be the most
important element.

Mrs. Adela L. Vicente

Vice President, Industrial Relations
PhilCom, Paseo de Roxas
Makati, Metro Manila
Madam:
I shall have the time and effort for the position of Company
physician with your corporation if you deemed it necessary. I
have the necessary qualifications, training and experience
required by such position and I am confident that I can serve the
best interests of your employees, medically.
My plan of works and targets shall cover the duties and
responsibilities required of a practitioner in industrial medicine
which includes the following:
1. Application of preventive medicine including
periodic check-up of employees;
2. Holding of clinic hours in the morning and
afternoon for a total of five (5) hours daily for
consultation services to employees;
3. Management and treatment of employees that
may necessitate hospitalization including
emergency cases and accidents;

4. Conduct pre-employment physical check-up of

prospective employees with no additional medical
fee;
5. Conduct home visits whenever necessary;
6. Attend to certain medical administrative
functions such as accomplishing medical forms,
evaluating conditions of employees applying for
sick leave of absence and subsequently issuing
proper certification, and all matters referred which
are medical in nature.
On the subject of compensation for the services that I propose to
render to the corporation, you may state an offer based on your
belief that I can very well qualify for the job having worked with
your organization for sometime now.
I shall be very grateful for whatever kind attention you may extend
on this matter and hoping that it will merit acceptance, I remain
Very truly yours,
(signed)
RICARDO V. DE VERA, M.D."
Significantly, the foregoing letter was substantially the basis of the
labor arbiters finding that there existed no employer-employee
relationship between petitioner and respondent, in addition to the
following factual settings:
The fact that the complainant was not considered an employee
was recognized by the complainant himself in a signed letter to
the respondent dated April 21, 1982 attached as Annex G to the
respondents Reply and Rejoinder. Quoting the pertinent portion
of said letter:

To carry out your memo effectively and to provide a systematic

and workable time schedule which will serve the best interests of
both the present and absent employee, may I propose an
extended two-hour service (1:00-3:00 P.M.) during which period I
can devote ample time to both groups depending upon the
urgency of the situation. I shall readjust my private schedule to be
available for the herein proposed extended hours, should you
consider this proposal.
As regards compensation for the additional time and services that
I shall render to the employees, it is dependent on your
evaluation of the merit of my proposal and your confidence on my
ability to carry out efficiently said proposal.
The tenor of this letter indicates that the complainant was
proposing to extend his time with the respondent and seeking
additional compensation for said extension. This shows that the
respondent PHILCOM did not have control over the schedule of
the complainant as it [is] the complainant who is proposing his
own schedule and asking to be paid for the same. This is proof
that the complainant understood that his relationship with the
respondent PHILCOM was a retained physician and not as an
employee. If he were an employee he could not negotiate as to
his hours of work.
The complainant is a Doctor of Medicine, and presumably, a welleducated person. Yet, the complainant, in his position paper, is
claiming that he is not conversant with the law and did not give
much attention to his job title- on a retainer basis. But the same
complainant admits in his affidavit that his service for the
respondent was covered by a retainership contract [which] was
renewed every year from 1982 to 1994. Upon reading the
contract dated September 6, 1982, signed by the complainant
himself (Annex C of Respondents Position Paper), it clearly
states that is a retainership contract. The retainer fee is indicated
thereon and the duration of the contract for one year is also
clearly indicated in paragraph 5 of the Retainership Contract. The
complainant cannot claim that he was unaware that the contract

was good only for one year, as he signed the same without any
objections. The complainant also accepted its renewal every year
thereafter until 1994. As a literate person and educated person,
the complainant cannot claim that he does not know what
contract he signed and that it was renewed on a year to year
basis.17
The labor arbiter added the indicia, not disputed by respondent,
that from the time he started to work with petitioner, he never was
included in its payroll; was never deducted any contribution for
remittance to the Social Security System (SSS); and was in fact
subjected by petitioner to the ten (10%) percent withholding tax
for his professional fee, in accordance with the National Internal
Revenue Code, matters which are simply inconsistent with an
employer-employee relationship. In the precise words of the labor
arbiter:
"xxx xxx xxx After more than ten years of services to PHILCOM,
the complainant would have noticed that no SSS deductions were
made on his remuneration or that the respondent was deducting
the 10% tax for his fees and he surely would have complained
about them if he had considered himself an employee of
PHILCOM. But he never raised those issues. An ordinary
employee would consider the SSS payments important and thus
make sure they would be paid. The complainant never bothered
to ask the respondent to remit his SSS contributions. This clearly
shows that the complainant never considered himself an
employee of PHILCOM and thus, respondent need not remit
anything to the SSS in favor of the complainant."18
Clearly, the elements of an employer-employee relationship are
wanting in this case. We may add that the records are replete
with evidence showing that respondent had to bill petitioner for
his monthly professional fees.19 It simply runs against the grain of
common experience to imagine that an ordinary employee has
yet to bill his employer to receive his salary.

We note, too, that the power to terminate the parties relationship

was mutually vested on both. Either may terminate the
arrangement at will, with or without cause.20
Finally, remarkably absent from the parties arrangement is the
element of control, whereby the employer has reserved the right
to control the employee not only as to the result of the work done
but also as to the means and methods by which the same is to be
accomplished.21
Here, petitioner had no control over the means and methods by
which respondent went about performing his work at the company
premises. He could even embark in the private practice of his
profession, not to mention the fact that respondents work hours
and the additional compensation therefor were negotiated upon
by the parties.22 In fine, the parties themselves practically agreed
on every terms and conditions of respondents engagement,
which thereby negates the element of control in their relationship.
For sure, respondent has never cited even a single instance
when petitioner interfered with his work.
Yet, despite the foregoing, all of which are extant on record, both
the NLRC and the Court of Appeals ruled that respondent is
petitioners regular employee at the time of his separation.
Partly says the appellate court in its assailed decision:
Be that as it may, it is admitted that private respondents written
retainer contract was renewed annually from 1981 to 1994 and
the alleged renewal for 1995 and 1996, when it was allegedly
terminated, was verbal.
Article 280 of the Labor code (sic) provides:
The provisions of written agreement to the
contrary notwithstanding and regardless of the oral
agreements of the parties, an employment shall be deemed to

be regular where the employee has been engaged to perform in

the usual business or trade of the employer, except where the
employment has been fixed for a specific project or undertaking
the completion or termination of which has been determined at
the time of the engagement of the employee or where the work or
services to be performed is seasonal in nature and the
employment is for the duration of the season.
An employment shall be deemed to be casual if it is not
covered by the preceding paragraph: Provided, That, any
employee who has rendered at least one (1) year of service,
whether such is continuous or broken, shall be considered a
regular with respect to the activity in which he is
employedand his employment shall continue while such activity
exists.
Parenthetically, the position of company physician, in the case of
petitioner, is usually necessary and desirable because the need
for medical attention of employees cannot be foreseen, hence, it
is necessary to have a physician at hand. In fact, the importance
and desirability of a physician in a company premises is
recognized by Art. 157 of the Labor Code, which requires the
presence of a physician depending on the number of employees
and in the case at bench, in petitioners case, as found by public
respondent, petitioner employs more than 500 employees.
Going back to Art. 280 of the Labor Code, it was made therein
clear that the provisions of a written agreement to the contrary
notwithstanding or the existence of a mere oral agreement, if the
employee is engaged in the usual business or trade of the
employer, more so, that he rendered service for at least one year,
such employee shall be considered as a regular employee.
Private respondent herein has been with petitioner since 1981
and his employment was not for a specific project or undertaking,
the period of which was pre-determined and neither the work or
service of private respondent seasonal. (Emphasis by the CA
itself).

We disagree to the foregoing ratiocination.

The appellate courts premise that regular employees are those
who perform activities which are desirable and necessary for the
business of the employer is not determinative in this case. For,
we take it that any agreement may provide that one party shall
render services for and in behalf of another, no matter how
necessary for the latters business, even without being hired as
an employee. This set-up is precisely true in the case of an
independent contractorship as well as in an agency agreement.
Indeed, Article 280 of the Labor Code, quoted by the appellate
court, is not the yardstick for determining the existence of an
employment relationship. As it is, the provision merely
distinguishes between two (2) kinds of employees, i.e., regular
and casual. It does not apply where, as here, the very existence
of an employment relationship is in dispute.23
Buttressing his contention that he is a regular employee of
petitioner, respondent invokes Article 157 of the Labor Code, and
argues that he satisfies all the requirements thereunder. The
provision relied upon reads:
ART. 157. Emergency medical and dental services. It shall be
the duty of every employer to furnish his employees in any locality
with free medical and dental attendance and facilities consisting
of:
(a) The services of a full-time registered nurse when the
number of employees exceeds fifty (50) but not more than
two hundred (200) except when the employer does not
maintain hazardous workplaces, in which case the
services of a graduate first-aider shall be provided for the
protection of the workers, where no registered nurse is
available. The Secretary of Labor shall provide by
appropriate regulations the services that shall be required
where the number of employees does not exceed fifty
(50) and shall determine by appropriate order hazardous
workplaces for purposes of this Article;

(b) The services of a full-time registered nurse, a parttime physician and dentist, and an emergency clinic,
when the number of employees exceeds two hundred
(200) but not more than three hundred (300); and
(c) The services of a full-time physician, dentist and fulltime registered nurse as well as a dental clinic, and an
infirmary or emergency hospital with one bed capacity for
every one hundred (100) employees when the number of
employees exceeds three hundred (300).
In cases of hazardous workplaces, no employer shall engage the
services of a physician or dentist who cannot stay in the premises
of the establishment for at least two (2) hours, in the case of
those engaged on part-time basis, and not less than eight (8)
hours in the case of those employed on full-time basis. Where the
undertaking is nonhazardous in nature, the physician and dentist
may be engaged on retained basis, subject to such regulations as
the Secretary of Labor may prescribe to insure immediate
availability of medical and dental treatment and attendance in
case of emergency.
Had only respondent read carefully the very statutory provision
invoked by him, he would have noticed that in non-hazardous
workplaces, the employer may engage the services of a physician
"on retained basis." As correctly observed by the petitioner, while
it is true that the provision requires employers to engage the
services of medical practitioners in certain establishments
depending on the number of their employees, nothing is there in
the law which says that medical practitioners so engaged be
actually hired as employees,24 adding that the law, as written,
only requires the employer "to retain", not employ, a part-time
physician who needed to stay in the premises of the nonhazardous workplace for two (2) hours.25
Respondent takes no issue on the fact that petitioners business
of telecommunications is not hazardous in nature. As such, what
applies here is the last paragraph of Article 157 which, to stress,

provides that the employer may engage the services of a

physician and dentist "on retained basis", subject to such
regulations as the Secretary of Labor may prescribe. The
successive "retainership" agreements of the parties definitely hue
to the very statutory provision relied upon by respondent.
Deeply embedded in our jurisprudence is the rule that courts may
not construe a statute that is free from doubt. Where the law is
clear and unambiguous, it must be taken to mean exactly what it
says, and courts have no choice but to see to it that the mandate
is obeyed.26 As it is, Article 157 of the Labor Code clearly and
unequivocally allows employers in non-hazardous establishments
to engage "on retained basis" the service of a dentist or
physician. Nowhere does the law provide that the physician or
dentist so engaged thereby becomes a regular employee. The
very phrase that they may be engaged "on retained basis",
revolts against the idea that this engagement gives rise to an
employer-employee relationship.
With the recognition of the fact that petitioner consistently
engaged the services of respondent on a retainer basis, as
shown by their various "retainership contracts", so can petitioner
put an end, with or without cause, to their retainership agreement
as therein provided.27
We note, however, that even as the contracts entered into by the
parties invariably provide for a 60-day notice requirement prior to
termination, the same was not complied with by petitioner when it
terminated on 17 December 1996 the verbally-renewed
retainership agreement, effective at the close of business hours
of 31 December 1996.
Be that as it may, the record shows, and this is admitted by both
parties,28 that execution of the NLRC decision had already been
made at the NLRC despite the pendency of the present recourse.
For sure, accounts of petitioner had already been garnished and
released to respondent despite the previous Status Quo
Order29issued by this Court. To all intents and purposes,

therefore, the 60-day notice requirement has become moot and

academic if not waived by the respondent himself.
WHEREFORE, the petition is GRANTED and the challenged
decision of the Court of Appeals REVERSED and SET ASIDE.
The 21 December 1998 decision of the labor arbiter is
REINSTATED.
No pronouncement as to costs.
SO ORDERED.
Panganiban, (Chairman), Corona, and Carpio-Morales, JJ.,
concur.
Sandoval-Gutierrez, J., on official leave.
G.R. No. 146989

February 7, 2007

MELENCIO GABRIEL, represented by surviving spouse,

FLORDELIZA V. GABRIEL, Petitioner,
vs.
NELSON BILON, ANGEL BRAZIL AND ERNESTO
PAGAYGAY, Respondents.
DECISION
AZCUNA, J.:
This is a petition for review on certiorari1 assailing the Decision
and Resolution of the Court of Appeals, respectively dated
August 4, 2000 and February 7, 2001, in CA-G.R. SP No. 52001
entitled "Nelson Bilon, et al. v. National Labor Relations
Commission, et al."
The challenged decision reversed and set aside the decision2 of
the National Labor Relations Commission (NLRC) dismissing
respondents complaint for illegal dismissal and illegal deductions,

and reinstating the decision of the Labor Arbiter finding petitioner

guilty of illegal dismissal but not of illegal deductions subject to
the modification that respondents be immediately reinstated to
their former positions without loss of seniority rights and privileges
instead of being paid separation pay.
Petitioner, represented by his surviving spouse, Flordeliza V.
Gabriel, was the owner-operator of a public transport business,
"Gabriel Jeepney," with a fleet of 54 jeepneys plying the
Baclaran-Divisoria-Tondo route. Petitioner had a pool of drivers,
which included respondents, operating under a "boundary
system" of P400 per day.
The facts3 are as follows:
On November 15, 1995, respondents filed their separate
complaints for illegal dismissal, illegal deductions, and separation
pay against petitioner with the National Labor Relations
Commission (NLRC). These were consolidated and docketed as
NLRC-NCR Case No. 00-11-07420-95.4
On December 15, 1995, the complaint was amended, impleading
as party respondent the Bacoor Transport Service Cooperative,
Inc., as both parties are members of the cooperative.
Respondents alleged the following:
1) That they were regular drivers of Gabriel Jeepney,
driving their respective units bearing Plate Nos. PHW
553, NXU 155, and NWW 557, under a boundary system
of P400 per day, plying Baclaran to Divisoria via Tondo,
and vice versa, since December 1990, November 1984
and November 1991, respectively, up to April 30,
1995,5 driving five days a week, with average daily
earnings of P400;

2) That they were required/forced to pay

additional P55.00 per day for the following: a) P20.00
police protection; b) P20.00 washing; c) P10.00 deposit;
and [d)] P5.00 garage fees;
3) That there is no law providing the operator to require
the drivers to pay police protection, deposit, washing, and
garage fees.
4) That on April 30, 1995, petitioner told them not to drive
anymore, and when they went to the garage to report for
work the next day, they were not given a unit to drive; and
5) That the boundary drivers of passenger jeepneys are
considered regular employees of the jeepney operators.
Being such, they are entitled to security of tenure.
Petitioner, however, dismissed them without factual and
legal basis, and without due process.
On his part, petitioner contended that:
1) He does not remember if the respondents were ever
under his employ as drivers of his passenger jeepneys.
Certain, however, is the fact that neither the respondents
nor other drivers who worked for him were ever dismissed
by him. As a matter of fact, some of his former drivers just
stopped reporting for work, either because they found
some other employment or drove for other operators, and
like the respondents, the next time he heard from them
was when they started fabricating unfounded complaints
against him;
2) He made sure that none of the jeepneys would stay
idle even for a day so he could collect his earnings;
hence, it had been his practice to establish a pool of
drivers. Had respondents manifested their desire to drive
his units, it would have been immaterial whether they

were his former drivers or not. As long as they obtained

the necessary licenses and references, they would have
been accommodated and placed on schedule;
3) While he was penalized or made to pay a certain
amount in connection with similar complaints by other
drivers in a previous case before this, it was not because
his culpability was established, but due to technicalities
involving oversight and negligence on his part by not
participating in any stage of the investigation thereof; and
4) Respondents claim that certain amounts, as
enumerated in the complaint, were deducted from their
days earnings is preposterous. Indeed, there were times
when deductions were made from the days earnings of
some drivers, but such were installment payments for the
amount previously advanced to them. Most drivers, when
they got involved in accidents or violations of traffic
regulations, managed to settle them, and in the process
they had to spend some money, but most of the time they
did not have the needed amount so they secured cash
advances from him, with the understanding that the same
should be paid back by installments through deductions
from their daily earnings or boundary.
On the other hand, Bacoor Transport Service Cooperative, Inc.
(BTSCI) declared that it should not be made a party to the case
because: 1) [I]t has nothing to do with the employment of its
member-drivers. The matter is between the member-operator and
their respective member-drivers. The member-drivers tenure of
employment, compensation, work conditions, and other aspects
of employment are matters of arrangement between them and the
member-operators concerned, and the BTSCI has nothing to do
with it, as can be inferred from the Management Agreement
between BTSCI and the member-operators; and 2) [T]he amount
allegedly deducted from respondents and the purpose for which
they were applied were matters that the cooperative was not
aware of, and much less imposed on them.

On September 17, 1996, respondents filed a motion to re-raffle

the case for the reason that the Labor Arbiter (Hon. Roberto I.
Santos) failed "to render his decision within thirty (30) calendar
days, without extension, after the submission of the case for
decision."

3. Ernesto Pagaygay

On September 18, 1996, said Labor Arbiter inhibited himself from

further handling the case due to "personal reasons."

P 1,034,000

On November 8, 1996, Labor Arbiter Ricardo C. Nora, to whom

the case was re-raffled, ordered the parties to file their respective
memoranda within ten days, after which the case was deemed
submitted for resolution.
On March 17, 1997, the Labor Arbiter (Hon. Ricardo C. Nora)
handed down his decision, the dispositive portion of which is
worded as follows:
WHEREFORE, premises considered, judgment is hereby
rendered declaring the illegality of [respondents] dismissal and
ordering [petitioner] Melencio Gabriel to pay the [respondents] the
total amount of ONE MILLION THIRTY FOUR THOUSAND
PESOS [P1,034,000,] representing [respondents] backwages
and separation pay as follows:
1. Nelson Bilon
Backwages P 284,800
Separation Pay 26,400 P 321,200
2. Angel Brazil
Backwages P 294,800
Separation Pay 96,800 391,600

Backwages P 294,800
Separation Pay 26,400 321,200

[Petitioner] Melencio Gabriel is likewise ordered to pay attorneys

fees equivalent to five percent (5%) of the judgment award or the
amount of P51,700 within ten (10) days from receipt of this
Decision.
All other issues are dismissed for lack of merit.
SO ORDERED.6
Incidentally, on April 4, 1997, petitioner passed away. On April
18, 1997, a copy of the above decision was delivered personally
to petitioners house. According to respondents, petitioners
surviving spouse, Flordeliza Gabriel, and their daughter, after
reading the contents of the decision and after they had spoken to
their counsel, refused to receive the same. Nevertheless, Bailiff
Alfredo V. Estonactoc left a copy of the decision with petitioners
wife and her daughter but they both refused to sign and
acknowledge receipt of the decision.7
The labor arbiters decision was subsequently served by
registered mail at petitioners residence and the same was
received on May 28, 1997.
On May 16, 1997, counsel for petitioner filed an entry of
appearance with motion to dismiss the case for the reason that
petitioner passed away last April 4, 1997.

On June 5, 1997, petitioner appealed the labor arbiters decision

to the National Labor Relations Commission, First Division,
contending that the labor arbiter erred:
1. In holding that [petitioner] Gabriel dismissed the
complainants, Arb. Nora committed a serious error in the
findings of fact which, if not corrected, would cause grave
or irreparable damage or injury to [petitioner] Gabriel;

6. In not dismissing the case[,] despite notice of the death

of [petitioner] Gabriel before final judgment, Arb. Nora
abused his discretion and committed a serious error of
law.8
On July 3, 1997, respondents filed a motion to dismiss petitioners
appeal on the ground that the "surety bond is defective" and the
appeal was "filed out of time," which move was opposed by
petitioner.

2. In holding that strained relations already exist between

the parties, justifying an award of separation pay in lieu of
reinstatement, Arb. Nora not only committed a serious
error in the findings of fact, but he also abused his
discretion;

Subsequently, on April 28, 1998, the NLRC promulgated its first

decision, the dispositive portion of which reads:

3. In computing the amount of backwages allegedly due

[respondents] from 30 April 1995 to 15 March 1997, Arb.
Nora abused his discretion, considering that the case had
been submitted for decision as early as 1 March 1996 and
that the same should have been decided as early as 31
March 1996;

SO ORDERED.9

4. In using P400.00 and 22 days as factors in

computing the amount of backwages allegedly due
[respondents], Arb. Nora abused his discretion and
committed a serious error in the findings of fact,
considering that there was no factual or evidentiary basis
therefor;
5. In using 33.5 months as factor in the computation of
the amount of backwages allegedly due [respondents],
Arb. Nora committed a serious error in the findings of
fact[,] because even if it is assumed that backwages are
due from 30 April 1995 to 15 March 1997, the period
between the two dates is only 22 months, and not 33
months as stated in the appealed decision; and

WHEREFORE, premises considered, the appealed decision is

hereby reversed and set aside. The above-entitled case is hereby
dismissed for lack of employer-employee relationship.

Respondents filed a motion for reconsideration. They claimed that

the decision did not discuss the issue of the timeliness of the
appeal. The lack of employer-employee relationship was
mentioned in the dispositive portion, which issue was not raised
before the labor arbiter or discussed in the body of the questioned
decision. In view of the issues raised by respondents in their
motion, the NLRC rendered its second decision on October 29,
1998. The pertinent portions are hereby quoted thus:
In the case at bar, [petitioner] Melencio Gabriel was not
represented by counsel during the pendency of the case. A
decision was rendered by the Labor Arbiter a quo on March 17,
1997 while Mr. Gabriel passed away on April 4, 1997 without
having received a copy thereof during his lifetime. The decision
was only served on April 18, 1997 when he was no longer around
to receive the same. His surviving spouse and daughter cannot
automatically substitute themselves as party respondents. Thus,
when the bailiff tendered a copy of the decision to them, they

were not in a position to receive them. The requirement of leaving

a copy at the partys residence is not applicable in the instant
case because this presupposes that the party is still living and is
just not available to receive the decision.
The preceding considered, the decision of the labor arbiter has
not become final because there was no proper service of copy
thereof to [petitioner] .
Undoubtedly, this case is for recovery of money which does not
survive, and considering that the decision has not become final,
the case should have been dismissed and the appeal no longer
entertained.
WHEREFORE, in view of the foregoing, the Decision of April 28,
1998 is set aside and vacated. Furthermore, the instant case is
dismissed and complainants are directed to pursue their claim
against the proceedings for the settlement of the estate of the
deceased Melencio Gabriel.
SO ORDERED.10
Aggrieved by the decision of the NLRC, respondents elevated the
case to the Court of Appeals (CA) by way of a petition
for certiorari. On August 4, 2000, the CA reversed the decisions
of the NLRC:

Article 223 of the Labor Code categorically mandates that "an

appeal by the employer may be perfected only upon the posting
of a cash bond or surety bond x x x." It is beyond peradventure
then that the non-compliance with the above conditio sine qua
non, plus the fact that the appeal was filed beyond the
reglementary period, should have been enough reasons to
dismiss the appeal.

In any event, even conceding ex gratia that such procedural

infirmity [were] inexistent, this petition would still be tenable based
on substantive aspects.
The public respondents decision, dated April 28, 1998, is
egregiously wrong insofar as it was anchored on the absence of
an employer-employee relationship. Well-settled is the rule that
the boundary system used in jeepney and (taxi) operations
presupposes an employer-employee relationship (National Labor
Union v. Dinglasan, 98 Phil. 649) .
The NLRC ostensibly tried to redeem itself by vacating the
decision April 28, 1998. By so doing, however, it did not
actually resolve the matter definitively. It merely relieved itself of
such burden by suggesting that the petitioners "pursue their claim
against the proceedings for the settlement of the estate of the
deceased Melencio Gabriel."
In the instant case, the decision (dated March 17, 1997) of the
Labor Arbiter became final and executory on account of the
failure of the private respondent to perfect his appeal on time.
Thus, we disagree with the ratiocination of the NLRC that the
death of the private respondent on April 4, 1997 ipso
facto negates recovery of the money claim against the
successors-in-interest . Rather, this situation comes within the
aegis of Section 3, Rule III of the NLRC Manual on Execution of
Judgment, which provides:
SECTION 3. Execution in Case of Death of Party. Where a
party dies after the finality of the decision/entry of judgment of
order, execution thereon may issue or one already issued may be
enforced in the following cases:
a) x x x ;

b) In case of death of the losing party, against his

successor-in-interest, executor or administrator;

merely paying his separation pay on the pretext that his

relationship with his employer had already become strained."

c) In case of death of the losing party after execution is

actually levied upon any of his property, the same may be
sold for the satisfaction thereof, and the sheriff making the
sale shall account to his successor-in-interest, executor or
administrator for any surplus in his hands.

Anent the award of backwages, the Labor Arbiter erred in

computing the same from the date the petitioners were illegally
dismissed (i.e. April 30, 1995) up to March 15, 1997, that is two
(2) days prior to the rendition of his decision (i.e. March 17,
1997).

Notwithstanding the foregoing disquisition though, We are not

entirely in accord with the labor arbiters decision awarding
separation pay in favor of the petitioners. In this regard, it [is]
worth mentioning that in Kiamco v. NLRC,11 citing GlobeMackay Cable and Radio Corp. v. NLRC,12 the Supreme Court
qualified the application of the "strained relations" principle when
it held -"If in the wisdom of the Court, there may be a ground or grounds
for the non-application of the above-cited provision (Art. 279,
Labor Code) this should be by way of exception, such as when
the reinstatement may be inadmissible due to ensuing strained
relations between the employer and employee.
In such cases, it should be proved that the employee concerned
occupies a position where he enjoys the trust and confidence of
his employer, and that it is likely that if reinstated, an atmosphere
of antipathy and antagonism may be generated as to adversely
affect the efficiency and productivity of the employee concerned x
x x Obviously, the principle of strained relations cannot be
applied indiscriminately. Otherwise, reinstatement can never be
possible simply because some hostility is invariably engendered
between the parties as a result of litigation. That is human nature.
Besides, no strained relations should arise from a valid legal act
of asserting ones right; otherwise[,] an employee who shall
assert his right could be easily separated from the service by

WHEREFORE, premises considered, the petition is GRANTED,

hereby REVERSING and SETTING ASIDE the assailed decisions
of the National Labor Relations Commission, dated April 28, 1998
ans October 29, 1998. Consequently, the decision of the Labor
Arbiter, dated March 17, 1997, is hereby REINSTATED, subject
to the MODIFICATION that the private respondent is ORDERED
to immediately REINSTATE petitioners Nelson Bilon, Angel Brazil
and Ernesto Pagaygay to their former position without loss of
seniority rights and privileges, with full backwages from the date
of their dismissal until their actual reinstatement. Costs against
private respondent.
SO ORDERED.13
Petitioner filed a motion for reconsideration but the same was
denied by the CA in a resolution dated February 7, 2001.
Hence, this petition raising the following issues:14
I
THE COURT OF APPEALS ERRED IN FINDING THAT
PETITIONERS APPEAL TO THE NATIONAL LABOR
RELATIONS COMMISSION WAS FILED OUT OF TIME.
II

THE COURT OF APPEALS ERRED IN HOLDING THAT THE

ALLEGED DEFECTS IN PETITIONERS APPEAL BOND WERE
OF SUCH GRAVITY AS TO PREVENT THE APPEAL FROM
BEING PERFECTED.
III
THE COURT OF APPEALS ERRED IN GRANTING
RESPONDENTS PETITION FOR CERTIORARI DESPITE THE
FACT THAT THE SAME ASSAILED A DECISION WHICH HAD
BEEN VACATED IN FAVOR OF A NEW ONE WHICH, IN TURN,
HAS SOLID LEGAL BASIS.

SEC. 4. Service of Notices and Resolutions. (a) Notices or

summons and copies of orders, resolutions or decisions shall be
served on the parties to the case personally by the bailiff or
authorized public officer within three (3) days from receipt thereof
or by registered mail; Provided, That where a party is represented
by counsel or authorized representative, service shall be made on
such counsel or authorized representative; Provided further, That
in cases of decision and final awards, copies thereof shall be
served on both parties and their counsel .
For the purpose of computing the period of appeal, the same
shall be counted from receipt of such decisions, awards or orders
by the counsel of record.

IV
THE COURT OF APPEALS ERRED IN APPLYING SECTION 3,
RULE III, OF THE MANUAL ON EXECUTION OF JUDGMENT
OF THE NATIONAL LABOR RELATIONS COMMISSION
WHICH, BY ITS OWN EXPRESS TERMS, IS NOT
APPLICABLE.
A resolution of the case requires a brief discussion of two issues
which touch upon the procedural and substantial aspects of the
case thus: a) whether petitioners appeal was filed out of time;
and b) whether the claim survives.
As regards the first issue, the Court considers the service of copy
of the decision of the labor arbiter to have been validly made on
May 28, 1997 when it was received through registered mail. As
correctly pointed out by petitioners wife, service of a copy of the
decision could not have been validly effected on April 18, 1997
because petitioner passed away on April 4, 1997.
Section 4, Rule III of the New Rules of Procedure of the NLRC
provides:

(b) The bailiff or officer personally serving the notice, order,

resolution or decision shall submit his return within two (2) days
from date of service thereof, stating legibly in his return, his
name, the names of the persons served and the date of receipt
which return shall be immediately attached and shall form part of
the records of the case. If no service was effected, the serving
officer shall state the reason therefore in the return.
Section 6, Rule 13 of the Rules of Court which is suppletory to the
NLRC Rules of Procedure states that: "[s]ervice of the papers
may be made by delivering personally a copy to the party or his
counsel, or by leaving it in his office with his clerk or with a person
having charge thereof. If no person is found in his office, or his
office is not known, or he has no office, then by leaving the copy,
between the hours of eight in the morning and six in the evening,
at the partys or counsels residence, if known, with a person of
sufficient age and discretion then residing therein."
The foregoing provisions contemplate a situation wherein the
party to the action is alive upon the delivery of a copy of the
tribunals decision. In the present case, however, petitioner died
before a copy of the labor arbiters decision was served upon him.
Hence, the above provisions do not apply. As aptly stated by the
NLRC:

 In the case at bar, respondent Melencio Gabriel was not

represented by counsel during the pendency of the case. A
decision was rendered by the Labor Arbiter a quo on March 17,
1997 while Mr. Gabriel passed away on April 4, 1997, without
having received a copy thereof during his lifetime. The decision
was only served on April 18, 1997 when he was no longer around
to receive the same. His surviving spouse and daughter cannot
automatically substitute themselves as party respondents. Thus,
when the bailiff tendered a copy of the decision to them, they
were not in a position to receive them. The requirement of leaving
a copy at the partys residence is not applicable in the instant
case because this presupposes that the party is still living and is
not just available to receive the decision.
The preceding considered, the decision of the Labor Arbiter has
not become final because there was no proper service of copy
thereof to party respondent.15
Thus, the appeal filed on behalf of petitioner on June 5, 1997
after receipt of a copy of the decision via registered mail on May
28, 1997 was within the ten-day reglementary period prescribed
under Section 223 of the Labor Code.
On the question whether petitioners surety bond was defective,
Section 6, Rule VI of the New Rules of Procedure of the NLRC
provides:
SEC. 6. Bond. In case the decision of a Labor Arbiter
involves monetary award, an appeal by the employer shall be
perfected only upon the posting of a cash or surety bond issued
by a reputable bonding company duly accredited by the
Commission or the Supreme Court in an amount equivalent to the
monetary award, exclusive of moral and exemplary damages and
attorneys fees.

The employer as well as counsel shall submit a joint declaration

under oath attesting that the surety bond posted is genuine and
that it shall be in effect until final disposition of the case.
The Commission may, in meritorious cases and upon Motion of
the Appellant, reduce the amount of the bond. (As amended on
Nov. 5, 1993).
The Court believes that petitioner was able to comply
substantially with the requirements of the above Rule. As
correctly pointed out by the NLRC:
While we agree with complainants-appellees that the posting of
the surety bond is jurisdictional, We do not believe that the
"defects" imputed to the surety bond posted for and in behalf of
respondent-appellant Gabriel are of such character as to affect
the jurisdiction of this Commission to entertain the instant appeal.
It matters not that, by the terms of the bond posted, the "Liability
of the surety herein shall expire on June 5, 1998 and this bond
shall be automatically cancelled ten (10) days after the
expiration." After all, the bond is accompanied by the joint
declaration under oath of respondent-appellants surviving
spouse and counsel attesting that the surety bond is genuine and
shall be in effect until the final disposition of the case.
Anent complainants-appellees contention that the surety bond
posted is defective for being in the name of BTSCI which did not
appeal and for having been entered into by Mrs. Gabriel without
BTSCIs authority, the same has been rendered moot and
academic by the certification issued by Gil CJ. San Juan, VicePresident of the bonding company to the effect that "Eastern
Assurance and Surety Corporation Bond No. 2749 was posted for
and on behalf appellant Melencio Gabriel and/or his heirs" and
that "(T)he name "Bacoor Transport Service Cooperative, Inc."
was indicated in said bond due merely in (sic) advertence."

At any rate, the Supreme Court has time and again ruled that
while Article 223 of the Labor Code, as amended requiring a cash
or surety bond in the amount equivalent to the monetary award in
the judgment appealed from for the appeal to be perfected, may
be considered a jurisdictional requirement, nevertheless,
adhering to the principle that substantial justice is better served
by allowing the appeal on the merits threshed out by this
Honorable Commission, the foregoing requirement of the law
should be given a liberal interpretation (Pantranco North Express,
Inc. v. Sison, 149 SCRA 238; C.W. Tan Mfg. v. NLRC, 170 SCRA
240; YBL v. NLRC, 190 SCRA 160; Rada v. NLRC, 205 SCRA
69; Star Angel Handicraft v. NLRC, 236 SCRA 580).16
On the other hand, with regard to the substantive aspect of the
case, the Court agrees with the CA that an employer-employee
relationship existed between petitioner and respondents.
In Martinez v. National Labor Relations
Commission,17 citing National Labor Union v. Dinglasan,18 the
Court ruled that:
[T]he relationship between jeepney owners/operators and
jeepney drivers under the boundary system is that of employeremployee and not of lessor-lessee because in the lease of
chattels the lessor loses complete control over the chattel leased
although the lessee cannot be reckless in the use thereof,
otherwise he would be responsible for the damages to the lessor.
In the case of jeepney owners/operators and jeepney drivers, the
former exercises supervision and control over the latter. The fact
that the drivers do not receive fixed wages but get only that in
excess of the so-called "boundary" [that] they pay to the
owner/operator is not sufficient to withdraw the relationship
between them from that of employer and employee. Thus, private
respondents were employees because they had been
engaged to perform activities which were usually necessary or
desirable in the usual business or trade of the employer.19
The same principle was reiterated in the case of Paguio
Transport Corporation v. NLRC.20

The Court also agrees with the labor arbiter and the CA that
respondents were illegally dismissed by petitioner. Respondents
were not accorded due process.21 Moreover, petitioner failed to
show that the cause for termination falls under any of the grounds
enumerated in Article 282
(then Article 283)22 of the Labor Code.23 Consequently,
respondents are entitled to reinstatement without loss of seniority
rights and other privileges and to their full backwages computed
from the date of dismissal up to the time of their actual
reinstatement in accordance with Article 279 of the Labor Code.
Reinstatement is obtainable in this case because it has not been
shown that there is an ensuing "strained relations" between
petitioner and respondents. This is pursuant to the principle laid
down in Globe-Mackay Cable and Radio Corporation v.
NLRC24 as quoted earlier in the CA decision.
With regard to respondents monetary claim, the same shall be
governed by Section 20 (then Section 21), Rule 3 of the Rules of
Court which provides:
1awphi1.net

SEC. 20. Action on contractual money claims. When the action

is for recovery of money arising from contract, express or implied,
and the defendant dies before entry of final judgment in the court
in which the action was pending at the time of such death, it shall
not be dismissed but shall instead be allowed to continue until
entry of final judgment. A favorable judgment obtained by the
plaintiff therein shall be enforced in the manner provided in these
Rules for prosecuting claims against the estate of a deceased
person. (21a)
In relation to this, Section 5, Rule 86 of the Rules of Court states:
SEC. 5. Claims which must be filed under the notice. If not filed,
barred ; exceptions. All claims for money against the decedent
arising from contract, express or implied, whether the same be

due, not due, or contingent, ... and judgment for money against
the decedent, must be filed within the time limited in the notice;
otherwise they are barred forever, except that they may be set
forth as counterclaims in any action that the executor or
administrator may bring against the claimants.
Thus, in accordance with the above Rules, the money claims of
respondents must be filed against the estate of petitioner
Melencio Gabriel.25
WHEREFORE, the petition is DENIED. The Decision and
Resolution of the Court of Appeals dated August 4, 2000 and
February 7, 2001, respectively, in CA-G.R. SP No. 52001 are
AFFIRMED but with the MODIFICATION that the money claims
of respondents should be filed against the estate of Melencio
Gabriel, within such reasonable time from the finality of this
Decision as the estate court may fix.
No costs.
SO ORDERED.
G.R. No. 119268

February 23, 2000

ANGEL JARDIN, DEMETRIO CALAGOS, URBANO MARCOS,

ROSENDO MARCOS, LUIS DE LOS ANGELES, JOEL
ORDENIZA and AMADO CENTENO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC) and
GOODMAN TAXI (PHILJAMA INTERNATIONAL,
INC.) respondents.
QUISUMBING, J.:
This special civil action for certiorari seeks to annul the
decision1 of public respondent promulgated on October 28, 1994,
in NLRC NCR CA No. 003883-92, and its resolution2 dated

December 13, 1994 which denied petitioners motion for

reconsideration.
Petitioners were drivers of private respondent, Philjama
International Inc., a domestic corporation engaged in the
operation of "Goodman Taxi." Petitioners used to drive private
respondent's taxicabs every other day on a 24-hour work
schedule under the boundary system. Under this arrangement,
the petitioners earned an average of P400.00 daily. Nevertheless,
private respondent admittedly regularly deducts from petitioners,
daily earnings the amount of P30.00 supposedly for the washing
of the taxi units. Believing that the deduction is illegal, petitioners
decided to form a labor union to protect their rights and interests.
Upon learning about the plan of petitioners, private respondent
refused to let petitioners drive their taxicabs when they reported
for work on August 6, 1991, and on succeeding days. Petitioners
suspected that they were singled out because they were the
leaders and active members of the proposed union. Aggrieved,
petitioners filed with the labor arbiter a complaint against private
respondent for unfair labor practice, illegal dismissal and illegal
deduction of washing fees. In a decision3 dated August 31, 1992,
the labor arbiter dismissed said complaint for lack of merit.
On appeal, the NLRC (public respondent herein), in a decision
dated April 28, 1994, reversed and set aside the judgment of the
labor arbiter. The labor tribunal declared that petitioners are
employees of private respondent, and, as such, their dismissal
must be for just cause and after due process. It disposed of the
case as follows:
WHEREFORE, in view of all the foregoing considerations,
the decision of the Labor Arbiter appealed from is hereby
SET ASIDE and another one entered:
1. Declaring the respondent company guilty of illegal
dismissal and accordingly it is directed to reinstate the

complainants, namely, Alberto A. Gonzales, Joel T.

Morato, Gavino Panahon, Demetrio L. Calagos, Sonny M.
Lustado, Romeo Q. Clariza, Luis de los Angeles, Amado
Centino, Angel Jardin, Rosendo Marcos, Urbano Marcos,
Jr., and Joel Ordeniza, to their former positions without
loss of seniority and other privileges appertaining thereto;
to pay the complainants full backwages and other
benefits, less earnings elsewhere, and to reimburse the
drivers the amount paid as washing charges; and

Expectedly, petitioners sought reconsideration of the labor

tribunal's latest decision which was denied. Hence, the instant
petition.

2. Dismissing the charge of unfair [labor] practice for

insufficiency of evidence.

THE NLRC HAS NO JURISDICTION TO ENTERTAIN

RESPONDENT'S SECOND MOTION FOR RECONSIDERATION
WHICH IS ADMITTEDLY A PLEADING PROHIBITED UNDER
THE NLRC RULES, AND TO GRANT THE SAME ON
GROUNDS NOT EVEN INVOKED THEREIN.

SO ORDERED.4
Private respondent's first motion for reconsideration was denied.
Remaining hopeful, private respondent filed another motion for
reconsideration. This time, public respondent, in its
decision5 dated October 28, 1994, granted aforesaid second
motion for reconsideration. It ruled that it lacks jurisdiction over
the case as petitioners and private respondent have no employeremployee relationship. It held that the relationship of the parties is
leasehold which is covered by the Civil Code rather than the
Labor Code, and disposed of the case as follows:
VIEWED IN THE LIGHT OF ALL THE FOREGOING, the
Motion under reconsideration is hereby given due course.
Accordingly, the Resolution of August 10, 1994, and the
Decision of April 28, 1994 are hereby SET ASIDE. The
Decision of the Labor Arbiter subject of the appeal is
likewise SET ASIDE and a NEW ONE ENTERED
dismissing the complaint for lack of jurisdiction.
No costs.
SO ORDERED.6

In this recourse, petitioners allege that public respondent acted

without or in excess of jurisdiction, or with grave abuse of
discretion in rendering the assailed decision, arguing that:
I

II
THE EXISTENCE OF AN EMPLOYER-EMPLOYEE
RELATIONSHIP BETWEEN THE PARTIES IS ALREADY A
SETTLED ISSUE CONSTITUTING RES JUDICATA, WHICH
THE NLRC HAS NO MORE JURISDICTION TO REVERSE,
ALTER OR MODIFY.
III
IN ANY CASE, EXISTING JURISPRUDENCE ON THE MATTER
SUPPORTS THE VIEW THAT PETITIONERS-TAXI DRIVERS
ARE EMPLOYEES OF RESPONDENT TAXI COMPANY.7
The petition is impressed with merit.
The phrase "grave abuse of discretion amounting to lack or
excess of jurisdiction" has settled meaning in the jurisprudence of
procedure. It means such capricious and whimsical exercise of
judgment by the tribunal exercising judicial or quasi-judicial power
as to amount to lack of power.8 In labor cases, this Court has

declared in several instances that disregarding rules it is bound to

observe constitutes grave abuse of discretion on the part of labor
tribunal.
In Garcia vs. NLRC,9 private respondent therein, after receiving a
copy of the labor arbiter's decision, wrote the labor arbiter who
rendered the decision and expressed dismay over the judgment.
Neither notice of appeal was filed nor cash or surety bond was
posted by private respondent. Nevertheless, the labor tribunal
took cognizance of the letter from private respondent and treated
said letter as private respondent's appeal. In a certiorari action
before this Court, we ruled that the labor tribunal acted with grave
abuse of discretion in treating a mere letter from private
respondent as private respondent's appeal in clear violation of the
rules on appeal prescribed under Section 3(a), Rule VI of the
New Rules of Procedure of NLRC.
In Philippine Airlines Inc. vs. NLRC,10 we held that the labor
arbiter committed grave abuse of discretion when he failed to
resolve immediately by written order a motion to dismiss on the
ground of lack of jurisdiction and the supplemental motion to
dismiss as mandated by Section 15 of Rule V of the New Rules of
Procedure of the NLRC.
In Unicane Workers Union-CLUP vs. NLRC,11 we held that the
NLRC gravely abused its discretion by allowing and deciding an
appeal without an appeal bond having been filed as required
under Article 223 of the Labor Code.
In Maebo vs. NLRC,12 we declared that the labor arbiter gravely
abused its discretion in disregarding the rule governing position
papers. In this case, the parties have already filed their position
papers and even agreed to consider the case submitted for
decision, yet the labor arbiter still admitted a supplemental
position paper and memorandum, and by taking into
consideration, as basis for his decision, the alleged facts adduced
therein and the documents attached thereto.

In Gesulgon vs. NLRC,13 we held that public respondent gravely

abused its discretion in treating the motion to set aside judgment
and writ of execution as a petition for relief of judgment. In doing
so, public respondent had, without sufficient basis, extended the
reglementary period for filing petition for relief from judgment
contrary to prevailing rule and case law.
In this case before us, private respondent exhausted
administrative remedy available to it by seeking reconsideration
of public respondent's decision dated April 28, 1994, which public
respondent denied. With this motion for reconsideration, the labor
tribunal had ample opportunity to rectify errors or mistakes it may
have committed before resort to courts of justice can be
had.14 Thus, when private respondent filed a second motion for
reconsideration, public respondent should have forthwith denied it
in accordance with Rule 7, Section 14 of its New Rules of
Procedure which allows only one motion for reconsideration from
the same party, thus:
Sec. 14. Motions for Reconsideration. Motions for
reconsideration of any order, resolution or decision of the
Commission shall not be entertained except when based
on palpable or patent errors, provided that the motion is
under oath and filed within ten (10) calendar days from
receipt of the order, resolution or decision with proof of
service that a copy of the same has been furnished within
the reglementary period the adverse party and provided
further, that only one such motion from the same party
shall be entertained. [Emphasis supplied]
The rationale for allowing only one motion for reconsideration
from the same party is to assist the parties in obtaining an
expeditious and inexpensive settlement of labor cases. For
obvious reasons, delays cannot be countenanced in the
resolution of labor disputes. The dispute may involve no less than
the livelihood of an employee and that of his loved ones who are
dependent upon him for food, shelter, clothing, medicine, and

education. It may as well involve the survival of a business or an

industry.15
As correctly pointed out by petitioner, the second motion for
reconsideration filed by private respondent is indubitably a
prohibited pleading16 which should have not been entertained at
all. Public respondent cannot just disregard its own rules on the
pretext of "satisfying the ends of justice",17 especially when its
disposition of a legal controversy ran afoul with a clear and long
standing jurisprudence in this jurisdiction as elucidated in the
subsequent discussion. Clearly, disregarding a settled legal
doctrine enunciated by this Court is not a way of rectifying an
error or mistake. In our view, public respondent gravely abused
its discretion in taking cognizance and granting private
respondent's second motion for reconsideration as it wrecks the
orderly procedure in seeking reliefs in labor cases.
But, there is another compelling reason why we cannot leave
untouched the flip-flopping decisions of the public respondent. As
mentioned earlier, its October 28, 1994 judgment is not in accord
with the applicable decisions of this Court. The labor tribunal
reasoned out as follows:
On the issue of whether or not employer-employee
relationship exists, admitted is the fact that complainants
are taxi drivers purely on the "boundary system". Under
this system the driver takes out his unit and pays the
owner/operator a fee commonly called "boundary" for the
use of the unit. Now, in the determination the existence of
employer-employee relationship, the Supreme Court in
the case of Sara, et al., vs. Agarrado, et al. (G.R. No.
73199, 26 October 1988) has applied the following fourfold test: "(1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power of control the employees
conduct."

"Among the four (4) requisites", the Supreme Court

stresses that "control is deemed the most important that
the other requisites may even be disregarded". Under the
control test, an employer-employee relationship exists if
the "employer" has reserved the right to control the
"employee" not only as to the result of the work done but
also as to the means and methods by which the same is
to be accomplished. Otherwise, no such relationship
exists. (Ibid.)
Applying the foregoing parameters to the case herein
obtaining, it is clear that the respondent does not pay the
drivers, the complainants herein, their wages. Instead, the
drivers pay a certain fee for the use of the vehicle. On the
matter of control, the drivers, once they are out plying
their trade, are free to choose whatever manner they
conduct their trade and are beyond the physical control of
the owner/operator; they themselves determine the
amount of revenue they would want to earn in a day's
driving; and, more significantly aside from the fact that
they pay for the gasoline they consume, they likewise
shoulder the cost of repairs on damages sustained by the
vehicles they are driving.
Verily, all the foregoing attributes signify that the
relationship of the parties is more of a leasehold or one
that is covered by a charter agreement under the Civil
Code rather than the Labor Code.18
The foregoing ratiocination goes against prevailing jurisprudence.
In a number of cases decided by this Court,19 we ruled that the
relationship between jeepney owners/operators on one hand and
jeepney drivers on the other under the boundary system is that of
employer-employee and not of lessor-lessee. We explained that
in the lease of chattels, the lessor loses complete control over the
chattel leased although the lessee cannot be reckless in the use
thereof, otherwise he would be responsible for the damages to

the lessor. In the case of jeepney owners/operators and jeepney

drivers, the former exercise supervision and control over the
latter. The management of the business is in the owner's hands.
The owner as holder of the certificate of public convenience must
see to it that the driver follows the route prescribed by the
franchising authority and the rules promulgated as regards its
operation. Now, the fact that the drivers do not receive fixed
wages but get only that in excess of the so-called "boundary" they
pay to the owner/operator is not sufficient to withdraw the
relationship between them from that of employer and employee.
We have applied by analogy the abovestated doctrine to the
relationships between bus owner/operator and bus
conductor,20 auto-calesa owner/operator and driver,21 and recently
between taxi owners/operators and taxi drivers.22 Hence,
petitioners are undoubtedly employees of private respondent
because as taxi drivers they perform activities which are usually
necessary or desirable in the usual business or trade of their
employer.
As consistently held by this Court, termination of employment
must be effected in accordance with law. The just and authorized
causes for termination of employment are enumerated under
Articles 282, 283 and 284 of the Labor Code. The requirement of
notice and hearing is set-out in Article 277 (b) of the said Code.
Hence, petitioners, being employees of private respondent, can
be dismissed only for just and authorized cause, and after
affording them notice and hearing prior to termination. In the
instant case, private respondent had no valid cause to terminate
the employment of petitioners. Neither were there two (2) written
notices sent by private respondent informing each of the
petitioners that they had been dismissed from work. These lack of
valid cause and failure on the part of private respondent to
comply with the twin-notice requirement underscored the illegality
surrounding petitioners' dismissal.
Under the law, an employee who is unjustly dismissed from work
shall be entitled to reinstatement without loss of seniority rights
and other privileges and to his full backwages, inclusive of

allowances, and to his other benefits or their monetary equivalent

computed from the time his compensation was withheld from him
up to the time of his actual reinstatement.23 It must be
emphasized, though, that recent judicial
pronouncements24 distinguish between employees illegally
dismissed prior to the effectivity of Republic Act No. 6715 on
March 21, 1989, and those whose illegal dismissals were effected
after such date. Thus, employees illegally dismissed prior to
March 21, 1989, are entitled to backwages up to three (3) years
without deduction or qualification, while those illegally dismissed
after that date are granted full backwages inclusive of allowances
and other benefits or their monetary equivalent from the time their
actual compensation was withheld from them up to the time of
their actual reinstatement. The legislative policy behind Republic
Act No. 6715 points to "full backwages" as meaning exactly
that, i.e., without deducting from backwages the earnings derived
elsewhere by the concerned employee during the period of his
illegal dismissal. Considering that petitioners were terminated
from work on August 1, 1991, they are entitled to full backwages
on the basis of their last daily earnings.
With regard to the amount deducted daily by private respondent
from petitioners for washing of the taxi units, we view the same as
not illegal in the context of the law. We note that after a tour of
duty, it is incumbent upon the driver to restore the unit he has
driven to the same clean condition when he took it out. Car
washing after a tour of duty is indeed a practice in the taxi
industry and is in fact dictated by fair play.25 Hence, the drivers
are not entitled to reimbursement of washing charges.
1w phi1.nt

WHEREFORE, the instant petition is GRANTED. The assailed

DECISION of public respondent dated October 28, 1994, is
hereby SET ASIDE. The DECISION of public respondent dated
April 28, 1994, and its RESOLUTION dated December 13, 1994,
are hereby REINSTATED subject to MODIFICATION. Private
respondent is directed to reinstate petitioners to their positions
held at the time of the complained dismissal. Private respondent
is likewise ordered to pay petitioners their full backwages, to be

computed from the date of dismissal until their actual

reinstatement. However, the order of public respondent that
petitioners be reimbursed the amount paid as washing charges is
deleted. Costs against private respondents.
SO ORDERED.
Bellosillo, Mendoza and De Leon, Jr., JJ., concur.
Buena, on official leave.
G.R. No. L-21212

September 23, 1966

CITIZENS' LEAGUE OF FREEWORKERS AND/OR BALBINO

EPIS, NICOLAS ROJO, ET AL., petitioners,
vs.
HON. MACAPANTON ABBAS, Judge of the Court of First
Instance of Davao and TEOFILO GERONIMO and EMERITA
MENDEZ, respondents.
Carlos Dominguez, Jr. for petitioners.
C. S. Nitorreda for respondents.
DIZON, J.:
Petition for certiorari with a prayer for the issuance of a writ of
preliminary injunction filed by the Citizens' League of
Freeworkers, a legitimate labor organization, hereinafter
referred to as the Union and its members against the spouses
Teofilo Geronimo and Emerita Mendez, and the Hon.
Macapanton Abbas, as judge of the Court of First Instance of
Davao. Its purpose is to set aside the writ of preliminary injunction
issued by the latter in Civil Case No. 3966 and restrain him from
proceeding with the case, on the ground that the controversy
involves a labor dispute and is, therefore, within the exclusive
jurisdiction of the Court of Industrial Relations.

It appears that on March 11, 1963, respondents-spouses owners

and operators of auto-calesas in Davao City, filed a complaint
with the Court of First Instance of Davao (Civil Case No. 3966) to
restrain the Union and its members, who were drivers of the
spouses in said business, from interfering with its operation, from
committing certain acts complained of in connection therewith,
and to recover damages. The complaint alleged that the
defendants named therein used to lease the auto-calesas of the
spouses on a daily rental basis; that, unable to get the spouses to
recognize said defendants as employees instead of lessees and
to bargain with it on that basis, the Union declared a strike on
February 20, 1963 and since then had paralyzed plaintiffs'
business operations through threats, intimidation and violence.
The complaint also prayed for the issuance of a writ of preliminary
injunction ex-parte restraining defendants therein from committing
said acts of violence and intimidation during the pendency of the
case.
On March 11, 1963 the respondent judge granted the writ prayed
for, while deferring action on petitioners' motion to dissolve said
writ to March 20 of the same year.
Meanwhile, on March 12, 1963, petitioners filed a complaint for
unfair labor practice against the respondents-spouses with the
Court of Industrial Relations on the ground, among others, of the
latter's refusal to bargain with them.
1aw phl.nt

On March 18, 1963, petitioners filed a motion to declare the writ

of preliminary injunction void on the ground that the same had
expired by virtue of Section 9 (d) of Republic Act 875. In his order
of March 21, 1963, however, the respondent judge denied said
motion on the ground that there was no employer-employee
relationship between respondents-spouses and the individual
petitioners herein and that, consequently, the Rules of Court and
not Republic Act No. 875 applied to the matter of injunction.
Thereupon the petition under consideration was filed.

In the case of Isabelo Doce vs. Workmen's Compensation

Commission, et al. (G.R. No. L-9417, December 22, 1958), upon
a similar if not an altogether identical set of facts, We held:
This case falls squarely within our ruling in National Labor
Union v. Dinglasan, 52 O.G., No. 4, 1933, wherein this
Court held that a driver of a jeep who operates the same
under the boundary system is considered an employee
within the meaning of the law and as such the case
comes under the jurisdiction of the Court of Industrial
Relations. In that case, Benedicto Dinglasan was the
owner and operator of TPU jeepneys which were driven
by petitioner under verbal contracts that they will pay
P7.50 for 10 hours use under the so called "boundary
system." The drivers did not receive salaries or wages
from the owner. Their day's earnings were the excess
over the P7.50 they paid for the use of the jeepneys. In
the event that they did not earn more, the owner did not
have to pay them anything. In holding that the employeremployee relationship existed between the owner of the
jeepneys and the drivers even if the latter worked under
the boundary system, this Court said:
"The only features that would make the
relationship of lessor and lessee between the
respondent, owner of the jeeps, and the drivers,
members of the petitioner union, are the fact that
he does not pay them any fixed wage but their
compensation is the excess of the total amount of
fares earned or collected by them over and above
the amount of P7.50 which they agreed to pay to
the respondent, and the fact that the gasoline
burned by the jeeps is for the account of the
drivers. These two features are not, however,
sufficient to withdraw the relationship, between
them from that of employer-employee, because
the estimated earnings for fares must be over and
above the amount they agreed to pay to the

respondent for a ten-hour shift or ten-hour a day

operation of the jeeps. Not having any interest in
the business because they did not invest anything
in the acquisition of the jeeps and did not
participate in the management thereof, their
service as drivers of the jeeps being their only
contribution to the business, the relationship of
lessor and lessee cannot be sustained."
Even assuming, arguendo, that the respondent court had
jurisdiction to issue the abovementioned writ of preliminary
injunction in Civil Case No. 3966 at the time it was issued, We are
of the opinion, and so hold, that it erred in denying petitioners'
motion to set aside said writ upon expiration of the period of thirty
days from its issuance, upon the wrong ground that there was no
labor dispute between the parties and that, therefore, the
provisions of Republic Act No. 875 did not apply to the case. As
stated heretofore, there was a labor dispute between the parties
from the beginning.
Moreover, upon the filing of the unfair labor practice case on
March 12, 1963, the Court of Industrial Relations acquired
complete jurisdiction over the labor dispute and the least that
could be done in Civil Case No. 3966 is either to dismiss it or
suspend proceedings therein until the final resolution of the
former.
Wherefore, judgment is hereby rendered setting aside the writ of
preliminary injunction issued by the respondent judge in Civil
Case No. 3966 of the Court of First Instance of Davao, with costs.
Concepcion, C.J., Reyes, J.B.L., Barrera, Makalintal, Bengzon,
J.P., Zaldivar, Sanchez and Castro, JJ., concur.
Regala, J., took no part.
G.R. No. L-37650 September 30, 1977

VISAYAN STEVEDORE TRANSPORTATION COMPANY

(HINIGARAN BRANCH) and RAFAEL XAUDARO, petitioners,
vs.
COURT OF INDUSTRIAL RELATIONS and UNITED
WORKERS AND FARMERS' ASSOCIATION (UWFA)
VENANCIO DANO-OG and BUENAVENTURA AGARCIO and
137 OTHERS, respondents.

WHEREFORE, let the Report of Examiner dated

August 20, 1969 be, as it is hereby, APPROVED,
and the respondents are hereby ordered to
deposit said amount of P78,468.48 representing
the backwages of complainants from November
12, 1955 up to July 31, 1969 with the Court, for
further disposition.

G.R. No. L-37693 September 30, 1977

The Chief Examiner of this Court is further

ordered to compute the backwages due
complainants herein, from August 1, 1969 up to
the date they are actually reinstated, and upon
termination, to submit the same to the Court for
further disposition.

UNITED WORKERS' AND FARMERS' ASSOCIATION and/or

VENANCIO DANO-OG and BUENAVENTURA AGARCIO and
137 OTHERS, petitioners,
vs.
VISAYAN STEVEDORE TRANSPORTATION COMPANY
(Hinigaran Branch) and/or RAFAEL XAUDARO as Branch
Manager and COURT OF INDUSTRIAL
RELATIONS, respondents.
Pelaez, Jalandoni & Adriano for petitioners in L-37650 and
respondents in L-37693.
Elesio P. Legaspi and Luis M. Treyes for petitioners in L37693
and respondents in L-37650.

SO ORDERED.
Manila, October 30,1972.
(SGD) ANSBERTO P. PAREDES
Acting Presiding Judge 2
and the Resolution en banc of said court dated
September 26, 1973 denying the motions for
reconsideration of the petitioners.3

FERNANDEZ, J.:
These are petitions filed respectively by the United Workers' and
Farmers' Association (UWFA) Venalicio Dano-og, Buenaventura
Agarcio and 137 others (No. L- 37693) 1 hereinafter referred to
as UWFA and by the Visayan Stevedore Transportation Company
(VISTRANCO) and Rafael Xaudaro (No. L-37650) hereinafter
referred to as the Company both seeking the review of the order
of the Court of Industrial Relations dated October 30, 1972 the
dispositive part of which reads:

The parties being the same and the actions

having arisen out of the same incident, the two
cases were consolidated. 4
The Company is engaged in the loading and
unloading of vessels, with a branch office in
Hinigaran, Negros Occidental. Its workers were
being supplied by UWFA. On November 11, 1955,
the company terminated the services of the
petitioners in G.R. No. L-37693 who are members
of UWFA. A complaint for unfair labor practice

was consequently instituted against the Company

and, in due course, the Court of Industrial
Relations found the Company guilty of unfair labor
practice. 5 On appeal, this Court in No. L-21696
affirmed on February 25, 1967 6said decision of the
Court of Industrial Relations.

After this Court's decision had become final and

executory, the Court of Industrial Relations
directed the Chief Examiner to compute the back
wages due each of the 138 UWFA members. In
his initial report, the Chief Examiner informed the
court of his inability to make an intelligent and fair
computation and asked for guidance as to the
proper basis of computation. In an order dated
February 24, 1969, the Court of Industrial
Relations adopted the suggested basis of
computation in the Company's motion dated May
10, 1968 in view of the conformity thereto of
UWFA embodied in their motion dated June 29,
1968, stating that the same was "fair enough to
determine the earnings of every complainant
every season, basing the same from the individual
earnings of those who were not discharged and
which is also in consonance with the rules laid
down by the Court in other cases similarly
situated." 7
The pertinent portion of the Company's motion
which the Court of Industrial Relations adopted
reads:
2. That, inasmuch as the payrolls
for the six (6) vessels .stevedored
at Hinigaran, Negros Occidental
are still available (Report, p. 2)
and it can be ascertained
therefrom the percentage of the

amounts actually paid to the

complainants in relation to the
payrolls prior to the stopped of
their . work, it is respectfully
submitted that the same
percentage be used in
ascertaining the amounts they
could hate earned had they
participated in the stevedoring of
the vessels that docked at
Hinigaran from November 12,
1955 to June 27, 1961, the
payrolls for said period being
available for examination;
3. That respondents are hereby
submitting a schedule showing his
tonnage handled for each of the
vessels during the period from
November- 2, 1955 to June 27,
1961, including the corresponding
gang hours, to supplement
Appendix "1" of the Report and
which schedule is made integral
part hereof as schedule "A".
4. That the foregoing is the most
reasonable method of computing
the amounts due the several
complainants, taking into
consideration the nature of their
work and the irregularity of their
schedule. (Emphasis supplied.)
Complying with the order dated February 24,
1969, the Chief Examiner submitted his report
dated Amount 20, 1969, wherein his computation
was summarized as follows:

10. That the, computed

backwages of the 183
complainant's in this case
covering the period from
November 12, 1955 (date of layoff until July 31, 1969 (they hate
'lot as yet been reinstated as of
this date) will amount to
P78,468.48 (See Appendix "I" for
details).
11. The computed backwages of
the 138 complainants in the
considering the period from
November 12, 1955 (date of layoff) until June 27, 1961 (there was
no more operation or stevedoring
work this date up to the present) it
will amount to P32,906.59 (See
Appendix "I" for details)."
(Emphasis supplied)
Both UWFA and the Company filed their
oppositions to the Chief Examiner's report of
August 20, 1969. In the course of the hearing of
their oppositions UWFA and the Company agreed
that the Chief Examiner should prepare another
computation report, which would only be 'for the
personal use of the counsels" in reaching a
common ground for agreement. The report, dated
December 15. 1969, did not, however, serve its
purpose and the Chief Examiner was again
required to prepare another supplementary report,
which he submitted on October 10, 1970.
The October 10, 1970 supplementary report
computed the back wages due the dismissed
UWFA members on the basis of the total milling

days of the two sugar centrals which employ the

Company's stevedoring services. This report
summarizes the computation as follows:
1 The total milling days of 2,605
(operating days) followed by the
Binalbagan- Isabela Sugar
Company Inc. and multiplied by
daily basic rates of the
complainants at the time of their
dismissal on November 12, 1955,
the total computed backwages of
the complainants from November
12, 1955 (date of dismissal) up to
November 30, 1967 (complainants
had not been reinstated as at the
close of office hours on this date)
before deducting whatever
amounts, if any, the complainants
might have been able to receive
from other employers or other
establishments during this period
covered by the back wages is
P1,634,711.10 (See Appendix '1'
for details).
2. Based from the total milling
days of 2,347 (operating days)
followed by the La Carlota Sugar
Central and Multiplied by the basic
daily rates of the complainants at
the time of their dismissal on
November 12, 1955, the total
computed back wages of the
complainants from November 12,
1955 (date of dismissal) up to
November 30, 1967 (complainants
had not been reinstated as at the

close of office hours on this date) before deducting whatever

amounts, if any, the complainants
might have been able to receive
from other employers or other
establishments during this period
covered by the back wages, is
P1,473,427.60 (see Appendix '1'
for details).

suggestions of the Company, and thus, the back

wages are unconsciously too meager to be fair,
just and equitable. The Company, on the other
hand, contends that since the 138 dismissed
employees are not entitled to back wages after
the cessation of operations at the Company's
Hinigaran branch on June 27, 1961, the
computation of back wages should not extend
beyond that date.

After several hearings, the court issued its order

dated October 30, 1972 approving the report
dated August 20, 1969, directing the company to
deposit with the court the amount of P78,468-48 r
be representing the back wages of complainants
from November r 12, 1955 up to July 31, 1969,
and directing the Chief Examiner to compute the
back wages due the complaints from August 1,
1969 up to the date they are actually reinstated
for submission to the court for further disposition.

UWFA and the intervenors never questioned the

correctness of the actual computations in the
report of the Chief Examiner dated August 20,
1969 in so far as it strictly conforms to the basis
and mode of computation indicated in the order of
the court dated February 24, 1969. What UWFA
and the intervenors now seek is the adoption of a
different computation which is based on the total
milling days of the two sugar centrals as reported
by the Chief Examiner on October 10, 1970.

Both UWFA and the Company filed their motions

for reconsideration of the order dated February
24, 1969 but the court sitting en banc denied their
motions in its Resolution dated September 26,
1973. Hence these petitions.

In the brief filed for the complainants-petitioners

by Atty. Eliseo P. Legaspi, Rollo, (L-37693), p.
598, it is averred that the correct computation of
the back wages is:

UWFA, the intervenors and the Company

separately questioned the computation of back
wages approved by the court on October 30,
1972. UWFA claims that the award of back wages
amounting to P78,468.48 for the period covering
thirteen 1 ' 13) years, eight (8) months and
nineteen (19) days is unfair, without foundation in
fact and in law, and constitutes an abuse of
discretion on the part of the court. The intervenors
contend that the basis of computation approved
was one- sided, adopted strictly from the

In the light of all the foregoing, it is

most respectfully prayed that the
correct computation should be
P4.60 x 138 claimants x 30 days X
8 months X 19 years as of
November 12, 1974, this year
equals P2,894,688.00 back wages
for 138 claimants-petitioners. 8
The employer company, petitioner in G.R. No. L37650, contends that no back wages should be
paid to the complainants-laborers after the

company had ceased to operate in Hinigaran,

Occidental Negros, on June 27, 1961.
Anent the claim of the complainants-workers that
the back wages as of November 12, 1974 had a
total of P2,894,688.00, the employer company
states: 9
Petitioners submit that 'the correct
computation should be P4.60 x
138 claimants x 30 days x 8
months x 19 years as of
November 12, 1974, this year
equals P2,894,688.00 back wages
for 138 claimants-petitioner'. As
we have illustrated earlier in this
reputation, such a competition in
this reputation, such a
computation overlooks the
peculiar circumstances attending
the stevedoring operations at
Hinigaran. This computation
ignores the fact that petitioners
herein presented only a small
faction of the total work force
called upon to participate in the
stevedoring operations of at
Hinigaran, and that because labor
supply far exceeded the demand
for it, it became necessary to
institute the so-called 'rotation
system', where several of- 'gangs'
took turns. Apparently, this
computation is also on the wrong
assumption that petitioners
worked everyday the milling
season and overlooks the more
important consideration that there

was stevedoring operation only

whenever a foreign vessel was in
Hinigaran. Furthermore, the
amount P2,894,688.00 being
prayed by the petitioners
overwhelmingly surpassed the
total payroll of P628.347.06 found
by the Court Examiner based on
the actual operations of the
respondent between November
12, 1955 and June 27, 1961, the
date when file `Patriakos' the
last foreign vessel to call at
Hinigaran left port.
In the light of the foregoing, it is
therefore most respectfully
submitted that the alternative
computation being suggested by
the petitioners this late hour in the
day is nit only fantastic and
unrealistic, but also irrational and
unjust. 10
The employer company insists that the correct
amount to be paid as back wages is P78,468.48
as found by the Court of Industrial Relations.
It is thus seen that there is a wide divergence
between the amounts fixed by the employer
company and the workers.
The records of both cases disclose that there is
no accurate basis for computing the back wages.
Attached to the record of case No. L-37693 as
Annex "T" 11 is the following computation submitted
by the Chief Examiner on December 12, 1969:

VISAYAN STEVEDORE
TRANSPORTATION COMPANY
Rate Per Case No. 62 ULP-CEBU
C
l
a
i
m
a
n
t
s

Y
e
a
r

1
0

1
4

Y
e
a
r

Y
e
a
r
s

Y
e
a
r
s

Y
e
a
r
s

9
0
0
.
0
0

9
0
0
.
0
0

5
,
4
0
0
.
0
0

9
,
0
0
0
.
0
0

1
2
,

4
,
8
0
0
.
0
0

2
8
,
8
0
0
.
0
0

4
8
,
0
0
0
.
0
0

6
0
0
.
0
0
6
7
,
2
0
0
.
0
0

3
,
5
0

2
1
,
0

3
5
,
0

4
9
,
0

N
o
.

C
a
b
o
1

W
i
n
c
h
m
a
n
6
S
i
g
n

8
0
0
.
0
0

7
0
0
.

a
l
m
a
n
5
S
t
e
v
e
d
o
r
e
s

0
0

0
.
0
0

0
0
.
0
0

0
0
.
0
0

0
0
.
0
0

5
0
0
.
0
0

6
3
,
0
0
.
0
0

3
7
8
,
0
0
0
.
0
0

6
3
0
,
0
0
0
.
0
0

8
8
2
,
0
0
0
.
0
0

1
2
6
Totals P72,200.00 P433,200.00
P722,000.00 P1,010,800.00
How much Each Claimant Will
Receive

C
a

Y
e
a
r

Y
e
a
r
s

9
0

5
,

1
0

1
4

Y
e
a
r
s
9
,

Y
e
a
r
s
1
2

b
o

0
.
0
0

4
0
0
.
0
0

0
0
0
.
0
0

W
i
n
c
h
m
a
n

8
0
0
.
0
0

4
,
8
0
0
.
0
0

8
,
0
0
0
.
0
0

S
i
g
n
a
l
m
e
n
S
t
e
v
e
d
o
r
e

7
0
0
.
0
0

4
,
2
0
0
.
0
0

7
,
0
0
0
.
0
0

,
6
0
0
.
0
0
1
1
,
2
0
0
.
0
0
9
,
8
0
0
.
0
0

5
0
0
.
0
0

3
,
0
0
0
.
0
0

5
,
0
0
0
.
0
0

7
,
0
0
0
.
0
0

Manila, Philippines, December 15, 1969.

Respectfully submitted:

(SGD) FELIPE C. TERSO

Chief Examiner
This computation was prepared pursuant to the
agreement of the Parties at the hearing on
December 4, 1969. 12 It Was understood, however,
that the said computation to be prepared by the
Chief Examiner "shall be for the personal use of the
counsels as a basic to meet on a common ground to
expedite meters."

It is futile to order a new computation of the back

wages of the complaining workers as prayed for
by the petitioners in Case No. L37693. To avoid
further delay, we adopt as basis the computation
prepared by the Chief Examiner dated December
15, 1969, Annex "T", 13 but we fix an amount
equivalent to only five (5) years for the whole period
from November 12, 1955 as follows:
1

C
a
b
o

a
t
9
0
0
x

W
i
n
c
h
m
e

5
a
t
8
0
0

4
,
5
0
0
.
0
0

2
4
,
0
0
0
.

0
0

3
6
1
,
0
0
0
.
0
0

5
x

S
i
g
n
a
l
m
e
n

6
a
t
7
0
0
x

1
7
,
5
0
0
.
0
0

pertinent portion which reads:

1
2
6

S
t
e
v
e
d
o
r
e
s

5
a
t
5
0
0
x
5

The amount of P361,000.00 should be paid to the

workers as computed above without qualification
or deduction. This computation is in consonance
with the ruling of this Court in FEATI University
Faculty Club (Paflu) vs. FEATI University 14 the

3
1
5
,
0
0
0
.
0
0

x
1
2
6
P

As to the amount of backwages,

the Court applies the precedent
recently, set in Mercury Drug Co.
vs. CIR31 of fixing the amount of
backwages to a just and
reasonable
level without qualification or
deduction so as to avoid
protracted delay in the execution
of the award for backwages due to
extended hearings and
unavoidable delays and difficulties
encountered in determining the
earnings of the laid- off employees
ordered to be reinstated with
backwages during the pendency
of the case for purposes of
deducting the same from the cross
backwages awarded.

As has been noted, this formula of

awarding reasonable net
wages without deduction or
qualification relieves the
employees from proving or
disproving their earnings during
their lay-off and the employers
from submitting counterproofs,
and obviates the twin evils of
illness on the part of the employee
who would 'with folded arms,
remain inactive in the expectation
that a windfall would come to him'
and attrition and protracted delay
in satisfying such award on the
part of unscrupulous employers
who have seized upon the further
proceedings to determine the
actual earnings of the wrongfully
dismissed or laid-off employees to
hold unduly extended hearings for
each and every employee
awarded backwages and thereby
render practically nugatory such
award and compel the employees
to agree to unconscionable
settlements of their backwages
award in order to satisfy their dire
need. 33 15
The total amount of back wages of P361,000.00
shall be for the whole period from November 12,
1955 until the present. It is no longer necessary to
determine when the Company stopped operating
in Hinigaran, Occidental Negros.
WHEREFORE, the order appealed from is hereby
modified in that the Visayan Stevedore

Transportation Company is ordered to pay the

total amount of P361,000.00 without qualification
or deduction to the 138 petitioners-workers in
Case No. G.R. No. L-37693, without
pronouncement as to costs.
SO ORDERED.
Teehankee,(Chairman), Makasiar, Muoz Palma,
Martin and Guerrero, JJ., concur.
G.R. No. 109704 January 17, 1995
ALFREDO B. FELIX, petitioner,
vs.
DR. BRIGIDA BUENASEDA, in her capacity as Director, and
ISABELO BAEZ, JR., in his capacity as Administrator, both
of the National Center for Mental Health, and the CIVIL
SERVICE COMMISSION,respondents.

KAPUNAN, J.:
Taking advantage of this Court's decisions involving the removal
of various civil servants pursuant to the general reorganization of
the government after the EDSA Revolution, petitioner assails his
dismissal as Medical Specialist I of the National Center for Mental
Health (formerly the National Mental Hospital) as illegal and
violative of the constitutional provision on security of tenure
allegedly because his removal was made pursuant to an invalid
reorganization.
In Mendoza vs. Quisumbing 1 and the consolidated cases involving
the reorganization of various government departments and agencies
we held:

We are constrained to set aside the

reorganizations embodied in these consolidated
petitions because the heads of departments and
agencies concerned have chosen to rely on their
own concepts of unlimited discretion and
"progressive" ideas on reorganization instead of
showing that they have faithfully complied with the
clear letter and spirit of the two Constitutions and
the statutes affecting reorganization. 2
In De Guzman vs. CSC 3, we upheld the principle, laid down by
Justice J.B.L. Reyes in Cruz vs. Primicias 4 that a valid abolition of an
office neither results in a separation or removal, likewise upholding
the corollary principle that "if the abolition is void, the incumbent is
deemed never to have ceased to hold office," in sustaining therein
petitioner's right to the position she held prior to the reorganization.

The instant petition on its face turns on similar facts and issues,
which is, that petitioner's removal from a permanent position in
the National Center for Mental Health as a result of the
reorganization of the Department of Health was void.
However, a closer look at the facts surrounding the instant
petition leads us to a different conclusion.
After passing the Physician's Licensure Examinations given by
the Professional Regulation Commission in June of 1979,
petitioner, Dr. Alfredo B. Felix, joined the National Center for
Mental Health (then the National Mental Hospital) on May 26,
1980 as a Resident Physician with an annual salary of
P15,264.00. 5 In August of 1983, he was promoted to the position of
Senior Resident Physician 6 a position he held until the Ministry of
Health reorganized the National Center for Mental Health (NCMH) in
January of 1988, pursuant to Executive Order No. 119.

Under the reorganization, petitioner was appointed to the position

of Senior Resident Physician in a temporary capacity immediately
after he and other employees of the NCMH allegedly tendered

their courtesy resignations to the Secretary of Health. 7 In August

of 1988, petitioner was promoted to the position of Medical Specialist
I (Temporary Status), which position was renewed the following
year. 8

In 1988, the Department of Health issued Department Order No.

347 which required board certification as a prerequisite for
renewal of specialist positions in various medical centers,
hospitals and agencies of the said department. Specifically,
Department Order No. 347 provided that specialists working in
various hospitals and branches of the Department of Health be
recognized as "Fellows" of their respective specialty societies
and/or "Diplomates" of their specialty boards or both. The Order
was issued for the purpose of upgrading the quality of specialties
in DOH hospitals by requiring them to pass rigorous theoretical
and clinical (bedside) examinations given by recognized specialty
boards, in keeping up with international standards of medical
practice.
Upon representation of the Chiefs of Hospitals of various
government hospitals and medical centers, (then) Secretary of
Health Alfredo Bengzon issued Department Order No. 347
providing for an extension of appointments of Medical Specialist
positions in cases where the termination of medical specialist who
failed to meet the requirement for board certification might result
in the disruption of hospital services. Department Order No. 478
issued the following guidelines:
1. As a general policy, the provision of
Department Order No. 347, Sec. 4 shall apply
unless the Chief of Hospital requests for
exemption, certifies that its application will result
in the disruption of the delivery service together
with the steps taken to implement Section 4, and
submit a plan of action, lasting no more than 3years, for the eventual phase out of non-Board
certified medical specialties.

2. Medical specialist recommended for extension

of appointment shall meet the following minimum
criteria:
a. DOH medical specialist certified
b. Has been in the service of the
Department at least three (3)
years prior to December 1988.
c. Has applied or taken the
specialty board examination.
3. Each recommendation for extension of
appointment must be individually justified to show
not only the qualification of the recommendee, but
also what steps he has taken to be board
certified.
4. Recommendation for extension of appointment
shall be evaluated on a case to case basis.
5. As amended, the other provisions of
Department Order No. 34/s. 1988 stands.
Petitioner was one of the hundreds of government medical
specialist who would have been adversely affected by
Department Order No. 347 since he was no yet accredited by the
Psychiatry Specialty Board. Under Department Order No. 478,
extension of his appointment remained subject to the guidelines
set by the said department order. On August 20, 1991, after
reviewing petitioner's service record and performance, the
Medical Credentials Committee of the National Center for Mental
Health recommended non-renewal of his appointment as Medical
Specialist I, informing him of its decision on August 22, 1991. He
was, however, allowed to continue in the service, and receive his

salary, allowances and other benefits even after being informed

of the termination of his appointment.
On November 25, 1991, an emergency meeting of the Chiefs of
Service was held to discuss, among other matters, the petitioner's
case. In the said meeting Dr. Vismindo de Grecia, petitioner's
immediate supervisor, pointed out petitioner's poor performance,
frequent tardiness and inflexibility as among the factors
responsible for the recommendation not to renew his
appointment. 9 With one exception, other department heads present
in the meeting expressed the same opinion, 10 and the overwhelming
concensus was for non-renewal. The matter was thereafter referred
to the Civil Service Commission, which on February 28, 1992 ruled
that "the temporary appointment (of petitioner) as Medical Specialist I
can be terminated at any time . . ." and that "[a]ny renewal of such
appointment is within the discretion of the appointing
authority." 11 Consequently, in a memorandum dated March 25, 1992
petitioner was advised by hospital authorities to vacate his cottage
since he was no longer with said memorandum petitioner filed a
petition with the Merit System Protection Board (MSPB) complaining
about the alleged harassment by respondents and questioning the
non-renewal of his appointment. In a Decision rendered on July 29,
1992, the (MSPB) dismissed petitioner's complaint for lack of merit,
finding that:

As an apparent incident of the power to appoint,

the renewal of a temporary appointment upon or
after its expiration is a matter largely addressed to
the sound discretion of the appointing authority. In
this case, there is no dispute that Complainant
was a temporary employee and his appointment
expired on August 22, 1991. This being the case,
his re-appointment to his former position or the
renewal of his temporary appointment would be
determined solely by the proper appointing
authority who is the Secretary, Department of
Health upon the favorable recommendation of the
Chief of Hospital III, NCMH. The Supreme Court
in the case of Central Bank vs. Civil Service

Commission G.R. Nos. 80455-56 dated April 10,

1989, held as follows:
The power of appointment is essentially a political
question involving considerations of wisdom
which only the appointing authority can decide.

Said decision was appealed to the Civil Service Commission

which dismissed the same in its Resolution dated December 1,
1992. Motion for Reconsideration was denied in CSC Resolution
No. 93-677 dated February 3, 1993, hence this appeal, in which
petitioner interposes the following assignments of errors:
I

In this light, Complainant therefore, has no basis

in law to assail the non-renewal of his expired
temporary appointment much less invoke the aid
of this Board cannot substitute its judgment to that
of the appointing authority nor direct the latter to
issue an appointment in the complainant's favor.
Regarding the alleged Department Order secured
by the complainant from the Department of Health
(DOH), the Board finds the same inconsequential.
Said Department Order merely allowed the
extension of tenure of Medical Specialist I for a
certain period but does not mandate the renewal
of the expired appointment.
The Board likewise finds as baseless complainant's allegation of
harassment. It should be noted that the subsistence, quarters and
laundry benefits provided to the Complainant were in connection
with his employment with the NCMH. Now that his employment
ties with the said agency are severed, he eventually loses his
right to the said benefits. Hence, the Hospital Management has
the right to take steps to prevent him from the continuous
enjoyment thereof, including the occupancy of the said cottage,
after his cessation form office.
In sum, the actuations of Dr. Buenaseda and Lt. Col. Balez are
not shown to have been tainted with any legal infirmity, thus
rendering as baseless, this instant complaint.

THE PUBLIC RESPONDENT CIVIL SERVICE

COMMISSION ERRED IN HOLDING THAT BY
SUBMITTING HIS COURTESY RESIGNATION
AND ACCEPTING HIS TEMPORARY
APPOINTMENT PETITIONER HAD
EFFECTIVELY DIVESTED HIMSELF OF HIS
SECURITY OF TENURE, CONSIDERING THE
CIRCUMSTANCES OF SUCH COURTESY
RESIGNATION AND ACCEPTANCE OF
APPOINTMENT.
II
THE RESPONDENT COMMISSION IN NOT
DECLARING THAT THE CONVERSION OF THE
PERMANENT APPOINTMENT OF PETITIONER
TO TEMPORARY WAS DONE IN BAD FAITH IN
THE GUISE OF REORGANIZATION AND THUS
INVALID, BEING VIOLATIVE OF THE
PETITIONER'S RIGHT OF SECURITY OF
TENURE.
Responding to the instant petition, 12 the Solicitor General contends
that 1) the petitioner's temporary appointment after the
reorganization pursuant to E.O. No. 119 were valid and did not
violate his constitutional right of security of tenure; 13 2) petitioner is
guilty of estoppel or laches, having acquiesced to such temporary
appointments from 1988 to 1991; 14 and 3) the respondent
Commission did not act with grave abuse of discretion in affirming

the petitioner's non-renewal of his appointment at the National

Center for Mental Hospital. 15

We agree.
The patent absurdity of petitioner's posture is readily obvious.
A residency or resident physician position in a medical specialty
is never a permanent one. Residency connotes training and
temporary status. It is the step taken by a physician right after
post-graduate internship (and after hurdling the Medical
Licensure Examinations) prior to his recognition as a specialist or
sub-specialist in a given field.
A physician who desires to specialize in Cardiology takes a
required three-year accredited residency in Internal Medicine
(four years in DOH hospitals) and moves on to a two or threeyear fellowship or residency in Cardiology before he is allowed to
take the specialty examinations given by the appropriate
accrediting college. In a similar manner, the accredited
Psychiatrist goes through the same stepladder process which
culminates in his recognition as a fellow or diplomate (or both) of
the Psychiatry Specialty Board. 16 This upward movement from
residency to specialist rank, institutionalized in the residency
training process, guarantees minimum standards and skills and
ensures that the physician claiming to be a specialist will not be
set loose on the community without the basic knowledge and
skills of his specialty. Because acceptance and promotion
requirements are stringent, competitive, and based on merit.
acceptance to a first year residency program is no guaranty that
the physician will complete the program. Attribution rates are
high. Some programs are pyramidal. Promotion to the next postgraduate year is based on merit and performance determined by
periodic evaluations and examinations of knowledge, skills and
bedside manner. 17 Under this system, residents, specialty those in
university teaching hospitals 18 enjoy their right to security of tenure
only to the extent that they periodically make the grade, making the
situation quite unique as far as physicians undergoing post-graduate
residencies and fellowships are concerned. While physicians (or

consultants) of specialist rank are not subject to the same stringent

evaluation procedures, 19 specialty societies require continuing
education as a requirement for accreditation for good standing, in
addition to peer review processes based on performance, mortality
and morbidity audits, feedback from residents, interns and medical
students and research output. The nature of the contracts of resident
physicians meet traditional tests for determining employer-employee
relationships, but because the focus of residency is training, they are
neither here nor there. Moreover, stringent standards and
requirements for renewal of specialist-rank positions or for promotion
to the next post-graduate residency year are necessary because
lives are ultimately at stake.

Petitioner's insistence on being reverted back to the status

quo prior to the reorganizations made pursuant to Executive
Order No. 119 would therefore be akin to a college student asking
to be sent back to high school and staying there. From the
position of senior resident physician, which he held at the time of
the government reorganization, the next logical step in the
stepladder process was obviously his promotion to the rank of
Medical Specialist I, a position which he apparently accepted not
only because of the increase in salary and rank but because of
the prestige and status which the promotion conferred upon him
in the medical community. Such status, however, clearly carried
with it certain professional responsibilities including the
responsibility of keeping up with the minimum requirements of
specialty rank, the responsibility of keeping abreast with current
knowledge in his specialty rank, the responsibility of completing
board certification requirements within a reasonable period of
time. The evaluation made by the petitioner's peers and superiors
clearly showed that he was deficient in a lot of areas, in addition
to the fact that at the time of his non-renewal, he was not even
board-certified.
It bears emphasis that at the time of petitioner's promotion to the
position of Medical Specialist I (temporary) in August of 1988, no
objection was raised by him about the change of position or the
temporary nature of designation. The pretense of objecting to the
promotion to specialist rank apparently came only as an

afterthought, three years later, following the non-renewal of his

position by the Department of Health.
We lay stress to the fact that petitioner made no attempt to
oppose earlier renewals of his temporary Specialist I contracts in
1989 and 1990, clearly demonstrating his acquiescence to if
not his unqualified acceptance of the promotion (albeit of a
temporary nature) made in 1988. Whatever objections petitioner
had against the earlier change from the status of permanent
senior resident physician to temporary senior physician were
neither pursued nor mentioned at or after his designation as
Medical Specialist I (Temporary). He is therefore estopped from
insisting upon a right or claim which he had plainly abandoned
when he, from all indications, enthusiastically accepted the
promotion. His negligence to assert his claim within a reasonable
time, coupled with his failure to repudiate his promotion to a
temporary position, warrants a presumption, in the words of this
Court in Tijam vs. Sibonghanoy, 20 that he "either abandoned (his
claim) or declined to assert it."

There are weighty reasons of public policy and convenience

which demand that any claim to any position in the civil service,
permanent, temporary of otherwise, or any claim to a violation of
the constitutional provision on security of tenure be made within a
reasonable period of time. An assurance of some degree of
stability in the civil service is necessary in order to avoid needless
disruptions in the conduct of public business. Delays in the
statement of a right to any position are strongly discouraged. 21 In
the same token, the failure to assert a claim or the voluntary
acceptance of another position in government, obviously without
reservation, leads to a presumption that the civil servant has either
given up his claim of has already settled into the new position. This is
the essence of laches which is the failure or neglect, for an
unreasonable and unexplained length of time to do that which, by
exercising due diligence, could or should have been done earlier; it is
the negligence or omission to assert a right within a reasonable time,
warranting a presumption that the party entitled to assert it either has
abandoned it or declined to assert it. 22

In fine, this petition, on its surface, seems to be an ordinary

challenge against the validity of the conversion of petitioner's
position from permanent resident physician status to that of a
temporary resident physician pursuant to the government
reorganization after the EDSA Revolution. What is unique to
petitioner's averments is the fact that he hardly attempts to
question the validity of his removal from his position of Medical
Specialist I (Temporary) of the National Center for Mental Health,
which is plainly the pertinent issue in the case at bench. The
reason for this is at once apparent, for there is a deliberate and
dishonest attempt to a skirt the fundamental issue first, by falsely
claiming that petitioner was forced to submit his courtesy
resignation in 1987 when he actually did not; and second, by
insisting on a right of claim clearly abandoned by his acceptance
of the position of Medical Specialist I (Temporary), which is hence
barred by laches.
The validity of the government reorganization of the Ministry of
Health pursuant to E.O. 119 not being the real issue in the case
at bench, we decline to make any further pronouncements
relating to petitioner's contentions relating to the effect on him of
the reorganization except to say that in the specific case of the
change in designation from permanent resident physician
to temporary resident physician, a change was necessary,
overall, to rectify a ludicrous situation whereby some government
resident physicians were erroneously being classified as
permanent resident physicians in spite of the inherently
temporary nature of the designation. The attempts by the
Department of Health not only to streamline these positions but to
make them conform to current standards of specialty practice is a
step in a positive direction. The patient who consults with a
physician of specialist rank should at least be safe in the
assumption that the government physician of specialist rank: 1.)
has completed all necessary requirements at least assure the
public at large that those in government centers who claim to be
specialists in specific areas of Medicine possess the minimum
knowledge and skills required to fulfill that first and foremost

maxim, embodied in the Hippocratic Oath, that they do their

patients no harm. Primium non nocere.
Finally, it is crystal clear, from the facts of the case at bench, that
the petitioner accepted a temporary appointment (Medical
Specialist I). As respondent Civil Service Commission has
correctly pointed out 23, the appointment was for a definite and
renewable period which, when it was not renewed, did not involve
a dismissal but an expiration of the petitioner's term.
ACCORDINGLY, the petition is hereby DISMISSED, for lack of
merit.
Narvasa, C.J., Feliciano, Padilla, Bidin, Regalado, Davide, Jr.,
Romero, Bellosillo, Melo, Quiason, Puno, Vitug and Mendoza,
JJ., concur.
G.R. No. 121948

Forthwith, petitioner PHCCI filed a motion to dismiss the

complaint on the ground that there is no employer-employee
relationship between them as private respondents are all
members and co-owners of the cooperative. Furthermore, private
respondents have not exhausted the remedies provided in the
cooperative by-laws.
On September 3, 1990, petitioner filed a supplemental motion to
dismiss alleging that Article 121 of R.A. No. 6939, otherwise
known as the Cooperative Development Authority Law which took
effect on March 26, 1990, requires conciliation or mediation within
the cooperative before a resort to judicial proceeding.
On the same date, the Labor Arbiter denied petitioner's motion to
dismiss, holding that the case is impressed with employeremployee relationship and that the law on cooperatives is
subservient to the Labor Code.

October 8, 2001

PERPETUAL HELP CREDIT COOPERATIVE, INC., petitioner,

vs.
BENEDICTO FABURADA, SISINITA VILLAR, IMELDA
TAMAYO, HAROLD CATIPAY, and the NATIONAL LABOR
RELATIONS COMMISSION, Fourth Division, Cebu
City, respondents.
SANDOVAL-GUTIERREZ, J.:
On January 3, 1990, Benedicto Faburada, Sisinita Vilar, Imelda
Tamayo and Harold Catipay, private respondents, filed a
complaint against the Perpetual Help Credit Cooperative, Inc.
(PHCCI), petitioner, with the Arbitration Branch, Department of
Labor and Employment (DOLE), Dumaguete City, for illegal
dismissal, premium pay on holidays and rest days, separation
pay, wage differential, moral damages, and attorney's fees.

On November 23, 1993, the Labor Arbiter rendered a decision,

the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby
rendered declaring complainants illegally dismissed, thus
respondent is directed to pay Complainants backwages
computed from the time they were illegally dismissed up
to the actual reinstatement but subject to the three year
backwages rule, separation pay for one month for every
year of service since reinstatement is evidently not
feasible anymore, to pay complainants 13th month pay,
wage differentials and Ten Percent (10%) attorney's fees
from the aggregate monetary award. However,
complainant Benedicto Faburada shall only be awarded
what are due him in proportion to the nine and a half
months that he had served the respondent, he being a
part-time employee. All other claims are hereby dismissed
for lack of merit.

The computation of the foregoing awards is hereto

attached and forms an integral part of this decision."
On appeal,1 the NLRC affirmed the Labor Arbiter's decision.
Hence, this petition by the PHCCI.
The issue for our resolution is whether or not respondent judge
committed grave abuse of discretion in ruling that there is an
employer-employee relationship between the parties and that
private respondents were illegally dismissed.
Petitioner PHCCI contends that private respondents are its
members and are working for it as volunteers. Not being regular
employees, they cannot sue petitioner.
In determining the existence of an employer-employee
relationship, the following elements are considered: (1 ) the
selection and engagement of the worker or the power to hire; (2)
the power to dismiss; (3) the payment of wages by whatever
means; and (4) the power to control the worker's conduct, with
the latter assuming primacy in the overall consideration. No
particular form of proof is required to prove the existence of an
employer-employee relationship. Any competent and relevant
evidence may show the relationship.2
The above elements are present here. Petitioner PHCCI, through
Mr. Edilberto Lantaca, Jr., its Manager, hired private respondents
to work for it. They worked regularly on regular working hours,
were assigned specific duties, were paid regular wages and
made to accomplish daily time records just like any other regular
employee. They worked under the supervision of the cooperative
manager. But unfortunately, they were dismissed.
That an employer-employee exists between the parties is shown
by the averments of private respondents in their respective

affidavits, carefully considered by respondent NLRC in affirming

the Labor Arbiter's decision, thus:
Benedicto Faburada Regular part-time Computer
programmer/ operator. Worked with the Cooperative
since June 1, 1988 up to December 29, 1989. Work
schedule: Tuesdays and Thursdays, from 1:00 p.m. to
5:30 p.m. and every Saturday from 8:00 to 11:30 a.m. and
1:00 to 4:00 p.m. and for at least three (3) hours during
Sundays. Monthly salary: P1,000.00 from June to
December 1988; P1,350.00 - from January to June 1989;
and P1,500.00 from July to December 1989. Duties:
Among others, Enter data into the computer; compute
interests on savings deposits, effect mortuary deductions
and dividends on fixed deposits; maintain the masterlist of
the cooperative members; perform various forms for
mimeographing; and perform such other duties as may be
assigned from time to time.
Sisinita Vilar Clerk. Worked with the Cooperative since
December 1, 1987 up to December 29, 1989.Work
schedule: Regular working hours. Monthly salary:
P500.00 from December 1, 1987 to December 31,
1988; P1,000.00 from January 1, 1989 to June 30,
1989; and P1,150.00 from July 1, 1989 to December
31, 1989. Duties: Among others, Prepare summary of
salary advances, journal vouchers, daily summary of
disbursements to respective classifications; schedule
loans; prepare checks and cash vouchers for regular and
emergency loans; reconcile bank statements to the daily
summary of disbursements; post the monthly balance of
fixed and savings deposits in preparation for the
computation of interests, dividends, mortuary and
patronage funds; disburse checks during regular and
emergency loans; and perform such other bookkeeping
and accounting duties as may be assigned to her from
time to time.

Imelda C. Tamayo Clerk. Worked with the Cooperative

since October 19, 1987 up to December 29, 1989. Work
schedule: Monday to Friday - 8:00 to 11:30 a.m and 2:00
to 5:30 p.m.; every Saturday 8:00 to 11:30 a.m and
1:00 to 4:00 p.m; and for one Sunday each month - for at
least three (3) hours. Monthly salary: P60.00 from
October to November 1987; P250.00 for December 1987;
P500.00 from January to December 1988; P950
from January to June 1989; and P1,000.00 from July to
December 1989.Duties: Among others, pick up balances
for the computation of interests on savings deposit,
mortuary, dividends and patronage funds; prepare cash
vouchers; check petty cash vouchers; take charge of the
preparation of new passbooks and ledgers for new
applicants; fill up members logbook of regular depositors,
junior depositors and special accounts; take charge of
loan releases every Monday morning; assist in the
posting and preparation of deposit slips; receive deposits
from members; and perform such other bookkeeping and
accounting duties as may be assigned her from time to
time.
Harold D. Catipay Clerk. Worked with the Cooperative
since March 3 to December 29, 1989. Work schedule:
Monday to Friday 8:00 to 11:30 a.m. and 2:00 to 5:30
p.m.; Saturday 8:00 to 11:30 a.m. and 1:00 to 4:00
p.m.; and one Sunday each month for at least three (3)
hours. Monthly salary: P900.00 from March to June
1989; P1,050.00 - from July to December 1989. Duties:
Among others, Bookkeeping, accounting and collecting
duties, such as, post daily collections from the two (2)
collectors in the market; reconcile passbooks and ledgers
of members in the market; and assist the other clerks in
their duties.
All of them were given a memorandum of termination on
January 2, 1990, effective December 29, 1989.

We are not prepared to disregard the findings of both the Labor

Arbiter and respondent NLRC, the same being supported by
substantial evidence, that quantum of evidence required in quasi
judicial proceedings, like this one.
Necessarily, this leads us to the issue of whether or not private
respondents are regular employees. Article 280 of the Labor
Code provides for three kinds of employees: (1) regular
employees or those who have been engaged to perform activities
which are usually necessary or desirable in the usual business or
trade of the employer; (2) project employees or those whose
employment has been fixed for a specific project or undertaking,
the completion or termination of which has been determined at
the time of the engagement of the employee or where the work or
service to be performed is seasonal in nature and the
employment is for the duration of the season; and (3) casual
employees or those who are neither regular nor project
employees.3 The employees who are deemed regular are: (a)
those who have been engaged to perform activities which are
usually necessary or desirable in the usual trade or business of
the employer; and (b) those casual employees who have
rendered at least one (1 ) year of service, whether such service is
continuous or broken, with respect to the activity in which they are
employed.4 Undeniably, private respondents were rendering
services necessary to the day-to-day operations of petitioner
PHCCI. This fact alone qualified them as regular employees.
All of them, except Harold D. Catipay, worked with petitioner for
more than one (1) year: Benedicto Faburada, for one and a half
(1 1/2) years; Sisinita Vilar, for two (2) years; and Imelda C.
Tamayo, for two (2) years and two (2) months. That Benedicto
Faburada worked only on a part-time basis, does not mean that
he is not a regular employee. One's regularity of employment is
not determined by the number of hours one works but by the
nature and by the length of time one has been in that particular
job.5 Petitioner's contention that private respondents are mere
volunteer workers, not regular employees, must necessarily fail.
Its invocation of San Jose City Electric Cooperative vs. Ministry of

Labor and Employment (173 SCRA 697, 703 (1989) is misplaced.

The issue in this case is whether or not the employees-members
of a cooperative can organize themselves for purposes of
collective bargaining, not whether or not the members can be
employees. Petitioner missed the point
As regular employees or workers, private respondents are
entitled to security of tenure. Thus, their services may be
terminated only for a valid cause, with observance of due
process.

them of the particular acts or omissions for which their dismissal

is sought and (b) the second, to inform them of the decision of the
employer that they are being dismissed.7 In this case, only one
notice was served upon private respondents by petitioner. It was
in the form of a Memorandum signed by the Manager of the
Cooperative dated January 2, 1990 terminating their services
effective December 29, 1989. Clearly, petitioner failed to comply
with the twin requisites of a valid notice.
We hold that private respondents have been illegally dismissed.

The valid causes are categorized into two groups: the just causes
under Articles 282 of the Labor Code and the authorized causes
under Articles 283 and 284 of the same Code. The just causes
are: (1) serious misconduct or willful disobedience of lawful
orders in connection with the employee's work; (2) gross or
habitual neglect of duties; (3) fraud or willful breach of trust; (4)
commission of a crime or an offense against the person of the
employer or his immediate family member or representative; and,
analogous cases. The authorized causes are: (1) the installation
of labor-saving devices; (2) redundancy; (3) retrenchment to
prevent losses; and (4) closing or cessation of operations of the
establishment or undertaking, unless the closing is for the
purpose of circumventing the provisions of law. Article 284
provides that an employer would be authorized to terminate the
services of an employee found to be suffering from any disease if
the employee's continued employment is prohibited by law or is
prejudicial to his health or to the health of his fellow employees6

Petitioner contends that the labor arbiter has no jurisdiction to

take cognizance of the complaint of private respondents
considering that they failed to submit their dispute to the
grievance machinery as required by P.D. 175 (strengthening the
Cooperative Movement) 8 and its implementing rules and
regulations under LOI 23. Likewise, the Cooperative
Development Authority did not issue a Certificate of NonResolution pursuant to Section 8 of R.A. 6939 or the Cooperative
Development Authority Law.

Private respondents were dismissed not for any of the above

causes. They were dismissed because petitioner considered
them to be mere voluntary workers, being its members, and as
such work at its pleasure. Petitioner thus vehemently insists that
their dismissal is not against the law.

Article 121 of Republic Act No. 6938 (Cooperative Code of the

Philippines) provides the procedure how cooperative disputes are
to be resolved, thus:

Procedural due process requires that the employer serve the

employees to be dismissed two (2) written notices before the
termination of their employment is effected: (a) the first, to apprise

As aptly stated by the Solicitor General in his comment, P.D. 175

does not provide for a grievance machinery where a dispute or
claim may first be submitted. LOI 23 refers to instructions to the
Secretary of Public Works and Communications to implement
immediately the recommendation of the Postmaster General for
the dismissal of some employees of the Bureau of Post.
Obviously, this LOI has no relevance to the instant case.

ART. 121. Settlement of Disputes. Disputes among

members, officers, directors, and committee members,
and intra-cooperative disputes shall, as far as practicable,
be settled amicably in accordance with the conciliation or

mediation mechanisms embodied in the by-laws of the

cooperative, and in applicable laws.
Should such a conciliation/mediation proceeding fail, the
matter shall be settled in a court of competent
jurisdiction."
Complementing this Article is Section8 of R.A. No. 6939
(Cooperative Development Authority Law) which reads:
SEC. 8 Mediation and Conciliation. Upon request of
either or both parties, the Authority shall mediate and
conciliate disputes within a cooperative or between
cooperatives: Provided, That if no mediation or
conciliation succeeds within three (3) months from
request thereof, a certificate of non-resolution shall be
issued by the Commission prior to the filing of appropriate
action before the proper courts.

671510 they are granted full backwages, meaning, without

deducting from their backwages the earnings derived by them
elsewhere during the period of their illegal dismissal.11 If
reinstatement is no longer feasible, as when the relationship
between petitioner and private respondents has become strained,
payment of their separation pay in lieu of reinstatement is in
order.12
WHEREFORE, the petition is hereby DENIED. The decision of
respondent NLRC is AFFIRMED, with modification in the sense
that the backwages due private respondents shall be paid in full,
computed from the time they were illegally dismissed up to the
time of the finality of this Decision.13
SO ORDERED.
Melo, Vitug and Panganiban, JJ., concur.
G.R. No. 159890

The above provisions apply to members, officers and directors of

the cooperative involved in disputes within a cooperative or
between cooperatives.
There is no evidence that private respondents are members of
petitioner PHCCI and even if they are, the dispute is about
payment of wages, overtime pay, rest day and termination of
employment. Under Art. 217 of the Labor Code, these disputes
are within the original and exclusive jurisdiction of the Labor
Arbiter.
As illegally dismissed employees, private respondents are
therefore entitled to reinstatement without loss of seniority rights
and other privileges and to full backwages, inclusive of
allowances, plus other benefits or their monetary equivalent
computed from the time their compensation was withheld from
them up to the time of their actual reinstatement.9 Since they
were dismissed after March 21, 1989, the effectivity date of R.A.

May 28, 2004

EMPERMACO B. ABANTE, JR., petitioner,

vs.
LAMADRID BEARING & PARTS CORP. and JOSE
LAMADRID, President, respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review under Rule 45 of the 1997 Revised
Rules of Civil Procedure assailing the Decision dated March 7,
2003 of the Court of Appeals in CA-G.R. SP No. 73102 which
affirmed the Resolution dated April 2, 2002 of the National Labor
Relations Commission.
Petitioner was employed by respondent company Lamadrid
Bearing and Parts Corporation sometime in June 1985 as a

salesman earning a commission of 3% of the total paid-up sales

covering the whole area of Mindanao. His average monthly
income was more or less P16,000.00, but later was increased to
approximately P20,269.50. Aside from selling the merchandise of
respondent corporation, he was also tasked to collect payments
from his various customers. Respondent corporation had
complete control over his work because its President, respondent
Jose Lamadrid, frequently directed him to report to a particular
area for his sales and collection activities, and occasionally
required him to go to Manila to attend conferences regarding
product competition, prices, and other market strategies.

Not contented with the issuance of the foregoing checks as

security for the bad accounts, respondents "tricked" petitioner into
signing two documents, which he later discovered to be a
Promissory Note2 and a Deed of Real Estate Mortgage.3

Sometime in 1998, petitioner encountered five customers/clients

with bad accounts, namely:

Due to financial difficulties, petitioner inquired about his

membership with the Social Security System in order to apply for
a salary loan. To his dismay, he learned that he was not covered
by the SSS and therefore was not entitled to any benefit. When
he brought the matter of his SSS coverage to his employer, the
latter berated and hurled invectives at him and, contrary to their
agreement, deposited the remaining checks which were
dishonored by the drawee bank due to "Account Closed."

Customers/Clients
1) A&B Engineering Services

Amount
P 86,431.20

2) Emmanuel Engineering Services 126, 858.50

3) Panabo Empire Marketing

226,458.76

4) Southern Fortune Marketing

191,208.00

5) Alreg Marketing

56, 901.18

Less Returns: 691.02

56, 210.16

Total Bad Accounts

P 687,166.62

Petitioner was confronted by respondent Lamadrid over the bad

accounts and warned that if he does not issue his own checks to
cover the said bad accounts, his commissions will not be
released and he will lose his job. Despite serious misgivings, he
issued his personal checks in favor of respondent corporation on
condition that the same shall not be deposited for clearing and
that they shall be offset against his periodic commissions.1

Pursuant to the parties agreement that the checks would not be

deposited, as their corresponding values would be offset from
petitioners sales commissions, respondents returned the same to
petitioner as evidenced by the undeposited checks and
respondent Lamadrids computations of petitioners
commissions.4

On March 22, 2001, counsel for respondent corporation sent a

letter to petitioner demanding that he make good the dishonored
checks or pay their cash equivalent. In response, petitioner sent a
letter addressed to Atty. Meneses, counsel for respondent
corporation, which reads:5
This has reference to your demand letter dated March 22,
2001 which I received on March 30, 2001, relative to the
checks I issued to my employer LAMADRID BEARING
PARTS CORPORATION.
May I respectfully request for a consideration as to the payment
of the amount covered by the said checks, as follows:
1. I have an earned commission in the amount of
P33,412.39 as shown in the hereto attached Summary of

Sales as of February 28, 2001 (P22,748.60) and as of

March 31, 2001 (P10,664.79), which I offer to be charged
or deducted as partial payment thereof;
2. I hereby commit One Hundred Percent (100%) of all
my commission to be directly charged or deducted as
payment, from date onward, until such time that payment
will be completed;
Sir, kindly convey my good faith to your client and
my employer, as is shown by my willingness to
continue working as Commission Salesman,
having served the Company for the last sixteen
(16) years.
Im sincerely appealing to my employer, through
you, Sir, to settle these accountabilities which all
resulted from the checks issued by my customers
which bounced and later charged to my account,
in the manner afore-cited.

3% commission to my sales and commissions of

more or less 90,000,000.00 (all collected and
covered with cleared check payments) for 16
years working with your company up to the
present year 2001.
If I am not wrong your company did not exactly
declare the correct amount of P90,000,000.00
more or less representing my sales and
collections (all collected and covered with cleared
check payments to the Bureau of Internal
Revenue [BIR] for tax declaration purposes). In
short your company profited large amount of
money to (sic) the above-mentioned sales and
collections of P90,000,000.00 more or less for 16
years working with your company.

Dear Mr. Lamadrid,

I remember that upon my employment with your

company last 1985 up to the present year 2001 as
commission basis salesman, I have not signed
any contract with your company stating that all
uncollected accounts including bounced checks
from Lamadrid Bearing & Parts Corp. will be
charged to me. I wonder why your company
forcibly instructed me to secure checking account
to pay and issue check payment of P15,000.00
per month to cover your companys bad accounts
in which this amount is too heavy on my part
paying a total bad accounts of more than
P650,000.00 for my 16 years employment with
your company as commission basis salesman.

This is to inform your good office that if you

pursue the case against me, I may refer this
problem to Mr. Paul Dominguez and Atty. Jesus
Dureza to solicit proper legal advice. I may also
file counter charges against your company of (sic)
unfair labor practice and unfair compensation of

Recalling your visit here at my Davao City

residence, located at Zone 1 2nd Avenue, San
Vicente Buhangin Davao City, way back 1998,
you even forced me to sign mortgage contract of
my house and lot located at Zone 1 2nd Avenue,
San Vicente, Buhangin, Davao City, according to

May this request merit your kindest consideration,

Sirs.
Thank you very much.
On April 2, 2001, petitioner sent another letter to respondent
Lamadrid, to wit:6

Mr. Jose Lamadrid this mortgage contract of my

house and lot will serve as guarantee to the
uncollected and bounced checks from Lamadrid
Bearing and Parts Corp., customers. I have asked
1 copy of the mortgage contract I have signed but
Mr. Jose C. Lamadrid never furnished me a copy.

(2) he does not have a monthly salary nor has he

received any benefits accruing to regular employment;

Very truly yours,

(4) he was not given the usual pay-slip to show his

monthly gross compensation;

(3) he was not required to report for work on a daily basis

but would occasionally drop by the Manila office when he
went to Manila for some other purpose;

(Sgd) Empermaco B. Abante, Jr.

While doing his usual rounds as commission salesman, petitioner
was handed by his customers a letter from the respondent
company warning them not to deal with petitioner since it no
longer recognized him as a commission salesman.
In the interim, petitioner received a subpoena from the Office of
the City Prosecutor of Manila for violations of Batas Pambansa
Blg. 22 filed by respondent Lamadrid.
Petitioner thus filed a complaint for illegal dismissal with money
claims against respondent company and its president, Jose
Lamadrid, before the NLRC Regional Arbitration Branch No. XI,
Davao City.
By way of defense, respondents countered that petitioner was not
its employee but a freelance salesman on commission basis,
procuring and purchasing auto parts and supplies from the latter
on credit, consignment and installment basis and selling the same
to his customers for profit and commission of 3% out of his total
paid-up sales. Respondents cite the following as indicators of the
absence of an employer-employee relationship between them:
(1) petitioner constantly admitted in all his acts, letters,
communications with the respondents that his relationship
with the latter was strictly commission basis salesman;

(5) neither has the respondent withheld his taxes nor was
he enrolled as an employee of the respondent under the
Social Security System and Philhealth;
(6) he was in fact working as commission salesman of
five other companies, which are engaged in the same line
of business as that of respondent, as shown by
certifications issued by the said companies;7
(7) if respondent owed petitioner his alleged
commissions, he should not have executed the
Promissory Note and the Deed of Real Estate Mortgage.8
Finding no necessity for further hearing the case after the parties
submitted their respective position papers, the Labor Arbiter
rendered a decision dated November 29, 2001, the decretal
portion of which reads:9
WHEREFORE, premises considered judgment is hereby
rendered DECLARING respondents LAMADRID
BEARING & PARTS CORPORATION AND JOSE
LAMADRID to pay jointly and severally complainant
EMPERMACO B. ABANTE, JR., the sum of PESOS ONE
MILLION THREE HUNDRED THIRTY SIX THOUSAND
SEVEN HUNDRED TWENTY NINE AND 62/100 ONLY
(P1,336,729.62) representing his awarded separation

pay, back wages (partial) unpaid commissions, refund of

deductions, damages and attorneys fees.
SO ORDERED.
On appeal, the National Labor Relations Commission reversed
the decision of the Labor Arbiter in a Resolution dated April 5,
2002, the dispositive portion of which reads:10
WHEREFORE, the Appeal is GRANTED. Accordingly, the
appealed decision is Set Aside and Vacated. In lieu
thereof, a new judgment is entered dismissing the instant
case for lack of cause of action.
SO ORDERED.
Petitioner challenged the decision of the NLRC before the Court
of Appeals, which rendered the assailed judgment on March 7,
2003, the dispositive portion of which reads:11
WHEREFORE, premises considered, petition is hereby
DENIED. Let the supersedeas bond dated 09 January
2002, issued the Philippine Charter Insurance
Corporation be cancelled and released.
SO ORDERED.
Upon denial of his motion for reconsideration, petitioner filed the
instant appeal based on the following grounds:
I
THE HONORABLE COURT OF APPEALS IN GRAVE
ABUSE OF DISCRETION "MODIFIED" THE IMPORT OF
THE "RELEVANT ANTECEDENTS" AS ITS PREMISE IN
ITS QUESTIONED DECISION CAUSING IT TO ARRIVE
AT ERRONEOUS CONCLUSIONS OF FACT AND LAW.

II
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN APPRECIATING THE TRUE FACTS OF THIS
CASE THEREBY IT MADE A WRONG CONCLUSION
BY STATING THAT THE FOURTH ELEMENT FOR
DETERMINING EMPLOYER-EMPLOYEE
RELATIONSHIP, WHICH IS THE "CONTROL TEST," IS
WANTING IN THIS CASE.
III
THE HONORABLE COURT OF APPEALS IS AT WAR
WITH THE EVIDENCE PRESENTED IN THIS CASE AS
WELL AS WITH THE APPLICABLE LAW AND
ESTABLISHED RULINGS OF THIS HONORABLE
COURT.
Initially, petitioner challenged the statement by the appellate court
that "petitioner, who was contracted a 3% of the total gross sales
as his commission, was tasked to sell private respondents
merchandise in the Mindanao area and to collect payments of his
sales from the customers." He argues that this statement, which
suggests contracting or subcontracting under Department Order
No. 10-97 Amending the Rules Implementing Books III and VI of
the Labor Code, is erroneous because the circumstances to
warrant such conclusion do not exist. Not being an independent
contractor, he must be a regular employee pursuant to Article 280
of the Labor Code because an employment shall be deemed to
be regular where the employee has been engaged to perform
activities which are usually necessary or desirable in the usual
business or trade of the employer.
Petitioner likewise disputes the finding of the appellate court that
no employer-employee relationship exists between him and
respondent corporation since the power of control, which is the
most decisive element to determine such relationship, is wanting.

He argues that the following circumstances show that he was in

truth an employee of the respondent corporation:
(1) As salesman of the private respondents, petitioner
was also the one collecting payment of his sales from
various customers. Thus, he was bringing with him
Provisional Receipts, samples of which are attached to
his Position Paper filed with the Labor Arbiter.
(2) Private respondents had complete control over the
work of the petitioner. From time to time, respondent
JOSE LAMADRID was directing him to report to a
particular area in Mindanao for his sales and collection
activities, and sometimes he was required to go to Manila
for a conference regarding competitions, new prices (if
any), special offer (if competitors gave special offer or
discounts), and other selling/marketing strategy. In other
words, respondent JOSE LAMADRID was closely
monitoring the sales and collection activities of the
petitioner.
Petitioner further contends that it was illogical for the appellate
court to conclude that since he was not required to report for work
on a daily basis, the power of control is absent. He reasons that
being a field personnel, as defined under Article 82 of the Labor
Code, who is covering the Mindanao area, it would be impractical
for him to report to the respondents office in Manila in order to
keep tab of his actual working hours.
Well-entrenched is the doctrine that the existence of an employeremployee relationship is ultimately a question of fact and that the
findings thereon by the Labor Arbiter and the National Labor
Relations Commission shall be accorded not only respect but
even finality when supported by substantial evidence. The
decisive factor in such finality is the presence of substantial
evidence to support said finding, otherwise, such factual findings
cannot be accorded finality by this Court.12 Considering the
conflicting findings of fact by the Labor Arbiter and the NLRC as

well as the Court of Appeals, there is a need to reexamine the

records to determine with certainty which of the propositions
espoused by the contending parties is supported by substantial
evidence.
We are called upon to resolve the issue of whether or not
petitioner, as a commission salesman, is an employee of
respondent corporation. To ascertain the existence of an
employer-employee relationship, jurisprudence has invariably
applied the four-fold test, namely: (1) the manner of selection and
engagement; (2) the payment of wages; (3) the presence or
absence of the power of dismissal; and (4) the presence or
absence of the power of control. Of these four, the last one is the
most important.13 The so-called "control test" is commonly
regarded as the most crucial and determinative indicator of the
presence or absence of an employer-employee relationship.
Under the control test, an employer-employee relationship exists
where the person for whom the services areperformed reserves
the right to control not only the end achieved, but also the manner
and means to be used in reaching that end.
Applying the aforementioned test, an employer-employee
relationship is notably absent in this case. It is undisputed that
petitioner Abante was a commission salesman who received 3%
commission of his gross sales. Yet no quota was imposed on him
by the respondent; such that a dismal performance or even a
dead result will not result in any sanction or provide a ground for
dismissal. He was not required to report to the office at any time
or submit any periodic written report on his sales performance
and activities. Although he had the whole of Mindanao as his
base of operation, he was not designated by respondent to
conduct his sales activities at any particular or specific place. He
pursued his selling activities without interference or supervision
from respondent company and relied on his own resources to
perform his functions. Respondent company did not prescribe the
manner of selling the merchandise; he was left alone to adopt any
style or strategy to entice his customers. While it is true that he
occasionally reported to the Manila office to attend conferences

on marketing strategies, it was intended not to control the manner

and means to be used in reaching the desired end, but to serve
as a guide and to upgrade his skills for a more efficient marketing
performance. As correctly observed by the appellate court,
reports on sales, collection, competitors, market strategies, price
listings and new offers relayed by petitioner during his
conferences to Manila do not indicate that he was under the
control of respondent.14 Moreover, petitioner was free to offer his
services to other companies engaged in similar or related
marketing activities as evidenced by the certifications issued by
various customers.15
In Encyclopedia Britannica (Philippines), Inc. v. NLRC,16 we
reiterated the rule that there could be no employer-employee
relationship where the element of control is absent. Where a
person who works for another does so more or less at his own
pleasure and is not subject to definite hours or conditions of work,
and in turn is compensated according to the result of his efforts
and not the amount thereof, no relationship of employeremployee exists.
We do not agree with petitioners contention that Article 28017 is a
crucial factor in determining the existence of an employment
relationship. It merely distinguishes between two kinds of
employees, i.e., regular employees and casual employees, for
purposes of determining their rights to certain benefits, such as to
join or form a union, or to security of tenure. Article 280 does not
apply where the existence of an employment relationship is in
dispute.18
Neither can we subscribe to petitioners misplaced reliance on the
case of Songco v. NLRC.19 While in that case the term
"commission" under Article 96 of the Labor Code was construed
as being included in the definition of the term "wage" available to
employees, there is no categorical pronouncement that the
payment of compensation on commission basis is conclusive
proof of the existence of an employer-employee relationship.

After all, commission, as a form of remuneration, may be availed

of by both an employee or a non-employee.
Petitioner decried the alleged intimidation and trickery employed
by respondents to obtain from him a Promissory Note and to
issue forty-seven checks as security for the bad accounts
incurred by five customers.
While petitioner may have been coerced into executing force to
issue the said documents, it may equally be true that petitioner
did so in recognition of a valid financial obligation. He who claims
that force or intimidation was employed upon him lies the onus
probandi. He who asserts must prove. It is therefore incumbent
upon petitioner to overcome the disputable presumption that
private transactions have been prosecuted fairly and regularly,
and that there is sufficient consideration for every contract.20 A
fortiori, it is difficult to imagine that petitioner, a salesman of long
standing, would accede without raising a protest to the patently
capricious and oppressive demand by respondent of requiring
him to assume bad accounts which, as he contended, he had not
incurred. This lends credence to the respondents assertion that
petitioner procured the goods from the said company on credit,
consignment or installment basis and then sold the same to
various customers. In the scheme of things, petitioner, having
directly contracted with the respondent company, becomes
responsible for the amount of merchandise he took from the
respondent, and in turn, the customer/s would be liable for their
respective accounts to the seller, i.e., the petitioner, with whom
they contracted the sale.
All told, we sustain the factual and legal findings of the appellate
court and accordingly, find no cogent reason to overturn the
same.
WHEREFORE, in view of the foregoing, the Decision of the Court
of Appeals dated March 7, 2003 in CA-G.R. SP No. 73102, which
denied the petition of Empermaco B. Abante, is AFFIRMED in
toto.

SO ORDERED.
G.R. No. L-41182-3 April 16, 1988
DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitionersappellants,
vs.
THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC.,
ELISEO S.CANILAO, and SEGUNDINA
NOGUERA, respondents-appellees.

SARMIENTO , J.:
The petitioners invoke the provisions on human relations of the
Civil Code in this appeal by certiorari. The facts are beyond
dispute:
xxx xxx xxx
On the strength of a contract (Exhibit A for the
appellant Exhibit 2 for the appellees) entered into
on Oct. 19, 1960 by and between Mrs. Segundina
Noguera, party of the first part; the Tourist World
Service, Inc., represented by Mr. Eliseo Canilao
as party of the second part, and hereinafter
referred to as appellants, the Tourist World
Service, Inc. leased the premises belonging to the
party of the first part at Mabini St., Manila for the
former-s use as a branch office. In the said
contract the party of the third part held herself
solidarily liable with the party of the part for the
prompt payment of the monthly rental agreed on.
When the branch office was opened, the same
was run by the herein appellant Una 0. Sevilla
payable to Tourist World Service Inc. by any

airline for any fare brought in on the efforts of Mrs.

Lina Sevilla, 4% was to go to Lina Sevilla and 3%
was to be withheld by the Tourist World Service,
Inc.
On or about November 24, 1961 (Exhibit 16) the
Tourist World Service, Inc. appears to have been
informed that Lina Sevilla was connected with a
rival firm, the Philippine Travel Bureau, and, since
the branch office was anyhow losing, the Tourist
World Service considered closing down its office.
This was firmed up by two resolutions of the
board of directors of Tourist World Service, Inc.
dated Dec. 2, 1961 (Exhibits 12 and 13), the first
abolishing the office of the manager and vicepresident of the Tourist World Service, Inc.,
Ermita Branch, and the second,authorizing the
corporate secretary to receive the properties of
the Tourist World Service then located at the said
branch office. It further appears that on Jan. 3,
1962, the contract with the appellees for the use
of the Branch Office premises was terminated and
while the effectivity thereof was Jan. 31, 1962, the
appellees no longer used it. As a matter of fact
appellants used it since Nov. 1961. Because of
this, and to comply with the mandate of the
Tourist World Service, the corporate secretary
Gabino Canilao went over to the branch office,
and, finding the premises locked, and, being
unable to contact Lina Sevilla, he padlocked the
premises on June 4, 1962 to protect the interests
of the Tourist World Service. When neither the
appellant Lina Sevilla nor any of her employees
could enter the locked premises, a complaint wall
filed by the herein appellants against the
appellees with a prayer for the issuance of
mandatory preliminary injunction. Both appellees
answered with counterclaims. For apparent lack

of interest of the parties therein, the trial court

ordered the dismissal of the case without
prejudice.
The appellee Segundina Noguera sought
reconsideration of the order dismissing her
counterclaim which the court a quo, in an order
dated June 8, 1963, granted permitting her to
present evidence in support of her counterclaim.
On June 17,1963, appellant Lina Sevilla refiled
her case against the herein appellees and after
the issues were joined, the reinstated
counterclaim of Segundina Noguera and the new
complaint of appellant Lina Sevilla were jointly
heard following which the court a quo ordered
both cases dismiss for lack of merit, on the basis
of which was elevated the instant appeal on the
following assignment of errors:
I. THE LOWER COURT ERRED EVEN IN
APPRECIATING THE NATURE OF PLAINTIFFAPPELLANT MRS. LINA O. SEVILLA'S
COMPLAINT.
II. THE LOWER COURT ERRED IN HOLDING
THAT APPELLANT MRS. LINA 0. SEVILA'S
ARRANGEMENT (WITH APPELLEE TOURIST
WORLD SERVICE, INC.) WAS ONE MERELY
OF EMPLOYER-EMPLOYEE RELATION AND IN
FAILING TO HOLD THAT THE SAID
ARRANGEMENT WAS ONE OF JOINT
BUSINESS VENTURE.
III. THE LOWER COURT ERRED IN RULING
THAT PLAINTIFF-APPELLANT MRS. LINA O.
SEVILLA IS ESTOPPED FROM DENYING THAT

SHE WAS A MERE EMPLOYEE OF

DEFENDANT-APPELLEE TOURIST WORLD
SERVICE, INC. EVEN AS AGAINST THE
LATTER.
IV. THE LOWER COURT ERRED IN NOT
HOLDING THAT APPELLEES HAD NO RIGHT
TO EVICT APPELLANT MRS. LINA O. SEVILLA
FROM THE A. MABINI OFFICE BY TAKING THE
LAW INTO THEIR OWN HANDS.
V. THE LOWER COURT ERRED IN NOT
CONSIDERING AT .ALL APPELLEE
NOGUERA'S RESPONSIBILITY FOR
APPELLANT LINA O. SEVILLA'S FORCIBLE
DISPOSSESSION OF THE A. MABINI
PREMISES.
VI. THE LOWER COURT ERRED IN FINDING
THAT APPELLANT APPELLANT MRS. LINA O.
SEVILLA SIGNED MERELY AS GUARANTOR
FOR RENTALS.
On the foregoing facts and in the light of the errors asigned the
issues to be resolved are:
1. Whether the appellee Tourist World Service
unilaterally disco the telephone line at the branch
office on Ermita;
2. Whether or not the padlocking of the office by
the Tourist World Service was actionable or not;
and
3. Whether or not the lessee to the office
premises belonging to the appellee Noguera was
appellees TWS or TWS and the appellant.

In this appeal, appealant Lina Sevilla claims that a

joint bussiness venture was entered into by and
between her and appellee TWS with offices at the
Ermita branch office and that she was not an
employee of the TWS to the end that her
relationship with TWS was one of a joint business
venture appellant made declarations showing:
1. Appellant Mrs. Lina 0. Sevilla, a
prominent figure and wife of an
eminent eye, ear and nose
specialist as well as a imediately
columnist had been in the travel
business prior to the
establishment of the joint business
venture with appellee Tourist
World Service, Inc. and appellee
Eliseo Canilao, her compadre, she
being the godmother of one of his
children, with her own clientele,
coming mostly from her own social
circle (pp. 3-6 tsn. February
16,1965).
2. Appellant Mrs. Sevilla was
signatory to a lease agreement
dated 19 October 1960 (Exh. 'A')
covering the premises at A. Mabini
St., she expressly warranting and
holding [sic] herself 'solidarily'
liable with appellee Tourist World
Service, Inc. for the prompt
payment of the monthly rentals
thereof to other appellee Mrs.
Noguera (pp. 14-15, tsn. Jan.
18,1964).

3. Appellant Mrs. Sevilla did not

receive any salary from appellee
Tourist World Service, Inc., which
had its own, separate office
located at the Trade & Commerce
Building; nor was she an
employee thereof, having no
participation in nor connection with
said business at the Trade &
Commerce Building (pp. 16-18 tsn
Id.).
4. Appellant Mrs. Sevilla earned
commissions for her own
passengers, her own bookings her
own business (and not for any of
the business of appellee Tourist
World Service, Inc.) obtained from
the airline companies. She shared
the 7% commissions given by the
airline companies giving appellee
Tourist World Service, Lic. 3%
thereof aid retaining 4% for herself
(pp. 18 tsn. Id.)
5. Appellant Mrs. Sevilla likewise
shared in the expenses of
maintaining the A. Mabini St.
office, paying for the salary of an
office secretary, Miss Obieta, and
other sundry expenses, aside from
desicion the office furniture and
supplying some of fice furnishings
(pp. 15,18 tsn. April 6,1965),
appellee Tourist World Service,
Inc. shouldering the rental and
other expenses in consideration
for the 3% split in the co procured

by appellant Mrs. Sevilla (p. 35 tsn

Feb. 16,1965).
6. It was the understanding
between them that appellant Mrs.
Sevilla would be given the title of
branch manager for appearance's
sake only (p. 31 tsn. Id.), appellee
Eliseo Canilao admit that it was
just a title for dignity (p. 36 tsn.
June 18, 1965- testimony of
appellee Eliseo Canilao pp. 38-39
tsn April 61965-testimony of
corporate secretary Gabino
Canilao (pp- 2-5, Appellants' Reply
Brief)
Upon the other hand, appellee TWS contend that
the appellant was an employee of the appellee
Tourist World Service, Inc. and as such was
designated manager. 1
xxx xxx xxx

The trial court 2 held for the private respondent on the premise that
the private respondent, Tourist World Service, Inc., being the true
lessee, it was within its prerogative to terminate the lease and
padlock the premises. 3 It likewise found the petitioner, Lina Sevilla,
to be a mere employee of said Tourist World Service, Inc. and as
such, she was bound by the acts of her employer. 4 The respondent
Court of Appeal 5 rendered an affirmance.

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW

AND GRAVELY ABUSED ITS DISCRETION IN HOLDING THAT
"THE PADLOCKING OF THE PREMISES BY TOURIST WORLD
SERVICE INC. WITHOUT THE KNOWLEDGE AND CONSENT
OF THE APPELLANT LINA SEVILLA ... WITHOUT NOTIFYING
MRS. LINA O. SEVILLA OR ANY OF HER EMPLOYEES AND
WITHOUT INFORMING COUNSEL FOR THE APPELLANT
(SEVILIA), WHO IMMEDIATELY BEFORE THE PADLOCKING
INCIDENT, WAS IN CONFERENCE WITH THE CORPORATE
SECRETARY OF TOURIST WORLD SERVICE (ADMITTEDLY
THE PERSON WHO PADLOCKED THE SAID OFFICE), IN
THEIR ATTEMP AMICABLY SETTLE THE CONTROVERSY
BETWEEN THE APPELLANT (SEVILLA) AND THE TOURIST
WORLD SERVICE ... (DID NOT) ENTITLE THE LATTER TO
THE RELIEF OF DAMAGES" (ANNEX "A" PP. 7,8 AND ANNEX
"B" P. 2) DECISION AGAINST DUE PROCESS WHICH
ADHERES TO THE RULE OF LAW.
II
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW
AND GRAVELY ABUSED ITS DISCRETION IN DENYING
APPELLANT SEVILLA RELIEF BECAUSE SHE HAD "OFFERED
TO WITHDRAW HER COMP PROVIDED THAT ALL CLAIMS
AND COUNTERCLAIMS LODGED BY BOTH APPELLEES
WERE WITHDRAWN." (ANNEX "A" P. 8)
III

The petitioners now claim that the respondent Court, in sustaining

the lower court, erred. Specifically, they state:

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW

AND GRAVELY ABUSED ITS DISCRETION IN DENYING-IN
FACT NOT PASSING AND RESOLVING-APPELLANT
SEVILLAS CAUSE OF ACTION FOUNDED ON ARTICLES 19,
20 AND 21 OF THE CIVIL CODE ON RELATIONS.

IV

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW

AND GRAVELY ABUSED ITS DISCRETION IN DENYING
APPEAL APPELLANT SEVILLA RELIEF YET NOT RESOLVING
HER CLAIM THAT SHE WAS IN JOINT VENTURE WITH
TOURIST WORLD SERVICE INC. OR AT LEAST ITS AGENT
COUPLED WITH AN INTEREST WHICH COULD NOT BE
TERMINATED OR REVOKED UNILATERALLY BY TOURIST
WORLD SERVICE INC. 6
As a preliminary inquiry, the Court is asked to declare the true
nature of the relation between Lina Sevilla and Tourist World
Service, Inc. The respondent Court of see fit to rule on the
question, the crucial issue, in its opinion being "whether or not the
padlocking of the premises by the Tourist World Service, Inc.
without the knowledge and consent of the appellant Lina Sevilla
entitled the latter to the relief of damages prayed for and whether
or not the evidence for the said appellant supports the contention
that the appellee Tourist World Service, Inc. unilaterally and
without the consent of the appellant disconnected the telephone
lines of the Ermita branch office of the appellee Tourist World
Service, Inc. 7 Tourist World Service, Inc., insists, on the other hand,
that Lina SEVILLA was a mere employee, being "branch manager"
of its Ermita "branch" office and that inferentially, she had no say on
the lease executed with the private respondent, Segundina Noguera.
The petitioners contend, however, that relation between the between
parties was one of joint venture, but concede that "whatever might
have been the true relationship between Sevilla and Tourist World
Service," the Rule of Law enjoined Tourist World Service and
Canilao from taking the law into their own hands, 8 in reference to the
padlocking now questioned.

The Court finds the resolution of the issue material, for if, as the
private respondent, Tourist World Service, Inc., maintains, that
the relation between the parties was in the character of employer
and employee, the courts would have been without jurisdiction to
try the case, labor disputes being the exclusive domain of the
Court of Industrial Relations, later, the Bureau Of Labor
Relations, pursuant to statutes then in force. 9

In this jurisdiction, there has been no uniform test to determine

the evidence of an employer-employee relation. In general, we
have relied on the so-called right of control test, "where the
person for whom the services are performed reserves a right to
control not only the end to be achieved but also the means to be
used in reaching such end." 10 Subsequently, however, we have
considered, in addition to the standard of right-of control, the existing
economic conditions prevailing between the parties, like the inclusion
of the employee in the payrolls, in determining the existence of an
employer-employee relationship. 11

The records will show that the petitioner, Lina Sevilla, was not
subject to control by the private respondent Tourist World
Service, Inc., either as to the result of the enterprise or as to the
means used in connection therewith. In the first place, under the
contract of lease covering the Tourist Worlds Ermita office, she
had bound herself in solidumas and for rental payments, an
arrangement that would be like claims of a master-servant
relationship. True the respondent Court would later minimize her
participation in the lease as one of mere guaranty, 12 that does not
make her an employee of Tourist World, since in any case, a true
employee cannot be made to part with his own money in pursuance
of his employer's business, or otherwise, assume any liability thereof.
In that event, the parties must be bound by some other relation, but
certainly not employment.

In the second place, and as found by the Appellate Court, '[w]hen

the branch office was opened, the same was run by the herein
appellant Lina O. Sevilla payable to Tourist World Service, Inc. by
any airline for any fare brought in on the effort of Mrs. Lina
Sevilla. 13 Under these circumstances, it cannot be said that Sevilla
was under the control of Tourist World Service, Inc. "as to the means
used." Sevilla in pursuing the business, obviously relied on her own
gifts and capabilities.

It is further admitted that Sevilla was not in the company's payroll.

For her efforts, she retained 4% in commissions from airline
bookings, the remaining 3% going to Tourist World. Unlike an

employee then, who earns a fixed salary usually, she earned

compensation in fluctuating amounts depending on her booking
successes.
The fact that Sevilla had been designated 'branch manager" does
not make her, ergo, Tourist World's employee. As we said,
employment is determined by the right-of-control test and certain
economic parameters. But titles are weak indicators.
In rejecting Tourist World Service, Inc.'s arguments however, we
are not, as a consequence, accepting Lina Sevilla's own, that is,
that the parties had embarked on a joint venture or otherwise, a
partnership. And apparently, Sevilla herself did not recognize the
existence of such a relation. In her letter of November 28, 1961,
she expressly 'concedes your [Tourist World Service, Inc.'s] right
to stop the operation of your branch office 14 in effect, accepting
Tourist World Service, Inc.'s control over the manner in which the
business was run. A joint venture, including a partnership,
presupposes generally a of standing between the joint co-venturers
or partners, in which each party has an equal proprietary interest in
the capital or property contributed 15 and where each party exercises
equal rights in the conduct of the business.16 furthermore, the parties
did not hold themselves out as partners, and the building itself was
embellished with the electric sign "Tourist World Service, Inc. 17in lieu
of a distinct partnership name.

It is the Court's considered opinion, that when the petitioner, Lina

Sevilla, agreed to (wo)man the private respondent, Tourist World
Service, Inc.'s Ermita office, she must have done so pursuant to a
contract of agency. It is the essence of this contract that the agent
renders services "in representation or on behalf of another. 18 In
the case at bar, Sevilla solicited airline fares, but she did so for and
on behalf of her principal, Tourist World Service, Inc. As
compensation, she received 4% of the proceeds in the concept of
commissions. And as we said, Sevilla herself based on her letter of
November 28, 1961, pre-assumed her principal's authority as owner
of the business undertaking. We are convinced, considering the
circumstances and from the respondent Court's recital of facts, that

the ties had contemplated a principal agent relationship, rather than

a joint managament or a partnership..

But unlike simple grants of a power of attorney, the agency that

we hereby declare to be compatible with the intent of the parties,
cannot be revoked at will. The reason is that it is one coupled with
an interest, the agency having been created for mutual interest, of
the agent and the principal. 19 It appears that Lina Sevilla is a bona
fide travel agent herself, and as such, she had acquired an interest in
the business entrusted to her. Moreover, she had assumed a
personal obligation for the operation thereof, holding herself solidarily
liable for the payment of rentals. She continued the business, using
her own name, after Tourist World had stopped further operations.
Her interest, obviously, is not to the commissions she earned as a
result of her business transactions, but one that extends to the very
subject matter of the power of management delegated to her. It is an
agency that, as we said, cannot be revoked at the pleasure of the
principal. Accordingly, the revocation complained of should entitle
the petitioner, Lina Sevilla, to damages.

As we have stated, the respondent Court avoided this issue,

confining itself to the telephone disconnection and padlocking
incidents. Anent the disconnection issue, it is the holding of the
Court of Appeals that there is 'no evidence showing that the
Tourist World Service, Inc. disconnected the telephone lines at
the branch office. 20Yet, what cannot be denied is the fact that
Tourist World Service, Inc. did not take pains to have them
reconnected. Assuming, therefore, that it had no hand in the
disconnection now complained of, it had clearly condoned it, and as
owner of the telephone lines, it must shoulder responsibility therefor.

The Court of Appeals must likewise be held to be in error with

respect to the padlocking incident. For the fact that Tourist World
Service, Inc. was the lessee named in the lease con-tract did not
accord it any authority to terminate that contract without notice to
its actual occupant, and to padlock the premises in such fashion.
As this Court has ruled, the petitioner, Lina Sevilla, had acquired
a personal stake in the business itself, and necessarily, in the
equipment pertaining thereto. Furthermore, Sevilla was not a

stranger to that contract having been explicitly named therein as

a third party in charge of rental payments (solidarily with Tourist
World, Inc.). She could not be ousted from possession as
summarily as one would eject an interloper.
The Court is satisfied that from the chronicle of events, there was
indeed some malevolent design to put the petitioner, Lina Sevilla,
in a bad light following disclosures that she had worked for a rival
firm. To be sure, the respondent court speaks of alleged business
losses to justify the closure '21 but there is no clear showing that Tourist World
Ermita Branch had in fact sustained such reverses, let alone, the fact that Sevilla had
moonlit for another company. What the evidence discloses, on the other hand, is that
following such an information (that Sevilla was working for another company), Tourist
World's board of directors adopted two resolutions abolishing the office of 'manager" and
authorizing the corporate secretary, the respondent Eliseo Canilao, to effect the takeover of
its branch office properties. On January 3, 1962, the private respondents ended the lease
over the branch office premises, incidentally, without notice to her.

It was only on June 4, 1962, and after office hours significantly,

that the Ermita office was padlocked, personally by the
respondent Canilao, on the pretext that it was necessary to
Protect the interests of the Tourist World Service. "22 It is strange
indeed that Tourist World Service, Inc. did not find such a need when
it cancelled the lease five months earlier. While Tourist World
Service, Inc. would not pretend that it sought to locate Sevilla to
inform her of the closure, but surely, it was aware that after office hours, she
could not have been anywhere near the premises. Capping these series of "offensives," it
cut the office's telephone lines, paralyzing completely its business operations, and in the
process, depriving Sevilla articipation therein.

This conduct on the part of Tourist World Service, Inc. betrays a

sinister effort to punish Sevillsa it had perceived to be disloyalty
on her part. It is offensive, in any event, to elementary norms of
justice and fair play.
We rule therefore, that for its unwarranted revocation of the
contract of agency, the private respondent, Tourist World Service,
Inc., should be sentenced to pay damages. Under the Civil Code,
moral damages may be awarded for "breaches of contract where
the defendant acted ... in bad faith. 23

We likewise condemn Tourist World Service, Inc. to pay further

damages for the moral injury done to Lina Sevilla from its brazen
conduct subsequent to the cancellation of the power of attorney
granted to her on the authority of Article 21 of the Civil Code, in
relation to Article 2219 (10) thereof
ART. 21. Any person who wilfully causes loss or
injury to another in a manner that is contrary to
morals, good customs or public policy shall
compensate the latter for the damage. 24
ART. 2219. Moral damages 25 may be recovered in
the following and analogous cases:

xxx xxx xxx

(10) Acts and actions refered into article 21, 26,
27, 28, 29, 30, 32, 34, and 35.
The respondent, Eliseo Canilao, as a joint tortfeasor is likewise
hereby ordered to respond for the same damages in a solidary
capacity.
Insofar, however, as the private respondent, Segundina Noguera
is concerned, no evidence has been shown that she had
connived with Tourist World Service, Inc. in the disconnection and
padlocking incidents. She cannot therefore be held liable as a
cotortfeasor.
The Court considers the sums of P25,000.00 as and for moral
damages,24 P10,000.00 as exemplary damages, 25and P5,000.00
as nominal 26 and/or temperate 27 damages, to be just, fair, and
reasonable under the circumstances.

WHEREFORE, the Decision promulgated on January 23, 1975 as

well as the Resolution issued on July 31, 1975, by the respondent
Court of Appeals is hereby REVERSED and SET ASIDE. The

private respondent, Tourist World Service, Inc., and Eliseo

Canilao, are ORDERED jointly and severally to indemnify the
petitioner, Lina Sevilla, the sum of 25,00.00 as and for moral
damages, the sum of P10,000.00, as and for exemplary
damages, and the sum of P5,000.00, as and for nominal and/or
temperate damages.

reversed the NLRC Decision which had dismissed all of

respondents' complaints,3 and reinstated the Joint Decision of the
Labor Arbiter4 which ruled that respondents were illegally
dismissed and entitled to their money claims.

Costs against said private respondents.

Petitioner Mayon Hotel & Restaurant is a single proprietor

business registered in the name of petitioner Pacita O.
Po,6 whose mother, petitioner Josefa Po Lam, manages the
establishment.7 The hotel and restaurant employed about sixteen
(16) employees.

SO ORDERED.
Yap (Chairman), Melencio-Herrera, Paras and Padilla, JJ.,
concur.
G.R. No. 157634

May 16, 2005

MAYON HOTEL & RESTAURANT, PACITA O. PO and/or

JOSEFA PO LAM, petitioners,
vs.
ROLANDO ADANA, CHONA BUMALAY, ROGER BURCE,
EDUARDO ALAMARES, AMADO ALAMARES, EDGARDO
TORREFRANCA, LOURDES CAMIGLA, TEODORO
LAURENARIA, WENEFREDO LOVERES, LUIS GUADES,
AMADO MACANDOG, PATERNO LLARENA, GREGORIO
NICERIO, JOSE ATRACTIVO, MIGUEL TORREFRANCA, and
SANTOS BROOLA, respondents.
DECISION
PUNO, J.:
This is a petition for certiorari to reverse and set aside the
Decision issued by the Court of Appeals (CA)1 in CA-G.R. SP No.
68642, entitled "Rolando Adana, Wenefredo Loveres, et. al. vs.
National Labor Relations Commission (NLRC), Mayon Hotel &
Restaurant/Pacita O. Po, et al.," and the Resolution2 denying
petitioners' motion for reconsideration. The assailed CA decision

The facts, culled from the records, are as follows:5

Records show that on various dates starting in 1981, petitioner

hotel and restaurant hired the following people, all respondents in
this case, with the following jobs:8
1. Wenefredo Loveres
2. Paterno Llarena
3. Gregorio Nicerio
4. Amado Macandog
5. Luis Guades
6. Santos Broola
7. Teodoro Laurenaria
8. Eduardo Alamares
9. Lourdes Camigla
10. Chona Bumalay
11. Jose Atractivo
12. Amado Alamares
13. Roger Burce
14. Rolando Adana
15. Miguel Torrefranca
16. Edgardo Torrefranca

Accountant and Officer-in-charge

Front Desk Clerk
Supervisory Waiter
Roomboy
Utility/Maintenance Worker
Roomboy
Waiter
Roomboy/Waiter
Cashier
Cashier
Technician
Dishwasher and Kitchen Helper
Cook
Waiter
Cook
Cook

Due to the expiration and non-renewal of the lease contract for

the rented space occupied by the said hotel and restaurant at
Rizal Street, the hotel operations of the business were suspended
on March 31, 1997.9 The operation of the restaurant was
continued in its new location at Elizondo Street, Legazpi City,
while waiting for the construction of a new Mayon Hotel &
Restaurant at Pearanda Street, Legazpi City.10 Only nine (9) of
the sixteen (16) employees continued working in the Mayon
Restaurant at its new site.11
On various dates of April and May 1997, the 16 employees filed
complaints for underpayment of wages and other money claims
against petitioners, as follows:12
Wenefredo Loveres, Luis Guades, Amado Macandog and
Jose Atractivo for illegal dismissal, underpayment of
wages, nonpayment of holiday and rest day pay; service
incentive leave pay (SILP) and claims for separation pay
plus damages;
Paterno Llarena and Gregorio Nicerio for illegal dismissal
with claims for underpayment of wages; nonpayment of
cost of living allowance (COLA) and overtime pay;
premium pay for holiday and rest day; SILP; nightshift
differential pay and separation pay plus damages;
Miguel Torrefranca, Chona Bumalay and Lourdes
Camigla for underpayment of wages; nonpayment of
holiday and rest day pay and SILP;
Rolando Adana, Roger Burce and Amado Alamares for
underpayment of wages; nonpayment of COLA, overtime,
holiday, rest day, SILP and nightshift differential pay;
Eduardo Alamares for underpayment of wages,
nonpayment of holiday, rest day and SILP and night shift
differential pay;

Santos Broola for illegal dismissal, underpayment of

wages, overtime pay, rest day pay, holiday pay, SILP,
and damages;13 and
Teodoro Laurenaria for underpayment of wages;
nonpayment of COLA and overtime pay; premium pay for
holiday and rest day, and SILP.
On July 14, 2000, Executive Labor Arbiter Gelacio L. Rivera, Jr.
rendered a Joint Decision in favor of the employees. The Labor
Arbiter awarded substantially all of respondents' money claims,
and held that respondents Loveres, Macandog and Llarena were
entitled to separation pay, while respondents Guades, Nicerio
and Alamares were entitled to their retirement pay. The Labor
Arbiter also held that based on the evidence presented, Josefa
Po Lam is the owner/proprietor of Mayon Hotel & Restaurant and
the proper respondent in these cases.
On appeal to the NLRC, the decision of the Labor Arbiter was
reversed, and all the complaints were dismissed.
Respondents filed a motion for reconsideration with the NLRC
and when this was denied, they filed a petition forcertiorari with
the CA which rendered the now assailed decision.
After their motion for reconsideration was denied, petitioners now
come to this Court, seeking the reversal of the CA decision on the
following grounds:
I. The Honorable Court of Appeals erred in reversing the
decision of the National Labor Relations Commission
(Second Division) by holding that the findings of fact of
the NLRC were not supported by substantial evidence
despite ample and sufficient evidence showing that the
NLRC decision is indeed supported by substantial
evidence;

II. The Honorable Court of Appeals erred in upholding the

joint decision of the labor arbiter which ruled that private
respondents were illegally dismissed from their
employment, despite the fact that the reason why private
respondents were out of work was not due to the fault of
petitioners but to causes beyond the control of petitioners.
III. The Honorable Court of Appeals erred in upholding the
award of monetary benefits by the labor arbiter in his joint
decision in favor of the private respondentS, including the
award of damages to six (6) of the private respondents,
despite the fact that the private respondents have not
proven by substantial evidence their entitlement thereto
and especially the fact that they were not illegally
dismissed by the petitioners.
IV. The Honorable Court of Appeals erred in holding that
Pacita Ong Po is the owner of the business
establishment, petitioner Mayon Hotel and Restaurant,
thus disregarding the certificate of registration of the
business establishment ISSUED by the local government,
which is a public document, and the unqualified
admissions of complainants-private respondents.14
In essence, the petition calls for a review of the following issues:
1. Was it correct for petitioner Josefa Po Lam to be held
liable as the owner of petitioner Mayon Hotel &
Restaurant, and the proper respondent in this case?
2. Were respondents Loveres, Guades, Macandog,
Atractivo, Llarena and Nicerio illegally dismissed?
3. Are respondents entitled to their money claims due to
underpayment of wages, and nonpayment of holiday pay,
rest day premium, SILP, COLA, overtime pay, and night
shift differential pay?

It is petitioners' contention that the above issues have already

been threshed out sufficiently and definitively by the NLRC. They
therefore assail the CA's reversal of the NLRC decision, claiming
that based on the ruling in Castillo v. NLRC,15 it is non
sequitur that the CA should re-examine the factual findings of
both the NLRC and the Labor Arbiter, especially as in this case
the NLRC's findings are allegedly supported by substantial
evidence.
We do not agree.
There is no denying that it is within the NLRC's competence, as
an appellate agency reviewing decisions of Labor Arbiters, to
disagree with and set aside the latter's findings.16 But it stands to
reason that the NLRC should state an acceptable cause
therefore, otherwise it would be a whimsical, capricious,
oppressive, illogical, unreasonable exercise of quasi-judicial
prerogative, subject to invalidation by the extraordinary writ
of certiorari.17 And when the factual findings of the Labor Arbiter
and the NLRC are diametrically opposed and this disparity of
findings is called into question, there is, necessarily, a reexamination of the factual findings to ascertain which opinion
should be sustained.18 As ruled in Asuncion v. NLRC,19
Although, it is a legal tenet that factual findings of
administrative bodies are entitled to great weight and
respect, we are constrained to take a second look at the
facts before us because of the diversity in the opinions of
the Labor Arbiter and the NLRC. A disharmony between
the factual findings of the Labor Arbiter and those of the
NLRC opens the door to a review thereof by this Court.20
The CA, therefore, did not err in reviewing the records to
determine which opinion was supported by substantial evidence.
Moreover, it is explicit in Castillo v. NLRC21 that factual findings
of administrative bodies like the NLRC are affirmed only if they

are supported by substantial evidence that is manifest in the

decision and on the records. As stated in Castillo:
[A]buse of discretion does not necessarily follow from a
reversal by the NLRC of a decision of a Labor Arbiter.
Mere variance in evidentiary assessment between the
NLRC and the Labor Arbiter does not automatically call
for a full review of the facts by this Court. The NLRC's
decision, so long as it is not bereft of substantial support
from the records, deserves respect from this Court. As a
rule, the original and exclusive jurisdiction to review a
decision or resolution of respondent NLRC in a petition
for certiorari under Rule 65 of the Rules of Court does not
include a correction of its evaluation of the evidence but is
confined to issues of jurisdiction or grave abuse of
discretion. Thus, the NLRC's factual findings, if supported
by substantial evidence, are entitled to great respect and
even finality, unless petitioner is able to show that it
simply and arbitrarily disregarded the evidence before it
or had misappreciated the evidence to such an extent as
to compel a contrary conclusion if such evidence had
been properly appreciated. (citations omitted)22
After careful review, we find that the reversal of the NLRC's
decision was in order precisely because it was not supported by
substantial evidence.
1. Ownership by Josefa Po Lam
The Labor Arbiter ruled that as regards the claims of the
employees, petitioner Josefa Po Lam is, in fact, the owner of
Mayon Hotel & Restaurant. Although the NLRC reversed this
decision, the CA, on review, agreed with the Labor Arbiter that
notwithstanding the certificate of registration in the name of
Pacita Po, it is Josefa Po Lam who is the owner/proprietor of
Mayon Hotel & Restaurant, and the proper respondent in the
complaints filed by the employees. The CA decision states in
part:

[Despite] the existence of the Certificate of Registration in

the name of Pacita Po, we cannot fault the labor arbiter in
ruling that Josefa Po Lam is the owner of the subject hotel
and restaurant. There were conflicting documents
submitted by Josefa herself. She was ordered to submit
additional documents to clearly establish ownership of the
hotel and restaurant, considering the testimonies given by
the [respondents] and the non-appearance and failure to
submit her own position paper by Pacita Po. But Josefa
did not comply with the directive of the Labor Arbiter. The
ruling of the Supreme Court in Metropolitan Bank and
Trust Company v. Court of Appeals applies to Josefa Po
Lam which is stated in this wise:
When the evidence tends to prove a material fact
which imposes a liability on a party, and he has it
in his power to produce evidence which from its
very nature must overthrow the case made
against him if it is not founded on fact, and he
refuses to produce such evidence, the
presumption arises that the evidence[,] if
produced, would operate to his prejudice, and
support the case of his adversary.
Furthermore, in ruling that Josefa Po Lam is the real
owner of the hotel and restaurant, the labor arbiter relied
also on the testimonies of the witnesses, during the
hearing of the instant case. When the conclusions of the
labor arbiter are sufficiently corroborated by evidence on
record, the same should be respected by appellate
tribunals, since he is in a better position to assess and
evaluate the credibility of the contending
parties.23 (citations omitted)
Petitioners insist that it was error for the Labor Arbiter and the CA
to have ruled that petitioner Josefa Po Lam is the owner of Mayon
Hotel & Restaurant. They allege that the documents they
submitted to the Labor Arbiter sufficiently and clearly establish the

fact of ownership by petitioner Pacita Po, and not her mother,

petitioner Josefa Po Lam. They contend that petitioner Josefa Po
Lam's participation was limited to merely (a) being the overseer;
(b) receiving the month-to-month and/or year-to-year financial
reports prepared and submitted by respondent Loveres; and (c)
visitation of the premises.24 They also put emphasis on the
admission of the respondents in their position paper submitted to
the Labor Arbiter, identifying petitioner Josefa Po Lam as the
manager, and Pacita Po as the owner.25 This, they claim, is a
judicial admission and is binding on respondents. They protest
the reliance the Labor Arbiter and the CA placed on their failure to
submit additional documents to clearly establish ownership of the
hotel and restaurant, claiming that there was no need for
petitioner Josefa Po Lam to submit additional documents
considering that the Certificate of Registration is the best and
primary evidence of ownership.
We disagree with petitioners. We have scrutinized the records
and find the claim that petitioner Josefa Po Lam is merely the
overseer is not borne out by the evidence.
First. It is significant that only Josefa Po Lam appeared in the
proceedings with the Labor Arbiter. Despite receipt of the Labor
Arbiter's notice and summons, other notices and Orders,
petitioner Pacita Po failed to appear in any of the proceedings
with the Labor Arbiter in these cases, nor file her position
paper.26 It was only on appeal with the NLRC that Pacita Po
signed the pleadings.27 The apathy shown by petitioner Pacita Po
is contrary to human experience as one would think that the
owner of an establishment would naturally be concerned when all
her employees file complaints against her.
Second. The records of the case belie petitioner Josefa Po Lam's
claim that she is merely an overseer. The findings of the Labor
Arbiter on this question were based on credible, competent and
substantial evidence. We again quote the Joint Decision on this
matter:

Mayon Hotel and Restaurant is a [business name] of an

enterprise. While [petitioner] Josefa Po Lam claims that it
is her daughter, Pacita Po, who owns the hotel and
restaurant when the latter purchased the same from one
Palanos in 1981, Josefa failed to submit the document of
sale from said Palanos to Pacita as allegedly the sale was
only verbal although the license to operate said hotel and
restaurant is in the name of Pacita which, despite our
Order to Josefa to present the same, she failed to comply
(p. 38, tsn. August 13, 1998). While several documentary
evidences were submitted by Josefa wherein Pacita was
named therein as owner of the hotel and restaurant (pp.
64, 65, 67 to 69; vol. I, rollo)[,] there were documentary
evidences also that were submitted by Josefa showing
her ownership of said enterprise (pp. 468 to 469; vol.
II, rollo). While Josefa explained her participation and
interest in the business as merely to help and assist her
daughter as the hotel and restaurant was near the
former's store, the testimonies of [respondents] and
Josefa as well as her demeanor during the trial in these
cases proves (sic) that Josefa Po Lam owns Mayon Hotel
and Restaurant. [Respondents] testified that it was Josefa
who exercises all the acts and manifestation of ownership
of the hotel and restaurant like transferring employees
from the Greatwall Palace Restaurant which she and her
husband Roy Po Lam previously owned; it is Josefa to
whom the employees submits (sic) reports, draws money
for payment of payables and for marketing, attending (sic)
to Labor Inspectors during ocular inspections. Except for
documents whereby Pacita Po appears as the owner of
Mayon Hotel and Restaurant, nothing in the record shows
any circumstance or manifestation that Pacita Po is the
owner of Mayon Hotel and Restaurant. The least that can
be said is that it is absurd for a person to purchase a hotel
and restaurant in the very heart of the City of Legazpi
verbally. Assuming this to be true, when [petitioners],
particularly Josefa, was directed to submit evidence as to
the ownership of Pacita of the hotel and restaurant,

considering the testimonies of [respondents], the former

should [have] submitted the lease contract between the
owner of the building where Mayon Hotel and Restaurant
was located at Rizal St., Legazpi City and Pacita Po to
clearly establish ownership by the latter of said enterprise.
Josefa failed. We are not surprised why some employers
employ schemes to mislead Us in order to evade
liabilities. We therefore consider and hold Josefa Po Lam
as the owner/proprietor of Mayon Hotel and Restaurant
and the proper respondent in these cases.28
Petitioners' reliance on the rules of evidence, i.e., the certificate of
registration being the best proof of ownership, is misplaced.
Notwithstanding the certificate of registration, doubts were cast as
to the true nature of petitioner Josefa Po Lam's involvement in the
enterprise, and the Labor Arbiter had the authority to resolve this
issue. It was therefore within his jurisdiction to require the
additional documents to ascertain who was the real owner of
petitioner Mayon Hotel & Restaurant.
Article 221 of the Labor Code is clear: technical rules are not
binding, and the application of technical rules of procedure may
be relaxed in labor cases to serve the demand of substantial
justice.29 The rule of evidence prevailing in court of law or equity
shall not be controlling in labor cases and it is the spirit and
intention of the Labor Code that the Labor Arbiter shall use every
and all reasonable means to ascertain the facts in each case
speedily and objectively and without regard to technicalities of law
or procedure, all in the interest of due process.30 Labor laws
mandate the speedy administration of justice, with least attention
to technicalities but without sacrificing the fundamental requisites
of due process.31
Similarly, the fact that the respondents' complaints contained no
allegation that petitioner Josefa Po Lam is the owner is of no
moment. To apply the concept of judicial admissions to
respondents who are but lowly employees - would be to exact
compliance with technicalities of law that is contrary to the

demands of substantial justice. Moreover, the issue of ownership

was an issue that arose only during the course of the proceedings
with the Labor Arbiter, as an incident of determining respondents'
claims, and was well within his jurisdiction.32
Petitioners were also not denied due process, as they were given
sufficient opportunity to be heard on the issue of ownership.33 The
essence of due process in administrative proceedings is simply
an opportunity to explain one's side or an opportunity to seek
reconsideration of the action or ruling complained of.34 And there
is nothing in the records which would suggest that petitioners had
absolute lack of opportunity to be heard.35 Obviously, the choice
not to present evidence was made by petitioners themselves.36
But more significantly, we sustain the Labor Arbiter and the CA
because even when the case was on appeal with the NLRC,
nothing was submitted to negate the Labor Arbiter's finding that
Pacita Po is not the real owner of the subject hotel and
restaurant. Indeed, no such evidence was submitted in the
proceedings with the CA nor with this Court. Considering that
petitioners vehemently deny ownership by petitioner Josefa Po
Lam, it is most telling that they continue to withhold evidence
which would shed more light on this issue. We therefore agree
with the CA that the failure to submit could only mean that if
produced, it would have been adverse to petitioners' case.37
Thus, we find that there is substantial evidence to rule that
petitioner Josefa Po Lam is the owner of petitioner Mayon Hotel &
Restaurant.
2. Illegal Dismissal: claim for separation pay
Of the sixteen employees, only the following filed a case for illegal
dismissal: respondents Loveres, Llarena, Nicerio, Macandog,
Guades, Atractivo and Broola.38

The Labor Arbiter found that there was illegal dismissal, and
granted separation pay to respondents Loveres, Macandog and
Llarena. As respondents Guades, Nicerio and Alamares were
already 79, 66 and 65 years old respectively at the time of the
dismissal, the Labor Arbiter granted retirement benefits pursuant
to Article 287 of the Labor Code as amended.39 The Labor Arbiter
ruled that respondent Atractivo was not entitled to separation pay
because he had been transferred to work in the restaurant
operations in Elizondo Street, but awarded him damages.
Respondents Loveres, Llarena, Nicerio, Macandog and Guades
were also awarded damages.40
The NLRC reversed the Labor Arbiter, finding that "no clear act of
termination is attendant in the case at bar" and that respondents
"did not submit any evidence to that effect, but the finding and
conclusion of the Labor Arbiter [are] merely based on his own
surmises and conjectures."41 In turn, the NLRC was reversed by
the CA.
It is petitioners contention that the CA should have sustained the
NLRC finding that none of the above-named respondents were
illegally dismissed, or entitled to separation or retirement pay.
According to petitioners, even the Labor Arbiter and the CA admit
that when the illegal dismissal case was filed by respondents on
April 1997, they had as yet no cause of action. Petitioners
therefore conclude that the filing by respondents of the illegal
dismissal case was premature and should have been dismissed
outright by the Labor Arbiter.42 Petitioners also claim that since
the validity of respondents' dismissal is a factual question, it is not
for the reviewing court to weigh the conflicting evidence.43
We do not agree. Whether respondents are still working for
petitioners is a factual question. And the records are unequivocal
that since April 1997, when petitioner Mayon Hotel & Restaurant
suspended its hotel operations and transferred its restaurant
operations in Elizondo Street, respondents Loveres, Macandog,
Llarena, Guades and Nicerio have not been permitted to work for
petitioners. Respondent Alamares, on the other hand, was also

laid-off when the Elizondo Street operations closed, as were all

the other respondents. Since then, respondents have not been
permitted to work nor recalled, even after the construction of the
new premises at Pearanda Street and the reopening of the hotel
operations with the restaurant in this new site. As stated by the
Joint Decision of the Labor Arbiter on July 2000, or more than
three (3) years after the complaint was filed:44
[F]rom the records, more than six months had lapsed
without [petitioner] having resumed operation of the hotel.
After more than one year from the temporary closure of
Mayon Hotel and the temporary transfer to another site of
Mayon Restaurant, the building which [petitioner] Josefa
allege[d] w[h]ere the hotel and restaurant will be
transferred has been finally constructed and the same is
operated as a hotel with bar and restaurant nevertheless,
none of [respondents] herein who were employed at
Mayon Hotel and Restaurant which was also closed on
April 30, 1998 was/were recalled by [petitioner] to
continue their services...
Parenthetically, the Labor Arbiter did not grant separation pay to
the other respondents as they had not filed an amended
complaint to question the cessation of their employment after the
closure of Mayon Hotel & Restaurant on March 31, 1997.45
The above factual finding of the Labor Arbiter was never refuted
by petitioners in their appeal with the NLRC. It confounds us,
therefore, how the NLRC could have so cavalierly treated this
uncontroverted factual finding by ruling that respondents have not
introduced any evidence to show that they were illegally
dismissed, and that the Labor Arbiter's finding was based on
conjecture.46 It was a serious error that the NLRC did not inquire
as to thelegality of the cessation of employment. Article 286 of
the Labor Code is clear there is termination of employment
when an otherwise bona fide suspension of work exceeds six (6)
months.47 The cessation of employment for more than six months

was patent and the employer has the burden of proving that the
termination was for a just or authorized cause.48
Moreover, we are not impressed by any of petitioners' attempts to
exculpate themselves from the charges. First, in the proceedings
with the Labor Arbiter, they claimed that it could not be illegal
dismissal because the lay-off was merely temporary (and due to
the expiration of the lease contract over the old premises of the
hotel). Theyspecifically invoked Article 286 of the Labor Code to
argue that the claim for separation pay was premature and
without legal and factual basis.49 Then, because the Labor Arbiter
had ruled that there was already illegal dismissal when the lay-off
had exceeded the six-month period provided for in Article 286,
petitioners raise this novel argument, to wit:
It is the firm but respectful submission of petitioners that
reliance on Article 286 of the Labor Code is misplaced,
considering that the reason why private respondents were
out of work was not due to the fault of petitioners. The
failure of petitioners to reinstate the private respondents
to their former positions should not likewise be
attributable to said petitioners as the private respondents
did not submit any evidence to prove their alleged illegal
dismissal. The petitioners cannot discern why they should
be made liable to the private respondents for their failure
to be reinstated considering that the fact that they were
out of work was not due to the fault of petitioners but due
to circumstances beyond the control of petitioners, which
are the termination and non-renewal of the lease contract
over the subject premises. Private respondents, however,
argue in their Comment that petitioners themselves
sought the application of Article 286 of the Labor Code in
their case in their Position Paper filed before the Labor
Arbiter. In refutation, petitioners humbly submit that even
if they invoke Article 286 of the Labor Code, still the fact
remains, and this bears stress and emphasis, that the
temporary suspension of the operations of the
establishment arising from the non-renewal of the lease

contract did not result in the termination of employment of

private respondents and, therefore, the petitioners cannot
be faulted if said private respondents were out of work,
and consequently, they are not entitled to their money
claims against the petitioners.50
It is confounding how petitioners have fashioned their arguments.
After having admitted, in effect, that respondents have been laidoff since April 1997, they would have this Court excuse their
refusal to reinstate respondents or grant them separation pay
because these same respondents purportedly have not proven
the illegality of their dismissal.
Petitioners' arguments reflect their lack of candor and the blatant
attempt to use technicalities to muddle the issues and defeat the
lawful claims of their employees. First, petitioners admit
that since April 1997, when hotel operations were suspended
due to the termination of the lease of the old premises,
respondents Loveres, Macandog, Llarena, Nicerio and
Guades have not been permitted to work. Second, even after
six monthsof what should have been just a temporary lay-off, the
same respondents were still not recalled to work. As a matter
of fact, the Labor Arbiter even found that as of the time when he
rendered his Joint Decision on July 2000 or more than three
(3) years after the supposed "temporary lay-off," the
employment of all of the respondents with petitioners had
ceased, notwithstanding that the new premises had been
completed and the same operated as a hotel with bar and
restaurant. This is clearly dismissal or the permanent
severance or complete separation of the worker from the service
on the initiative of the employer regardless of the reasons
therefor.51
On this point, we note that the Labor Arbiter and the CA are in
accord that at the time of the filing of the complaint, respondents
had no cause of action to file the case for illegal dismissal.
According to the CA and the Labor Arbiter, the lay-off of the

respondents was merely temporary, pending construction of the

new building at Pearanda Street.52
While the closure of the hotel operations in April of 1997 may
have been temporary, we hold that the evidence on record belie
any claim of petitioners that the lay-off of respondents on that
same date was merely temporary. On the contrary, we find
substantial evidence that petitioners intended the termination to
be permanent. First, respondents Loveres, Macandog, Llarena,
Guades, Nicerio and Alamares filed the complaint for illegal
dismissalimmediately after the closure of the hotel operations in
Rizal Street, notwithstanding the alleged temporary nature of the
closure of the hotel operations, and petitioners' allegations that
the employees assigned to the hotel operations knew about this
beforehand. Second, in their position paper submitted to the
Labor Arbiter, petitioners invoked Article 286 of the Labor Code to
assert that the employer-employee relationship was merely
suspended, and therefore the claim for separation pay was
premature and without legal or factual basis.53 But they made no
mention of any intent to recall these respondents to work
upon completion of the new premises. Third,the various
pleadings on record show that petitioners held respondents,
particularly Loveres, as responsible for mismanagement of the
establishment and for abuse of trust and confidence. Petitioner
Josefa Po Lam's affidavit on July 21, 1998, for example, squarely
blamed respondents, specifically Loveres, Bumalay and Camigla,
for abusing her leniency and causing petitioner Mayon Hotel &
Restaurant to sustain "continuous losses until it is closed." She
then asserts that respondents "are not entitled to separation pay
for they were not terminated and if ever the business ceased to
operate it was because of losses."54 Again, petitioners make the
same allegation in their memorandum on appeal with the NLRC,
where they alleged that three (3) years prior to the expiration of
the lease in 1997, the operation of the Hotel had been sustaining
consistent losses, and these were solely attributed to
respondents, but most especially due to Loveres's
mismanagement and abuse of petitioners' trust and
confidence.55 Even the petition filed in this court made reference

to the separation of the respondents due to "severe financial

losses and reverses," again imputing it to respondents'
mismanagement.56 The vehemence of petitioners' accusation of
mismanagement against respondents, especially against
Loveres, is inconsistent with the desire to recall them to
work. Fourth, petitioners' memorandum on appeal also averred
that the case was filed "not because of the business being
operated by them or that they were supposedly not receiving
benefits from the Labor Code which is true, but because of the
fact that the source of their livelihood, whether legal or
immoral, was stopped on March 31, 1997, when the owner of
the building terminated the Lease Contract."57Fifth, petitioners
had inconsistencies in their pleadings (with the NLRC, CA and
with this Court) in referring to the closure,58 i.e., in the petition
filed with this court, they assert that there is no illegal dismissal
because there was "only a temporary cessation or suspension of
operations of the hotel and restaurant due to circumstances
beyond the control of petitioners, and that is, the non-renewal of
the lease contract..."59 And yet, in the same petition, they also
assert that: (a) the separation of respondents was due to severe
financial losses and reverses leading to the closure of the
business; and (b) petitioner Pacita Po had to close shop and
was bankrupt and has no liquidity to put up her own building to
house Mayon Hotel & Restaurant.60 Sixth, and finally, the
uncontroverted finding of the Labor Arbiter that petitioners
terminated all the other respondents, by not employing them
when the Hotel and Restaurant transferred to its new site on
Pearanda Street.61 Indeed, in this same memorandum,
petitioners referred to all respondents as "former employees of
Mayon Hotel & Restaurant."62
These factors may be inconclusive individually, but when taken
together, they lead us to conclude that petitioners really intended
to dismiss all respondents and merely used the termination of the
lease (on Rizal Street premises) as a means by which they could
terminate their employees.

Moreover, even assuming arguendo that the cessation of

employment on April 1997 was merely temporary,
itbecame dismissal by operation of law when petitioners failed to
reinstate respondents after the lapse of six (6) months, pursuant
to Article 286 of the Labor Code.
We are not impressed by petitioners' claim that severe business
losses justified their failure to reinstate respondents. The
evidence to prove this fact is inconclusive. But more important,
serious business losses do not excuse the employer from
complying with the clearance or report required under Article 283
of the Labor Code and its implementing rules before terminating
the employment of its workers.63 In the absence of justifying
circumstances, the failure of petitioners to observe the procedural
requirements set out under Article 284, taints their actuations with
bad faith, especially since they claimed that they have been
experiencing losses in the three years before 1997. To say the
least, if it were true that the lay-off was temporary but then
serious business losses prevented the reinstatement of
respondents, then petitioners should have complied with the
requirements of written notice. The requirement of law mandating
the giving of notices was intended not only to enable the
employees to look for another employment and therefore ease
the impact of the loss of their jobs and the corresponding income,
but more importantly, to give the Department of Labor and
Employment (DOLE) the opportunity to ascertain the verity of the
alleged authorized cause of termination.64
And even assuming that the closure was due to a reason beyond
the control of the employer, it still has to accord its employees
some relief in the form of severance pay.65
While we recognize the right of the employer to terminate the
services of an employee for a just or authorized cause, the
dismissal of employees must be made within the parameters of
law and pursuant to the tenets of fair play.66 And in termination
disputes, the burden of proof is always on the employer to prove
that the dismissal was for a just or authorized cause.67 Where

there is no showing of a clear, valid and legal cause for

termination of employment, the law considers the case a matter
of illegal dismissal.68
Under these circumstances, the award of damages was proper.
As a rule, moral damages are recoverable where the dismissal of
the employee was attended by bad faith or fraud or constituted an
act oppressive to labor, or was done in a manner contrary to
morals, good customs or public policy.69 We believe that the
dismissal of the respondents was attended with bad faith and
meant to evade the lawful obligations imposed upon an employer.
To rule otherwise would lead to the anomaly of respondents
being terminated from employment in 1997 as a matter of fact,
but without legal redress. This runs counter to notions of fair play,
substantial justice and the constitutional mandate that labor rights
should be respected. If doubts exist between the evidence
presented by the employer and the employee, the scales of
justice must be tilted in favor of the latter the employer must
affirmatively show rationally adequate evidence that the dismissal
was for a justifiable cause.70 It is a time-honored rule that in
controversies between a laborer and his master, doubts
reasonably arising from the evidence, or in the interpretation of
agreements and writing should be resolved in the former's
favor.71 The policy is to extend the doctrine to a greater number of
employees who can avail of the benefits under the law, which is
in consonance with the avowed policy of the State to give
maximum aid and protection of labor.72
We therefore reinstate the Labor Arbiter's decision with the
following modifications:
(a) Separation pay for the illegal dismissal of respondents
Loveres, Macandog and Llarena; (Santos Broola cannot
be granted separation pay as he made no such claim);

(b) Retirement pay for respondents Guades, Nicerio, and

Alamares, who at the time of dismissal were entitled to
their retirement benefits pursuant to Article 287 of the
Labor Code as amended;73 and
(c) Damages for respondents Loveres, Macandog,
Llarena, Guades, Nicerio, Atractivo, and Broola.
3. Money claims
The CA held that contrary to the NLRC's ruling, petitioners had
not discharged the burden of proving that the monetary claims of
the respondents have been paid.74 The CA thus reinstated the
Labor Arbiter's grant of respondents' monetary claims, including
damages.
Petitioners assail this ruling by repeating their long and
convoluted argument that as there was no illegal dismissal, then
respondents are not entitled to their monetary claims or
separation pay and damages. Petitioners' arguments are not only
tiring, repetitive and unconvincing, but confusing and confused
entitlement to labor standard benefits is a separate and distinct
concept from payment of separation pay arising from illegal
dismissal, and are governed by different provisions of the Labor
Code.
We agree with the CA and the Labor Arbiter. Respondents have
set out with particularity in their complaint, position paper,
affidavits and other documents the labor standard benefits they
are entitled to, and which they alleged that petitioners have failed
to pay them. It was therefore petitioners' burden to prove that
they have paid these money claims. One who pleads payment
has the burden of proving it, and even where the employees must
allege nonpayment, the general rule is that the burden rests on
the defendant to prove nonpayment, rather than on the plaintiff to
prove non payment.75 This petitioners failed to do.

We also agree with the Labor Arbiter and the CA that the
documents petitioners submitted, i.e., affidavits executed by
some of respondents during an ocular inspection conducted by
an inspector of the DOLE; notices of inspection result and Facility
Evaluation Orders issued by DOLE, are not sufficient to prove
payment.76 Despite repeated orders from the Labor
Arbiter,77 petitioners failed to submit the pertinent employee files,
payrolls, records, remittances and other similar documents which
would show that respondents rendered work entitling them to
payment for overtime work, night shift differential, premium pay
for work on holidays and rest day, and payment of these as well
as the COLA and the SILP documents which are not in
respondents' possession but in the custody and absolute control
of petitioners.78 By choosing not to fully and completely disclose
information and present the necessary documents to prove
payment of labor standard benefits due to respondents,
petitioners failed to discharge the burden of proof.79 Indeed,
petitioners' failure to submit the necessary documents which as
employers are in their possession, inspite of orders to do so,
gives rise to the presumption that their presentation is prejudicial
to its cause.80 As aptly quoted by the CA:
[W]hen the evidence tends to prove a material fact which
imposes a liability on a party, and he has it in his power to
produce evidence which from its very nature must
overthrow the case made against him if it is not founded
on fact, and he refuses to produce such evidence, the
presumption arises that the evidence, if produced, would
operate to his prejudice, and support the case of his
adversary.81
Petitioners next claim that the cost of the food and snacks
provided to respondents as facilities should have been included in
reckoning the payment of respondents' wages. They state that
although on the surface respondents appeared to receive minimal
wages, petitioners had granted respondents other benefits which
are considered part and parcel of their wages and are allowed
under existing laws.82 They claim that these benefits make up for

whatever inadequacies there may be in

compensation.83 Specifically, they invoked Sections 5 and 6, Rule
VII-A, which allow the deduction of facilities provided by the
employer through an appropriate Facility Evaluation Order issued
by the Regional Director of the DOLE.84 Petitioners also aver that
they give five (5) percent of the gross income each month as
incentives. As proof of compliance of payment of minimum
wages, petitioners submitted the Notice of Inspection Results
issued in 1995 and 1997 by the DOLE Regional Office.85
The cost of meals and snacks purportedly provided to
respondents cannot be deducted as part of respondents'
minimum wage. As stated in the Labor Arbiter's decision:86
While [petitioners] submitted Facility Evaluation Orders
(pp. 468, 469; vol. II, rollo) issued by the DOLE Regional
Office whereby the cost of meals given by [petitioners] to
[respondents] were specified for purposes of considering
the same as part of their wages, We cannot consider the
cost of meals in the Orders as applicable to
[respondents]. [Respondents] were not interviewed by the
DOLE as to the quality and quantity of food appearing in
the applications of [petitioners] for facility evaluation prior
to its approval to determine whether or not [respondents]
were indeed given such kind and quantity of food. Also,
there was no evidence that the quality and quantity of
food in the Orders were voluntarily accepted by
[respondents]. On the contrary; while some [of the
respondents] admitted that they were given meals and
merienda, the quality of food serve[d] to them were not
what were provided for in the Orders and that it was only
when they filed these cases that they came to know about
said Facility Evaluation Orders (pp. 100; 379[,] vol.
II, rollo; p. 40, tsn[,] June 19, 1998). [Petitioner] Josefa
herself, who applied for evaluation of the facility (food)
given to [respondents], testified that she did not inform
[respondents] concerning said Facility Evaluation Orders
(p. 34, tsn[,] August 13, 1998).

Even granting that meals and snacks were provided and indeed
constituted facilities, such facilities could not be deducted without
compliance with certain legal requirements. As stated in Mabeza
v. NLRC,87 the employer simply cannot deduct the value from the
employee's wages without satisfying the following: (a) proof that
such facilities are customarily furnished by the trade; (b) the
provision of deductible facilities is voluntarily accepted in writing
by the employee; and (c) the facilities are charged at fair and
reasonable value. The records are clear that petitioners failed to
comply with these requirements. There was no proof of
respondents' written authorization. Indeed, the Labor Arbiter
found that while the respondents admitted that they were given
meals and merienda, the quality of food served to them was not
what was provided for in the Facility Evaluation Orders and it was
only when they filed the cases that they came to know of this
supposed Facility Evaluation Orders.88 Petitioner Josefa Po Lam
herself admitted that she did not inform the respondents of the
facilities she had applied for.89
Considering the failure to comply with the above-mentioned legal
requirements, the Labor Arbiter therefore erred when he ruled
that the cost of the meals actually provided to respondents should
be deducted as part of their salaries, on the ground that
respondents have availed themselves of the food given by
petitioners.90 The law is clear that mere availment is not sufficient
to allow deductions from employees' wages.
More important, we note the uncontroverted testimony of
respondents on record that they were required to eat in the hotel
and restaurant so that they will not go home and there is no
interruption in the services of Mayon Hotel & Restaurant. As ruled
in Mabeza, food or snacks or other convenience provided by the
employers are deemed as supplements if they are granted for the
convenience of the employer. The criterion in making a distinction
between a supplement and a facility does not so much lie in the
kind (food, lodging) but the purpose.91 Considering, therefore, that
hotel workers are required to work different shifts and are
expected to be available at various odd hours, their ready

availability is a necessary matter in the operations of a small

hotel, such as petitioners' business.92 The deduction of the cost of
meals from respondents' wages, therefore, should be removed.
We also do not agree with petitioners that the five (5) percent of
the gross income of the establishment can be considered as part
of the respondents' wages. We quote with approval the Labor
Arbiter on this matter, to wit:
While complainants, who were employed in the hotel,
receive[d] various amounts as profit share, the same
cannot be considered as part of their wages in
determining their claims for violation of labor standard
benefits. Although called profit share[,] such is in the
nature of share from service charges charged by the
hotel. This is more explained by [respondents] when they
testified that what they received are not fixed amounts
and the same are paid not on a monthly basis (pp. 55, 93,
94, 103, 104; vol. II, rollo). Also, [petitioners] failed to
submit evidence that the amounts received by
[respondents] as profit share are to be considered part of
their wages and had been agreed by them prior to their
employment. Further, how can the amounts receive[d] by
[respondents] be considered as profit share when the
same [are] based on the gross receipt of the hotel[?] No
profit can as yet be determined out of the gross receipt of
an enterprise. Profits are realized after expenses are
deducted from the gross income.
On the issue of the proper minimum wage applicable to
respondents, we sustain the Labor Arbiter. We note that
petitioners themselves have admitted that the establishment
employs "more or less sixteen (16) employees,"93therefore they
are estopped from claiming that the applicable minimum wage
should be for service establishments employing 15 employees or
less.

As for petitioners repeated invocation of serious business losses,

suffice to say that this is not a defense to payment of labor
standard benefits. The employer cannot exempt himself from
liability to pay minimum wages because of poor financial
condition of the company. The payment of minimum wages is not
dependent on the employer's ability to pay.94
Thus, we reinstate the award of monetary claims granted by the
Labor Arbiter.
4. Conclusion
There is no denying that the actuations of petitioners in this case
have been reprehensible. They have terminated the respondents'
employment in an underhanded manner, and have used and
abused the quasi-judicial and judicial processes to resist payment
of their employees' rightful claims, thereby protracting this case
and causing the unnecessary clogging of dockets of the Court.
They have also forced respondents to unnecessary hardship and
financial expense. Indeed, the circumstances of this case would
have called for exemplary damages, as the dismissal was
effected in a wanton, oppressive or malevolent manner,95 and
public policy requires that these acts must be suppressed and
discouraged.96
Nevertheless, we cannot agree with the Labor Arbiter in granting
exemplary damages of P10,000.00 each to all respondents.
While it is true that other forms of damages under the Civil Code
may be awarded to illegally dismissed employees,97 any award of
moral damages by the Labor Arbiter cannot be based on the
Labor Code but should be grounded on the Civil Code.98 And the
law is clear that exemplary damages can only be awarded if
plaintiff shows proof that he is entitled to moral, temperate or
compensatory damages.99

As only respondents Loveres, Guades, Macandog, Llarena,

Nicerio, Atractivo and Broola specifically claimed damages from
petitioners, then only they are entitled to exemplary damages.sjgs1
Finally, we rule that attorney's fees in the amount to P10,000.00
should be granted to each respondent. It is settled that in actions
for recovery of wages or where an employee was forced to litigate
and incur expenses to protect his rights and interest, he is entitled
to an award of attorney's fees.100 This case undoubtedly falls
within this rule.

(6) Granting attorney's fees of P10,000.00 each to all

respondents.
The case is REMANDED to the Labor Arbiter for the
RECOMPUTATION of the total monetary benefits awarded and
due to the employees concerned in accordance with the decision.
The Labor Arbiter is ORDERED to submit his compliance thereon
within thirty (30) days from notice of this decision, with copies
furnished to the parties.
SO ORDERED.

IN VIEW WHEREOF, the petition is hereby DENIED. The

Decision of January 17, 2003 of the Court of Appeals in CA-G.R.
SP No. 68642 upholding the Joint Decision of July 14, 2000 of the
Labor Arbiter in RAB V Case Nos. 04-00079-97 and 04-00080-97
is AFFIRMED, with the following MODIFICATIONS:
(1) Granting separation pay of one-half (1/2) month for
every year of service to respondents Loveres, Macandog
and Llarena;

Austria-Martinez, Callejo Sr., Tinga, and Chico-Nazario,

JJ., concur.
G.R. No. 118506 April 18, 1997
NORMA MABEZA, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, PETER
NG/HOTEL SUPREME, respondents.

(2) Granting retirement pay for respondents Guades,

Nicerio, and Alamares;
(3) Removing the deductions for food facility from the
amounts due to all respondents;
(4) Awarding moral damages of P20,000.00 each for
respondents Loveres, Macandog, Llarena, Guades,
Nicerio, Atractivo, and Broola;
(5) Deleting the award of exemplary damages
of P10,000.00 from all respondents except Loveres,
Macandog, Llarena, Guades, Nicerio, Atractivo, and
Broola; and

KAPUNAN, J.:
This petition seeking the nullification of a resolution of public
respondent National Labor Relations Commission dated April 28,
1994 vividly illustrates why courts should be ever vigilant in the
preservation of the constitutionally enshrined rights of the working
class. Without the protection accorded by our laws and the
tempering of courts, the natural and historical inclination of capital
to ride roughshod over the rights of labor would run unabated.
The facts of the case at bar, culled from the conflicting versions of
petitioner and private respondent, are illustrative.

Petitioner Norma Mabeza contends that around the first week of

May, 1991, she and her co-employees at the Hotel Supreme in
Baguio City were asked by the hotel's management to sign an
instrument attesting to the latter's compliance with minimum wage
and other labor standard provisions of law. 1 The instrument
provides: 2

IN WITNESS WHEREOF, we have hereunto set

our hands this 7th day of May, 1991 at Baguio
City, Philippines.
(Sgd.) (Sgd.) (Sgd.)
SYLVIA IGAMA HERMINIGILDO AQUINO
EVELYN OGOY

JOINT AFFIDAVIT
We, SYLVIA IGANA, HERMINIGILDO AQUINO,
EVELYN OGOY, MACARIA JUGUETA,
ADELAIDA NONOG, NORMA MABEZA,
JONATHAN PICART and JOSE DIZON, all of
legal ages (sic), Filipinos and residents of Baguio
City, under oath, depose and say:
1. That we are employees of Mr. Peter L. Ng of
his Hotel Supreme situated at No. 416 Magsaysay
Ave., Baguio City.
2. That the said Hotel is separately operated from
the Ivy's Grill and Restaurant;
3. That we are all (8) employees in the hotel and
assigned in each respective shifts;
4. That we have no complaints against the
management of the Hotel Supreme as we are
paid accordingly and that we are treated well.
5. That we are executing this affidavit voluntarily
without any force or intimidation and for the
purpose of informing the authorities concerned
and to dispute the alleged report of the Labor
Inspector of the Department of Labor and
Employment conducted on the said establishment
on February 2, 1991.

(Sgd.) (Sgd.) (Sgd.)

MACARIA JUGUETA ADELAIDA NONOG
NORMA MABEZA.
(Sgd.) (Sgd.)
JONATHAN PICART JOSE DIZON
SUBSCRIBED AND SWORN to before me this 7th day of May,
1991, at Baguio City, Philippines.
Asst. City Prosecutor
Petitioner signed the affidavit but refused to go to the City
Prosecutor's Office to swear to the veracity and contents of the
affidavit as instructed by management. The affidavit was
nevertheless submitted on the same day to the Regional Office of
the Department of Labor and Employment in Baguio City.
As gleaned from the affidavit, the same was drawn by
management for the sole purpose of refuting findings of the Labor
Inspector of DOLE (in an inspection of respondent's
establishment on February 2, 1991) apparently adverse to the
private respondent. 3
After she refused to proceed to the City Prosecutor's Office on
the same day the affidavit was submitted to the Cordillera
Regional Office of DOLE petitioner avers that she was ordered
by the hotel management to turn over the keys to her living
quarters and to remove her belongings from the hotel

premises. 4 According to her, respondent strongly chided her for

refusing to proceed to the City Prosecutor's Office to attest to the
affidavit. 5 She thereafter reluctantly filed a leave of absence from her
job which was denied by management. When she attempted to
return to work on May 10, 1991, the hotel's cashier, Margarita Choy,
informed her that she should not report to work and, instead,
continue with her unofficial leave of absence. Consequently, on May
13, 1991, three days after her attempt to return to work, petitioner
filed a complaint for illegal dismissal before the Arbitration Branch of
the National Labor Relations Commission CAR Baguio City. In
addition to her complaint for illegal dismissal, she alleged
underpayment of wages, non-payment of holiday pay, service
incentive leave pay, 13th month pay, night differential and other
benefits. The complaint was docketed as NLRC Case No. RABCAR-05-0198-91 and assigned to Labor Arbiter Felipe P. Pati.

Responding to the allegations made in support of petitioner's

complaint for illegal dismissal, private respondent Peter Ng
alleged before Labor Arbiter Pati that petitioner "surreptitiously
left (her job) without notice to the management" 6 and that she
actually abandoned her work. He maintained that there was no basis
for the money claims for underpayment and other benefits as these
were paid in the form of facilities to petitioner and the hotel's other
employee. 7Pointing to the Affidavit of May 7, 1991, the private
respondent asserted that his employees actually have no problems
with management. In a supplemental answer submitted eleven (11)
months after the original complaint for illegal dismissal was filed,
private respondent raised a new ground, loss of confidence, which
was supported by a criminal complaint for Qualified Theft he filed
before the prosecutor's office of the City of Baguio against petitioner
on July 4, 1991. 8

On May 14, 1993, Labor Arbiter Pati rendered a decision

dismissing petitioner's complaint on the ground of loss of
confidence. His disquisitions in support of his conclusion read as
follows:
It appears from the evidence of respondent that
complainant carted away or stole one (1) blanket,

1 piece bedsheet, 1 piece thermos, 2 pieces towel

(Exhibits "9", "9-A," "9-B," "9-C" and "10" pages
12-14 TSN, December 1, 1992).
In fact, this was the reason why respondent Peter
Ng lodged a criminal complaint against
complainant for qualified theft and perjury. The
fiscal's office finding a prima facie evidence that
complainant committed the crime of qualified theft
issued a resolution for its filing in court but
dismissing the charge of perjury (Exhibit "4" for
respondent and Exhibit "B-7" for complainant). As
a consequence, complainant was charged in court
for the said crime (Exhibit "5" for respondent and
Exhibit "B-6" for the complainant).
With these pieces of evidence, complainant
committed serious misconduct against her
employer which is one of the just and valid
grounds for an employer to terminate an
employee (Article 282 of the Labor Code as
amended). 9
On April 28, 1994, respondent NLRC promulgated its assailed
Resolution 10 affirming the Labor Arbiter's decision. The resolution
substantially incorporated the findings of the Labor
Arbiter. 11 Unsatisfied, petitioner instituted the instant special civil
action for certiorari under Rule 65 of the Rules of Court on the
following grounds: 12

1. WITH ALL DUE RESPECT, THE HONORABLE

NATIONAL LABOR RELATIONS COMMISSION
COMMITTED A PATENT AND PALPABLE
ERROR AMOUNTING TO GRAVE ABUSE OF
DISCRETION IN ITS FAILURE TO CONSIDER
THAT THE ALLEGED LOSS OF CONFIDENCE
IS A FALSE CAUSE AND AN AFTERTHOUGHT
ON THE PART OF THE RESPONDENT-

EMPLOYER TO JUSTIFY, ALBEIT ILLEGALLY,

THE DISMISSAL OF THE COMPLAINANT FROM
HER EMPLOYMENT;
2. WITH ALL DUE RESPECT, THE HONORABLE
NATIONAL LABOR RELATIONS COMMISSION
COMMITTED A PATENT AND PALPABLE
ERROR AMOUNTING TO GRAVE ABUSE OF
DISCRETION IN ADOPTING THE RULING OF
THE LABOR ARBITER THAT THERE WAS NO
UNDERPAYMENT OF WAGES AND BENEFITS
ON THE BASIS OF EXHIBIT "8" (AN UNDATED
SUMMARY OF COMPUTATION PREPARED BY
ALLEGEDLY BY RESPONDENT'S EXTERNAL
ACCOUNTANT) WHICH IS TOTALLY
INADMISSIBLE AS AN EVIDENCE TO PROVE
PAYMENT OF WAGES AND BENEFITS;
3. WITH ALL DUE RESPECT, THE HONORABLE
NATIONAL LABOR RELATIONS COMMISSION
COMMITTED A PATENT AND PALPABLE
ERROR AMOUNTING TO GRAVE ABUSE OF
DISCRETION IN FAILING TO CONSIDER THE
EVIDENCE ADDUCED BEFORE THE LABOR
ARBITER AS CONSTITUTING UNFAIR LABOR
PRACTICE COMMITTED BY THE
RESPONDENT.
The Solicitor General, in a Manifestation in lieu of Comment
dated August 8, 1995 rejects private respondent's principal claims
and defenses and urges this Court to set aside the public
respondent's assailed resolution. 13
We agree.
It is settled that in termination cases the employer bears the
burden of proof to show that the dismissal is for just cause, the

failure of which would mean that the dismissal is not justified and
the employee is entitled to reinstatement. 14
In the case at bar, the private respondent initially claimed that
petitioner abandoned her job when she failed to return to work on
May 8, 1991. Additionally, in order to strengthen his contention
that there existed sufficient cause for the termination of petitioner,
he belatedly included a complaint for loss of confidence,
supporting this with charges that petitioner had stolen a blanket, a
bedsheet and two towels from the hotel. 15 Appended to his last
complaint was a suit for qualified theft filed with the Baguio City
prosecutor's office.

From the evidence on record, it is crystal clear that the

circumstances upon which private respondent anchored his claim
that petitioner "abandoned" her job were not enough to constitute
just cause to sanction the termination of her services under
Article 283 of the Labor Code. For abandonment to arise, there
must be concurrence of two things: 1) lack of intention to
work; 16 and 2) the presence of overt acts signifying the employee's
intention not to work. 17

In the instant case, respondent does not dispute the fact that
petitioner tried to file a leave of absence when she learned that
the hotel management was displeased with her refusal to attest to
the affidavit. The fact that she made this attempt clearly indicates
not an intention to abandon but an intention to return to work after
the period of her leave of absence, had it been granted, shall
have expired.
Furthermore, while absence from work for a prolonged period
may suggest abandonment in certain instances, mere absence of
one or two days would not be enough to sustain such a claim.
The overt act (absence) ought
to unerringly point to the fact that the employee has no intention
to return to work, 18 which is patently not the case here. In fact,
several days after she had been advised to take an informal leave,
petitioner tried to resume working with the hotel, to no avail. It was

only after she had been repeatedly rebuffed that she filed a case for
illegal dismissal. These acts militate against the private respondent's
claim that petitioner abandoned her job. As the Solicitor General in
his manifestation observed:

Petitioner's absence on that day should not be

construed as abandonment of her job. She did not
report because the cashier told her not to report
anymore, and that private respondent Ng did not
want to see her in the hotel premises. But two
days later or on the 10th of May, after realizing
that she had to clarify her employment status, she
again reported for work. However, she was
prevented from working by private respondents. 19
We now come to the second cause raised by private respondent
to support his contention that petitioner was validly dismissed
from her job.
Loss of confidence as a just cause for dismissal was never
intended to provide employers with a blank check for terminating
their employees. Such a vague, all-encompassing pretext as loss
of confidence, if unqualifiedly given the seal of approval by this
Court, could readily reduce to barren form the words of the
constitutional guarantee of security of tenure. Having this in mind,
loss of confidence should ideally apply only to cases involving
employees occupying positions of trust and confidence or to
those situations where the employee is routinely charged with the
care and custody of the employer's money or property. To the
first class belong managerial employees, i.e., those vested with
the powers or prerogatives to lay down management policies
and/or to hire, transfer, suspend, lay-off, recall, discharge, assign
or discipline employees or effectively recommend such
managerial actions; and to the second class belong cashiers,
auditors, property custodians, etc., or those who, in the normal
and routine exercise of their functions, regularly handle significant
amounts of money or property. Evidently, an ordinary
chambermaid who has to sign out for linen and other hotel

property from the property custodian each day and who has to
account for each and every towel or bedsheet utilized by the
hotel's guests at the end of her shift would not fall under any of
these two classes of employees for which loss of confidence, if
ably supported by evidence, would normally apply. Illustrating this
distinction, this Court in Marina Port Services,
Inc. vs. NLRC, 20 has stated that:
To be sure, every employee must enjoy some
degree of trust and confidence from the employer
as that is one reason why he was employed in the
first place. One certainly does not employ a
person he distrusts. Indeed, even the lowly janitor
must enjoy that trust and confidence in some
measure if only because he is the one who opens
the office in the morning and closes it at night and
in this sense is entrusted with the care or
protection of the employer's property. The keys he
holds are the symbol of that trust and confidence.
By the same token, the security guard must also
be considered as enjoying the trust and
confidence of his employer, whose property he is
safeguarding. Like the janitor, he has access to
this property. He too, is charged with its care and
protection.
Notably, however, and like the janitor again, he is
entrusted only with the physical task of protecting
that property. The employer's trust and confidence
in him is limited to that ministerial function. He is
not entrusted, in the Labor Arbiter's words, with
the duties of safekeeping and safeguarding
company policies, management instructions, and
company secrets such as operation devices. He is
not privy to these confidential matters, which are
shared only in the higher echelons of
management. It is the persons on such levels

who, because they discharge these sensitive

duties, may be considered holding positions of
trust and confidence. The security guard does not
belong in such category. 21
More importantly, we have repeatedly held that loss of confidence
should not be simulated in order to justify what would otherwise
be, under the provisions of law, an illegal dismissal. "It should not
be used as a subterfuge for causes which are illegal, improper
and unjustified. It must be genuine, not a mere afterthought to
justify an earlier action taken in bad faith." 22
In the case at bar, the suspicious delay in private respondent's
filing of qualified theft charges against petitioner long after the
latter exposed the hotel's scheme (to avoid its obligations as
employer under the Labor Code) by her act of filing illegal
dismissal charges against the private respondent would hardly
warrant serious consideration of loss of confidence as a valid
ground for dismissal. Notably, the Solicitor General has himself
taken a position opposite the public respondent and has observed
that:
If petitioner had really committed the acts charged
against her by private respondents (stealing
supplies of respondent hotel), private respondents
should have confronted her before dismissing her
on that ground. Private respondents did not do so.
In fact, private respondent Ng did not raise the
matter when petitioner went to see him on May 9,
1991, and handed him her application for leave. It
took private respondents 52 days or up to July 4,
1991 before finally deciding to file a criminal
complaint against petitioner, in an obvious attempt
to build a case against her.
The manipulations of private respondents should
not be countenanced. 23

Clearly, the efforts to justify petitioner's dismissal on top of the

private respondent's scheme of inducing his employees to sign
an affidavit absolving him from possible violations of the Labor
Code taints with evident bad faith and deliberate malice
petitioner's summary termination from employment.
Having said this, we turn to the important question of whether or
not the dismissal by the private respondent of petitioner
constitutes an unfair labor practice.
The answer in this case must inevitably be in the affirmative.
The pivotal question in any case where unfair labor practice on
the part of the employer is alleged is whether or not the employer
has exerted pressure, in the form of restraint, interference or
coercion, against his employee's right to institute concerted action
for better terms and conditions of employment. Without doubt, the
act of compelling employees to sign an instrument indicating that
the employer observed labor standards provisions of law when he
might have not, together with the act of terminating or coercing
those who refuse to cooperate with the employer's scheme
constitutes unfair labor practice. The first act clearly preempts the
right of the hotel's workers to seek better terms and conditions of
employment through concerted action.
We agree with the Solicitor General's observation in his
manifestation that "[t]his actuation . . . is analogous to the
situation envisaged in paragraph (f) of Article 248 of the Labor
Code" 24 which distinctly makes it an unfair labor practice "to dismiss,
discharge or otherwise prejudice or discriminate against an
employee for having given or being about to give testimony" 25 under
the Labor Code. For in not giving positive testimony in favor of her
employer, petitioner had reserved not only her right to dispute the
claim and proffer evidence in support thereof but also to work for
better terms and conditions of employment.

For refusing to cooperate with the private respondent's scheme,

petitioner was obviously held up as an example to all of the

hotel's employees, that they could only cause trouble to

management at great personal inconvenience. Implicit in the act
of petitioner's termination and the subsequent filing of charges
against her was the warning that they would not only be deprived
of their means of livelihood, but also possibly, their personal
liberty.
This Court does not normally overturn findings and conclusions of
quasi-judicial agencies when the same are ably supported by the
evidence on record. However, where such conclusions are based
on a misperception of facts or where they patently fly in the face
of reason and logic, we will not hesitate to set aside those
conclusions. Going into the issue of petitioner's money claims, we
find one more salient reason in this case to set things right: the
labor arbiter's evaluation of the money claims in this case
incredibly ignores existing law and jurisprudence on the matter.
Its blatant one-sidedness simply raises the suspicion that
something more than the facts, the law and jurisprudence may
have influenced the decision at the level of the Arbiter.
Labor Arbiter Pati accepted hook, line and sinker the private
respondent's bare claim that the reason the monetary benefits
received by petitioner between 1981 to 1987 were less than
minimum wage was because petitioner did not factor in the
meals, lodging, electric consumption and water she received
during the period in her computations. 26 Granting that meals and
lodging were provided and indeed constituted facilities, such facilities
could not be deducted without the employer complying first with
certain legal requirements. Without satisfying these requirements,
the employer simply cannot deduct the value from the employee's
ages. First, proof must be shown that such facilities are customarily
furnished by the trade. Second, the provision of deductible facilities
must be voluntarily accepted in writing by the employee. Finally,
facilities must be charged at fair and reasonable value. 27

These requirements were not met in the instant case. Private

respondent "failed to present any company policy or guideline to
show that the meal and lodging . . . (are) part of the salary;" 28 he

failed to provide proof of the employee's written authorization; and,

he failed to show how he arrived at the valuations. 29

Curiously, in the case at bench, the only valuations relied upon by

the labor arbiter in his decision were figures furnished by the
private respondent's own accountant, without corroborative
evidence. On the pretext that records prior to the July 16, 1990
earthquake were lost or destroyed, respondent failed to produce
payroll records, receipts and other relevant documents, where he
could have, as has been pointed out in the Solicitor General's
manifestation, "secured certified copies thereof from the nearest
regional office of the Department of Labor, the SSS or the BIR." 30
More significantly, the food and lodging, or the electricity and
water consumed by the petitioner were not facilities but
supplements. A benefit or privilege granted to an employee for
the convenience of the employer is not a facility. The criterion in
making a distinction between the two not so much lies in the kind
(food, lodging) but the purpose. 31 Considering, therefore, that hotel
workers are required to work different shifts and are expected to be
available at various odd hours, their ready availability is a necessary
matter in the operations of a small hotel, such as the private
respondent's hotel.

It is therefore evident that petitioner is entitled to the payment of

the deficiency in her wages equivalent to the fullwage applicable
from May 13, 1988 up to the date of her illegal dismissal.
Additionally, petitioner is entitled to payment of service incentive
leave pay, emergency cost of living allowance, night differential
pay, and 13th month pay for the periods alleged by the petitioner
as the private respondent has never been able to adduce proof
that petitioner was paid the aforestated benefits.
However, the claims covering the period of October 1987 up to
the time of filing the case on May 13, 1988 are barred by
prescription as P.D. 442 (as amended) and its implementing rules
limit all money claims arising out of employer-employee

relationship to three (3) years from the time the cause of action
accrues. 32
We depart from the settled rule that an employee who is unjustly
dismissed from work normally should be reinstated without loss of
seniority rights and other privileges. Owing to the strained
relations between petitioner and private respondent, allowing the
former to return to her job would only subject her to possible
harassment and future embarrassment. In the instant case,
separation pay equivalent to one month's salary for every year of
continuous service with the private respondent would be proper,
starting with her job at the Belfront Hotel.

answer to petitioner's complaint. Clearly, the dismissal of

petitioner without the benefit of notice and hearing prior to her
termination violated her constitutional right to due process. Under
the circumstance an award of One Thousand Pesos (P1,000.00)
on top of payment of the deficiency in wages and benefits for the
period aforestated would be proper.
WHEREFORE, premises considered, the RESOLUTION of the
National Labor Relations Commission dated April 24, 1994 is
REVERSED and SET ASIDE, with costs. For clarity, the
economic benefits due the petitioner are hereby summarized as
follows:

In addition to separation pay, backwages are in order. Pursuant

to R.A. 6715 and our decision in Osmalik Bustamante, et
al. vs. National Labor Relations Commission, 33 petitioner is

1) Deficiency wages and the applicable ECOLA from May 13,

1988 up to the date of petitioner's illegal dismissal;

entitled to full backwages from the time of her illegal dismissal up to

the date of promulgation of this decision without qualification or
deduction.

2) Service incentive leave pay; night differential pay and 13th

month pay for the same period;

Finally, in dismissal cases, the law requires that the employer

must furnish the employee sought to be terminated from
employment with two written notices before the same may be
legally effected. The first is a written notice containing a
statement of the cause(s) for dismissal; the second is a notice
informing the employee of the employer's decision to terminate
him stating the basis of the dismissal. During the process leading
to the second notice, the employer must give the employee ample
opportunity to be heard and defend himself, with the assistance of
counsel if he so desires.
Given the seriousness of the second cause (qualified theft) of the
petitioner's dismissal, it is noteworthy that the private respondent
never even bothered to inform petitioner of the charges against
her. Neither was petitioner given the opportunity to explain the
loss of the articles. It was only almost two months after petitioner
had filed a complaint for illegal dismissal, as an afterthought, that
the loss was reported to the police and added as a supplemental

3) Separation pay equal to one month's salary for every year of

petitioner's continuous service with the private respondent
starting with her job at the Belfront Hotel;
4) Full backwages, without qualification or deduction, from the
date of petitioner's illegal dismissal up to the date of promulgation
of this decision pursuant to our ruling in Bustamante vs. NLRC. 34
5) P1,000.00.
ORDERED.
Padilla, Bellosillo and Vitug, JJ., concur.
Hermosisima, Jr., J., is on leave.
G.R. No. L-58870 December 18, 1987

CEBU INSTITUTE OF TECHNOLOGY (CIT), petitioner,

vs.
HON. BLAS OPLE, in his capacity as Minister, Ministry of
Labor and Employment, JULIUS ABELLA, ARSENIO
ABELLANA, RODRIGO ALIWALAS, ZOSIMO ALMOCERA,
GERONIDES ANCOG, GREGORIO ASIA, ROGER BAJARIAS,
BERNARDO BALATAYO, JR., BASILIO CABALLES,
DEMOCRITO TEVES, VOLTAIRE DELA CERNA, ROBERTO
COBARRUBIAS, VILMA GOMEZ CHUA, RUBEN GALLITO,
EDGARDO CONCEPCION, VICTOR COQUILLA, JOSE
DAKOYKOY, PATERNO WONG, EVELYN LACAYA, RODRIGO
GONZALES, JEOGINA GOZO, MIGUEL CABALLES,
CONSUELO JAVELOSA, QUILIANO LASCO, FRANKLIN
LAUTA, JUSTINIANA LARGO, RONALD LICUPA, ALAN
MILANO, MARIA MONSANTO, REYNALDO NOYNAY, RAMON
PARADELA, NATALIO PLAZA, LUZPURA QUIROGA, NOE
RODIS, COSMENIA SAAVEDRA, LEONARDO SAGARIO,
LETICIA SERRA, SIEGFREDO TABANAG, LUCINO
TAMAOSO, DANILO TERANTE, HELEN CALVO TORRES,
ERNESTO VILLANUEVA, DOLORES VILLONDO, EDWARD
YAP, ROWENA VIVARES, DOLORES SANANAM, RODRIGO
BACALSO, YOLANDA TABLANTE, ROMERO BALATUCAN,
CARMELITA LADOT, PANFILO CANETE, EMMANUEL
CHAVEZ, JR., SERGIO GALIDO, ANGEL COLLERA, ZOSIMO
CUNANAN, RENE BURT LLANTO, GIL BATAYOLA, VICENTE
DELANTE, CANDELARIO DE DIOS, JOSE MA. ESTELLA,
NECITA TRINIDAD, ROTELLO ILUMBA, TEODORICO JAYME,
RAYMUNDO ABSIN, RUDY MANEJA, REYNA RAMOS,
ANASTACIA BLANCO, FE DELMUNDO, ELNORA MONTERA,
MORRISON MONTESCLAROS, ELEAZAR PANIAMOGAN,
BERNARDO PILAPIL, RODOLFO POL, DEMOSTHENES
REDOBLE, PACHECO ROMERO, DELLO SABANAL, SARAH
SALINAS, RENATO SOLATORIO, EDUARDO TABLANTE,
EMMANUEL TAN, FELICISIMO TESALUNA, JOSE VERALLO,
JR., MAGDALENO VERGARA, ESMERALDA ABARQUEZ,
MAC ARTHUR DACUYCUY ACOMPANADA, TRINIDAD
ADLAWAN, FE ELIZORDO ALCANTARA, REOSEBELLA
AMPER, ZENAIDA BACALSO, ELIZA BADANA, GEORGIA

BAS, ERLINDA BURIAS, ELDEFONSO BURIAS, CORAZON

CASENAS, REGINO CASTANEDA, GEORGE CATADA,
CARMENCITA G. CHAVEZ, LORETIA CUNANAN, FLORES
DELFIN, TERESITA ESPINO, ELVIE GALANZA, AMADEA
GALELA, TERESITA. JUNTILLA, LEONARDA KAPUNGAN,
ADORACION LANAWAN, LINDA LAYAO, GERARDO
LAYSON, VIRGILIO LIBETARIO, RAYMOND PAUL LOGARTA,
NORMA LUCERO, ANATOLIA MENDEZ, ELIODORO
MENDEZ, JUDALINE MONTE, ELMA OCAMPO, ESTEFA
OLIVARES, GEORGE ORAIS, CRISPINA PALANG, GRETA
PEGARIDO, MELBA QUIACHON, REMEDIOS QUIROS,
VIRGINIA RANCES, EDNA DELOS REYES, VICENTE TAN,
EMERGENCIA ROSELL, JULIETA TATING, MERCIA
TECARRO, FELISA VERGARA, WEMINA VILLACIN,
MACRINA YBARSABAL, MILAGROS CATALAN, JULIETA
AQUINDE, SONIA ARTIAGA, MA. TERESITA OBANDO,
ASUNCION ABAYAN, ESTHER CARREON, ECHEVARRE,
BUENAFE SAMSON, CONCEPCION GONZALES, VITALIANA
VENERACION, LEONCIA ABELLAR, REYNITA
VILLACARLOS. respondents.
No. L-68345 December 18, 1987
DIVINE WORD COLLEGE OF LEGAZPI, petitioner,
vs.
The Honorable Deputy Minister of Labor and Employment,
VICENTE LEOGARDO, JR., the HONORABLE REGIONAL
DIRECTOR (Regional Office No. 5) of the Ministry of Labor &
Employment GERARDO S. CASTILLO, CECILIA MANUEL and
other alleged complainants, respondents.
Nos. L-69224-5 December 18, 1987
FAR EASTERN UNIVERSITY EMPLOYEES LABOR
UNION, petitioner,
vs.
FAR EASTERN UNIVERSITY and the NATIONAL LABOR
RELATIONS COMMISSION, respondents.

No. 70832 December 18, 1987

GREGORIO T. FABROS, ROGELIO B. DE GUZMAN,
CRESENCIANO ESPINO, JOSE RAMOS SUNGA, BAYLON
BANEZ FERNANDO ELESTERIO, ISMAEL TABO, AMABLE
TUIBEO CELSO TUBAY, RAFAEL HERNANDEZ, GERONIMO
JASARENO, MEL BALTAZAR, MA. LOURDES PASCUAL, T.
DEL ROSARIO ACADEMY TEACHERS and EMPLOYEES
ASSOCIATION, DENNIS MONTE, BECKY TORRES, LOIDA
VELASCO, ROMLY NERY, DAISY N. AMPIG, PATRICIO
DOLORES, ROGELIO RAMIREZ, and NILDA L.
SEVILLA, petitioners,
vs.
The HON. JAIME C. LAYA, in his capacity as Minister of
Education, Culture and Sports, respondents.
No. L-76524 December 18, 1987
JASMIN BISCOCHO, ROWENA MARIANO, AGNES
GALLEGO, MA. ANA ORDENES, ISABEL DE LEON,
LUZVIMINDA FIDEL, MARIQUIT REYES, SOTERA ORTIZ,
ANGELINA ROXAS, BITUIN DE PANO, ELIZABETH ORDEN,
APOLLO ORDEN, GUILLERMA CERCANO, IMELDA
CARINGAL, EFREN BATIFORA, ROSIE VALDEZ, DELIA
QUILATEZ, FELIX RODRIGUEZ, OSCAR RODRIGUEZ,
JOVITA CEREZO, JOSEFINA BONDOC, BELEN POSADAS,
DOLORES PALMA, ANTONINA CRUS, CONRADO BANAYAT,
TERESITA LORBES, and CORAZON MIRANDA, petitioners,
vs.
THE HONORABLE AUGUSTO SANCHEZ, in his capacity as
Minister of Labor and Employment, ESPIRITU SANTO
PAROCHIAL SCHOOL AND ESPIRITU SANTO PAROCHIAL
SCHOOL FACULTY ASSOCIATION,respondents.
No. 76596 December 18, 1987

RICARDO C. VALMONTE and CORAZON

BADIOLA, petitioners,
vs.
THE HONORABLE AUGUSTO SANCHEZ, in his capacity as
Minister of Labor and Employment, ESPIRITU SANTO
PAROCHIAL SCHOOL FACULTY ASSOCIATION, and
ESPIRITU SANTO PAROCHIAL SCHOOL,respondents.

CORTES, J.:
Six cases involving various private schools, their teachers and
non-teaching school personnel, and even parents with children
studying in said schools, as well as the then Minister of Labor and
Employment, his Deputy, the National Labor Relations
Commission, and the then Minister of Education, Culture and
Sports, have beenconsolidated in this single Decision in order to
dispose of uniformly the common legal issue raised therein,
namely,the allocation of the incremental proceeds of authorized
tuition fee increases of private schools provided for in section 3
(a) of Presidential Decree No. 451, and thereafter, under the
Education Act of 1982 (Batas Pambansa Blg. 232).
Specifically, the common problem presented by these cases
requires an interpretation of section 3(a) of Pres. Decree No.
451 which states:
SEC. 3. Limitations. The increase in tuition or
other school fees or other charges as well as the
new fees or charges authorized under the next
preceding section shall be subject to the following
conditions;
(a) That no increase in tuition or other school fees
or charges shall be approved unless sixty
(60%)per centum of the proceeds is allocated for

increase in salaries or wages of the members of

the faculty and all other employees of the school
concerned, and the balance for institutional
development, student assistance and extension
services, and return to
investments: Provided That in no case shall the
return to investments exceed twelve (12%) per
centum of the incremental proceeds;

their employees may enter into a collective bargaining agreement

allocating more than 60% of said incremental proceeds for salary
increases and other benefits of said employees. After these subissues have been resolved, the Court will tackle the other
incidents attending the individual cases, seriatim.

xxx xxx xxx

I.. FACTUAL BACKGROUND OF EACH CASE

In addition, there is also a need for a pronouncement on the

effect of the subsequent enactment of B.P. Blg. 232 which
provides for the allocation of tuition fee increases in section 42
thereof.
In a nutshell, the present controversy was precipitated by the
claims of some school personnel for allowances and other
benefits and the refusal of the private schools concerned to pay
said allowances and benefits on the ground that said items
should be deemed included in the salary increases they had paid
out of the 60% portion of the proceeds from tuition fee increases
provided for in section 3 (a) of Pres. Decree No. 451. The
interpretation and construction of laws being a matter of judicial
power and duty [Marbury v. Madison, 1 Cranch 137 (1803);
Endencia v. David, 93 Phil. 696 (1953)], this Court has been
called upon to resolve the controversy.
In the process of reading and at times, having to decipher, the
numerous pleadings filed in the six cases, the Court found that
the main issue has been approached by the parties from almost
diametrical points, thereby bringing into focus three subissues: first, whether or not allowances and other fringe benefits
of faculty members and other school employees may be charged
against the 60% portion of the tuition fee increases provided for in
section 3(a) of Pres. Dec. No. 451: second, whether or not the
same items may be charged against said portion under the
provisions of B.P. Blg. 232: and, third, whether or not schools and

The factual antecedents that brought these cases before this

Tribunal are as follows:

A.
CEBU INSTITUTE OF TECHNOLOGY CASE
This case originated from a Complaint filed with the Regional
Office No. VII of the Ministry of Labor on February 11, 1981
against petitioner Cebu Institute of Technology (CIT) by private
respondents, Panfilo Canete, et al., teachers of CIT, for nonpayment of: a) cost of living allowances (COLA) under Pres. Dec.
Nos. 525, 1123, 1614, 1678 and 1713, b) thirteenth (13th) month
pay differentials and c) service incentive leave. By virtue of an
Order issued by the then Deputy Minister of Labor Carmelo C.
Noriel, a labor-management committee composed of one
representative each from the Ministry of Labor and Employment
(MOLE), the Minister of Education, Culture and Sports (MECS),
and two representatives each from CIT and from the teachers
was created. Said committee was to ascertain compliance with
the legal requirements for the payment of COLA, thirteenth (13th)
month pay and service incentive leave [Rollo, p. 84].
The position taken by CIT during the conference held by the labor
management committee was that it had paid the allowances
mandated by various decrees but the same had been integrated
in the teacher's hourly rate. It alleged that the payment of COLA
by way of salary increases is in line with Pres. Dec. No. 451. It
also claimed in its position paper that it had paid thirteenth month

pay to its employees and that it was exempt from the payment of
service incentive leave to its teachers who were employed on
contract basis [Rollo, pp. 85-86].

1981 against the enforcement of the questioned Order of the

Minister of Labor and Employment.
B.

After the report and recommendation of the committee, herein

public respondent, then Minister of Labor and Employment issued
the assailed Order dated September 29, 1981 and held that the
basic hourly rate designated in the Teachers' Program is
regarded as the basic hourly rate of teachers exclusive of the
COLA, and that COLA should not be taken from the 60%
incremental proceeds of the approved increase in tuition fee. The
dispositive portion of the Order reads:
PREMISES CONSIDERED, CIT is hereby
ordered to pay its teaching staff the following:
1) COLA under P.D.'s 525 and 1123 from
February 1978 up to 1981;
2) COLA under P.D.'s l6l4,1634,1678 and l7l3;and
3) Service incentive leave from l978 upto l981.
CIT is further directed to integrate into the basic
salaries of its teachers and (sic) COLA under
P.D.'s 525 and 1123 starting on January 1981,
pursuant to P.D. 1751. For purposes of
integration, the hourly rate shown in its Teachers'
Program for school year 198182 shall be
considered as the basic hourly rate.
SO ORDERED.
Petitioner assails the aforesaid Order in this Special Civil Action
of certiorari with Preliminary Injunction and/or Restraining Order.
The Court issued a Temporary Restraining Order on December 7,

DIVINE WORD COLLEGE OF LEGAZPI CASE

Upon a complaint filed by ten faculty members for alleged noncompliance by herein petitioner Divine Word College of Legazpi
with, among others, Pres. Dec. No. 451, i.e., allowances were
charged to the 60% incremental proceeds of tuition fee increase,
the Labor Regulation Section of Regional Office No. V (Legazpi
City) of the Ministry of Labor and Employment conducted an
inspection of the employment records of said school. On the
basis of the report on the special inspection that the school did
not comply with Pres. Dec. No. 451, herein respondent Regional
Director issued an Order dated May 30, 1983, requiring
compliance by the Divine Word College. The latter filed a
Memorandum of Appeal from said Order which the Regional
Director treated as a Motion for Reconsideration. Upon failure of
the school to comply with the aforesaid Order, another Order
(August 2, 1983) was issued by herein respondent Regional
Director requiring herein petitioner to pay the faculty memberscomplainants (herein private respondents) the amounts indicated
therein or the total sum of Six Hundred Seventeen Thousand
Nine Hundred Sixty Seven Pesos and Seventy Seven Centavos
(P 617,967.77). Petitioner's Motion for Reconsideration of the
Order was denied.
On appeal, the respondent Deputy Minister of Labor and
Employment affirmed the Order of the Regional Director,viz:
xxx xxx xxx
Coming now to the substantial merit of the case,
we share the view that the emergency allowances
due the complainants under the several

presidential decrees (PD's 525, 1123, etc.) cannot

be charged by the respondent against the 60% of
the incremental proceeds from increase in tuition
fees authorized under PD 451, not only because
as per decision of the Supreme Court (UE vs. UE
Faculty Association, et. al., G.R. No. 57387,
September 30, 1982) said allowances whether
mandated by law or secured by collective
bargaining should be taken only from the return to
investment referred to in the decree if the school
has no other resources to grant the allowances
but not from the 60% incremental proceeds, but
also because to hold otherwise would, to our
mind, inevitably result in the loss of one benefit
due the complainants-that is the salary or wage
increase granted them by PD 451.

On March 25, 1985, after considering the allegations, issues and

arguments adduced in the Petition as well as the Comment
thereon of the public respondent and dispensing with the private
respondents' Comment, the Court resolved to dismiss the Petition
for lack of merit (Rollo, p. 198). On April 26, 1985, petitioner filed
a Motion for Reconsideration with Motion to Consider the Case
En Banc. On June 26, 1985 the First Division of the Court
referred the case to the Court En Banc for consolidation with G.R.
No. 70832, entitled "Gregorio T. Fabros, et al vs. Hon. Jaime C.
Laya, etc. " since it involves the same issue on the application of
60% incremental proceeds of authorized tuition fee increases
[Rollo, p. 235]. The Court EN BANC resolved to accept the case.
(Resolution of July 16, 1985). These cases were further
consolidated with other cases involving the same issues.

In other words, we believe that by paying the

complainants' allowances out of the 60%
incremental proceeds intended for their salary
increase they are practically being deprived of
one benefit-their share in the 60% incremental
proceeds in terms of salary or wage increase.

FAR EASTERN UNIVERSITY CASE

WHEREFORE, for the reasons abovestated, the

Order appealed from is hereby AFFIRMED, and
the appeal DISMISSED, for lack of merit.
SO ORDERED.
(Annex "K " to Petition; Rollo, p. 108, 110).
This special civil action of certiorari and Prohibition with
Preliminary Injunction questions the interpretation of, and
application by the respondent Deputy Minister, of the provisions
of Pres. Dec. No. 45 1, as set forth in the assailed Order.

C.

On December 17, 1978, petitioner Union filed with the Ministry of

Labor and Employment a complaint against respondent
University for non-payment of legal holiday pay and underpayment of the thirteenth (13th) month pay. On July 7, 1979,
while the case was pending, the Union President, in his personal
capacity, filed another complaint for violation of Pres. Dec. No.
451 against the same respondent.
The two cases were forthwith consolidated and jointly heard and
tried. On March 10, 1980, Labor Arbiter Ruben A. Aquino
promulgated a decision the dispositive portion of which is quoted
hereunder:
RESPONSIVE TO THE FOREGOING,
respondent is hereby directed, within ten (10)
days from receipt hereof, to:

1. To (sic) pay the paid legal holidays that it

withdrew since January 14, 1976 up to the
present; and
2. Pay the 13th month pay differential of
complainant's for the covered period December
16, 1975 to December 17, 1978, date of filing of
complaint for non-payment of legal holiday pay
and under payment of the 13th month pay, and
thereafter. Barred forever are money claims
beyond three (3) years from the time the course
(sic) of action occurred. Respondent's formula on
transportation allowance which was deducted
from the 13th month pay is thus subject to this
prescriptive period, for purposes of computation of
differentials for the 13th month pay.
The claim under PD 451 is hereby dismissed for
lack of merit.
SO ORDERED.
(Annex " E " to Petition; Rollo, p. 55, 65-66).
Both parties appealed the decision of the Labor Arbiter. On
September 18, 1984, the respondent Commission disposed of the
appeal in the following manner:
RESPONSIVE TO THE FOREGOING, the
Decision of Labor Arbiter Ruben A. Aquino in the
instant case dated March 10, 1980 is hereby
Modified in the sense that complainant's claims
for legal holiday pay and 13th month pay are
likewise dismissed for lack of merit and the
dismissal of the claim under P.D. 451 is hereby
Affirmed en (sic) toto.

(Annex "A" to Petition: Rollo, p. 24, 35).

Petitioner's Motion for Reconsideration dated September 29,
1984 was denied for lack of merit on November 8, 1984. Before
this Court is the petition on certiorari filed by the Union assailing
the abovementioned decision of the Commissioner.
D.
FABROS CASE
This petition is in the nature of a class suit brought by petitioners
in behalf of the faculty members and other employees of more
than 4000 private schools nationwide. Petitioners seek to enjoin
the implementation of paragraphs 7 to 7.5 of MECS Order No. 5,
series of 1985 on the ground that the said order is null and void
for being contrary to Pres. Dec. No. 451 and the rulings of the
Supreme Court in the cases of University of the East v. UE
Faculty Association [G.R. No. L-57387, September 20, 1982, 117
SCRA 5541, University of Pangasinan Faculty Union v. University
of Pangasinan and NLRC [G.R. No. 63122, February 20, 1984,
127 SCRA 691 ], St. Louis University Faculty Club v. NLRC and
St. Louis University [G.R. No. 65585, September 28, 1984, 132
SCRA 380].
On September 11, 1982, Batas Pambansa Blg. 232 (Education
Act of 1982) was signed into law. On the matter of tuition and
other school fees of private schools, section 42 of said law
provides as follows:
Sec. 42. Tuition and other School Fees. Each
private School shall determine its rate of tuition
and other school fees or charges. The rates and
charges adopted by schools pursuant to this
provision shall be collectible, and their application
or use authorized subject to rules and regulations

promulgated by the Ministry of Education, Culture

and Sports. (Emphasis supplied).
Invoking section 42 of B.P. Blg. 232, among others, as its legal
basis, the then Minister of Education Jaime C. Laya promulgated
on April 1, 1985 the disputed MECS Order No. 25, s. 1985
entitled Rules and Regulations To Implement the Provisions of
B.P. Blg. 232. The Education Act of 1982, Relative to Student
Fees for School Year 1985-1986. The relevant portions of said
Order are quoted hereunder:
7. Application or Use of Tuition and
Other School Fees or Charges.
7.1. The proceeds from tuition fees and other
school charges as well as other income of each
school shall be treated as an institutional fund
which shall be administered and managed for the
support of school purposes strictly: Provided, That
for the purpose of generating additional financial
resources or income for the operational support
and maintenance of each school two or more
schools may pool their institutional funds, in whole
or in part, subject to the prior approval of their
respective governing boards.
7.2. Tuition fees shag be used to cover the
general expenses of operating the school in order
to allow it to meet the minimum standards
required by the Ministry or any other higher
standard, to which the school aspires. They may
be used to meet the costs of operation for
maintaining or improving the quality of
instruction/training/research through improved
facilities and through the payment of adequate
and competitive compensation for its faculty and

support personnel, including compliance with

mandated increases in personnel compensation
and/or allowance.
7.3. Tuition fees shag be used to cover minimum
and necessary costs including the following: (a)
compensation of school personnel such as
teaching or academic staff, school administrators,
academic non-teaching personnel, and nonacademic personnel, (b) maintenance and
operating expenses, including power and utilities,
rentals, depreciation, office supplies; and (c)
interest expenses and installment payments on
school debts.
7.4. Not less than sixty (60) percent of the
incremental tuition proceeds shall be used for
salaries or wages, allowances and fringe benefits
of faculty and support staff, including cost of living
allowance, imputed costs of contributed services,
thirteenth (13th) month pay, retirement fund
contributions, social security, medicare, unpaid
school personnel claims and payments as may be
prescribed by mandated wage orders. collective
bargaining agreements and voluntary employer
practices, Provided That increases in fees
specifically authorized for the purposes listed in
paragraph 4.3.3 hereof shall be used entirely for
those purposes. (Italics supplied).
7.5. Other student fees and charges as may be
approved, including registration, library,
laboratory, athletic, application, testing fees and
charges shall be used exclusively for the indicated
purposes, including (a) the acquisition and
maintenance of equipment, furniture and fixtures,
and buildings, (b) the payment of debt
amortization and interest charges on debt

incurred for school laboratory, athletic, or other

purposes, and (c) personal services and
maintenance and operating expenses incurred to
operate the facilities or services for which fees
and charges are collected.
The Petition prayed for the issuance of a temporary restraining
order which was granted by this Court after hearing. The
dispositive portion of the resolution dated May 28, 1985 reads as
follows:
After due consideration of the allegations of the
petition dated May 22, 1985 and the arguments of
the parties, the Court Resolved to ISSUE,
effective immediately and continuing until further
orders from this Court, a TEMPORARY
RESTRAINING ORDER enjoining the respondent
from enforcing or implementing paragraphs 7.4 to
7.5 of MECS Order No. 25, s. 1985, which provide
for the use and application of sixty per centum
(60%) of the increases in tuition and other school
fees or charges authorized by public respondent
for the school year 1985-1986 in a manner
inconsistent with section 3(a), P.D. No. 451,
(which allocates such 60% of the increases
exclusively "for increases in salaries or wages of
the members of the faculty and other employees
of the school concerned.") and directing
accordingly that such 60% of the authorized
increases shall be held in escrow by the
respective colleges and universities, i.e., shall be
kept intact and not disbursed for any purpose
pending the Court's resolution of the issue of the
validity of the aforementioned MECS Order in
question.
(Rollo, p. 21).

In the same resolution, the Philippine Association of Colleges and

Universities (PACU) was impleaded as respondent.
Subsequent to the issuance of this resolution, four (4) schools,
represented in this petition, moved for the lifting of the temporary
restraining order as to them. In separate resolutions, this Court
granted their prayers.
Ateneo de Manila University, De La Sale University (Taft Avenue)
and De La Salle University-South, through their respective
counsels, manifested that for the school year 1985-1986, tuition
fee increase was approved by the MECS and that on the basis of
Pres. Dec. No. 451, 60% of the tuition fee increases shall answer
for salary increase. However, a budgeted salary increase,
exclusive of living allowances and other benefits, was approved
for the same school year which when computed amounts to more
than the 60%.
This Court granted the motions in separate resolutions lifting the
temporary restraining order with respect to these schools in order
that they may proceed with the implementation of the general
salary increase for their employees.
In the case of St. Louis University, its Faculty Club, Administrative
Personnel Association and the University itself joined in a petition
seeking for leave that 49% of the increase in tuition and other
fees for school year 1985-1986 be released. Petitioners
manifested that the remaining balance shall continue to be held in
escrow by the University.
In a resolution dated January 28, 1986, the Court resolved as
follows:
Accordingly, the Temporary Restraining Order
issued by this Court on May 28, 1985 is hereby
ordered LIFTED with respect to Saint Louis
University of Baguio City in order that it may

proceed immediately with the implementation of

salary increases for its employees.
D.
BISCOCHO CASE
The Espiritu Santo Parochial School and the Espiritu Santo
Parochial School Faculty Association were parties to a labor
dispute which arose from a deadlock in collective bargaining. The
parties entered into conciliation proceedings. The union went on
strike after efforts at the conciliation failed. Subsequently, a return
to work agreement was forged between the parties and both
agreed to submit their labor dispute to the jurisdiction of the
Minister of Labor.
In the exercise of his power to assume jurisdiction, the Ministry of
Labor and Employment issued an Order dated April 14, 1986
which provides for the following:
IN CONSIDERATION OF ALL THE FOREGOING,
the Ministry hereby declares the strike staged by
the Union to be legal and orders the following:
a) the School to submit the pertinent record of
employment of Romualdo Noriego to the
Research and Information Division of the NLRC
for computation of his underpayment of wages
and for the parties to abide by the said
computation;
b) the School to submit all pertinent record of
collections of tuition fee increases for school year
(sic) 1982-1983, 1983-1984 and 1984-1985 to the
Research and Information Division of the NLRC
for proper computation and for equal distribution
of the amount to all employees and teachers

during the abovementioned school year (sic) as

their salary adjustment under P.D. 461;
c) the parties to wait for the final resolution of the
illegal dismissal (case) docketed as NLRC NCR
Case No. 5-1450-85 and to abide by the said
resolution;
d) to furnish the MECS a copy of this order for
them to issue the guidelines in the implementation
of PRODED Program;
e) the parties to execute a collective bargaining
agreement with an economic package equivalent
to 90% of the proceeds from tuition fee increases
for school year 1985-1986 and another 90% for
school year 1986-1987 and 85% for school year
1987-1988. The amount aforementioned shall be
divided equally to all members of the bargaining
unit as their respective salary adjustments. Such
other benefits being enjoyed by the members of
the bargaining unit prior to the negotiation of the
CBA shall remain the same and shall not be
reduced.
f) the School to deduct the amount equivalent to
ten (10%) per cent of the backwages payable to
all members of the bargaining unit as negotiation
fee and to deliver the same to the Union
Treasurer for proper disposition (Emphasis
supplied).
SO ORDERED.
(Rollo, pp. 16-17)

Pursuant to the said order, private respondent Union agreed to

incorporate in their proposed collective bargaining agreement
(CBA) with the School the following:

1986 at the Espiritu Santo Parochial School

Library.
(Rollo, pp. 3-4).

2) The Union and School Administration will

incorporate the following in their CBA 1) The computation of the tuition
fee increase shall be gross to
gross from which the
corresponding percentage of 90%
will be taken. The resulting
amount will be divided among
141.5 employees for 1985-86 and
132.5 employees for 1986-87.
1/2 of the resulting increase will be
added to basic and divided by
13.3 to arrive at monthly increase
in basic. The other 1/2 will be
divided by 12.3 to arrive at
monthly increase in living
allowance.

The herein petitioners, Jasmin Biscocho and 26 others, all

employees and faculty members of the respondent School, filed
the present petition for prohibition to restrain the implementation
of the April 14, 1986 Order of respondent Labor Minister as well
as the agreements arrived at pursuant thereto. They contend that
said Order and agreements affect their rights to the 60%
incremental proceeds under Pres. Dec. No. 451 which provide for
the exclusive application of the 60% incremental proceeds to
basic salary.
Acting on the petitioners' prayer, this Court immediately issued a
temporary restraining order on November 25, 1986 ". . . enjoining
the respondents from enforcing, implementing and proceeding
with the questioned order of April 14, 1986 and collective
bargaining agreement executed between respondents Union and
the School Administration in pursuance thereof." [Rollo, p. 20].
F.

xxx xxx xxx

VALMONTE CASE

4) xxx

This Petition was filed by parents with children studying at

respondent school, Espiritu Santo Parochial School to nullify the
Order dated April 14, 1986 issued by public respondent, then
Minister of Labor and Employment, specifically paragraphs (e)
and (f) thereof, quoted in the Biscocho case.

Upon request/demand of the Union, School win

deduct from backwages of managerial employees
and others outside the bargaining unit what Union
win charge its own members in the form of
attorney's fees, special assessment and union
dues/agency fee.
5) The signing of the CBA and payment of
backwages and others shall be on November 26,

The award contained in the said Order is the result of the

assumption of jurisdiction by the public respondent over a labor
dispute involving the private respondents school and faculty
association. The latter had earlier filed a notice of strike because
of a bargaining deadlock on the demands of its members for

additional economic benefits. After numerous conciliation

conferences held while the union was on strike, the parties
voluntarily agreed that the public respondent shall assume
jurisdiction over all the disputes between them. As to the subject
matter of the instant case, the public respondent found that the
latest proposals of the respondent school was to give 85% of the
proceeds from tuition fee increases for the school years to be
divided among the teachers and employees as salary
adjustments. What the respondent faculty association offered to
accept was a package of 95% for school year 1985-1986, 90%
for school year 1986- 1987. The respondent school offered to
strike the middle of the two positions, hence the Order
complained of by the petitioners [See Annex "A", Petition; Rollo,
pp. 9, 14-15; Comment of the Respondent Faculty Association:
Rollo, p. 26].

the law is as enacted by the lawmaking body. That is not the

same as saying what the law should be or what is the correct rule
in a given set of circumstances. It is not the province of the
judiciary to look into the wisdom of the law nor to question the
policies adopted by the legislative branch. Nor is it the business
of this Tribunal to remedy every unjust situation that may arise
from the application of a particular law. It is for the legislature to
enact remedial legislation if that be necessary in the premises.
But as always, with apt judicial caution and cold neutrality, the
Court must carry out the delicate function of interpreting the law,
guided by the Constitution and existing legislation and mindful of
settled jurisprudence. The Court's function is therefore limited,
and accordingly, must confine itself to the judicial task of saying
what the law is, as enacted by the lawmaking body.
FIRST SUB-ISSUE

II. RESOLUTION OF THE COMMON LEGAL ISSUE

This long-drawn controversy has sadly placed on the balance
diverse interests, opposed yet intertwined, and all deserving, and
demanding, the protection of the State. On one arm of the
balance hang the economic survival of private schools and the
private school system, undeniably performing a complementary
role in the State's efforts to maintain an adequate educational
system in the country. Perched precariously on the other arm of
the same balance is the much-needed financial uplift of
schoolteachers, extolled for all times as the molders of the minds
of youth, hence of every nation's future. Ranged with them with
needs and claims as insistent are other school personnel. And
then, anxiously waiting at the sidelines, is the interest of the
public at large, and of the State, in the continued availability to all
who desire it, high-standard education consistent with national
goals, at a reasonable and affordable price.
Amidst these opposing forces the task at hand becomes saddled
with the resultant implications that the interpretation of the law
would bear upon such varied interests. But this Court can not go
beyond what the legislature has laid down. Its duty is to say what

A. Whether or not allowances and other fringe

benefits of employees may be charged against
the 60% portion of the incremental proceeds
provided for in sec. 3(a) of Pres. Dec. No. 451.
1. Arguments raised in the Cebu Institute of Technology case
In maintaining its position that the salary increases it had paid to
its employees should be considered to have included the COLA,
Cebu Institute of Technology (CIT) makes reference to Pres. Dec.
No. 451 and its Implementing Rules. The line of reasoning of the
petitioner appears to be based on the major premise that under
said decree and rules, 60% of the incremental proceeds from
tuition fee increases may be applied to salaries, allowances and
other benefits of teachers and other school personnel. In support
of this major premise, petitioner cites various implementing rules
and regulations of the then Minister of Education, Culture and
Sports, to the effect that 60% of the incremental proceeds may be
applied to salaries, allowances and other benefits for members of
the faculty and other school personnel [Petition citing
Implementing Rules and Regulations of Pres. Dec. No. 451 of

various dates; Rollo, pp. 318-320]. Petitioner concludes that the

salary increases it had granted the CIT teachers out of the 60%
portion of the incremental proceeds of its tuition fee increases
from 1974-1980 pursuant to Pres. Dec. No. 451 and the MECS
implementing rules and regulations must be deemed to have
included the COLA payable to said employees for those years
[Rollo, pp. 911].
With leave of Court, the Philippine Association of Colleges and
Universities, filed its Memorandum as Intervenor in support of the
proposition that schools may pay the COLA to faculty members
and other employees out of the 60% of the increase in tuition
fees. In addition to the arguments already set forth in the
memorandum of the petitioner CIT, intervenor PACU attacks the
Decision of this Court in University of the East v. University of the
East Faculty Association et. all G.R. No. 57387 as "not doctrinal"
and inapplicable to the CIT case. The Court held in the UE case,
which was promulgated on September 30, 1982, during the
pendency of these cases, that:
... allowances and benefits should be chargeable
to the return to investment referred to in Sec. 3(a),
if the schools should happen to have no other
resources than incremental proceeds of
authorized tuition fee increases ... (See
Dispositive Portion of the Decision)
Intervenor PACU alleges that the aforecited U.E. decision does
not categorically rule that COLA and other fringe benefits should
not be charged against the 60% incremental proceeds of the
authorized tuition fee increase.
The Solicitor General, on the other hand, argues in support of the
Order of the public respondent that Pres. Dec. No. 451 allocates
the 60% proceeds of tuition fee increases exclusively for salary
increases of teachers and non- teaching supportive personnel of
the school concerned, and that the Decree does not provide that
said salary increases would take the place of the COLA [Rollo, p.

244-245]. He cites as authority for this stance, two (2)

memoranda of the then President dated June 6, 1978 and March
30, 1979 both of which provide that the 60% incremental
proceeds of tuition fee increases "shall be allocated for the
increase in the salaries of teachers and supportive personnel. "
Anent the U.E. case, the Solicitor General states that the
Supreme Court in deciding said case took note of the stand of the
Office of the President that the 60% incremental proceeds shall
be solely applied to salaries of faculty members and employees.
On August 7, 1986, considering the supervening events, including
the change of administration, that have transpired during the
pendency of these cases, the Court required the Solicitor General
to state whether or not he maintains the action and position taken
by his predecessor-in-office. In his Compliance with said
Resolution, the Solicitor General Manifested the position that:
a. If the tuition fee increase was collected during
the effectivity oil Presidential Decree No. 451,
60% thereof shall answer exclusively for salary
increase of school personnel. Other employment
benefits shall be covered by the 12% allocated for
return of investment, this is in accordance with the
ruling of this Honorable Court in University of the
East vs. U.E. Faculty Association, et. al (117
SCRA 554), ... and reiterated in University of
Pangasinan Faculty Union v. University of
Pangasinan, et. al. (127 SCRA 691) and St. Louis
Faculty Club u. NLRC (132 SCRA 380).
b. If the salary increase was collected during the
effectivity of Batas Pambansa Blg. (sic) 232, 60%
thereof shall answer not only for salary increase
of school personnel but also for other employment
benefits.
(Rollo, at pp. 513-514)

2. Arguments raised in the Divine Word College Case

Petitioner Divine Word College of Legazpi (DWC) advances the
theory that the COLA, 13th month pay and other personnel
benefits decreed by law, must be deemed chargeable against the
60% portion allocated for increase of salaries or wages of faculty
and all other school employees. In support of this stance,
petitioner points out that said personnel benefits are not included
in the enumeration of the items for which the balance (less 60%)
or 40% portion of the incremental proceeds may be alloted under
section 3(a) of Pres. Dec. No. 451 [Rollo, pp. 29-30. Petitioner
likewise cites the interpretation of the respondent Minister of
Education, Culture and Sports embodied in the Implementing
Rules and Regulations of P.D. 451, DEC Issuance, May 13,
1987; Rollo, p. 30], that the 60% incremental proceeds of
authorized tuition fee increases may be applied to increases in
emoluments and/or benefits for members of faculty, including
staff and administrative employees of the school as the valid
interpretation of the law, as against that made by the respondent
Deputy Minister of Labor in the assailed Order. If the latter
interpretation is upheld, petitioner would go as far as questioning
the constitutionality of Pres. Dec. No. 451 upon the ground that
the same discriminates against the petitioner and other private
schools as a class of employers. According to the petitioner, the
discrimination takes the form of requiring said class of employers
to give 60% of their profits to their employees in addition to the
COLA mandated by law, while other employers have to contend
only with salary increases and COLA [Petition; Rollo, p. 46].
With regard to the Decision of this Court in the U.E. case,
petitioner claims exemption therefrom upon the ground that the
Court's interpretation of a law cannot be applied retroactively to
parties who have relied upon the previous administrative
interpretation which has not been declared invalid or
unconstitutional [Petition; Rollo, pp. 50-51 1. Petitioner further
argues on this point that if the court had intended to invalidate the
MECS interpretation of the Decree, it should have positively
stated so in the Decision [Petition; Rollo, p. 50].

The Comment of the public respondents cite as settled

jurisprudence applicable to the case at bar, the ruling of this Court
in the U.E. case, supra, which was reiterated in the subsequent
cases of University of Pangasinan Faculty Union v. University of
Pangasinan et all and St. Louis Faculty Club v. NLRC, et al.
Public respondents Deputy Minister of Labor and Employment
and Regional Director of the MOLE (Region V) likewise attack the
validity of the Revised Implementing Rules and Regulations of
Pres. Dec. No. 451 cited by the petitioner insofar as said rules
direct the allotment of the 60% of incremental proceeds from
tuition fee hikes for retirement plan, faculty development and
allowances. They argue that said rules and regulations were
invalid for having been promulgated in excess of the rule-making
authority of the then Minister of Education under Pres. Dec. No.
451 which mandates that the 60% of incremental proceeds from
tuition fee hikes should be allotted solely for salary increases
[Comment; Rollo, pp. 184-185]. Finally, with respect to the issue
on the allege unconstitutionality of Pres. Dec. No. 451, the public
respondents posit that a legislation (such as Pres. Dec. No. 451)
which affects a particular class does not infringe the constitutional
guarantee of equal protection of the law as long as it applies
uniformly and without discrimination to everyone of that class
[Comment; Rollo, p. 14].
3. Arguments raised in the Far Eastern University case
It is the petitioner's contention that in respect of Pres. Dec. No.
451, the decision of the NLRC is a defiance of the rulings of this
Court in the cases of University of the East v. U.E. Faculty,
Association et al. and of University of Pangasinan Faculty Union
v. University of Pangasinan and NLRC (supra). The Union
submits that monetary benefits, other than increases in basic
salary, are not chargeable to the 60% incremental proceeds.
The respondent University in its Comment dated June 13, 1982
refers to Article 97(f) of the Labor Code which provides a
definition of the term "wages" to support its position that "salaries

or wages" as used in Pres. Dec. No. 451 should be interpreted to

include other benefits in terms of money.
As mentioned in the Cebu Institute of Technology case, the
Solicitor General filed its Compliance with this Court's resolution
dated August 7, 1986 requiring him to manifest whether public
respondents maintain the position they have taken in these
consolidated cases. The resolution of September 25, 1986
required petitioners to Comment on said Compliance.
The Comment dated December 6, 1986 was received by this
Court after petitioner Union was required to show cause why no
disciplinary action should be taken against them for failure to
comply earlier. The Union agreed with the position taken by the
Solicitor General that under Pres. Dec. No. 451, 60% of the
tuition fee increases, shall answer exclusively for salary increase.
However, it expressed disagreement with the opinion that during
the effectivity of B.P. Blg. 232, the 60% ncremental proceeds
shall answer not only for salary increases but also for other
employment benefits. The Union argues that whereas "Pres. Dec.
No. 451 is a law on a particular subject, viz., increase of tuition
fee by educational institutions and how such increase shall be
allocated B.P. Blg. 232 is not a law on a particular subject of
increase of tuition fee . . . ; at most it is a general legislation on
tuition fee as it touches on such subject in general, " [Comment
on Compliance; Rollo, p. 376], Suppletory to its argument that
B.P. Blg. 232 did not impliedly repeal Pres. Dec. No. 451, the
Union also invokes the principle that a special or particular law
cannot be repealed by a general law.
RESOLUTION OF THE FIRST SUB-ISSUE
This Court has consistently held, beginning with the University of
the East case, that if the schools have no resources other than
those derived from tuition fee increases, allowances and benefits
should be charged against the proceeds of tuition fee increases
which the law allows for return on investments under section 3(a)
of Pres. Dec. No. 451, therefore, not against the 60% portion

allocated for increases in salaries and wages (See 117 SCRA at

571). This ruling was reiterated in the University of
Pangasinan case and in the Saint Louis Universitycase.
There is no cogent reason to reverse the Court's ruling in the
aforecited cases. Section 3(a) of Pres. Dec. No. 451 imposes
among the conditions for the approval of tuition fee increases, the
allocation of 60% per cent of the incremental proceeds thereof for
increases in salaries or wages of school personnel and not for
any other item such as allowances or other fringe benefits. As
aptly put by the Court in University of Pangasinan Faculty Union
v. University of Pangasinan, supra:
... The sixty (60%) percent incremental proceeds
from the tuition increase are to be devoted entirely
to wage or salary increases which means
increases in basic salary. The law cannot be
construed to include allowances which are
benefits over and above the basic salaries of the
employees. To charge such benefits to the 60%
incremental proceeds would be to reduce the
increase in basic salary provided by law, an
increase intended also to help the teachers and
other workers tide themselves and their families
over these difficult economic times. [Italics
supplied] (127 SCRA 691, 702).
This interpretation of the law is consistent with the legislative
intent expressed in the Decree itself, i.e., to alleviate the sad
plight of private schools and that of their personnel wrought by
slump in enrollment and increasing operational costs on the part
of the schools, and the increasing costs of living on the part of the
personnel (Preamble, Pres. Dec. No. 451). While coming to the
aid of the private school system by simplifying the procedure for
increasing tuition fees, the Decree imposes as a condition for the
approval of any such increase in fees, the allocation of 60% of the
incremental proceeds thereof, to increases in salaries or wages of
school personnel. This condition makes for a quid pro quo of the

approval of any tuition fee hike by a school, thereby assuring the

school personnel concerned, of a share in its proceeds. The
condition having been imposed to attain one of the main
objectives of the Decree, which is to help the school personnel
cope with the increasing costs of living, the same cannot be
interpreted in a sense that would diminish the benefit granted said
personnel.
In the light of existing laws which exclude allowances from the
basic salary or wage in the computation of the amount of
retirement and other benefits payable to an employee, this Court
will not adopt a different meaning of the terms "salaries or wages"
to mean the opposite, i.e. to include allowances in the concept of
salaries or wages.
As to the alleged implementing rules and regulations promulgated
by the then MECS to the effect that allowances and other benefits
may be charged against the 60% portion of the proceeds of
tuition fee increases provided for in Section 3(a) of Pres. Dec. No.
45 1, suffice it to say that these were issued ultra vires, and
therefore not binding upon this Court.
The rule-making authority granted by Pres. Dec. No. 451 is
confined to the implementation of the Decree and to the
imposition of limitations upon the approval of tuition fee
increases, to wit:
SEC. 4. Rules and Regulations. The Secretary
of Education and Culture is hereby authorized,
empowered and directed to issue the requisite
rules and regulations for the effective
implementation of this Decree. He may, in
addition to the requirements and limitations
provided for under Sections 2 and 3 hereof,
impose other requirements and limitations as he
may deem proper and reasonable.

The power does not allow the inclusion of other items in addition
to those for which 60% of the proceeds of tuition fee increases
are allocated under Section 3(a) of the Decree.
Rules and regulations promulgated in accordance with the power
conferred by law would have the force and effect of law [Victorias
Milling Company, Inc. v. Social Security Commission, 114 Phil.
555 (1962)] if the same are germane to the subjects of the
legislation and if they conform with the standards prescribed by
the same law [People v. Maceren, G.R. No. L-32166, October 18,
1977, 79 SCRA 450]. Since the implementing rules and
regulations cited by the private schools adds allowances and
other benefits to the items included in the allocation of 60% of the
proceeds of tuition fee increases expressly provided for by law,
the same were issued in excess of the rule-making authority of
said agency, and therefore without binding effect upon the courts.
At best the same may be treated as administrative
interpretations of the law and as such, they may be set aside by
this Court in the final determination of what the law means.
SECOND SUB-ISSUE
B. Whether or not allowances and other fringe benefits may be
charged against the 60% portion of the incremental proceeds of
tuition fee increases upon the effectivity of the Education Act of
1982 (B.P. Blg. 232).
1. Arguments raised in the Fabros case
In assailing MECS Order No. 25, s. 1985, petitioners argue that
the matter of allocating the proceeds from tuition fee increases is
still governed by Pres. Dec. No. 451. It is their opinion that
section 42 of B.P. Blg. 232 did not repeal Pres. Dec. No. 451 for
the following reasons: first, there is no conflict between section 42
of B.P. Blg. 232 and section 3(a) of Pres. Dec. No. 451 or any
semblance of inconsistency to deduce a case of a repeal by
implication: second, Pres. Dec. No. 451 is a specific law upon a

particular subject-the purposes and distribution of the incremental

proceeds of tuition fee increases, while B.P. Blg. 232 is a general
law on the educational system; as such, a specific law is not
repealed by a subsequent general law in the absence of a clear
intention; and third, Pres. Dec. No. 451 is still the only law on the
subject of tuition fee increases there being no prescription or
provision in section 42 of B.P. Blg. 232 or elsewhere in the law.
They furthermore aver that the disputed MECS Order which
imposed additional burdens against the 60% incremental
proceeds of tuition fee increases are not provided in either Pres.
Dec. No. 451 or B.P. Blg. 232. The logical result as intimated by
petitioners is that the inclusion of paragraph 7.4 and related
paragraphs 7 to 7.3 and 7.5 in the questioned MECS order
contravenes the statutory authority granted to the public
respondent, and the same are therefore, void.
Respondent PACU takes the contrary view contending that
MECS Order No. 25, s. 1985, complies with the mandate of
section 42 of B.P. Blg. 232 which law had already repealed Pres.
Dec. No. 451. PACU notes that theUniversity of the East case
invoked by petitioners is not applicable because the issue in that
case does not involve the effect of B.P. Blg. 232 on Pres. Dec.
No. 451.
The Solicitor General, representing the public respondent, after
giving a summary of the matters raised by petitioner and
respondent PACU, points out that the decisive issue in this case
is whether B.P. Big. 232 has repealed Pres. Dec. No. 451
because on the answer to this question depends the validity of
MECS Order No. 25, s. 1985. Public respondent holds the view
consistent with that of PACU on the matter of B.P. Blg. 232
having repealed Pres. Dec. No. 451. To support this contention,
the Solicitor General compared the respective provisions of the
two laws to show the inconsistency and incompatibility which
would result in a repeal by implication.
RESOLUTION OF THE SECOND SUB-ISSUE

On the matter of tuition fee increases section 42 of B.P. Blg. 232

provides:
SEC. 42. Tuition and Other School Fees. Each
private school shall determine its rate of tuition
and other school fees or charges. The rates and
charges adopted by schools pursuant to this
provision shall be collectible and their application
or use authorized, subject to rules and regulations
promulgated by the Ministry of Education, Culture
and Sports. (Emphasis supplied).
The enactment of B.P. Blg. 232 and the subsequent issuance of
MECS Order No. 25, s. 1985 revived the old controversy on the
application and use of the incremental proceeds from tuition fee
increases. As can be gleaned from the pleadings and arguments
of the parties in these cases, one side, composed of the teachers
and other employees of the private schools, insist on the
applicability of section 3(a) of Pres. Dec. No. 451 as interpreted
arid applied in the University of the East, University of
Pangasinan and St Louis University cases, while the private
schools uphold the view that the matter of allocating the
incremental proceeds from tuition fee increases is governed by
section 42 of B.P. Blg. 232 as implemented by the MECS Rules
and Regulations. As stated, the latter's argument is premised on
the allegation that B.P. Blg. 232 impliedly repealed Pres. Dec. No.
451.
On the second sub-issue, therefore, this Court upholds the view
taken by the Solicitor General in the Fabros case, that the
decisive issue is whether B.P. Blg. 232 has repealed Pres. Dec.
No. 451.
In recognition of the vital role of private schools in the country's
educational system, the government has provided measures to
regulate their activities. As early as March 10, 1917, the power to
inspect private schools, to regulate their activities, to give them
official permits to operate under certain conditions and to revoke

such permits for cause was granted to the then Secretary of

Public Instruction by Act No. 2706 as amended by Act No. 3075
and Commonwealth Act No. 180. Republic Act No. 6139, enacted
on August 31, 1970, provided for the regulation of tuition and
other fees charged by private schools in order to discourage the
collection of exorbitant and unreasonable fees. In an effort to
simplify the "cumbersome and time consuming" procedure
prescribed under Rep. Act No. 6139 and "to alleviate the sad
plight of private schools," Pres. Dec. No. 451 was enacted on
May 11, 1974. While this later statute was being implemented,
the legislative body envisioned a comprehensive legislation which
would introduce changes and chart directions in the educational
system, hence, the enactment of B.P. Blg. 232. What then was
the effect of B.P. Blg. 232 on Pres. Dec. No. 451?

proceeds of the tuition fee increases; such power is delegated to

the Ministry of Education and Culture under B.P. Blg.
232.Second, Pres. Dec. No. 451 limits the application or use of
the increment to salary or wage increase, institutional
development, student assistance and extension services and
return on investment, whereas B.P. Blg. 232 gives the MECS
discretion to determine the application or use of the
increments. Third, the extent of the application or use of the
increment under Pres. Dec. No. 451 is fixed at the predetermined percentage allocations; 60% for wage and salary
increases, 12% for return in investment and the balance of 28%
to institutional development, student assistance and extension
services, while under B.P. Blg. 232, the extent of the allocation or
use of the increment is likewise left to the discretion of the MECS.

The Court after comparing section 42 of B.P. Blg. 232 and Pres.
Dec. No. 451, particularly section 3(a) thereof, finds evident
irreconcilable differences.

The legislative intent to depart from the statutory limitations under

Pres. Dec. No. 451 is apparent in the second sentence of section
42 of B.P. Blg. 232. Pres. Dec. No. 451 and section 42 of B.P.
Blg. 232 which cover the same subject matter, are so clearly
inconsistent and incompatible with each other that there is no
other conclusion but that the latter repeals the former in
accordance with section 72 of B.P. Blg. 232 to wit:

Under Pres. Dec. No. 451, the authority to regulate the imposition
of tuition and other school fees or charges by private schools is
lodged with the Secretary of Education and Culture (Sec. 1),
where section 42 of B.P. Blg. 232 liberalized the procedure by
empowering each private school to determine its rate of tuition
and other school fees or charges.
Pres. Dec. No. 451 provides that 60% of the incremental
proceeds of tuition fee increases shall be applied or used to
augment the salaries and wages of members of the faculty and
other employees of the school, while B.P. Blg. 232 provides that
the increment shall be applied or used in accordance with the
regulations promulgated by the MECS.
A closer look at these differences leads the Court to resolve the
question in favor of repeal. As pointed out by the Solicitor
General, three aspects of the disputed provisions of law support
the above conclusion. First, the legislative authority under Pres.
Dec. No. 451 retained the power to apportion the incremental

Sec. 72. Repealing clause. All laws or parts

thereof inconsistent with any provision of this Act
shall be deemed repealed or modified, as the
case may be.
Opinion No. 16 of the Ministry of Justice dated January 29, 1985,
quoted below, supports the above conclusion:
Both P.D. No. 451 and B.P. Blg. 232 deal with the
imposition of tuition and other school fees or
charges and their use and application, although
the latter is broader in scope as it covers other
aspects of the education system. We note
substantial differences or inconsistencies between
the provisions of the two laws. P.D. No. 451

prescribes certain limitations in the increase of

tuition and other school fees and their application,
whereas the latter law, B.P. Blg. 232 s silent on
the matter. Under P.D. 451, rates of tuition/school
fees need prior approval of the Secretary of
Education, Culture (now Minister of Education,
Culture and Sports), who also determines the
reasonable rates for new school fees, whereas
under B.P. Blg. 232, each private school
determines its rate of tuition and other school fees
or charges. P.D. No. 451 authorizes the Secretary
of Education and Culture to issue requisite rules
and regulations to implement the said Decree and
for that purpose, he is empowered to impose
other requirements and limitations as he may
deem proper and reasonable in addition to the
limitations prescribed by the Decree for increases
in tuition fees and school charges, particularly, the
limitations imposed in the allocation of increases
in fees and charges, whereas under B.P. Blg.
232, the collection and application or use of rates
and charges adopted by the school are subject to
rules and regulations promulgated by the Ministry
of Education, Culture and Sports without any
mention of the statutory limitations on the
application or use of the fees or charges. The
authority granted to private schools to determine
its rates of tuition and unconditional authority
vested in the Ministry of Education, Culture and
Sports to determine by rules and regulations the
collection and application or use of tuition or fees
rates and charges under B.P. Big. 232 constitute
substantial and irreconcilable incompatibility with
the provisions of P.D. No. 451, which should be
for that reason deemed to have been abrogated
by the subsequent legislation.

Moreover, B.P. Blg. 232 is a comprehensive

legislation dealing with the establishment and
maintenance of an integrated system of education
and as such, covers the entire subject matter of
the earlier law, P.D. No. 451. The omission of the
limitations or conditions imposed in P.D. No. 451
for increases in tuition fees and school charges is
an indication of a legislative intent to do away with
the said limitations or conditions.
(Crawford, supra, p. 674). It has also been said
that
an act which purports to set out in
full all that it intends to contain,
operates as a repeal of anything
omitted which was contained in
the old act and not included in the
amendatory act." (People vs.
Almuete 69 SCRA 410; People vs.
Adillo 68 SCRA 90) (Ministry of
Justice, Op. No. 16, s. 1985).
Having concluded that under B.P. Big. 232 the collection and
application or use of tuition and other school fees are subject only
to the limitations under the rules and regulations issued by the
Ministry, the crucial point now shifts to the said implementing
rules.
The guidelines and regulations on tuition and other school fees
issued after the enactment of B.P. Blg. 232 consistently permit
the charging of allowances and other benefits against the 60%
incremental proceeds. Such was the tenor in the MECS Order
No. 23, s. 1983; MECS Order No. 15, s. 1984; MECS Order No.
25, s. 1985; MECS Order No. 22, s. 1986; and DECS Order No.
37, s. 1987. The pertinent portion of the latest order reads thus:
In any case of increase at least sixty percent
(60%) of the incremental proceeds should be

allocated for increases in or provisions for salaries

or wages, allowances and fringe benefits of
faculty and other staff, including accruals to cost
of living allowance, 13th month pay, social
security, medicare and retirement contribution and
increases as may be provided in mandated wage
orders, collective bargaining agreements or
voluntary employer practices.
The validity of these orders, particularly MECS Order No. 25, s.
1985, is attacked on the ground that the additional burdens
charged against ". . . the 60% of the proceeds of the increases in
tuition fees constitute both as [sic] an excess of statutory authority
and as (sic) a substantial impairment of the accrued, existing and
protected rights and benefits of the members of faculty and nonacademic personnel of private schools." Memorandum for
Petitioners, Rollo, p. 1911. Petitioners alleged that these
additional burdens under the MECS Order are not provided in the
law itself, either in section 42 of B.P. Blg. 232 or section 3(a) of
Pres. Dec. No. 451, except increases in salaries in the latter
provision.
Section 42 of B.P. Blg. 232 grants to the Minister of Education
(now Secretary of Education) rule-making authority to fill in the
details on the application or use of tuition fees and other school
charges. In the same vein is section 70 of the same law which
states:
SEC. 70. Rule-making Authority. The Minister
of Education, Culture and Sports charged with the
administration and enforcement of this Act, shall
promulgate the necessary implementing rules and
regulations.
Contrary to the petitioners' insistence that the questioned rules
and regulations contravene the statutory authority granted to the
Minister of Education, this Court finds that there was a valid
exercise of rule-making authority.

The statutory grant of rule-making power to administrative

agencies like the Secretary of Education is a valid exception to
the rule on non-delegation of legislative power provided two
conditions concur, namely: 1) the statute is complete in itself,
setting forth the policy to be executed by the agency, and 2) said
statute fixes a standard to which the latter must conform [Vigan
Electric Light Co., Inc. v. Public Service Commission, G.R. No. L19850, January 30, 1964, and Pelaez v. Auditor General, G. R.
No. L-23825, December 24, 1965].
The Education Act of 1982 is "an act providing for the
establishment and maintenance of an integrated system for
education " with the following basic policy:
It is the policy of the State to establish and
maintain a complete, adequate and integrated
system of education relevant to the goals of
national development. Toward this end, the
government shall ensure, within the context of a
free and democratic system, maximum
contribution of the educational system to the
attainment of the following national development
goals:
1. To achieve and maintain an accelerating rate of
economic development and social progress;
2. To assure the maximum participation of all the
people in the attainment and enjoyment of the
benefits of such growth; and
3. To achieve and strengthen national unity and
consciousness and preserve, develop and
promote desirable cultural, moral and spiritual
values in a changing world.

The State shall promote the right of every

individual to relevant quality education, regardless
of sex, age, creed, socioeconomic status, physical
and mental conditions, racial or ethnic origin,
political or other affiliation. The State shall
therefore promote and maintain equality of access
to education as well as the enjoyment of the
benefits of education by all its citizens.

Thus, in the recent case of Tablarin et al. v. Hon. Gutierrez, et al.

(G.R. No. 78164, July 31, 1987], the Court held that the
necessary standards are set forth in Section 1 of the 1959
Medical Act, i.e., "the standardization and regulation of medical
education" as well as in other provisions of the Act. Similarly, the
standards to be complied with by Minister of Education in this
case may be found in the various policies set forth in the
Education Act of 1982.

The State shall promote the right of the nation's

cultural communities in the exercise of their right
to develop themselves within the context of their
cultures, customs, traditions, interests and belief,
and recognizes education as an instrument for
their maximum participation in national
development and in ensuring their involvement in
achieving national unity. (Section 3, Declaration of
Basic Policy).

MECS Order No. 25, s. 1985 touches upon the economic

relationship between some members and elements of the
educational community, i.e., the private schools and their faculty
and support staff. In prescribing the minimum percentage of
tuition fee increments to be applied to the salaries, allowances
and fringe benefits of the faculty and support staff, the Act affects
the economic status and the living and working conditions of
school personnel, as well as the funding of the private schools.

With the foregoing basic policy as well as, specific policies clearly
set forth in its various provisions, the Act is complete in itself and
does not leave any part of the policy-making, a strictly legislative
function, to any administrative agency.
Coming now to the presence or absence of standards to guide
the Minister of Education in the exercise of rule-making power,
the pronouncement in Edu v. Ericta [G.R. No. L-32096, October
24, 1970, 35 SCRA 481, 497] is relevant:
The standard may be either expressed or implied.
If the former, the non-delegation objection is
easily met. The standard though does not have to
be spelled out specifically. It could be implied from
the policy and purpose of the act considered as a
whole. In the Reflector Law, clearly the legislative
objective is public safety. What is sought to be
attained as in Calalang v. Williams is "safe transit
upon the roads." (Italics supplied).

The policies and objectives on the welfare and interests of the

various members of the educational community are found in
section 5 of B.P. Blg. 232. which states:
SEC. 5. Declaration of Policy and Objectives. It
is likewise declared government policy to foster,
at all times, a spirit of shared purposes and
cooperation among the members and elements of
the educational community, and between the
community and other sectors of society, in the
realization that only in such an atmosphere can
the true goals and objectives of education be
fulfilled.
Moreover, the State shall:
1. Aid and support the natural right and duty of
parents in the rearing of the youth through the
educational system.

2. Promote and safeguard the welfare and

interests of the students by defining their rights
and obligations, according them privileges, and
encouraging the establishment of sound
relationships between them and the other
members of the school community.

Given the abovementioned policies and objectives, there are

sufficient standards to guide the Minister of Education in
promulgating rules and regulations to implement the provisions of
the Education Act of 1982, As in the Ericta and Tablarin cases,
there is sufficient compliance with the requirements of the nondelegation principle.

3. Promote the social and economic status of an

school personnel, uphold their rights, define their
obligations, and improve their living and working
conditions and career prospects.

THIRD SUB-ISSUE

4. Extend support to promote the viability of those

institutions through which parents, students and
school personnel seek to attain their educational
goals.
On the other hand, the policy on the funding of schools in
general, are laid down in section 33:
SEC. 33. Declaration of Policy. It is hereby
declared to be a policy of the State that the
national government shall contribute to the
financial support of educational programs
pursuant to the goals of education as declared in
the Constitution. Towards this end, the
government shall:
1. Adopt measures to broaden access to
education through financial assistance and other
forms of incentives to schools, teachers, pupils
and students; and
2. Encourage and stimulate private support to
education through, inter alia, fiscal and other
assistance measures.

C. Whether or not schools and their employees

may enter into a collective bargaining agreement
allocating more than 60% of said incremental
proceeds for salary increases and other benefits
of said employees.
1. Arguments raised in the Biscocho and Valmonte cases
Assailed by the petitioners in the Biscocho and
the Valmonte cases is the Order of the respondent Minister of
Labor directing the execution of a CBA between the school and
the respondent Espiritu Santo Parochial School Faculty
Association which provides for an economic package equivalent
to 90% of the proceeds of tuition fee increases for school year
1985-1986, another 90% for school year 1986-1987 and 85% for
school year 1987-1988. Pursuant to said Order, petitioners in
the Biscocho case alleged that the parties had agreed to
incorporate in their CBA a provision which allocates one-half (1/2)
of the 90% portion of the proceeds or 45% to increases in the
monthly basic salaries and the other one-half (1/2) or 45% to
increases in monthly living allowance.
The petitioners in the two cases seek the nullification of the
MOLE Order for exactly opposite reasons. In theBiscocho case,
the controversy springs from what petitioners perceive to be a
diminution of the benefits to be received by the school employees
insofar as the CBA allocates only 45% for salary increases
instead of 60%, which petitioners claim to be the portion set aside

by Pres. Dec. No. 451 for that purpose. Parenthetically, the case
questions the allocation of the remaining 45% of the 90%
economic package under the CBA, to allowances. Stripped down
to its essentials, the question is whether or not the 90% portion of
the proceeds of tuition fee increases alloted for the economic
package may be allocated for both salary increases and
allowances.
On the other hand, petitioners in the Valmonte case believe that
the MOLE cannot order the execution of a CBA which would
allocate more than 60% of the proceeds of tuition fee increases
for salary increases of school employees. Furthermore,
petitioners question the authority of the then Minister of Labor and
Employment to issue the aforequoted Order insofar as this
allocates the tuition fee increases of the respondent private
school. According to them, only the Minister of Education, Culture
and Sports has the authority to promulgate rules and regulations
on the use of tuition fees and increases thereto, pursuant to the
provisions of B.P. Blg. 232. They further argue that the assailed
Order collides with the provisions of Pres. Dec. No. 451 insofar as
it allocates 90% of the tuition fee increases for salary adjustments
of the members of the bargaining unit which exceeds the 60% of
the said increases allocated by the Decree for the same purpose.
Before delving further into the questions raised, this Court notes
that in the Valmonte case, respondent Minister and respondent
Faculty Association raise a procedural objection to the filing of the
Petition: the standing of the petitioners to bring this suit. Both
respondents decry the petitioners' lack of the interest required in
Rule 65 of the Rules of Court for the filing of the Petition for
certiorari and Prohibition, since the latter do not appear to be in
any way aggrieved by the enforcement of the Order. Petitionersparents did not even participate in the proceedings below which
led to the issuance of the assailed Order.
This Court finds merit in the respondents' objection. Under Rule
65 of the Rules of Court (Secs. 1 and 2), only a person aggrieved
by the act or proceeding in question may file a petition for

certiorari and/or prohibition. TheValmonte petition fails to indicate

how the petitioners would be aggrieved by the assailed Order. It
appears that the petitioners are not parties and never at any time
intervened in the conciliation conferences and arbitration
proceedings before the respondent Minister. The parties therein,
who stand to be directly affected by the Order of the respondent
Minister, do not contest the validity of said Order. The petition
does not even state that petitioners act as representative of the
parents' association in the School or in behalf of other parents
similarly situated.
If indeed, petitioners Valmonte and Badiola are aggrieved by the
said Order, they should have intervened and moved for a
reconsideration of respondent Minister's Order before filing the
instant petition. Petitioners failed to show that the case falls under
any one of the recognized exceptions to the rule that a motion for
reconsideration should first be availed of before filing a petition for
certiorari and prohibition.
In view of the foregoing, the resolution of the third sub-issue will
be based mainly on the arguments raised in theBiscocho case.
RESOLUTION OF THE THIRD SUB-ISSUE
The Biscocho case involves the issue on the allocation of the
incremental proceeds of the tuition fee increases applied for by
the respondent Espiritu Santo Parochial School for school years
1985-1986, 1986-1987, and 1987-1988. With the repeal of Pres.
Dec. No. 451 by B.P. Blg. 232, the allocation of the proceeds of
any authorized tuition fee increase must be governed by specific
rules and regulations issued by the Minister (now Secretary) of
Education pursuant to his broadened rule making authority under
section 42 of the new law. Thus, insofar as the proceeds of the
authorized tuition fee increases for school year 1985-1986 are
concerned, the allocation must conform with the pertinent section
of MECS Order No. 25, s. 1985, to wit:

7. Application or Use of Tuition and Other School

Fees or Charges.
xxx xxx xxx
7.4. Not less than sixty (60) percent of the
incremental tuition proceeds shall be used for
salaries or wages, allowances and fringe benefits
of faculty and support staff, including cost of living
allowance, imputed costs of contributed services,
thirteenth (13th) month pay, retirement fund
contributions, social security, medicare, unpaid
school personnel claims, and payments as may
be prescribed by mandated wage orders,
collective bargaining agreements and voluntary
employer practices:Provided, That increases in
fees specifically authorized for the purposes fisted
in paragraph 4.3.3 hereof shall be used entirely
for those purposes.
xxx xxx xxx
With regard to the proceeds of the tuition fee increases for school
year 1986-1987, the applicable rules are those embodied in
MECS Order No. 22, s. 1986 which made reference to MECS
Order No. 25, s. 1985, the pertinent portion of which is quoted
above.
Finally, as to the proceeds of the tuition fee increases for school
year 1987- 1988, DECS Order No. 37, s. 1987 must apply:
c. Allocation of lncremental Proceeds
(1) In any case of increase at least sixty percent
(60%) of the incremental proceeds should be
allocated for increases in or provisions for salaries
or wages, allowances and fringe benefits of

faculty and other staff, including accruals to cost

of living allowance, 13th month pay, social
security, medicare and retirement contributions
and increases as may be provided in mandated
wage orders, collective bargaining agreements or
voluntary employer practices.
(2) Provided, that in all cases of increase the
allocation of the incremental proceeds shall be
without prejudice to the Supreme Court cases on
the interpretation and applicability of existing
legislations on tuition and other fees especially on
the allocation and use of any incremental
proceeds of tuition and other fees increases.
(Emphasis supplied).
xxx xxx xxx
Based on the aforequoted MECS and DECS rules and
regulations which implement BP Blg. 232, the 60% portion of the
proceeds of tuition fee increases may now be allotted for both
salaries and allowances and other benefits. The 60% figure is,
however, a minimum which means that schools and their
employees may agree on a larger portion, or in this case, as
much as 90% for salaries and allowances and other benefits. This
is not in anyway to allow diminution or loss of the portion allotted
for institutional development of the school concerned. Thus,
paragraph 7.5 of MECS Order No. 25, series of 1985 specifically
provides that other student fees and charges like registration,
library, laboratory or athletic fees shall be used exclusively for the
purposes indicated.
III RESOLUTION OF THE SPECIFIC ISSUES
CEBU INSTITUTE OF TECHNOLOGY CASE
Petitioner assigns three other errors in the petition for certiorari:

1
RESPONDENT MINISTER OF THE MINISTRY OF LABOR AND
EMPLOYMENT COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO A DENIAL OF DUE PROCESS OF LAW IN
DIRECTLY ISSUING THE ORDER DATED SEPTEMBER
29,1981 WITHOUT CONDUCTING A FORMAL INVESTIGATION
AND ARBITRATION PROCEEDINGS.
2
PUBLIC RESPONDENT ERRED IN NOT DECLARING THAT
PETITIONER IS EXEMPTED AND/OR NOT OBLIGED TO PAY
SERVICE INCENTIVE LEAVE.
3
PUBLIC RESPONDENT ERRED IN NOT DECLARING THAT
PRIVATE RESPONDENTS' CLAIMS FOR COLA AND SERVICE
INCENTIVE LEAVE ARE FULLY BARRED BY LACHES AND/OR
EXTINGUISHED BY PRESCRIPTION.
1. Petitioner assails the Order of the Minister of Labor on the
ground that the same was issued without the benefit of a hearing
and was merely based on the report of the labor management
committee which is allegedly without power to pass upon the
issues raised. On this premise, petitioner claims that it was
denied its right to due process.
Petitioner's contention is without merit. The Labor Management
Committee was empowered to investigate the complaint against
the petitioner for non-payment of the cost of living allowance, 13th
month pay and service incentive leave from 1974-1981 [Annex
"F"; Rollo, p. 37]. In the committee, petitioner was represented by
its counsel, registrar and assistant accountant and in the
conferences that were held, the representatives of the petitioner
were present. Furthermore, the petitioner's position paper

submitted to the committee reflects that in all the deliberations, it

was never denied the right to present evidence and be heard on
all the issues raised, particularly to demonstrate that it had
complied with the various COLA, 13th month pay and service
incentive leave decrees. The evidence presented during the
conferences and the position paper of the parties were made the
basis of the committee's report and recommendation which in
turn became the basis of the order of the Minister of Labor
directing the petitioner to pay the complainants their COLA and
service incentive leave benefits.
It could not therefore be contended that the petitioner was
deprived of his right to be heard when it appears on the record
that it was permitted to ventilate its side of the issues. There was
sufficient compliance with the requirements of due process. In the
face of the well- settled principle that administrative agencies are
not strictly bound by the technical rules of procedure, this Court
dismisses the petitioner's claim that formal investigative and
arbitration proceedings should be conducted. "While a day in
court is a matter of right in judicial proceedings, in administrative
proceedings it is otherwise since they rest upon different
principles." [Cornejo v. Gabriel and Provincial Board of Rizal, 41
Phil. 188 (1920); Tajonera v. Lamaroza, G.R. Nos. L-48907 and
L-49035, December 19,1981, 110 SCRA 438].
2. Going now to the matter of service incentive leave benefits,
petitioner claims that private respondents are engaged by the
school on a contract basis as shown by the individual teachers
contract which defines the nature, scope and period of their
employment; hence, they are not entitled to the said benefit
according to Rule V of the Implementing Rules and Regulations
of the Labor Code to wit:
Sec. 1. Coverage. This rule [on Service
Incentive Leave] shall apply to all employees,
except:
xxx xxx xxx

(d) Field personnel and other employees whose

performance is unsupervised by the employer
including those who are engaged on task or
contract basis, purely commission basis, or those
who are paid in a fixed amount for performing
work irrespective of the time consumed in the
performance thereof; (MOLE Rules and
Regulations, Rule V, Book III)
The phrase "those who are engaged on task or contract basis"
should however, be related with "field personnel " applying the
rule on ejusdem generis that general and unlimited terms are
restrained and limited by the particular terms that they follow,
[Vera v. Cuevas, G.R. No. L-33693, May 31, 1979, 90 SCRA
379]. Clearly, petitioner's teaching personnel cannot be deemed
field personnel which refers "to non-agricultural employees who
regularly perform their duties away from the principal place of
business or branch office of the employer and whose actual hours
of work in the field cannot be determined with reasonable
certainty. [Par. 3, Article 82, Labor Code of the Philippines].
Petitioner's claim that private respondents are not entitled to the
service incentive leave benefit cannot therefore be sustained.
3. As a last ditch effort to bar private respondents'claims,
petitioner asserts that the same are barred by laches and/or
extinguished by prescription according to Article 291 of the Labor
Code which provides:
Art. 291. Money claims. All money claims
arising from employer-employee , relations
accruing during the effectivity of this Code shall
be filed within three (3) years from the time the
cause of action accrued; otherwise, they shall be
forever barred.
All money claims accruing prior to the effectivity of
this Code shall be filed with the appropriate
entities established under this Code within one (1)

year from the date of effectivity, and shall be

processed or determined in accordance with
implementing rules and regulations of the Code;
otherwise, they shall be forever barred.
xxx xxx xxx
Considering that the complaint alleging non-payment of benefits
was filed only on February 11, 1981, petitioner argues that
prescription has already set in.
From the aforequoted provision, it is not fully accurate to
conclude that the entire claims for COLA and service incentive
leave are no longer recoverable. This Court finds no reason to
disturb the following pronouncement of the Minister of Labor:
xxx xxx xxx
Simply stated, claims for COLA under P.D. 525,
which took effect on August 1, 1974, for the
months of August, September and October 1974
must be filed within one (1) year from November
1, 1974, otherwise they shall be considered
prescribed; claims under the same decree that
accrued on or after November 1, 1974 should be
initiated within three (3) years from the date of
accrual thereof, otherwise the same shall be
deemed extinguished. Although this particular
claim was filed on February 11, 1981, petitioners
herein are entitled to COLA under P.D. 525 from
February 1978 up to the present since the COLA
that accrued in February 1978 has not yet
prescribed at the time that the claim was filed in
February 1981. In the same vein, petitioners
herein should be granted COLA under P.D. 1123
from February 1978 up to 1981 inasmuch as said
decree became effective only on May 11, 1977.

Further, petitioners are entitled to the full amount

of COLA provided under P.D.'s 1614, 1634, 1678
and 1713. It must be pointed out that the earliest
of the just cited four (4) decrees, i.e., P.D. 1614,
just took effect on April 1, 1979. Thus, the
prescriptive period under Art. 292 of the Labor
Code, as amended, does not as yet apply to
money claims under the just mentioned decrees.

Contrary to the petitioner's protestation of lack of jurisdiction, the

Secretary of Labor or his duly authorized representatives (which
includes Regional Directors) are accorded the power to
investigate complaints for non- compliance with labor laws,
particularly those which deal with labor standards such as
payment of wages and other forms of compensation, working
hours, industrial safety, etc. This is provided for in article 128 of
the Labor Code, as amended:

DIVINE WORD COLLEGE CASE

Art. 128. Visitorial and enforcement power.

In assailing the disputed Order, petitioner contends that the public

respondents acted with grave and patent abuse of discretion
amounting to lack of jurisdiction in that:

(a) The Secretary of Labor or his duly authorized

representatives including labor regulation officers,
shall have access to employers' records and
premises at any time of the day or night,
whenever work is being undertaken therein, and
the right to copy therefrom, to question any
employee and investigate any fact, condition or
matter which may be necessary to determine
violations or which may aid in the enforcement of
this Code and of any labor law, wage order or
rules and regulations issued pursuant thereto.

1. The Regional Director has no jurisdiction over

money claims arising from employer-employee
relationship; and
2. The Regional Director and Deputy Minister of
Labor adopted the report of the Labor Standards
Division without affording the petitioner the
opportunity to be heard.
1. Petitioner school claims that the case at bar is a money claim
and should therefore be within the original and exclusive
jurisdiction of the Labor Arbiter pursuant to article 217 of the
Labor Code, as amended.
It appears from the record, however, that the original complaint
filed by ten (10) faculty members of the Divine Word College was
for non-compliance with Pres. Dec. No. 451 and with Labor Code
provisions on service incentive leave, holiday and rest day pay
and which complaint specifically prayed that an inspection of the
College be conducted.

(b) The Secretary of Labor or his duly authorized

representatives shall have the power to order and
administer, after due notice and
hearing, compliance with the labor standards
provisions of this Code based on the findings of
labor regulation officers or industrial safety
engineers made in the course of inspection, and
to issue writs of execution to the appropriate
authority for the enforcement of their order, except
in cases where the employer contests the findings
of the labor regulations officer and raises issues
which cannot be resolved without considering
evidentiary matters that are not verifiable in the
normal course of inspection. (Emphasis supplied).

Furthermore, Policy Instruction No. 6 which deals with the

distribution of jurisdiction over labor cases restates inter alia that
"(L)abor standards cases arising from violation of labor standards
laws discovered in the course of inspection or complaints where
employer-employee relations still exist" are under the exclusive
original jurisdiction of the Regional Director.
Even assuming that respondent Regional Director was without
jurisdiction to entertain the case at bar, petitioner is now barred at
this stage to claim lack of jurisdiction having actively participated
in the proceedings below. Petitioner never questioned the
jurisdiction of the respondent Regional Director.

were considered by respondent Regional Director in the order

issued subsequently. They, therefore, had ample opportunity to
present their side of the controversy.
What due process contemplates is not merely the existence of an
actual hearing. The "right to be heard" focuses more on the
substance rather than the form. In the case at bar, petitioner was
actually heard through the pleadings that it filed with the Regional
Office V. As it itself admitted in its petition that it was afforded the
right to be heard on appeal [See Rollo, p. 581, petitioner cannot
therefore insist that it was denied due process.
FAR EASTERN UNIVERSITY CASE

2. The petitioner claims that it was never afforded the opportunity

to be heard and was therefore denied due process.
There is no dispute that an inspection of the College was
conducted after a complaint by some faculty members was filed
with the Regional Office of the Ministry of Labor and Employment.
A report was submitted on the basis of the findings contained
therein. Petitioner was furnished a copy of said report to which it
filed a comment. Finding this to be without merit, the Regional
Director issued an order giving petitioner ten (10) days to
manifest its compliance with the findings, otherwise, another
would be issued to enforce payment. Petitioner appealed but
instead of resolving the memorandum of appeal, which the
Regional Director treated as a motion for reconsideration, said
Director issued another Order dated August 2, 1983 directing the
payment of the employees' share in the sixty (60%) percent
incremental proceeds. Petitioner moved for a reconsideration of
the latest order which the Regional Director, however, denied,
thereby elevating the case to the Office of the Minister of Labor
and Employment.
The foregoing facts demonstrate that petitioner had the
opportunity to refute the report on the inspection conducted. It
submitted a comment thereto, which was in effect its position
paper. The arguments therein and evidence attached thereto

Two other issues are raised in this petition, to wit:

1
WHETHER OR NOT 'TRANSPORTATION ALLOWANCE'
SHOULD BE CONSIDERED AS 'EQUIVALENT TO 13THMONTH PAY UNDER PRES. DEC. NO. 851.
2
WHETHER OR NOT LEGAL HOLIDAY PAY BENEFIT COULD
BE VALIDLY WITHDRAWN AFTER BEING PRACTICED
CONTINUOUSLY FOR EIGHT (8) MONTHS.
1. The issue on the thirteenth (13th) month pay involves an
interpretation of the provisions of Pres. Dec. No. 851 which
requires all employers "to pay all their employees receiving a
basic salary of not more than Pl,000 a month, regardless of the
nature of the employment, a 13th- month pay" (Sec. 1). However,
"employer[s] already paying their employees a 13th-month pay or
its equivalent are not covered" (Sec. 2). (Emphasis supplied)

The Rules and Regulations Implementing Pres. Dec. No. 851

provide the following:
SEC. 3. Employees. The Decree shall apply to
all employers except to: ...
c) Employers already paying their employees
13th-month or more in a calendar year or its
equivalent at the time of this issuance; ...

50% of basic salary for the first year of service

plus additional 5% every year thereafter but not to
exceed 100% of basic salary.
For employees who have served the University for
more than 10 years, the University pays them
emoluments equivalent to the 14 months salaries.
13th Month Pay Formula:

xxx xxx xxx

Monthly Rate x No. of

The term "its equivalent" as used in paragraph (c)

hereof shall include Christmas bonus, mid-year
bonus, profit-sharing payments and other cash
bonuses amounting to not less than 1/12th of the
basic salary but shall not include cash and stock
dividends, cost of living allowances and all other
allowances regularly enjoyed by the employer, as
well as non-monetary benefits. Where an
employer pays less than 1/1 2th of the employees
basic salary, the employer shall pay the
difference.

months served for the year

In the case at bar, the 13th month pay is paid in the following
manner:
FOR REGULAR EMPLOYEES:
Transportation Allowance (TA)
50% of basic for the first year of service plus
additional 5% every year thereafter but not to
exceed 100% of basic salary
Christmas Bonus (CB)

Less TA/CB = 13th Mo. pay

12 months
FOR CASUAL EMPLOYEES:
13th Month Pay Formula:
Add salaries from 16 December of previous year to 15th
December of present year [and] divide by 12 months = 13th Mo.
Pay (Rollo, pp. 60, 72).
The University's answer to the Union's claim of underpayment of
the 13th month pay is that the "transportation allowance" paid to
its employees partakes the nature of a mid-year bonus which
under section 2 of Pres. Dec. No. 851 and section 3(c) of the
Implementing Rules and Regulations is equivalent to the 13th
month pay,
The Labor Arbiter ordered FEU to pay the 13th month pay
differentials of the complainants reasoning that:

CLEARLY, transportation allowance cannot be

considered as equivalent" of 13th month pay as it
is neither a Christmas bonus, mid-year bonus,
profit sharing payment, or other cash bonuses,
pursuant to paragraphs (c) and (e), Section 3 of
PD 851. The regularity of its payment further
cements this proposition.
PERFORCE, complainants are underpaid of their
13th month pay in an amount equivalent to 50%
of their basic salary for the lst year of service, plus
additional 5% every year thereafter but not to
exceed 100% of their basic salary which, per
respondent's formula, corresponds to their
transportation allowance. (Rollo, p. 61).
On appeal, the Third Division of the National Labor Relations
Commission reversed the Labor Arbiter's ruling by dismissing the
complainant's claim for underpayment of the 13th month pay for
lack of merit. The NLRC ruled that:
From the above findings and conclusion, it is clear
that insofar as employees with ten (10) years of
service or more are concerned, they receive the
equivalent of one (1) month pay for Christmas
bonus and another one (1) month pay as
transportation allowance or a total of fourteen (14)
months salary in a year. Obviously, this group of
employees are fully paid of their 13th month pay
and are not therefore subject to the instant claim.
As it is only those with less than ten (10) years of
service are included or encompassed by the
Labor Arbiter's resolution on this particular issue.
With this clarification, we shall now proceed to
discuss the crux of the controversy, that is, the
determination of whether or not the so designated
"transportation allowance" being paid to the
employees should be considered among those

deemed equivalent to 13th month pay. As

adverted earlier, the Labor Arbiter opined that it
cannot be so considered as the equivalent of 13th
month pay.
xxx xxx xxx
In passing upon the issue, we deemed it best to
delve deeper into the nature and intendment of
the transportation allowances as designated by
both the complainants and the respondent.
Complainants claim that the transportation
allowance they enjoy has always been called and
termed allowance and never as bonus since the
time the same was given to them. They assert
that it simply was intended as an allowance and
not a bonus. It would appear however that
complainants do not dispute respondent's stand
that transportation allowance is being paid only
every March of each year as distinguished from
other allowances that are being paid on a monthly
basis or on a bimonthly basis; that the amount of
transportation allowance to be paid is dependent
on the length of service of the employee
concerned (i.e. 50% basic in the first year and
additional 5% for each succeeding years, etc.);
that the said method of computing the amount of
the transportation allowance to be paid the
complainants is Identical to that used in
determining Christmas bonus (respondent's
exhibit 8) that the reason behind said
transportation allowance is to financially assist
employees in meeting their tax obligations as the
same become due on or about the month of
March of each year.
xxx xxx xxx

We are inclined to believe and so hold that by the

manner by which said transportation allowance is
being paid (only once a year) as well as the
method in determining the amount to be paid
(similar to Christmas bonus) and considering
further the reason behind said payment (easing
the burden of taxpayer-employee), the said
transportation allowance given out by respondent
while designating as such, partakes the nature of
a mid-year bonus. It bears to note in passing that
in providing for transportation allowance,
respondent was not compelled by law nor by the
CBA (Annex "A" of respondent's Appeal) as
nowhere in the CBA nor in the Labor Code can be
found any provision on transportation allowance.
It was therefore a benefit that stemmed out purely
from the voluntary act and generosity of the
respondent FEU. Moreover, said transportation
allowance is only being paid once a year. On the
other hand, regular allowances not considered as
13th month pay equivalent under P.D. 851, to our
mind, refer to those paid on regular intervals and
catering for specific employees' needs and
requirements that recur on a regular basis. Verily,
if the intendment behind the disputed
transportation allowance is to answer for the daily
recurring transportation expenses of the
employees, the same should have been paid to
employees on regular periodic intervals. All
indications, as we see it, point out to conclusion
that the disputed transportation allowance, while
dominated as such apparently for lack of better
term, is in fact a form of bonus doled out by the
respondent during the month of March every year.
Hence, we hold that it is one of those that can
very well be considered as equivalent to the 13th
month pay (Rollo, pp. 73, 74, 75, 76).

This Court sustains the aforequoted view of public respondent.

The benefit herein designated as "transportation allowance" is a
form of bonus equivalent to the 13th month pay. Nevertheless,
where this does not amount to 1/12 of the employees basic
salary, the employer shall pay the difference.
The evident intention of the law was to grant an additional income
in the form of a 13th month pay to employees not already
receiving the same. This Court ruled in National Federation of
Sugar Workers (NFSW) v. Ovejera[G.R. No. 59743, May 31,
1982, 114 SCRA 354].
Otherwise put, the intention was to grant some
relief not to all workers but only to the
unfortunate ones not actually paid a 13th month
salary or what amounts to it, by whatever name
called: but it was not envisioned that a double
burden would be imposed on the employer
already paying his employees a 13th month pay
or its equivalent whether out of pure generosity
or on the basis of a binding agreement and, in the
latter case, regardless of the conditional character
of the grant (such as making the payment
dependent on profit), so long as there is actual
payment. Otherwise, what was conceived to be a
13th month salary would in effect become a 14th
or possibly 15th month pay.
xxx xxx xxx
Pragmatic considerations also weigh heavily in
favor of crediting both voluntary and contractual
bonuses for the purpose of determining liability for
the 13th month pay. To require employers
(already giving their employees a 13th month
salary or its equivalent) to give a second 13th
month pay would be unfair and productive of
undesirable results. To the employer who had

acceded and is already bound to give bonuses to

his employees, the additional burden of a 13th
month pay would amount to a penalty for his
munificence or liberality. The probable reaction of
one so circumstanced would be to withdraw the
bonuses or resist further voluntary grants for fear
that if and when a law is passed giving the same
benefits, his prior concessions might not be given
due credit; and this negative attitude would have
an adverse impact on the employees
(pp.369,370).
The case of Dole Philippines, Inc. v. Leogardo [G.R. No. 60018,
October 23, 1982, 117 SCRA 938 (1982)], citing the ruling in the
above case also pointed out that:
To hold otherwise would be to impose an unreasonable and
undue burden upon those employers who had demonstrated their
sensitivity and concern for the welfare of their employees. A
contrary stance would indeed create an absurd situation whereby
an employer who started giving his employees the 13th month
pay only because of the unmistakable force of the law would be in
a far better position than another who, by his own magnanimity or
by mutual agreement, had long been extending his employees
the benefits contemplated under PD No. 851, by whatever
nomenclature these benefits have come to be known. Indeed, PD
No. 851, a legislation benevolent in its purpose, never intended to
bring about such oppressive situation. (p. 944)
2. Presidential Decree No. 570-A was issued on November 1,
1974 amending certain articles of Presidential Decree No. 442
(Labor Code of the Philippines promulgated on May 1, 1974
which took effect six months thereafter). Section 28 thereof
provides that:
Section 28. A new provision is hereby substituted
in lieu of the original provision of Article 258 of the
same Code to read as follows:

Art. 258. Right to holiday pay(a) Every worker shall be paid his regular
holidays, except in retail and service
establishments regularly employing less than ten
(10) workers;
(b) The term "holiday" as used in this Chapter,
shall include: New Year's day, Maundy Thursday,
Good Friday, the ninth of April, the first of May,
the twelfth of June, the fourth of July, the thirtieth
of November, the twenty fifth and thirtieth of
December and the day designated by law for
holding a general election.
(c) When employer may require work on holidays.
The employer may require an employee to work
on any holiday but such employee shall be paid a
compensation equivalent twice his regular rate.
Presidential Decree No. 850 issued on December 16, 1975 also
amending certain articles of Pres. Dec. No. 442 adopted the
aforequoted provision. Two months later, on February 16, 1976,
the Rules and Regulations Implementing the Labor Code, as
amended, was released the pertinent portion of which states that:
Section 2. Status of employees paid by the
month. Employees who are uniformly paid by
the month, irrespective of the number of working
days therein, with a salary of not less than the
statutory or established minimum wage shall be
presumed to be paid for all days in the month
whether worked or not.
For this purpose, the monthly minimum wage
shall not be less than the statutory minimum wage
multiplied by 365 days divided by twelve.

(e) Section 3. Holiday Pay. Every employer

shall pay his employees their regular daily wage
for any unworked regular holiday.
As used in the Rule, the term 'holiday' shall
exclusively refer to: New Year's Day, Maundy
Thursday, Good Friday, the ninth of April, the first
of May, the twelfth of June, the fourth of July, the
thirtieth of November, the twenty-fifth and thirtieth
of December and the day designated by law for a
general election or national referendum or
plebiscite (MOLE Rules and Reg. Book III, Rule
IV, sec. 2 (1976).
After one week, on February 23, 1976, the Minister of Labor
issued Policy Instruction No. 9, to clarify further the right to
holiday pay, thus:
The Rules Implementing PD 850 have clarified
the policy in the implementation of the ten (10)
paid legal holidays. Before PD 850. the number of
working days a year in a firm was considered
important in determining entitlement to the benefit.
Thus, where an employee was working for at least
313 days, he was definitely already paid. If he
was working for less than 313, there was no
certainty whether the ten (10) paid legal holidays
were already paid to him or not.
The ten (10) paid legal holidays law, to start with,
is intended to benefit principally daily employees.
In the case of monthly, only those whose monthly
salary did not yet include payment for the ten (10)
paid legal holidays are entitled to the benefit.
Under the rules implementing PD 850, this policy
has been fully clarified to eliminate controversies

on the entitlement of monthly paid employees.

The new determining rule is this: If the monthly
paid employee is receiving not less than P 240,
the maximum monthly minimum wage, and his
monthly pay is uniform from January to
December, he is presumed to be already paid the
ten (10) paid legal holidays. However, if
deductions are made from his monthly salary on
account of holidays in months where they occur,
then he is entitled to the ten (10) legal holidays.
These new interpretations must be uniformly and
consistently upheld.
This issuance shall take effect immediately.
In the meantime, respondent University paid its employees
holiday pay for the following days:
DATE HOLIDAYS PAID
June 9, 1975 for the previous nine legal holidays
August, 1975 for the previous June 12 and July 4
Jan. 14, 1976 or the previous Nov. 30, Dec. 25
and 30 and Jan. 1
After January 14, 1976, however, the University ceased paying
the holiday pay allegedly by reason of Policy Instruction No. 9.
Specifically, the University claimed that the monthly salary of its
employees was, as of 1976, more than P 240.00 without
deductions from their monthly salary on account of holidays in
months where they occurred and that therefore, by virtue of
Policy Instruction No. 9, they were no longer entitled to the ten
paid legal holidays.

Petitioners, upon the other hand, contend that Policy Instruction

No. 9 could not have possibly been the reason that prompted the
University to withdraw such benefits from its faculty and
employees because said implementing rule was issued only on
April 23, 1976 or four months later.
The Labor Arbiter ruled in favor of the complainant Union for the
reason that ". . . the payment of the 10-paid legal holiday benefits
from June 8, 1975 up to January 14, 1976 is considered an
employer practice that can no longer be withdrawn." [Decision;
Rollo, p. 59].
As in the case of the 13th month pay, the NLRC reversed the
Labor Arbiter's ruling. The NLRC held that:
Apparently, Arbiter Ruben Aquino concluded that
payment by the respondent of the legal holiday
pay preceded the effectivity of the Rules and
Regulations Implementing P.D. 850 and which
rules took effect on February 16, 1976. Hence, his
conclusion that the payment of the legal holiday
pay stemmed out from company practice and not
from law. Tracing back, however, the payments
made by respondent of said holiday pay will show
that, if ever, the same was made pursuant to P.D.
570-A which took effect on November 1, 1974.
Noteworthy is the undisputed fact that respondent
first paid its employees legal holiday pay in June
1975 corresponding to nine (9) legal holidays. It
bears to note that from the time of the effectivity of
P.D. 570-A which was in November of 1974 up to
June of 1975, the time respondent first paid legal
holiday pay for nine (9) legal holidays, there, were
indeed more or less nine legal holidays that
transpired to wit: November 30, 1974, December
25, 1974, December 30, 1974, January 1, 1975,
February 27, 1975 (Referendum Day), Maundy
Thursday of 1975, Good Friday of 1975, April 9,

1975 and finally, May 1st of 1975. We are

therefore inclined to lend credence to
respondent's claim that the payment of legal
holiday pay was in fact made pursuant to law,
P.D. 570-A in particular, it is not one that arose
out of company practice or policy.
Finding that said payment was made based on an
honest although erroneous interpretation of law,
which interpretation was later on corrected by the
issuance (sic) of Policy Instruction No. 9 and
which issuance prompted respondent to withdraw
the holiday pay benefits extended to the
employees who were paid on a regular monthly
basis, and finding further that under Policy
Instructions No. 9, said subject employees are
deemed paid their holiday pay as they were paid
on a monthly basis at a wage rate presumably
above the statutory minimum, we believe and so
hold that the withdrawal of said holiday pay
benefit was valid and justifiable under the
circumstances (Rollo, pp. 33-4).
This Court cannot sustain the foregoing decision of public
respondent. Said decision relied on Section 2, Rule IV, Book Ill of
the implementing rules and on Policy Instruction No. 9 which
were declared by this Court to be null and void in Insular Bank of
Asia and America Employee's Union (IBAAEU) v. Inciong (G.R.
No. 52415, October 23, 1984, 132 SCRA 6631. In disposing of
the issue at hand, this Court reiterates the ruling in that case, to
wit:
WE agree with the petitioner's contention that
Section 2, Rule IV, Book Ill of the implementing
rules and Policy Instruction No. 9 issued by the
then Secretary of Labor are nun and void since in
the guise of clarifying the Labor Code's provision

on holiday pay, they in fact amended them by

enlarging the scope of their exclusion.
xxx xxx xxx
It is elementary in the rules of statutory
construction that when the language of the law is
clear and unequivocal the law must be taken to
mean exactly what it says. In the case at bar, the
provisions of the Labor Code on the entitlement to
the benefits of holiday pay are clear and explicit
it provides for both the coverage of and
exclusion from the benefits. In Policy Instruction
No. 9, the then Secretary of Labor went as far as
to categorically state that the benefit is principally
intended for daily paid employees, when the law
clearly states that every worker shall be paid their
regular holiday pay. This is a flagrant violation of
the mandatory directive of Article 4 of the Labor
Code, which states that "All doubts in the
implementation and interpretation of the
provisions of this Code, including its implementing
rules and regulations, shall be resolved in favor of
labor. " Moreover, it shall always be presumed
that the legislature intended to enact a valid and
permanent statute which would have the most
beneficial effect that its language permits (Orlosky
vs. Haskell, 155 A. 112). (pp. 673-4).
BISCOCHO CASE
At issue also in this petition is whether the 60% incremental
proceeds may be subjected to attorney's fees, negotiation fees,
agency fees and the like.
The Court notes the fact that there are two classes of employees
among the petitioners: (1) those who are members of the

bargaining unit and (2) those who are not members of the
bargaining unit. The first class may be further subdivided into two:
those who are members of the collective bargaining agent and
those who are not.
It is clear that the questioned Order of the respondent
Minister applies only to members of the bargaining unit. The CBA
prepared pursuant to said Order, however, covered employees
who are not members of the bargaining unit, although said CBA
had not yet been signed at the time this petition was filed on
November 24, 1986. Assuming it was signed thereafter, the
inclusion of employees outside the bargaining unit should be
nullified as this does not conform to said order which directed
private respondents to execute a CBA covering only members of
the bargaining unit.
Being outside the coverage of respondent Minister's order, and
thus, not entitled to the economic package involved therein,
employees who are non- members of the bargaining unit should
not be assessed negotiation fees, attorney's fees, agency fees
and the like, for the simple reason that the resulting collective
bargaining agreement does not apply to them. It should be clear,
however, that while non-members of the bargaining unit are not
entitled to the economic package provided by said order, they
are, in lieu thereof, still entitled to their share in the 60%
incremental proceeds of increases in tuition or other school fees
or charges.
As far as assessment of fees against employees of the collective
bargaining unit who are not members of the collective bargaining
agent is concerned, Article 249 of the Labor Code, as amended
by B.P. Blg. 70, provides the rule:
Art. 249. Unfair labor practices of employers.xxx xxx xxx

(e) ... Employees of an appropriate collective

bargaining unit who are not members of the
recognized collective bargaining agent may be
assessed a reasonable fee equivalent to the dues
and other fees paid by members of the
recognized collective bargaining agent, if such
non- union members accept the benefits under
the collective agreement . . .
Employees of the collective bargaining unit who are not members
of the collective bargaining agent have to pay the foregoing fees if
they accept the benefits under the collective bargaining
agreement and if such fees are not unreasonable. Petitioners
who are members of the bargaining unit failed to show that the
equivalent of ten (10%) percent of their backwages sought to be
deducted is unreasonable.
WHEREFORE, the Court rules:
CEBU INSTITUTE OF TECHNOLOGY CASE
In G.R. No. 58870, the Order of respondent Minister of Labor and
Employment dated September 29, 1981 is SUSTAINED insofar
as it ordered petitioner Cebu Institute of Technology to pay its
teaching staff the following:
(1) Cost of living allowance under Pres.
Dec.Nos.525 and 1123 from February 1978 up to
1981;
(2) Cost of living allowance under Pres. Dec. Nos.
1614, 1634, 1678 and 1713; and
(3) Service incentive leave due them from 1978.
The Temporary Restraining Order issued by this Court on
December 7, 1981 is hereby LIFTED and SET ASIDE. No costs.

DIVINE WORD COLLEGE CASE

The petition in G.R. No. 68345 is DENIED for lack of merit. The
questioned Orders of respondent Deputy Minister of Labor and
Employment, dated December 19, 1983 and July 4, 1984
are SUSTAINED insofar as said Orders denied the payment of
the emergency cost of living allowances of private respondents
faculty teachers of the Divine Word College of Legazpi out of the
sixty (60%) incremental proceeds of tuition and other school fee
increases collected during the effectivity of Pres. Dec. No. 451.
The Rules and Regulations implementing Pres. Dec. No. 451 are
hereby declared invalid for being ultra vires No costs.
FAR EASTERN UNIVERSITY CASE
The Decision of public respondent National Labor Relations
Commission dated September 18, 1984 isREVERSED insofar as
it affirmed in toto the dismissal of petitioner Far Eastern University
Employee Labor Union's claim under Pres. Dec. No. 451 and its
claim for payment of holiday pay. Private respondent Far Eastern
University is therefore ordered to pay its employees the following:
(1) Their sixty (60) percent share in the increases
in tuition and other school fees or charges which
shall be allocated exclusively for increase in
salaries or wages if the tuition or other school fee
increase was collected during the effectivity of
Pres. Dec. No. 451;
(2) Their claim for holiday pay which was
withdrawn since January 14, 1976 up to the
present.
The Decision of respondent National Labor Relations
Commission, however, is SUSTAINED insofar as it denied
petitioner's claim for thirteenth (1 3th month pay. No costs.

FABROS CASE

Fernan, Narvasa, Cruz and Padilla, JJ., took no part.

In G.R. No. 70832, the Petition for certiorari and Prohibition is

DISMISSED. MECS Order No. 25. s. 1985, particularly
paragraphs 7.0 to 7.5 thereof, which provide for the use and
application of sixty (60%) percent of the increases in tuition and
other school fees or charges, having been issued pursuant to
B.P. Blg. 232 which repealed Pres. Dec. No. 451, is hereby
declared VALID. The Temporary Restraining Order issued by this
Court dated May 29, 1985 is LIFTED and SET ASIDE. No costs.

G.R. No. 91231 February 4, 1991

BISCOCHO CASE

Banzuela, Flores, Miralles, Raneses, Sy, Taquio & Associates for

private respondent.

The assailed portions of the Order of the Minister of Labor and

Employment dated April 14, 1986 are AFFIRMED. The collective
bargaining agreement prepared pursuant thereto should,
however, be MODIFIED to cover only members of the bargaining
unit. Only petitioners who are members of the collective
bargaining unit, if they accept the benefits under the resulting
collective bargaining agreement, shall be charged ten (10%)
percent of the payable backwages as negotiation fees. The
Temporary Restraining Order dated November 25, 1986
is LIFTEDand SET ASIDE. No costs.
VALMONTE CASE
The petition in G.R. No. 76596 is DISMISSED for lack of merit.
Effective September 1, 1982, the application and use of the
proceeds from increases in tuition fees and other schools fees or
charges shall be governed by section 42 of B.P. Blg. 232 as
implemented by the Rules and Regulations issued by the then
Ministry, now Department of Education, Culture and Sports. SO
ORDERED.
Teehankee, C.J., Yap, Melencio-Herrera, Gutierrez, Jr., Paras,
Feliciano, Gancayco, Bidin and Sarmiento, JJ., concur.

NESTL PHILIPPINES, INC., petitioner,

vs.
THE NATIONAL LABOR RELATIONS COMMISSION and
UNION OF FILIPRO EMPLOYEES, respondents.
Siguion Reyna, Montecillo & Ongsiako for petitioner.

GRIO-AQUINO, J.:p
Nestl Philippines, Inc., by this petition for certiorari, seeks to
annul, on the ground of grave abuse of discretion, the decision
dated August 8, 1989 of the National Labor Relations
Commission (NLRC), Second Division, in Cert. Case No. 0522
entitled, "In Re: Labor Dispute of Nestl Philippines, Inc." insofar
as it modified the petitioner's existing non-contributory Retirement
Plan.
Four (4) collective bargaining agreements separately covering the
petitioner's employees in its:
1. Alabang/Cabuyao factories;
2. Makati Administration Office.
(Both Alabang/Cabuyao factories
and Makati office were
represented by the respondent,
Union of Filipro Employees [UFE]);

3. Cagayan de Oro Factory

represented by WATU; and
4. Cebu/Davao Sales Offices
represented by the Trade Union of
the Philippines and Allied Services
(TUPAS),

After conciliation efforts of the National Conciliation and Mediation

Board (NCMB) yielded negative results, the dispute was certified
to the NLRC by the Secretary of Labor on October 28, 1988.
After the parties had filed their pleadings, the NLRC issued a
resolution on June 5, 1989, whose pertinent disposition regarding
the union's demand for liberalization of the company's retirement
plan for its workers, provides as follows:

all expired on June 30, 1987.

xxx xxx xxx
Thereafter, UFE was certified as the sole and exclusive
bargaining agent for all regular rank-and-file employees at the
petitioner's Cagayan de Oro factory, as well as its Cebu/Davao
Sales Office.
In August, 1987, while the parties, were negotiating, the
employees at Cabuyao resorted to a "slowdown" and walk-outs
prompting the petitioner to shut down the factory. Marathon
collective bargaining negotiations between the parties ensued.
On September 2, 1987, the UFE declared a bargaining deadlock.
On September 8, 1987, the Secretary of Labor assumed
jurisdiction and issued a return to work order. In spite of that
order, the union struck, without notice, at the Alabang/Cabuyao
factory, the Makati office and Cagayan de Oro factory on
September 11, 1987 up to December 8, 1987. The company
retaliated by dismissing the union officers and members of the
negotiating panel who participated in the illegal strike. The NLRC
affirmed the dismissals on November 2, 1988.
On January 26, 1988, UFE filed a notice of strike on the same
ground of CBA deadlock and unfair labor practices. However, on
March 30, 1988, the company was able to conclude a CBA with
the union at the Cebu/Davao Sales Office, and on August 5,
1988, with the Cagayan de Oro factory workers. The union
assailed the validity of those agreements and filed a case of
unfair labor practice against the company on November 16, 1988.

7. Retirement Plan
The company shall continue implementing its
retirement plan modified as follows:
a) for fifteen years of service or less an amount
equal to 100% of the employee's monthly salary
for every year of service;
b) more than 15 but less than 20 years 125%
of the employee's monthly salary for every year of
service;
c) 20 years or more 150% of the employee's
monthly salary for every year of service. (pp. 5859,Rollo.)
Both parties separately moved for reconsideration of the decision.
On August 8, 1989, the NLRC issued a resolution denying the
motions for reconsideration. With regard to the Retirement Plan,
the NLRC held:
Anent management's objection to the modification
of its Retirement Plan, We find no cogent reason
to alter our previous decision on this matter.

While it is not disputed that the plan is noncontributory on the part of the workers, tills does
not automatically remove it from the ambit of
collective bargaining negotiations. On the
contrary, the plan is specifically mentioned in the
previous bargaining agreements (Exhibits "R-1"
and "R-4"), thereby integrating or incorporating
the provisions thereof to the agreement. By
reason of its incorporation, the plan assumes a
consensual character which cannot be terminated
or modified at will by either party. Consequently, it
becomes part and parcel of CBA negotiations.
However, We need to clarify Our resolution on
this issue. When we increased the emoluments in
the plan, the conditions for the availment of the
benefits set forth therein remain the same. (p.
32, Rollo.)
On December 14, 1989, the petitioner filed this petition
for certiorari, alleging that since its retirement plan is noncontributory, it (Nestl) has the sole and exclusive prerogative to
define the terms of the plan "because the workers have no vested
and demandable rights thereunder, the grant thereof being not a
contractual obligation but merely gratuitous. At most the company
can only be directed to maintain the same but not to change its
terms. It should be left to the discretion of the company on how to
improve or mollify the same" (p. 10, Rollo).
The Court agrees with the NLRC's finding that the Retirement
Plan was "a collective bargaining issue right from the start" (p.
109, Rollo) for the improvement of the existing Retirement Plan
was one of the original CBA proposals submitted by the UFE on
May 8, 1987 to Arthur Gilmour, president of Nestl Philippines.
The union's original proposal was to modify the existing plan by
including a provision for early retirement. The company did not
question the validity of that proposal as a collective bargaining
issue but merely offered to maintain the existing non-contributory

retirement plan which it believed to be still adequate for the needs

of its employees, and competitive with those existing in the
industry. The union thereafter modified its proposal, but the
company was adamant. Consequently, the impass on the
retirement plan become one of the issues certified to the NLRC
for compulsory arbitration.
The company's contention that its retirement plan is nonnegotiable, is not well-taken. The NLRC correctly observed that
the inclusion of the retirement plan in the collective bargaining
agreement as part of the package of economic benefits extended
by the company to its employees to provide them a measure of
financial security after they shall have ceased to be employed in
the company, reward their loyalty, boost their morale and
efficiency and promote industrial peace, gives "a consensual
character" to the plan so that it may not be terminated or modified
at will by either party (p. 32, Rollo).
The fact that the retirement plan is non-contributory, i.e., that the
employees contribute nothing to the operation of the plan, does
not make it a non-issue in the CBA negotiations. As a matter of
fact, almost all of the benefits that the petitioner has granted to its
employees under the CBA salary increases, rice allowances,
mid-year bonuses, 13th and 14th month pay, seniority pay,
medical and hospitalization plans, health and dental services,
vacation, sick & other leaves with pay are non-contributory
benefits. Since the retirement plan has been an integral part of
the CBA since 1972, the Union's demand to increase the benefits
due the employees under said plan, is a valid CBA issue. The
deadlock between the company and the union on this issue was
resolvable by the Secretary of Labor, or the NLRC, after the
Secretary had assumed jurisdiction over the labor dispute (Art.
263, subparagraph [i] of the Labor Code).
The petitioner's contention, that employees have no vested or
demandable right to a non-contributory retirement plan, has no
merit for employees do have a vested and demandable right over
existing benefits voluntarily granted to them by their employer.

The latter may not unilaterally withdraw, eliminate or diminish

such benefits (Art. 100, Labor Code; Tiangco, et al. vs. Hon.
Leogardo, et al., 122 SCRA 267).

SO ORDERED.

This Court ruled similarly in Republic Cement Corporation vs.

Honorable Panel of Arbitrators, G.R. No. 89766, Feb. 19, 1990:

Cruz, J., took no part.

Narvasa, Gancayco and Medialdea, JJ., concur.

G.R. No. L-57636 May 16, 1983

. . . Petitioner's claim that retirement benefits,
being noncontributory in nature, are not proper
subjects for voluntary arbitration is devoid of
merit. The expired CBA previously entered into by
the parties included provisions for the
implementation of a "Retirement and Separation
Plan." it is only to be expected that the parties
would seek a renewal or an improvement of said
item in the new CBA. In fact, the parties
themselves expressly included retirement benefits
among the economic issues to be resolved by
voluntary arbitration. Petitioner is estopped from
now contesting the validity of the increased award
granted by the arbitrators. (p. 145, Rollo.)
The NLRC's resolution of the bargaining deadlock between
Nestl and its employees is neither arbitrary, capricious, nor
whimsical. The benefits and concessions given to the employees
were based on the NLRC's evaluation of the union's demands,
the evidence adduced by the parties, the financial capacity of the
Company to grant the demands, its longterm viability, the
economic conditions prevailing in the country as they affect the
purchasing power of the employees as well as its concommitant
effect on the other factors of production, and the recent trends in
the industry to which the Company belongs (p. 57, Rollo). Its
decision is not vitiated by abuse of discretion.
WHEREFORE, the petition for certiorari is dismissed, with costs
against the petitioner.

REYNALDO TIANGCO and VICTORIA TIANGCO, petitioners,

vs.
HON. VICENTE LEOGARDO, JR., as Deputy Minister of the
Ministry of Labor and Employment, AURELIO ILUSTRISIMO,
ABRAHAM GILBUENA, ROGELIO CARABIO, JESUS
GILBUENA, PEPITO GILBUENA, DOMINADOR LASERNA,
CLEMENTE VILLARUEL, RUSTOM OFQUERIA, ERNESTO
DIONG, GRACIANO DURANA, AGUEDO MARABE,
SOLOMON CLARIN, ALCAFONE ESGANA, JUAN CASTRO,
ANTONIO GILBUENA, GREGORIO LAYLAY, DANIEL
CABRERA, ROBERTO BAYON-ON, ELIAS ESCARAN,
ERNESTO BATOY, EDDIE BATOBALANOS, TOMAS
CAPALAR, JUAN GIHAPON, JOSE OFQUERIA, FRUTO
GIHAPON, PEPITO BATOY, and SERAFIO
YADAWON, respondents.
Florencio Pineda for petitioners.
The Solicitor General for respondents.

CONCEPCION, JR., J.:

Petition for certiorari and prohibition, with preliminary injunction
and/or restraining order, to annul and set aside the order of the
respondent Deputy Minister of Labor which modified and affirmed
the order of Director of the National Capitol Region of the Ministry
of Labor directing the petitioners to pay the private respondents

their legal holiday pay, service incentive pay, and differentials in

their emergency cost of living allowances.
The petitioner, Reynaldo Tiangco, is a fishing operator who owns
the Reynaldo Tiangco Fishing Company and a fleet of fishing
vessels engaged in deep-sea fishing which operates from
Navotas, Rizal. His business is capitalized at
P2,000,000.00, 1 while the petitioner, Victoria Tiangco, is a fish
broker whose business is capitalized at P100,000.00. 2

The private respondents, Aurelio Ilustrisimo, Pepito Gilbuena,

Rogelio Carabio, Abraham Gilbuena, Rustom Ofqueria, Ernesto
Diong, Jesus Gilbuena, Clemente (Emerenciano) Villaruel,
Dominador Lacerna, and Graciano Durana, are batillos engaged
by the petitioner Reynaldo Tiangco to unload the fish catch from
the vessels and take them to the Fish Stall of the petitioner
Victoria Tiangco. The private respondents, Eddie Batobalanos,
Aguedo Marabe, Gregorio Laylay, Fruto Gihapon, Solomon
Clarin, Pepito Batoy, Jose Ofqueria, Daniel Cabrera, Juan Castro,
Alcafone Esgana, Tomas Capalar, Antonio Gilbuena, Ernesto
Batoy, Serafio Yadawon, Juan Gihapon, Elias Escaran and
Roberto Bayon-on, were batillos engaged by Victoria
Tiangco. 3 The work of these batillos were limited to days of arrival
of the fishing vessels and their working days in a month are
comparatively few. Their working hours average four (4) hours a day.

On April 8, 1980, the private respondents filed a complaint

against the petitioners with the Ministry of Labor and Employment
for non-payment of their legal holiday pay and service incentive
leave pay, as well as underpayment of their emergency cost of
living allowances which used to be paid in full irrespective of their
working days, but which were reduced effective February, 1980,
in contravention of Article 100 of the new Labor Code which
prohibits the elimination or diminution of existing benefits. 4
The petitioners denied the laborers' contention, claiming that the
laborers were all given, in addition to their regular daily wage, a
daily extra pay in amounts ranging from 30 centavos to 10 pesos

which are sufficient to offset the laborers' claim for service

incentive leave and legal holiday pay. As regards the claim for
emergency allowance differentials, the petitioners admitted that
they discontinued their practice of paying their employees a fixed
monthly allowance, and effective February, 1980, they no longer
paid allowances for non-working days. They argued, however,
that no law was violated as their refusal to pay allowances for
non-working days is in consonance with the principle of "no work,
no allowance"; and that they could not pay private respondents a
fixed monthly allowance without risking the viability of their
business. 5
Resolving the case, the Director of the National Capitol Region of
the Ministry of Labor and Employment ruled that the daily extra
pay given to private respondents was a ,'production incentive
benefit", separate and distinct from the service incentive leave
pay and legal holiday pay, payment of which cannot be used to
offset a benefit provided by law, and ordered the petitioners to
pay the private respondents their service incentive leave pay and
legal holiday pay. However, he denied the laborers' claim for
differentials in the emergency cost of living allowance for the
reason that the emergency cost of living allowance accrues only
when the laborers actually work following the principle of "no
work, no pay," and private respondents are not entitled to a fixed
monthly allowance since they work on a part time basis which
average only four (4) days a week. The private respondents
should not be paid their allowances during non-working days. 6
From this order, both parties appealed.
On May 22, 1981, the respondent Deputy Minister of Labor and
Employment modified the order and directed the petitioners to
restore and pay the individual respondents their fixed monthly
allowance from March, 1980 and to pay them the amount of
P58,860.00, as underpayment of their living allowance from May,
1977 to February 21, 1980. 7

When their motion for the reconsideration of the above order was
denied, the petitioners interposed the present recourse.

proportionately in the payment of the allowance of

the employee.

The petitioners claim that the respondent Deputy Minister of

Labor and Employment acted in excess of jurisdiction, or with
grave abuse of discretion in ordering them to pay the private
respondents a fixed monthly allowance from March, 1980, despite
the "no work, no pay," law; the private respondents' consent to
receive an allowance for days worked for, as stated in their
appeal; and the findings of the Director of the National Capitol
Region that private respondents work for other employers and are
part-time employees of the petitioners.

Section 11 of the Rules implementing P.D. 1123,

increasing the emergency allowance under P.D.
525, also provides, as follows:

Indeed, the record shows that the private respondents work for
the petitioners on a part-time basis and their work average only
four (4) days a week. It is not also disputed that the private
respondents work for more than one employer so that the private
respondents should be paid their living allowance only for the
days they actually worked in a week or month and all the
employers of the employee shall share proportionately in the
payment of the allowance of the employee. Section 12 of the
Rules and Regulations implementing P.D. 525 which made
mandatory the payment of emergency cost of living allowances to
workers in the private section, provides, as follows:
Section 12. Allowance on Daily Paid & Part
Time employees. Employees who are paid on
a daily basis shall be paid their allowances for the
number of days they actually worked in a week or
month, on the basis of the scales provided in
Section 7 hereof.
In case of part-time employment, the allowances
shall be paid in the amount proportionate to the
time worked by the employee, or higher. If
employed by more than one employer, all
employers of such employee shall share

Section 11. Allowances of full-time and part-time

employees. Employees shall be paid in full the
monthly allowances on the basis of the scales
provided in Section 3 hereof, regardless of the
number of their regular working days, if they incur
no absence during the month. If they incur
absences, the amounts corresponding to their
absences may be deducted from the monthly
allowance.
In case of part-time employment, the allowance to
be paid shall be proportionate to the time worked
by the employee. This requirement shall apply to
any employee with more than one employer.
However, the respondent Deputy Minister of Labor and
Employment correctly ruled that since the petitioners had been
paying the private respondents a fixed monthly emergency
allowance since November, 1976 up to February, 1980, as a
matter of practice and/or verbal agreement between the
petitioners and the private respondents, the discontinuance of the
practice and/or agreement unilaterally by the petitioners
contravened the provisions of the Labor Code, particularly Article
100 thereof which prohibits the elimination or diminution of
existing benefits.
Section 15 of the Rules on P.D. 525 and Section 16 of the Rules
on P. D. 1123 also prohibits the diminution of any benefit granted
to the employees under existing laws, agreements, and voluntary

employer practice. Section 15 of the Rules on P.D. 525 provides,

as follows:
Section 15. Relation to Agreement. Nothing
herein shall prevent the employer and his
employees from entering into any agreement with
terms more favorable to the employees than
those provided therein, or be construed to
sanction the diminution of any benefit granted to
the employees under existing laws, agreements,
and voluntary employer practice.
Section 16 of the Rules on P.D. 1123 similarly
prohibits diminution of benefits. It provides, as
follows:
Section 16. Relation to other agreements.
Nothing herein shall prevent employers from
granting allowances to their employees in excess
of those provided under the Decree and the Rules
nor shall it be construed to countenance any
reduction of benefits already being enjoyed.
The petitioners further claim that the respondent Deputy Minister
of Labor and Employment erred in ordering them to pay the
amount of P58,860.00 to the private respondents as
underpayment of respondents' allowances from May, 1977 to
February 20, 1980. The petitioners contend that the emergency
cost of living allowances of the private respondents had been
paid in full.
We find no merit in the contention. However, a revision of the
amount due the private respondents is in order for the reason that
the respondent Deputy Minister of Labor and Employment failed
to take into consideration, in computing the amount due each
worker, the fact that the private respondents are employed by two
different individuals whose businesses are divergent and

capitalized at various amounts, contrary to the provisions of P.D.

525 and subsequent amendatory decrees, wherein the amount of
the emergency cost of living allowance to be paid to a worker is
made to depend upon the capitalization of the business of his
employer or its total assets, whichever is higher. Thus, Section 7
of the Rules and Regulations implementing P.D. 525 reads, as
follows:
Section 7. Amount of Allowances. Every
covered employer shall give to each of his
employees who is receiving less than P600.00 a
month not less than the following allowances;
(a) P50.00 where the authorized capital stock or
total assets, whichever is applicable and higher, is
71 million or more;
(b) P30.00 where the authorized capital stock or
total assets, whichever is applicable and higher is
at least P100,000.00 but less than P 1miilion and
(c) P15.00 where the authorized capital stock or
total assets, whichever is applicable and higher, is
less than P100,000.00.
Nothing herein shall prevent employers from
granting allowances to their employees who will
receive more than P600.00 a month, including the
allowances. An employer, however, may grant his
employees an allowance which if added to their
monthly salary, will not yield to them more than
P600.00 a month.
In this case, the private respondents admit that only ten (10) of
them, namely: Aurelio Ilustrisimo, Pepito Gilbuena, Rogelio
Carabio, Abraham Gilbuena, Rustom Ofquiera, Ernesto Diong,
Jesus Gilbuena, Emerenciano Villaruel, Dominador Lacerna, and

Graciano Durana, were employees of the petitioner Reynaldo

Tiangco, while the remaining seventeen (17) were employed by
the petitioner Victoria Tiangco. 8 Accordingly, the workers of the
petitioner Victoria Tiangco, whose business as fish broker is
capitalized at P100,000.00, 9 should receive a lesser amount of
allowance (P30.00) than those workers employed by the petitioner
Reynaldo Tiangco whose business, as a fishing operator with a fleet
of fishing vessels, is capitalized at more than P2,000,000.00, and are
entitled to receive a fixed monthly allowance of P50.00 a month,
each.

After P.D. 525, the following amendatory decrees, directing the

payment of additional allowances to employees, were
promulgated:
1. P.D. 1123. providing for an across-the-board
increase of P60.00 a month effective May 1,
1977;
2. P.D. 1614, which directed the payment of
P60.00 monthly allowance effective April 1, 1979;
3. P.D. 1634, which provided for the payment of
an additional P60.00 a month effective September
1, 1979, and another P30.00 a month beginning
January 1, 1980; and
4. P.D. 1678,which directed the payment of an
additional P2.00 a day from February 21, 1980.
Hence, for the period from November, 1976 to April 30, 1977, the
petitioner Victoria Tiangco should pay her workers a fixed
monthly allowance of P 30.00, while the workers of the petitioner
Reynaldo Tiangco were entitled to a fixed monthly allowance of
P50.00, each. The record shows that during this period, the
petitioner Victoria Tiangco was paying her workers a monthly
allowance of P30.00 each. 10 Accordingly, there was no
underpayment for this period insofar as her batillos are concerned.

The petitioner Reynaldo Tiangco, however, paid his employees

P30.00, instead of P50.00, as mandated by law. 11 Therefore, there
was an underpayment of P20.00 a month for each batillo under his
employ. For the 6-month period, he should pay his workers
differentials in the amount of P120.00 each.

For the period from May, 1977 to March 1979, the workers of the
petitioner Victoria Tiangco were entitled to a fixed monthly
allowance of P90.00 in view of the promulgation of P.D. 1123
which granted an across-the-board increase of P60.00 a month in
their allowances. For this period, however, the said petitioner paid
her workers only P60.00 a month, or a difference of P30.00 a
month. 12 There was, therefore, an underpayment of P690.00 for
everybatillo under her employ for the 23-month period.

With the addition of P60.00 across-the-board increase in their

allowances, the workers of the petitioner Reynaldo Tiangco were
entitled to receive a fixed monthly allowance of P110.00.
However, the record shows that his workers were only paid
P60.00 a month, 13 or a difference of P50.00 a month.
Consequently, each batillo hired by him should be paid a differential
of P1,150.00 for the 23-month period.

For the period from April, 1979 to August, 1979, the employees of
the petitioner Victoria Tiangco were entitled to a fixed monthly
allowance of P150.00 while the workers employed by the
petitioner Reynaldo Tiangco were entitled to an allowance of
P170.00, pursuant to P.D. 1614. The record shows, however, that
both petitioners paid their workers only P120.00 a month. 14 There
was a difference of P30.00 a month in the case of the petitioner
Victoria Tiangco, and P50.00, a month, in the case of the petitioner
Reynaldo Tiangco. Hence, for this period, the petitioner Victoria
Tiangco should pay the amount of P150.00 to each batillo in her
employ, while the petitioner Reynaldo Tiangco should pay the
amount of P250.00, as differentials in the cost of living allowances of
the workers under his employ.

Upon the promulgation of P.D. 1634, directing the payment of an

additional P60.00 a month effective September, 1979 and
another P30.00 effective January 1, 1980, the workers of the
petitioner Victoria Tiangco were entitled to receive a fixed monthly
allowance of P210.00 a month from September, 1979, and
P340.00, a month beginning January, 1980. The workers of the
petitioner Reynaldo Tiangco, upon the other hand, were entitled
to a monthly allowance of P230.00, effective September, 1979,
and P260.00, a month beginning January, 1980. The record
shows, however, that both petitioners paid their workers the
amounts of P180.00 a month for the months of September to
December, 1979, 15 and P210.00 a month for the months of January

For the month of April, 1980, the workers of the petitioner,

Victoria Tiangco, were paid varying amounts ranging from
P120.00 to P210.00. 20 Hence, there was also underpayment in

and February, 1980. 16 There was underpayment, therefore, in the

allowances of the workers of the petitioner Victoria Tiangco in the
amount of P30.00, a month, for the months of September, 1979 to
February, 1980, or P180.00 for each batillo in her employ. The
private respondents hired by the petitioner Reynaldo Tiangco, upon
the other hand, are entitled to differentials in the amount of P50.00 a
month for the same period, or P300.00 each.

this month.

Then, beginning February, 21, 1980, the workers should be paid

an additional P2.00, a day, pursuant to P.D. 1678. The record
shows that the petitioners had complied with this
requirement. 17 The petitioners, however, failed to pay the fixed
monthly allowance of their workers which was P240.00, in the case
of the workers employed by the petitioner Victoria Tiangco, and
P260.00, in the case of the workers of the petitioner Reynaldo
Tiangco. Thus, for the month of March, 1980, the petitioner Victoria
Tiangco paid her workers varying amounts, the lowest of which was
P30.00, paid to Eddie Batobalanos and Fruto Gihapon, and the
highest of which was P210.00, paid to Juan Gihapon and Roberto
Bayonon. 18Hence, there was underpayment in their emergency cost
of living allowances. But, since, the respondents employed by
Victoria Tiangco are wining to accept P50.00 a month as differentials
for the months of March, 1980 to May, 1980, 19 the workers
employed by her should be paid P50.00, each, for the month of
March, 1980, except Juan Gihapon and Roberto Bayon-on who
should be paid P30.00, each, for the said month, having received the
amount of P210.00, each as allowance for that month.

their allowances. Accordingly, they should be paid the amount of

P50.00, each, except for Juan Gihapon, Antonio Gilbuena, Juan
Castro, and Aguedo Marabe, who should be paid P40.00, each, and
Solomon Clarin, Daniel Cabrera, and Gregorio Laylay who should be
paid P30.00 each.

For the month of May, 1980, the petitioner Victoria Tiangco, paid
her workers varying amounts less that what was provided for by
law. 21 Hence, they should be paid the amount of P50.00, each, for

The petitioner, Reynaldo Tiangco, also paid the employees

varying amounts, ranging from P210.00 to P250.00, as
emergency cost of living allowance, for the month of March, 22,
1980. 22 Since they were entitled to a fixed monthly allowance of
P260.00, each, there was underpayment in their cost of living
allowances. Accordingly, the petitioner should pay the respondent
Pepito Gilbuena the amount of P50.00; the respondents Dominador
Lacerna and Graciano Durano, the amount of P40.00, each; the
respondent Ernesto Diong, the amount of P30.00; the respondents
Rustom Ofqueria and Aurelio Ilustrisimo, the amount of P20.00,
each; and the respondents Abraham Gilbuena, Jesus Gilbuena,
Rogelio Carabio, and Emerenciano Villaruel, the amount of P10.00
each.

For the month of April, 1980, the workers of the petitioner

Reynaldo Tiangco, were not also paid their emergency cost of
living allowance in full. 23 Hence, the said petitioner should pay his
workers the amount of P30.00 each, except for Pepito Gilbuena, who
should be paid the amount of P50.00, and Rustom Ofqueria, Jesus
Gilbuena, and Graciano Durano, who are entitled to only P40.00
each.

The petitioner, Reynaldo Tiangco did not also pay his workers
their full cost of living allowance for the month of May, 1980. The
workers were paid varying amounts of P130.00 to P150.00,

instead of P260.00, as required by law. 24 Hence, they should be

paid the amunt of P50.00 each for the month of May, 1980.

8
.

WHEREFORE, the petitioners Victoria Tiangco and Reynaldo

Tiangco should be, as they are hereby, ordered to PAY the
private respondents the following amounts as differentials in their
emergency cost of living allowance:

Daniel
Cabrera........
.............

1,1
50.
00

9
.

Juan
Castro..........
................

1,1
60.
00

1
0
.

Alcafone
Esgana........
.........

1,1
70.
00

1
1
.

Tomas
Capalar
....................

1,1
70.
00

Petitioner Victoria Tiangco:

1

Eddie
Batobalanos.
............

Pl,
17
0.0
0

2
.

Aguedo
Morabe........
.........

1,1
60.
00

1
2
.

Antonio
Gilbuena......
..........

1,1
60.
00

3
.

Gregorio
Laylay..........
........

1,1
50.
00

1
3
.

Ernesto
Batoy...........
...........

1,1
70.
00

4
.

Fruto
Gihapon.......
..............

1,1
70.
00

1
4
.

Serapio
Yadawon......
..........

1,1
50.
00

5
.

Solomon
Clarin
...................

1,1
50.
00

1
5
.

Juan
Gihapon.......
................

1,1
40.
00

6
.

Pepito
Batoy...........
.............

1,1
70.
00

1
6
.

1,1
50.
00

7
.

Jose
Ofqueria.......
................

1,1
70.
00

Elias
Escaran
.....................
.

1
7

Roberto
Bayon-

1,1
30.

on..............

00

9
.

Dominador
Lacerna.......
.....

1,9
40.
00

1
0
.

Graciano
Durano........
.........

1,9
50.
00

Petitioner Reynaldo Tiangco:

1

Aurelio
Ilustrisimo...
.........

P
l,9
20.
00

2
.

Pepito
Gilbuena.....
............

1,9
70.
00

3
.

Rogelio
Carabio.......
..........

1,9
10.
00

4
.

Abraham
Gilbuena.....
........

1,9
10.
00

5
.

Rustom
Ofqueria......
..........

1,9
30.
00

Ernesto
Diong..........
..........

1,9
30.
00

Jesus
Gilbuena.....
..............

1,9
20.
00

Emerencian
o
Villaruel.......
.

1,9
10.
00

6
.
7
.
8
.

With this modification, the judgment appealed from is AFFIRMED

in all other respects. With costs against the petitioners.
SO ORDERED.
G.R. No. 58094-95 March 15, 1989
MAMERTO B. ASIS, petitioner,
vs.
MINISTER OF LABOR AND EMPLOYMENT, CENTRAL
AZUCARERA DE PILAR, and EMMANUEL
JAVELLANA,respondents.
Belo, Ermitano Abiera & Associates for petitioner.
Yolanda, Quisumbing-Javellana & Associates for respondent
Emmanuel Q. Javellana.
V. Veloso & Associates for respondent Central Azucarera

NARVASA, J.:
The facts of this case depict a picture that is hardly edifying:
avidity trying to wear the mantle of right. The facts raise a twofold
issue: whether a company which has been haled to court by its
own in-house counsel is obliged to continue his employment and

entrust its legal affairs to him, specially when his cause of action
has been shown to be devoid of merit; and whether a firm is
bound to retain in its service a personnel manager who has
incited the very employees under his supervision and control to
file complaints against it. Asserting a right to sue his employer for
a legitimate grievance without meriting retaliatory action, the
petitioner claims that his dismissal for such conduct or on the
ground, essentially, of loss of confidence, was illegal; and he asks
this Court to annul the judgment of the respondent Commission,
which upheld the termination of his services in respondent
company. Said claim finds no support in either the law or the
established facts and must, therefore, be rejected.
The petitioner was appointed Legal Counsel of the Central
Azucarera de Pilar 1 Later, concurrently with his position as Legal Counsel, he was
named Head of its Manpower and Services Department.

In addition to his basic salaries and other fringe benefits, his

employer granted him, and a few other officials of the company, a
monthly ration of 200 liters of gasoline and a small tank of
liquefied petroleum gas (LPG). 2 This monthly ration was temporarily revoked
some five (5) years later as a cost reduction measure of the Central .3 The petitioner and
the other officials adversely affected moved for reconsideration. Their plea was denied.

The petitioner then commenced an action against the Central with

the Regional Office of the Ministry of Labor and Employment,
seeking restoration of his monthly ration of gasoline and LPG
which, as aforesaid, had been temporarily suspended. The case
was docketed as LRD Case No. 1632.
Shortly afterwards, he filed another action against his employer,
docketed as LRD Case No. 1685, this time complaining against
the Central's memorandum ordaining his relief (by being placed
on leave of absence) as the Central's Legal Counsel and Head of
the Manpower Services Department, impleaded by the petitioner
as co-respondent was Emmanuel Q. Javellana, the Finance
Manager and Comptroller of the Central, who had signed the
memorandum for his relief. 4 The petitioner theorized that he had in effect been
dismissed, illegally. 5

The two cases were jointly heard and decided by the Regional Director. The latter's
judgments 6 was for the petitioner's reinstatement to his former positions without loss of
seniority, benefits and other privileges, the payment to him of back wages from date of his
relief up to time of reinstatement, and the delivery to him of the monthly benefits from the
time of their temporary revocation up to actual restoration or, at his option, the money
equivalent thereof. 7

The Deputy Minister of Labor however reversed this decision of

the Regional Director, on appeal taken by the Central; the Deputy
Minister ordered the dismissal of the petitioner's complaint. 8 The
Deputy Minister found that the evidence satisfactorily established that the Central's
suspension of the petitioner's and others' monthly ration of gasoline and LPG, had been
caused by unavoidable financial constraints; that such a suspension, in line with its
conservation and cost-saving policy, did not in truth effect any significant diminution of said
benefits, since the petitioner was nevertheless entitled to reimbursement of the actual
amount of gas consumed; that petitioner had encouraged his co-employees to file
complaints against the Central over the rations issue, and this, as well as his institution of
his own actions, had created an atmosphere of enmity in the Central, and caused the loss
by the Central of that trust and confidence in him so essential in a lawyer-client relationship
as that theretofore existing between them; and that under the circumstances, petitioner's
discharge as the Central's Legal Counsel and Head of the Manpower & Services
Department was justified. The Deputy Minister's order of dismissal was however
subsequently modified, at the petitioner's instance, by decreeing the payment to the latter of
separation pay equivalent to one month's salary for every year of service rendered. 9

The petitioner theorizes that apart from the fact that the Deputy
Minister lacked jurisdiction to entertain the Central's appeal from
the decision of the Regional Director, he had gravely abused his
discretion in reaching his factual conclusions, pejoratively
described as guesswork and speculation.
The petitioner's theory of the Deputy Minister's lack of jurisdiction,
founded on the tardy payment by the Central of the appeal fee of
P 25.00, is quickly disposed of by simply adverting to our holding
in Del Rosario & Sons Logging Enterprises, Inc. v. NLRC, 10 to wit:
It may be that, as held in Acda vs. MOLE, 119 SCRA 306 [1982],
payment of the appeal fee is by no means a mere technicality but
is an essential requirement in the perfection of an appeal.
However, where as in this case, the fee had been paid, unlike in
the Acda case, although payment was delayed, the broader
interest of justice and the desired objective of resolving
controversies on the merits demanded that the appeal be given

course as, in fact, it was so given by the NLRC. Besides, it was

within the inherent power of the NLRC to have allowed the late
payment of the appeal fee.

The Solicitor General and the Chief Legal Officer, NLRC, for
public respondent.
Zoilo V. de la Cruz for private respondent.

As regards the temporary revocation of the petitioner's monthly

ration of fuel, suffice it to point out that, as the Solicitor General
stresses, this bad been occasioned by force of circumstances
affecting the Central's business. The monthly ration was not a
part of his basic salary, and is not indeed found in any of the
management payroll vouchers pertinent to the
petitioner. 11 Moreover, the adverse consequences of the suspension of the monthly
rations had been largely if not entirely negated by the Central's undertaking to reimburse the
petitioner for his actual consumption of fuel during the period of suspension. These facts are
entirely distinct from those obtaining in the case of States Marine Corporation and Royal
Line, Inc. v. Cebu Seamen's Association, Inc., 12 invoked by petitioner and thus preclude
application of the ruling therein laid down to the case at bar.

A review of the record demonstrates that there is substantial

evidence supporting the factual findings of the respondent Deputy
Minister. Said findings, as well as the legal conclusions derived
therefrom, cannot be said to have been rendered with grave
abuse of discretion, and will thus be affirmed. In fine, and as
petitioner could not but have realized from the outset, neither he
nor any other employee similarly situated had any legitimate
grievance against the Central.
WHEREFORE, the petition is DISMISSED for lack of merit, with
costs against petitioner.
Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur.
G.R. No. 101761. March 24, 1993.
NATIONAL SUGAR REFINERIES CORPORATION, petitioner,
vs. NATIONAL LABOR RELATIONS COMMISSION and NBSR
SUPERVISORY UNION, (PACIWU) TUCP, respondents.
Jose Mario C. Bunag for petitioner.

DECISION
REGALADO, J p:
The main issue presented for resolution in this original petition for
certiorari is whether supervisory employees, as defined in Article
212 (m), Book V of the Labor Code, should be considered as
officers or members of the managerial staff under Article 82, Book
III of the same Code, and hence are not entitled to overtime rest
day and holiday pay.
Petitioner National Sugar Refineries Corporation (NASUREFCO),
a corporation which is fully owned and controlled by the
Government, operates three (3) sugar refineries located at
Bukidnon, Iloilo and Batangas. The Batangas refinery was
privatized on April 11, 1992 pursuant to Proclamation No. 50. 1
Private respondent union represents the former supervisors of the
NASUREFCO Batangas Sugar Refinery, namely, the Technical
Assistant to the Refinery Operations Manager, Shift Sugar
Warehouse Supervisor, Senior Financial/Budget Analyst, General
Accountant, Cost Accountant, Sugar Accountant, Junior
Financial/Budget Analyst, Shift Boiler Supervisor,, Shift
Operations Chemist, Shift Electrical Supervisor, General Services
Supervisor, Instrumentation Supervisor, Community Development
Officer, Employment and Training Supervisor, Assistant Safety
and Security Officer, Head and Personnel Services, Head Nurse,
Property Warehouse Supervisor, Head of Inventory Control
Section, Shift Process Supervisor, Day Maintenance Supervisor
and Motorpool Supervisor.
On June 1, 1988, petitioner implemented a Job Evaluation (JE)
Program affecting all employees, from rank-and-file to department

heads. The JE Program was designed to rationalized the duties

and functions of all positions, reestablish levels of responsibility,
and recognize both wage and operational structures. Jobs were
ranked according to effort, responsibility, training and working
conditions and relative worth of the job. As a result, all positions
were re-evaluated, and all employees including the members of
respondent union were granted salary adjustments and increases
in benefits commensurate to their actual duties and functions.
We glean from the records that for about ten years prior to the JE
Program, the members of respondent union were treated in the
same manner as rank-and file employees. As such, they used to
be paid overtime, rest day and holiday pay pursuant to the
provisions of Articles 87, 93 and 94 of the Labor Code as
amended. With the implementation of the JE Program, the
following adjustments were made: (1) the members of respondent
union were re-classified under levels S-5 to S-8 which are
considered managerial staff for purposes of compensation and
benefits; (2) there was an increase in basic pay of the average of
50% of their basic pay prior to the JE Program, with the union
members now enjoying a wide gap (P1,269.00 per month) in
basic pay compared to the highest paid rank-and-file employee;
(3) longevity pay was increased on top of alignment adjustments;
(4) they were entitled to increased company COLA of P225.00
per month; (5) there was a grant of P100.00 allowance for rest
day/holiday work.
On May 11, 1990, petitioner NASUREFCO recognized herein
respondent union, which was organized pursuant to Republic Act
NO. 6715 allowing supervisory employees to form their own
unions, as the bargaining representative of all the supervisory
employees at the NASUREFCO Batangas Sugar Refinery.
Two years after the implementation of the JE Program,
specifically on June 20, 1990, the members of herein respondent
union filed a complainant with the executive labor arbiter for nonpayment of overtime, rest day and holiday pay allegedly in
violation of Article 100 of the Labor Code.

On January 7, 1991, Executive Labor Arbiter Antonio C. Pido

rendered a decision 2 disposing as follows:
"WHEREFORE, premises considered, respondent National Sugar
refineries Corporation is hereby directed to
1. pay the individual members of complainant union the usual
overtime pay, rest day pay and holiday pay enjoyed by them
instead of the P100.00 special allowance which was implemented
on June 11, 1988; and
2. pay the individual members of complainant union the difference
in money value between the P100.00 special allowance and the
overtime pay, rest day pay and holiday pay that they ought to
have received from June 1, 1988.
All other claims are hereby dismissed for lack of merit.
SO ORDERED."
In finding for the members therein respondent union, the labor
ruled that the along span of time during which the benefits were
being paid to the supervisors has accused the payment thereof to
ripen into contractual obligation; at the complainants cannot be
estopped from questioning the validity of the new compensation
package despite the fact that they have been receiving the
benefits therefrom, considering that respondent union was formed
only a year after the implementation of the Job Evaluation
Program, hence there was no way for the individual supervisors
to express their collective response thereto prior to the formation
of the union; and the comparative computations presented by the
private respondent union showed that the P100.00 special
allowance given NASUREFCO fell short of what the supervisors
ought to receive had the overtime pay rest day pay and holiday
pay not been discontinued, which arrangement, therefore,
amounted to a diminution of benefits.

On appeal, in a decision promulgated on July 19, 1991 by its

Third Division, respondent National Labor Relations Commission
(NLRC) affirmed the decision of the labor arbiter on the ground
that the members of respondent union are not managerial
employees, as defined under Article 212 (m) of the Labor Code
and, therefore, they are entitled to overtime, rest day and holiday
pay. Respondent NLRC declared that these supervisory
employees are merely exercising recommendatory powers
subject to the evaluation, review and final action by their
department heads; their responsibilities do not require the
exercise of discretion and independent judgment; they do not
participate in the formulation of management policies nor in the
hiring or firing of employees; and their main function is to carry
out the ready policies and plans of the corporation. 3
Reconsideration of said decision was denied in a resolution of
public respondent dated August 30, 1991. 4
Hence this petition for certiorari, with petitioner NASUREFCO
asseverating that public respondent commission committed a
grave abuse of discretion in refusing to recognized the fact that
the members of respondent union are members of the managerial
staff who are not entitled to overtime, rest day and holiday pay;
and in making petitioner assume the "double burden" of giving the
benefits due to rank-and-file employees together with those due
to supervisors under the JE Program.
We find creditable merit in the petition and that the extraordinary
writ of certiorari shall accordingly issue.
The primordial issue to be resolved herein is whether the
members of respondent union are entitled to overtime, rest day
and holiday pay. Before this can be resolved, however it must of
necessity be ascertained first whether or not the union members,
as supervisory employees, are to be considered as officers or
members of the managerial staff who are exempt from the
coverage of Article 82 of the Labor Code.

It is not disputed that the members of respondent union are

supervisory employees, as defined employees, as defined under
Article 212(m), Book V of the Labor Code on Labor Relations,
which reads:
"(m) 'Managerial employee' is one who is vested with powers or
prerogatives to lay down and execute management policies
and/or to hire, transfer, suspend, lay-off, recall, discharged,
assign or discipline employees. Supervisory employees are those
who, in the interest of the employer effectively recommend such
managerial actions if the exercise of such authority is not merely
routinary or clerical in nature but requires the use of independent
judgment. All employees not falling within any of those above
definitions are considered rank-and-file employees of this Book."
Respondent NLRC, in holding that the union members are
entitled to overtime, rest day and holiday pay, and in ruling that
the latter are not managerial employees, adopted the definition
stated in the aforequoted statutory provision.
Petitioner, however, avers that for purposes of determining
whether or not the members of respondent union are entitled to
overtime, rest day and holiday pay, said employees should be
considered as "officers or members of the managerial staff" as
defined under Article 82, Book III of the Labor Code on "Working
Conditions and Rest Periods" and amplified in Section 2, Rule I,
Book III of the Rules to Implement the Labor Code, to wit:
"Art. 82 Coverage. The provisions of this title shall apply to
employees in all establishments and undertakings whether for
profit or not, but not to government employees, managerial
employees, field personnel, members of the family of the
employer who are dependent on him for support, domestic
helpers, persons in the personal service of another, and workers
who are paid by results as determined by the Secretary of Labor
in Appropriate regulations.

"As used herein, 'managerial employees' refer to those whose

primary duty consists of the management of the establishment in
which they are employed or of a department or subdivision
thereof, and to other officers or members of the managerial staff."
(Emphasis supplied.)
xxx xxx xxx
'Sec. 2. Exemption. The provisions of this rule shall not apply
to the following persons if they qualify for exemption under the
condition set forth herein:

(3) (i) Regularly and directly assist a proprietor or a managerial

employee whose primary duty consists of the management of the
establishment in which he is employed or subdivision thereof; or
(ii) execute under general supervision work along specialized or
technical lines requiring special training, experience, or
knowledge; or (iii) execute under general supervision special
assignments and tasks; and
(4) Who do not devote more 20 percent of their hours worked in a
work-week to activities which are not directly and closely related
to the performance of the work described in paragraphs (1), (2),
and above."

xxx xxx xxx

(b) Managerial employees, if they meet all of the following
conditions, namely:
(1) Their primary duty consists of the management of the
establishment in which they are employed or of a department or
subdivision thereof:
(2) They customarily and regularly direct the work of two or more
employees therein:
(3) They have the authority to hire or fire other employees of
lower rank; or their suggestions and recommendations as to the
hiring and firing and as to the promotion or any other change of
status of other employees are given particular weight.
(c) Officers or members of a managerial staff if they perform the
following duties and responsibilities:
(1) The primary duty consists of the performance of work directly
related to management policies of their employer;
(2) Customarily and regularly exercise discretion and independent
judgment;

It is the submission of petitioner that while the members of

respondent union, as supervisors, may not be occupying
managerial positions, they are clearly officers or members of the
managerial staff because they meet all the conditions prescribed
by law and, hence, they are not entitled to overtime, rest day and
supervisory employees under Article 212 (m) should be made to
apply only to the provisions on Labor Relations, while the right of
said employees to the questioned benefits should be considered
in the light of the meaning of a managerial employee and of the
officers or members of the managerial staff, as contemplated
under Article 82 of the Code and Section 2, Rule I Book III of the
implementing rules. In other words, for purposes of forming and
joining unions, certification elections, collective bargaining, and so
forth, the union members are supervisory employees. In terms of
working conditions and rest periods and entitlement to the
questioned benefits, however, they are officers or members of the
managerial staff, hence they are not entitled thereto.
While the Constitution is committed to the policy of social justice
and the protection of the working class, it should not be supposed
that every labor dispute will be automatically decided in favor of
labor. Management also has its own rights which, as such, are
entitled to respect and enforcement in the interest of simple fair
play. Out of its concern for those with less privileges in life, this
Court has inclined more often than not toward the worker and

upheld his cause in his conflicts with the employer. Such

favoritism, however, has not blinded us 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 law and doctrine. 5
This is one such case where we are inclined to tip the scales of
justice in favor of the employer.
The question whether a given employee is exempt from the
benefits of the law is a factual one dependent on the
circumstances of the particular case, In determining whether an
employee is within the terms of the statutes, the criterion is the
character of the work performed, rather than the title of the
employee's position. 6
Consequently, while generally this Court is not supposed to
review the factual findings of respondent commission, substantial
justice and the peculiar circumstances obtaining herein mandate
a deviation from the rule.
A cursory perusal of the Job Value Contribution Statements 7 of
the union members will readily show that these supervisory
employees are under the direct supervision of their respective
department superintendents and that generally they assist the
latter in planning, organizing, staffing, directing, controlling
communicating and in making decisions in attaining the
company's set goals and objectives. These supervisory
employees are likewise responsible for the effective and efficient
operation of their respective departments. More specifically, their
duties and functions include, among others, the following
operations whereby the employee:

b) organizing and scheduling of work activities of the department,

which includes employee shifting scheduled and manning
complement;
c) decision making by providing relevant information data and
other inputs;
d) attaining the company's set goals and objectives by giving his
full support;
e) selecting the appropriate man to handle the job in the
department; and
f) preparing annual departmental budget;
2) observes, follows and implements company policies at all
times and recommends disciplinary action on erring subordinates;
3) trains and guides subordinates on how to assume
responsibilities and become more productive;
4) conducts semi-annual performance evaluation of his
subordinates and recommends necessary action for their
development/advancement;
5) represents the superintendent or the department when
appointed and authorized by the former;
6) coordinates and communicates with other inter and intra
department supervisors when necessary;

1) assists the department superintendent in the following:

7) recommends disciplinary actions/promotions;

a) planning of systems and procedures relative to department

activities;

8) recommends measures to improve work methods, equipment

performance, quality of service and working conditions;

9) sees to it that safety rules and regulations and procedure and

are implemented and followed by all NASUREFCO employees,
recommends revisions or modifications to said rules when
deemed necessary, and initiates and prepares reports for any
observed abnormality within the refinery;
10) supervises the activities of all personnel under him and goes
to it that instructions to subordinates are properly implemented;
and
11) performs other related tasks as may be assigned by his
immediate superior.
From the foregoing, it is apparent that the members of
respondent union discharge duties and responsibilities which
ineluctably qualify them as officers or members of the managerial
staff, as defined in Section 2, Rule I Book III of the aforestated
Rules to Implement the Labor Code, viz.: (1) their primary duty
consists of the performance of work directly related to
management policies of their employer; (2) they customarily and
regularly exercise discretion and independent judgment; (3) they
regularly and directly assist the managerial employee whose
primary duty consist of the management of a department of the
establishment in which they are employed (4) they execute, under
general supervision, work along specialized or technical lines
requiring special training, experience, or knowledge; (5) they
execute, under general supervision, special assignments and
tasks; and (6) they do not devote more than 20% of their hours
worked in a work-week to activities which are not directly and
clearly related to the performance of their work hereinbefore
described.
Under the facts obtaining in this case, we are constrained to
agree with petitioner that the union members should be
considered as officers and members of the managerial staff and
are, therefore, exempt from the coverage of Article 82. Perforce,
they are not entitled to overtime, rest day and holiday.

The distinction made by respondent NLRC on the basis of

whether or not the union members are managerial employees, to
determine the latter's entitlement to the questioned benefits, is
misplaced and inappropriate. It is admitted that these union
members are supervisory employees and this is one instance
where the nomenclatures or titles of their jobs conform with the
nature of their functions. Hence, to distinguish them from a
managerial employee, as defined either under Articles 82 or 212
(m) of the Labor Code, is puerile and in efficacious. The
controversy actually involved here seeks a determination of
whether or not these supervisory employees ought to be
considered as officers or members of the managerial staff. The
distinction, therefore, should have been made along that line and
its corresponding conceptual criteria.
II. We likewise no not subscribe to the finding of the labor arbiter
that the payment of the questioned benefits to the union members
has ripened into a contractual obligation.
A. Prior to the JE Program, the union members, while being
supervisors, received benefits similar to the rank-and-file
employees such as overtime, rest day and holiday pay, simply
because they were treated in the same manner as rank-and-file
employees, and their basic pay was nearly on the same level as
those of the latter, aside from the fact that their specific functions
and duties then as supervisors had not been properly defined and
delineated from those of the rank-and-file. Such fact is apparent
from the clarification made by petitioner in its motion for
reconsideration 8 filed with respondent commission in NLRC
Case No. CA No. I-000058, dated August 16, 1991, wherein, it
lucidly explained:
"But, complainants no longer occupy the same positions they
held before the JE Program. Those positions formerly classified
as 'supervisory' and found after the JE Program to be rank-andfile were classified correctly and continue to receive overtime,
holiday and restday pay. As to them, the practice subsists.

"However, those whose duties confirmed them to be supervisory,

were re-evaluated, their duties re-defined and in most cases their
organizational positions re-designated to confirm their superior
rank and duties. Thus, after the JE program, complainants cannot
be said to occupy the same positions." 9
It bears mention that this positional submission was never refuted
nor controverted by respondent union in any of its pleadings filed
before herein public respondent or with this Court. Hence, it can
be safely concluded therefrom that the members of respondent
union were paid the questioned benefits for the reason that, at
that time, they were rightfully entitled thereto. Prior to the JE
Program, they could not be categorically classified as members
or officers of the managerial staff considering that they were then
treated merely on the same level as rank-and-file. Consequently,
the payment thereof could not be construed as constitutive of
voluntary employer practice, which cannot be now be unilaterally
withdrawn by petitioner. To be considered as such, it should have
been practiced over a long period of time, and must be shown to
have been consistent and deliberate. 10
The test or rationale of this rule on long practice requires an
indubitable showing that the employer agreed to continue giving
the benefits knowingly fully well that said employees are not
covered by the law requiring payment thereof. 11 In the case at
bar, respondent union failed to sufficiently establish that petitioner
has been motivated or is wont to give these benefits out of pure
generosity.
B. It remains undisputed that the implementation of the JE
Program, the members of private respondent union were reclassified under levels S-5 S-8 which were considered under the
program as managerial staff purposes of compensation and
benefits, that they occupied re-evaluated positions, and that their
basic pay was increased by an average of 50% of their basic
salary prior to the JE Program. In other words, after the JE
Program there was an ascent in position, rank and salary. This in
essence is a promotion which is defined as the advancement

from one position to another with an increase in duties and

responsibilities as authorized by law, and usually accompanied by
an increase in salary. 12
Quintessentially, with the promotion of the union members, they
are no longer entitled to the benefits which attach and pertain
exclusively to their positions. Entitlement to the benefits provided
for by law requires prior compliance with the conditions set forth
therein. With the promotion of the members of respondent union,
they occupied positions which no longer met the requirements
imposed by law. Their assumption of these positions removed
them from the coverage of the law, ergo, their exemption
therefrom.
As correctly pointed out by petitioner, if the union members really
wanted to continue receiving the benefits which attach to their
former positions, there was nothing to prevent them from refusing
to accept their promotions and their corresponding benefits. As
the sating goes by, they cannot have their cake and eat it too or,
as petitioner suggests, they could not, as a simple matter of law
and fairness, get the best of both worlds at the expense of
NASUREFCO.
Promotion of its employees is one of the jurisprudentiallyrecognized exclusive prerogatives of management, provided it is
done in good faith. In the case at bar, private respondent union
has miserably failed to convince this Court that the petitioner
acted implementing the JE Program. There is no showing that the
JE Program was intended to circumvent the law and deprive the
members of respondent union of the benefits they used to
receive.
Not so long ago, on this particular score, we had the occasion to
hold that:
". . . it is the prerogative of the management to regulate,
according to its discretion and judgment, all aspects of

employment. This flows from the established rule that labor law
does not authorize the substitution of the judgment of the
employer in the conduct of its business. Such management
prerogative may be availed of without fear of any liability so long
as it is exercised in good faith for the advancement of the
employer's interest and not for the purpose of defeating on
circumventing the rights of employees under special laws or valid
agreement and are not exercised in a malicious, harsh,
oppressive, vindictive or wanton manner or out of malice or
spite." 13
WHEREFORE, the impugned decision and resolution of
respondent National Labor Relations Commission promulgated
on July 19, 1991 and August 30, 1991, respectively, are hereby
ANNULLED and SET ASIDE for having been rendered and
adopted with grave abuse of discretion, and the basic complaint
of private respondent union is DISMISSED.
Narvasa, C . J ., Padilla, Nocon and Campos, Jr., JJ., concur.
G.R. No. L-7518

May 27, 1955

ATOK-BIG WEDGE MINING CO., petitioner,

vs.
THE HONORABLE MODESTO CASTILLO, JOSE S. BAUTISTA
AND V. JANSON, JUDGE OF THE COURT OF INDUSTRIAL
RELATIONS; and ATOK-BIG WEDGE MUTUAL BENEFIT
ASSOCIATION, respondents.
Gerardo M. Roxas and Abraham E. Sarmiento for petitioner.
Pablo C. Sanidad for respondent.
Emilio Lopez for respondent Court of Industrial Relations.
CONCEPCION, J.:
This is petition for certiorari under Rule 67 of the Rules of Court.
Petitioner Atok-Big Wedge Mining Co., Inc., prays that a

resolution of the Court of Industrial Relations sitting in

banc, reconsidering an order of the Presiding Judge thereof, be
set aside, or, else, that "the reopening of this case for introduction
of additional evidence" be ordered. The dispositive part of said
resolution read as follows:
IN VIEW OF THE FOREGOING CONSIDERATIONS, and
following the decision of this Court and that of the
Supreme Court, under similar circumstances, petition of
respondents for the payment of Christmas bonus to the
laborers and employees of petitioner for the year 1951 is
hereby approved. In view hereof, petitioner is hereby
ordered to pay to its laborer and employees their
Christmas bonus for the year 1951 only.
IT IS ORDERED. (Annex B, p. 3).
The fact relative to the merits of the case, are set forth in said
resolution from which we quote:
The industrial dispute which was elevated to our Court in
banc, is about the petition filed by the Atok-Big Wedge
Mutual Benefit Association, praying that petitioner
company be ordered to pay its laborers and employees
the Christmas bonus for 1951 and every year thereafter.
xxx

xxx

xxx

After a careful perusal of the records of this case, we

found that petitioner admitted in its answer dated
November 15, 1952, that in the years 1946, 1947, 1948,
1949, and 1950, the amounts of P910.58, P6,734.93,
P15,742.32, P30,339.83 and P41,830.45, respectively
were distributed among the laborers and employees as
an act of grace, goodwill, liberality and generosity of the
petitioner. In its Balance Sheet ended as of March 31,
1951, petitioner has Reserved for provision for Bonus in

the amount of P18,000.00 (Exh. 4-A (1); as of June 30,

1951, said Provision for Bonus was P36,000.00 (Exh. 4-B
(1); as of September 30, 1951, said provision for Bonus
was P50,898.00 (Exh. 4-C (1); but as of December 31,
1951, said Provision for Bonus no longer appeared. The
disappearance in the Balance Sheet ended December 31,
1951 for the provision for Bonus was explained by the
company's accountant, Mr. Pablo Floro, as follows:
Q. Will you please explain to this Court why the
provision for bonuses which had been appearing
in the last three statements under the caption
"reserve' no longer appear so in this balance
sheet or Exh. 4-D?
The above testimony of the company's accountant shows that
even in 1951, the Christmas bonus for the laborers and
employees was also set aside.
Records further show that in the Balance Sheet of
petitioner as of December 31, 1951, the Net Profit carried
to surplus was P1,336,190.41. Petitioner, however, has
not set aside any amount for Christmas bonus after
December 31, 1951.
Taking into consideration that petitioner made a Net Profit
of P1,336,190.41 for the year ended December 31, 1951,
and the Christmas bonus set aside for the said year only
P61,227.63, justice and equity demand that such bonus
which was already set aside to be paid to the laborers
and employees concerned. After deducting P61,227.63
from the Net Profit of P1,336,190.41, there still remains
the amount of P1,274,962.78 for petitioner company.
(Annex B, pp. 1-3; emphasis supplied.)
Petitioner contends "that the Court of Industrial Relations siting in
banc committed a grave abuse of discretion:

(1) "When it gave due course to respondent Union's Motion for

Reconsideration of the decision of the trial court;"
(2) "In finding that the Christmas bonus for the year 1951 had
been declared due and payable by the board of directors of your
petitioner and that the amount of P61,227.63 had been set aside
for this purpose;"
(3) "In ordering your petitioner to pay to respondent Union the
sum of P61,227.63;" and
(4) "In not remanding this case to the trial court, in the interest of
justice, for the purpose of clarifying the inconsistency of the
witness, Mr. Pablo Floro, . . . and . . . when without waiting for
your petitioner's argument in support of its motion for
reconsideration and new trial it denied the same."
It appears that the parties herein had entered into a written
stipulation (Annex E), dated October 29, 1952, providing that
. . . both parties agree to submit the matter on stipulation
to the Honorable Presiding Judge of the Court of
Industrial Relations for decision, with the understanding
that whatever decision to be rendered therein shall be
considered final without the benefit of an appeal by either
of the parties to the Court in banc or to the Supreme
Court. (Annex E, p. 2.)
Petitioner maintains that the order of the presiding Judge of the
Court of Industrial Relations denying the claim of the Atok-Big
Wedge Mutual Benefit Association for Christmas bonus for the
year 1951, was pursuant to the agreement above quoted
"final, without the benefit of an appeal . . . to the court in banc or
to the Supreme Court" and that, accordingly, "the Court of
Industrial Relations sitting in banc commited a grave abuse of
discretion when when it gave due course to respondent unions

motion for reconsideration of the decision" of the Presiding Judge

of said court.
At the outset, it should be noted, however, that the provision
negating "benefit of an appeal" was a complement to the
agreement "to submit the matter on stipulation . . . with the
understanding" aforementioned. Said denial of the "benefit of an
appeal" was merely an implication ("understanding") of the
agreement "to submit the matter on stipulation", or a qualification
thereof. In other words, the provision "to submit the matter of
stipulation" was theprincipal agreement, and the negation of the
"benefit of an appeal" an accessory thereto, which cannot exist or
be enforced, without the main agreement which it qualifies.
It appears, also in the word of petitioner herein "that both
the respondent and the petitioner" eventually"elected not to
submit this case on a stipulation of facts, but rather to introduce
evidence in support of their respective contentions."
Said election by the parties amounted to an abandonment,
remission or novation resulting in the extinction of the above
quoted stipulation of the agreement of October 29, 1952. Hence,
the Court of Industrial Relation, sitting in banc, did not commit the
first alleged error pointed out by the petitioner herein.
Indeed, although the parties may have been willing to accept as
final the order of the Presiding Judge of the Court of Industrial
Relations if the latter had merely applied the law to the fact as
agreed upon by them, they might not have been prepared to
waive the right to appeal, in the absence of the stipulations of
facts, for the findings of fact made by said officer might not tally
with the objective facts, as they believe the same to be.
At any rate, even if the stipulation denying "the benefit of an
appeal" did subsist, the same does not affect either
the jurisdiction of the Court of Industrial Relations to consider in
banc the motion for reconsideration of respondent union, or the
validity of the resolution granting said motion. The jurisdiction of
the court is determined and conferred by law and may not be

taken away, modified and even qualified, by the parties. The latter
may enter into valid contracts in reference some of their rights,
including those conferred by remedial laws, and such contract
may affect the wisdom of the judicial action relative thereto, but
not the jurisdiction of the court thereon. In short, the proper
remedy against the resolution in question if violative of the
agreement of October 29, 1952, and it is not is appeal,
not certiorari, under Rule 67 of the Rules of the Court, which is
the one sought by petitioner herein.
This conclusion renders it unnecessary to consider the other point
raised by herein petitioner. However, we do not wish to dispose of
the case merely on a procedural technicality. In order that
petitioner may not be deprived of the protection afforded by our
laws, we will pass upon the other issue raised in the case at bar
as if the same had been brought to us on appeal by certiorari.
In connection with issues Nos. (2) and (3), we note that the
findings complained of are based upon the very records of
petitioner herein and the testimony of one of its accountants. In
fact, this accuracy of the following passage of the resolution
complained of is not controverted:
In its Balance Sheets ended as of March 31, 1951,
petitioner has Reserve for Provision for Bonus in the
amount of P18,000 (Exh. 4-A(1); as of June 30, 1951,
said Provision for Bonus was P36,000 (Exh. 4-B (1); as of
Sept. 30, 1951, said Provision for Bonus was P50,898
(Exh. 4-C(1); but as of Dec. 31, 1951, said Provision for
Bonus no longer appeared. The disappearance in the
Balance Sheet ended Dec. 31, 1951 of the Provision for
Bonus was explained by the company's accountant, Mr.
Pablo Floro, as follows:
Q. Will you please explain to this Court why the
provision for bonuses which had been appearing
in the last three statements under the caption

"reserve" no longer appear so in this balance

sheet or Exh. 4-D?
A. The monthly reserve for bonuses is no longer
under the caption reserve because it has been
declared due and payable by the board of
directors of the Company and for this reason it
appears under the caption current liabilities,
accrued payroll, in the amount of P61,227.63.
(t.s.n. p. 24, Magale; Annex B, p. 2; Emphasis
supplied.)
Explaining the meaning of the words "reserved for bonus" and
"current liabilities" used in the records of petitioner herein,
accountant Pablo Floro, said:
The term "reserved for bonuses" does not denote the
liability of the company because a reserve is just a
provision for future possible contingencies which may or
may not arise, whereas current liabilities is a definite
obligation on the part of the company. (Annex A, p. 4;
Emphasis supplied.)
The foregoing facts fall squarely within the purview of the rule laid
down in Philippine Education Co. vs. Court of Industrial Relations
and Union of Philippine Employees (92 Phil., 381), in which it was
held:
As heretofore stated the payment of bonus is not from the
legal point of view a contractual and enforceable
obligation. But the petitioner is not sued before a court of
justice. It is before the Court of Industrial Relations. And
according to the law of its creation it may make an award
for the purpose of settling and preventing further disputes.
And taking into consideration the facts and circumstances
of the case thatbonuses had been given to the employees
at lease in three previous years; that the amount of

P90,706.36 has been set aside for payment as bonus to

its employees and laborers and the reason for withholding
the payment thereof was the strike stages by the
employees and laborers for more favorable working
conditions which was declared legal by the respondent
court, justice and equity demand that bonus already set
aside for its employees and laborers be paid to them. The
award would still be within the ambit of the respondent
court's power and function which is so detrimental to both
labor and management and to the public wealth. Whether
this petition be deemed and appeal by certiorari under
Rule 44 or one of certiorari under Rule 67, it is clear that
the respondent court had under and pursuant to the law
of its creation the power and authority to make the award
complained of.
The payment of Christmas bonus is more justifiable in the case at
bar than in the Philippine Education case in which said bonus
was given for three (3) consecutive years, for petitioner herein
had paid it for five (5) consecutive years, and regarded the
amount of the Christmas bonus for 1951 as "current liability", or
"part of the cost of production," which was not done by the
Philippine Education Co. These circumstances become more
significant when we consider that a former superintendent of
petitioner herein, one by the name of Canon, had told its laborers,
in 1950, "that the Christmas bonus in the next year would be
increased," thus indicating, not only that said bonus would be
paid in 1951, but, also, that it would be "increased." Although the
order of the Presiding Judge, reversed by the Court in
banc, questions the competence of Canon to promise said
payment, the presumption is that he had been duly authorized to
act as he did, in the absence of satisfactory proof to the contrary,
and such proof is lacking. What is more, instead of being
disauthorized by petitioner's board of directors, the manner in
which its accounts were kept, particularly the inclusion of the
amount of the bonus in "the cost of productions," and the
treatment thereof as "current liability," confirms said promise or
amounts to a ratification and the implementation thereof. In this

respect the situation is analogous to that which obtained in H. E.

Heacock Co.vs. National Labor Union (50 Off. Gaz., 4233, 42344237), in which a promise of the President and General Manager
of the Company was one of the factors which led to the decision
favorable to the payment of bonus to the employee concerned.
As regards alleged error No. 4, suffice it to say that petitioner had
not asked the Court of Industrial Relations sitting in banc to
remand the case to the Presiding Judge for any purpose
whatsoever, and that said court was not bound to wait for the
submission of the argument of said petitioner in support of its pro
forma motion for reconsideration of the resolution complained of,
upon the ground "that the evidence was insufficient to justify" said
resolution prudence." Anyhow, petitioner has had every
opportunity to present said argument before us, and we still
believe that the aforementioned resolution should not be
disturbed.
Wherefore, the petition is hereby denied, with costs against the
petitioner. So ordered.
Pablo, Bengzon, Padilla, Montemayor, Reyes, A., Bautista
Angelo, Labrador and Reyes, J.B.L., JJ., concur.