Labor Review: Case Digests (Labor Standards) RULING: Petition is partly meritorious.

Samahan ng Mangagawa Sa Hanjin Shipyard 1.) Yes, Samahan can form workers
vs. Bureau of Labor Relations association for the purpose of mutual aid
and protection.
The right to self-organization is not limited to
unionism. Workers may also form or join an In the case at bench, the Court cannot sanction
association for mutual aid and protection and the opinion of the CA that Samahan should have
for other legitimate purposes. formed a union for purposes of collective
bargaining instead of a workers' association
FACTS: Samahan argues that the right to form because the choice belonged to it. The right to
a workers' association is not exclusive to form or join a labor organization necessarily
intermittent, ambulant and itinerant workers. includes the right to refuse or refrain from
While the Labor Code allows the workers "to exercising the said right. It is self-evident that
form, join or assist labor organizations of their just as no one should be denied the exercise of a
own choosing" for the purpose of collective right granted by law, so also, no one should be
bargaining, it does not prohibit them from compelled to exercise such a conferred right.
forming a labor organization simply for Also inherent in the right to self-organization is
purposes of mutual aid and protection. All the right to choose whether to form a union for
members of Samahan have one common place purposes of collective bargaining or a workers'
of work, Hanjin Shipyard. Thus, there is no association for purposes of providing mutual aid
reason why they cannot use "Hanjin Shipyard" and protection.
in their name.
The right to self-organization, however, is
Hanjin counters that Samahan failed to adduce subject to certain limitations as provided by law.
sufficient basis that all its members were For instance, the Labor Code specifically
employees of Hanjin or its legitimate disallows managerial employees from joining,
contractors, and that the use of the name "Hanjin assisting or forming any labor union.
Shipyard" would create an impression that all its Meanwhile, supervisory employees, while
members were employess of HHIC. eligible for membership in labor organizations,
are proscribed from joining the collective
Samahan reiterates its stand that workers with a
bargaining unit of the rank and file employees.
definite employer can organize any association
Even government employees have the right to
for purposes of mutual aid and protection.
self-organization. It is not, however, regarded as
Inherent in the workers' right to self-
existing or available for purposes of collective
organization is its right to name its own
bargaining, but simply for the furtherance and
organization. Samahan referred "Hanjin
protection of their interests.
Shipyard" as their common place of work.
Therefore, they may adopt the same in their Hanjin posits that the members of Samahan have
association's name. definite employers, hence, they should have
formed a union instead of a workers' association.
ISSUE: 1.) WON Samahan can form a workers
The Court disagrees. There is no provision in the
association for mutual aid and protection?
Labor Code that states that employees with
2.) WON Samahan can use the name definite employers may form, join or assist
“Hanjin”? unions only.
The Court cannot subscribe either to Hanjin's in a labor union of the rank-and-file employees but may
form, join or assist separate labor unions of their own.
position that Samahan's members cannot form
Managerial employees shall not be eligible to form, join or
the association because they are not covered by assist any labor unions for purposes of collective
the second sentence of Article 243 (now 249), to bargaining. Alien employees with valid working permits
wit: issued by the Department may exercise the right to self-
organization and join or assist labor unions for purposes
Article 243. Coverage and employees' right to self- of collective bargaining if they are nationals of a country
organization. All persons employed in commercial, which grants the same or similar rights to Filipino
industrial and agricultural enterprises and in religious, workers, as certified by the Department of Foreign Affairs.
charitable, medical, or educational institutions, whether
operating for profit or not, shall have the right to self- For purposes of this section, any employee, whether
organization and to form, join, or assist labor employed for a definite period or not, shall beginning on
organizations of their own choosing for purposes of the first day of his/her service, be eligible for membership
collective bargaining. Ambulant, intermittent and itinerant in any labor organization.
workers, self-employed people, rural workers and those
without any definite employers may form labor All other workers, including ambulant, intermittent and
organizations for their mutual aid and protection. (As other workers, the self-employed, rural workers and those
amended by Batas Pambansa Bilang 70, May 1, 1980) without any definite employers may form labor
organizations for their mutual aid and protection and other
[Emphasis Supplied] legitimate purposes except collective bargaining.

Further, Article 243 should be read together with [Emphases Supplied]

Rule 2 of Department Order (D.O.) No. 40-03,
Clearly, there is nothing in the foregoing
Series of 2003, which provides:
implementing rules which provides that workers,
RULE II with definite employers, cannot form or join a
workers' association for mutual aid and
COVERAGE OF THE RIGHT TO SELF-ORGANIZATION
protection. Section 2 thereof even broadens the
Section 1. Policy. - It is the policy of the State to promote coverage of workers who can form or join a
the free and responsible exercise of the right to self- workers' association. Thus, the Court agrees
organization through the establishment of a simplified with Samahan's argument that the right to form a
mechanism for the speedy registration of labor unions and
workers' association is not exclusive to
workers associations, determination of representation
status and resolution of inter/intra-union and other related ambulant, intermittent and itinerant workers.
labor relations disputes. Only legitimate or registered The option to form or join a union or a workers'
labor unions shall have the right to represent their association lies with the workers themselves,
members for collective bargaining and other purposes. and whether they have definite employers or not.
Workers' associations shall have the right to represent
their members for purposes other than collective
2.) No, Samahan cannot use the name
bargaining.
“Hanjin”
Section 2. Who may join labor unions and workers'
associations. - All persons employed in commercial, Nevertheless, the Court agrees with the BLR
industrial and agricultural enterprises, including that "Hanjin Shipyard" must be removed in the
employees of government owned or controlled name of the association. A legitimate workers'
corporations without original charters established under
association refers to an association of workers
the Corporation Code, as well as employees of religious,
charitable, medical or educational institutions whether organized for mutual aid and protection of its
operating for profit or not, shall have the right to self- members or for any legitimate purpose other
organization and to form, join or assist labor unions for than collective bargaining registered with the
purposes of collective bargaining: provided, however, that DOLE. Having been granted a certificate of
supervisory employees shall not be eligible for membership
registration, Samahan's association is now
recognized by law as a legitimate workers' BPI vs. BPI Employees Union Davao Chapter
association. et. al. (2010) (Absorption of EE’s in cases of
merger)
According to Samahan, inherent in the workers'
right to self-organization is its right to name its Human beings are never embraced in the term
own organization. It seems to equate the “assets and liabilities”. The Corporation Code
dropping of words "Hanjin Shipyard" from its does not also mandate the absorption of the
name as a restraint in its exercise of the right to employees of the non-surviving corporation by
self-organization. Hanjin, on the other hand, the surviving corporation in the case of a
invokes that "Hanjin Shipyard" is a registered merger.
trade name and, thus, it is within their right to
prohibit its use. FACTS: Bangko Sentral ng Pilipinas approved
the Articles of Merger executed by and between
As there is no provision under our labor laws BPI, herein petitioner, and Far East Bank and
which speak of the use of name by a workers' Trust Company (FEBTC) and was approved by
association, the Court refers to the Corporation the Securities and Exchange Commission. The
Code, which governs the names of juridical Articles of Merger and Plan of Merger did not
persons. Section 18 thereof provides: contain any specific stipulation with respect to
the employment contracts of existing personnel
No corporate name may be allowed by the Securities and
of the non-surviving entity which is FEBTC.
Exchange Commission if the proposed name is identical or
deceptively or confusingly similar to that of any existing Pursuant to the said Article and Plan of Merger,
corporation or to any other name already protected by law all the assets and liabilities of FEBTC were
or is patently deceptive, confusing or contrary to existing transferred to and absorbed by BPI as the
laws. When a change in the corporate name is approved,
surviving corporation. FEBTC employees,
the Commission shall issue an amended certificate of
incorporation under the amended name. including those in its different branches across
the country, were hired by petitioner as its own
[Emphases Supplied] employees, with their status and tenure
recognized and salaries and benefits maintained.
The policy underlying the prohibition in Section
18 against the registration of a corporate name ISSUE: WON Employees are ipso jure absorbed
which is "identical or deceptively or confusingly in a merger of two corporations?
similar" to that of any existing corporation or
which is "patently deceptive" or "patently RULING: NO. Human beings are never
confusing" or "contrary to existing laws," is the embraced in the term “assets and liabilities.”
avoidance of fraud upon the public which would Moreover, BPI’s absorption of former FEBTC
have occasion to deal with the entity concerned, employees was neither by operation of law nor
the evasion of legal obligations and duties, and by legal consequence of contract. There was no
the reduction of difficulties of administration government regulation or law that compelled the
and supervision over corporations. merger of the two banks or the absorption of the
employees of the dissolved corporation by the
For the same reason, it would be misleading for surviving corporation. Had there been such law
the members of Samahan to use "Hanjin or regulation, the absorption of employees of the
Shipyard" in its name as it could give the wrong non-surviving entities of the merger would have
impression that all of its members are employed been mandatory on the surviving corporation. In
by Hanjin. the present case, the merger was voluntarily
entered into by both banks presumably for some
mutually acceptable consideration. In fact, the in violation of an individual’s freedom to
Corporation Code does not also mandate the contract. It would have been a different matter
absorption of the employees of the non- if there was an express provision in the articles
surviving corporation by the surviving of merger that as a condition for the merger, BPI
corporation in the case of a merger. was being required to assume all the
employment contracts of all existing FEBTC
The Court cannot uphold the reasoning that the employees with the conformity of the
general stipulation regarding transfer of FEBTC employees. In the absence of such a provision
assets and liabilities to BPI as set forth in the in the articles of merger, then BPI clearly had
Articles of Merger necessarily includes the the business management decision as to whether
transfer of all FEBTC employees into the or not employ FEBTC’s employees. FEBTC
employ of BPI and neither BPI nor the FEBTC employees likewise retained the prerogative to
employees allegedly could do anything about it. allow themselves to be absorbed or not;
Even if it is so, it does not follow that the otherwise, that would be tantamount to
absorbed employees should not be subject to the involuntary servitude.
terms and conditions of employment obtaining
in the surviving corporation. NOTE: However in a MR (in 2011) this
decision was reversed.
Furthermore, the Court believes that it is
contrary to public policy to declare the former In said case the SC ruled that, employees should
FEBTC employees as forming part of the assets be absorbed.
or liabilities of FEBTC that were transferred and
absorbed by BPI in the Articles of Merger. It is more in keeping with the dictates of social
Assets and liabilities, in this instance, should be justice and the State policy of according full
deemed to refer only to property rights and protection to labor to deem employment
obligations of FEBTC and do not include the contracts as automatically assumed by the
employment contracts of its personnel. A surviving corporation in a merger, even in the
corporation cannot unilaterally transfer its absence of an express stipulation in the articles
employees to another employer like chattel. of merger or the merger plan. In his dissenting
Certainly, if BPI as an employer had the right to opinion, Justice Brion reasoned that:
choose who to retain among FEBTC’s To my mind, due consideration of Section 80 of
employees, FEBTC employees had the the Corporation Code, the constitutionally
concomitant right to choose not to be absorbed declared policies on work, labor and
by BPI. Even though FEBTC employees had no employment, and the specific FEBTC-BPI
choice or control over the merger of their situation — i.e., a merger with complete “body
employer with BPI, they had a choice whether or and soul” transfer of all that FEBTC embodied
not they would allow themselves to be absorbed and possessed and where both participating
by BPI. Certainly nothing prevented the banks were willing (albeit by deed, not by their
FEBTC’s employees from resigning or retiring written agreement) to provide for the affected
and seeking employment elsewhere instead of human resources by recognizing continuity of
going along with the proposed absorption. employment — should point this Court to a
Employment is a personal consensual contract declaration that in a complete merger situation
and absorption by BPI of a former FEBTC where there is total takeover by one corporation
employee without the consent of the employee is over another and there is silence in the merger
agreement on what the fate of the human
resource complement shall be, the latter should employment, whether before or after the merger,
not be left in legal limbo and should be properly subject to existing contractual obligations. In
provided for, by compelling the surviving entity this manner, Justice Brion’s theory of automatic
to absorb these employees. This is what Section assumption may be reconciled with the
80 of the Corporation Code commands, as the majority’s concerns with the successor
surviving corporation has the legal obligation to employer’s prerogative to choose its employees
assume all the obligations and liabilities of the and the prohibition against involuntary
merged constituent corporation. servitude.

Not to be forgotten is that the affected Notwithstanding this concession, the Court finds
employees managed, operated and worked on no reason to reverse our previous
the transferred assets and properties as their pronouncement that the absorbed FEBTC
means of livelihood; they constituted a basic employees are covered by the Union Shop
component of their corporation during its Clause.
existence. In a merger and consolidation
situation, they cannot be treated without
consideration of the applicable constitutional
declarations and directives, or, worse, be simply
disregarded. If they are so treated, it is up to this
Court to read and interpret the law so that they
are treated in accordance with the legal
requirements of mergers and consolidation, read
in light of the social justice, economic and social
provisions of our Constitution. Hence, there is a
need for the surviving corporation to take
responsibility for the affected employees and to
absorb them into its workforce where no
appropriate provision for the merged
corporation’s human resources component is
made in the Merger Plan.

By upholding the automatic assumption of the

non-surviving corporation’s existing
employment contracts by the surviving
corporation in a merger, the Court strengthens
judicial protection of the right to security of
tenure of employees affected by a merger and
avoids confusion regarding the status of their
various benefits which were among the chief
objections of our dissenting colleagues.
However, nothing in this Resolution shall impair
the right of an employer to terminate the
employment of the absorbed employees for a
lawful or authorized cause or the right of such an
employee to resign, retire or otherwise sever his
ISAE vs. Quisimbing (Equal Pay for Equal There is no evidence that foreign-hires perform
Work) 25% more efficiently or effectively than the
local-hires. Both groups have similar functions
Employees working in the Philippines, if they and responsibilities, which they perform under
are performing similar functions and similar working conditions.
responsibilities under similar working
conditions, should be paid under the principle of While the need of the School to attract foreign-
“equal pay for equal work.” hires is recognized, salaries should not be used
as an enticement to the prejudice of local-hires.
FACTS: The School hires both foreign and The local-hires perform the same services as
local teachers as members of its faculty, foreign-hires and they ought to be paid the same
classifying the same into two: (1) foreign-hires salaries as the latter. For the same reason, the
and (2) local-hires. The School grants foreign- “dislocation factor” and the foreign-hires’
hires certain benefits not accorded local-hires. limited tenure also cannot serve as valid bases
These include housing, transportation, shipping for the distinction in salary rates. The dislocation
costs, taxes, and home leave allowance. Foreign- factor and limited tenure affecting foreign-hires
hires are also paid a salary rate twenty-five are adequately compensated by certain benefits
percent (25%) more than that of local-hires. The accorded them which are not enjoyed by local
School justifies the difference on two hires, such as housing, transportation, shipping
“significant economic disadvantages” that costs, taxes and home leave travel allowances.
foreign-hires have to endure, namely: (a) the
“dislocation factor” and (b) limited tenure. The State has the right and duty to regulate the
relations between labor and capital. These
Petitioner union claims that the point-of-hire relations are not merely contractual but are so
classification employed by the School is impressed with public interest that labor
discriminatory to Filipinos and that the grant of contracts, collective bargaining agreements
higher salaries to foreign hires constitutes racial included, must yield to the common good.
discrimination. When the CBA negotiation Should such contracts contain stipulations that
reached a deadlock, the Secretary of Labor are contrary to public policy, courts will not
assumed jurisdiction. The Acting Secretary hesitate to strike down these stipulations.
upheld the point-of-hire classification for the
distinction in salary rates, as he said: We find the point-of-hire classification
employed by respondent School to justify the
The principle “equal pay for equal work” does not find
distinction in the salary rates of foreign-hires
application in the present case. The international character
of the School requires the hiring of foreign personnel to and local hires to be an invalid classification.
deal with different nationalities and different cultures, There is no reasonable distinction between the
among the student population. services rendered by foreign-hires and local-
hires.
ISSUE: WON the Acting Labor Secretary’s
ruling is correct?

RULING: NO, the Acting Labor Secretary’s

ruling is not correct. If an employer accords
employees the same position and rank, the
presumption is that these employees perform
equal work.
Serrano vs. Gallant Maritime Services et. al. overtime pay, + US$490.00/ month, vacation
(Constitutionality Section 10(5) of RA 8042) leave pay = US$2,590.00/ compensation per
month.” Respondents appealed to the NLRC to
The Court concludes that the subject clause question the finding of the LA that Serrano was
contains a suspect classification in that, in the illegally dismissed. Serrano also appealed on the
computation of the monetary benefits of fixed- sole issue that the LA erred in not applying the
term employees who are illegally discharged, it previous ruling of the Court that in case of
imposes a 3-month cap on the claim of OFWs illegal dismissal, OFWs are entitled to their
with an unexpired portion of one year or more salaries for the unexpired portion of their
in their contracts, but none on the claims of contracts. The NLRC corrected the LA's
other OFWs or local workers with fixed- term computation of the lump-sum salary awarded to
employment. Serrano by reducing the applicable salary rate
from US$2,590.00 to US$1,400.00 because R.A.
FACTS: Serrano was hired by Gallant Maritime
No. 8042 "does not provide for the award of
Services, Inc. and Marlow Navigation Co., Ltd.
overtime pay, which should be proven to have
under a Philippine Overseas Employment
been actually performed, and for vacation leave
Administration (POEA)-approved Contract of
pay." Serrano questioned the constitutionality of
Employment. On the date of his departure,
the subject clause1.
Serrano was constrained to accept a downgraded
employment contract for the position of 2nd ISSUE: Is the subject clause under RA 8042
Officer with a monthly salary of US$1,000.00, unconstitutional?
upon the assurance and representation of
respondents that he would be made Chief RULING: YES. The subject clause violates
Officer however the latter did not deliver their Section 1, Article III of the Constitution, and
promise. Serrano refused to stay on as 2nd Section 18, Article II and Section 3, Article XIII
Officer and was repatriated to the Philippines. on labor as a protected sector. Upon cursory
Serrano's employment contract was for a period reading, the subject clause appears facially
of 12 months but at the time of his repatriation neutral, for it applies to all OFWs. However, a
he had served only 2 months and 7 days of his closer examination reveals that the subject
contract, leaving an unexpired portion of 9 clause has a discriminatory intent against and an
months and 23 days. Serrano filed with the LA a invidious impact on, OFWs at two levels:
complaint against respondents for constructive
dismissal and for payment of his money claims. First, OFWs with employment contracts of less
The LA declared the dismissal of Serrano illegal than one year vis-à-vis OFWs with employment
and awarding him monetary benefits. contracts of one year or more;

In awarding Serrano a lump-sum salary of Second, among OFWs with employment

US$8,770.00, the LA based his computation on contracts of more than one year; and
the salary period of 3 months only, rather than Third, OFWs vis-à-vis local workers with fixed-
the entire unexpired portion of 9 months and 23 period employment; OFWs with employment
days of petitioner's employment contract,
applying the subject clause13. However, the LA 1
Sec. 10. Money Claims. - x x x In case of termination of overseas
employment without just, valid or authorized cause as defined by
applied the salary rate of US$2,590.00, law or contract, the workers shall be entitled to the full
consisting of Serrano's "basic salary, reimbursement of his placement fee with interest of 12% per
annum, plus his salaries for the unexpired portion of his
US$1,400.00/ month + US$700.00/ month, fixed employment contract or for three (3) months for every year of the
unexpired term, whichever is less.
contracts of less than one year vis-à-vis OFWs from such prejudice, simply because the latter's
with employment contracts of one year or more. unexpired contracts fall short of one year.

As pointed out by Serrano, it was in Marsaman The Court concludes that the subject clause
Manning Agency, Inc. v. National Labor contains a suspect classification in that, in the
Relations Commission, that the Court laid down computation of the monetary benefits of fixed-
the following rules on the application of the term employees who are illegally discharged, it
periods prescribed under Section 10(5) of R.A. imposes a 3-month cap on the claim of OFWs
No. 8042, to wit: “A plain reading of Sec. 10 with an unexpired portion of one year or more in
clearly reveals that the choice of which amount their contracts, but none on the claims of other
to award an illegally dismissed overseas contract OFWs or local workers with fixed- term
worker, i.e., whether his salaries for the employment. The subject clause singles out one
unexpired portion of his employment contract or classification of OFWs and burdens it with a
three (3) months' salary for every year of the peculiar disadvantage. The subject clause does
unexpired term, whichever is less, comes into not state or imply any definitive governmental
play only when the employment contract purpose; and it is for that precise reason that the
concerned has a term of at least one (1) year or clause violates not just Serrano's right to equal
more. This is evident from the words " for every protection, but also the right to substantive due
year of the unexpired term" which follows the process under Section 1, Article III of the
words " salaries x x x for three months." To Constitution. The subject clause being
follow petitioners' thinking that private unconstitutional, Serrano is entitled to his
respondent is entitled to three (3) months salary salaries for the entire unexpired period of
only simply because it is the lesser amount is to nine months and 23 days of his employment
completely disregard and overlook some words contract, pursuant to law and jurisprudence
used in the statute while giving effect to some. prior to the enactment of R.A. No. 8042.
This is contrary to the well established rule in
legal hermeneutics that in interpreting a statute, Sameer Overseas Placement Agency Inc. vs.
care should be taken that every part or word Joy Cabiles (RA 10022 in relation to RA 8042
thereof be given effect since the law-making and Serrano case)
body is presumed to know the meaning of the Thus, when a law or a provision of law is null
words employed in the statue and to have used because it is inconsistent with the Constitution,
them advisedly. the nullity cannot be cured by reincorporation
The enactment of the subject clause in R.A. No. or reenactment of the same or a similar law or
8042 introduced a differentiated rule of provision. A law or provision of law that was
computation of the money claims of illegally already declared unconstitutional remains as
dismissed OFWs based on their employment such unless circumstances have so changed as
periods, in the process singling out one category to warrant a reverse conclusion.
whose contracts have an unexpired portion of Note: In this case, RA 8042 was already
one year or more and subjecting them to the amended by RA 10022 in 2010, which reinstated
peculiar disadvantage of having their monetary Sec. 10 Paragraph 5 of said provision which was
awards limited to their salaries for 3 months or declared unconstitutional by the SC in the
for the unexpired portion thereof, whichever is Serrano case.
less, but all the while sparing the other category
FACTS: Petitioner, Sameer Overseas Placement In Serrano v. Gallant Maritime Services, Inc.
Agency, Inc., is a recruitment and placement and Marlow Navigation Co., Inc., this court
agency. ruled that the clause “or for three (3) months for
every year of the unexpired term, whichever is
Respondent Joy Cabiles was hired thus signed a less” is unconstitutional for violating the equal
one-year employment contract for a monthly protection clause and substantive due process.
salary of NT$15,360.00. Joy was deployed to
work for Taiwan Wacoal, Co. Ltd. (Wacoal) on A statute or provision which was declared
June 26, 1997. She alleged that in her unconstitutional is not a law. It “confers no
employment contract, she agreed to work as rights; it imposes no duties; it affords no
quality control for one year. In Taiwan, she was protection; it creates no office; it is inoperative
asked to work as a cutter. as if it has not been passed at all.”

Sameer claims that on July 14, 1997, a certain The Court said that they are aware that the
Mr. Huwang from Wacoal informed Joy, clause “or for three (3) months for every year of
without prior notice, that she was terminated and the unexpired term, whichever is less” was
that “she should immediately report to their reinstated in Republic Act No. 8042 upon
office to get her salary and passport.” She was promulgation of Republic Act No. 10022 in
asked to “prepare for immediate repatriation.” 2010.
Joy claims that she was told that from June 26 to
July 14, 1997, she only earned a total of Ruling on the constitutional issue
NT$9,000.15 According to her, Wacoal In the hierarchy of laws, the Constitution is
deducted NT$3,000 to cover her plane ticket to supreme. No branch or office of the government
Manila. may exercise its powers in any manner
On October 15, 1997, Joy filed a complaint for inconsistent with the Constitution, regardless of
illegal dismissal with the NLRC against the existence of any law that supports such
petitioner and Wacoal. LA dismissed the exercise. The Constitution cannot be trumped by
complaint. NLRC reversed LA’s decision. CA any other law. All laws must be read in light of
affirmed the ruling of the National Labor the Constitution. Any law that is inconsistent
Relations Commission finding respondent with it is a nullity.
illegally dismissed and awarding her three Thus, when a law or a provision of law is null
months’ worth of salary, the reimbursement of because it is inconsistent with the Constitution,
the cost of her repatriation, and attorney’s fees. the nullity cannot be cured by reincorporation or
ISSUE: Whether or not Cabiles was entitled to reenactment of the same or a similar law or
the unexpired portion of her salary due to illegal provision. A law or provision of law that was
dismissal? already declared unconstitutional remains as
such unless circumstances have so changed as to
RULING: YES. The Court held that the award warrant a reverse conclusion.
of the three-month equivalent of respondent’s
salary should be increased to the amount The Court observed that the reinstated clause,
equivalent to the unexpired term of the this time as provided in Republic Act. No.
employment contract. 10022, violates the constitutional rights to equal
protection and due process. Petitioner as well as
the Solicitor General has failed to show any
compelling change in the circumstances that the petitioner was not covered by the
would warrant us to revisit the precedent. retrenchment program.

The Court declared, once again, the clause, “or ISSUE: Is Manuel Sosito, who was on
for three (3) months for every year of the Indefinite Leave, entitled to separation pay
unexpired term, whichever is less” in Section 7 under the retrenchment program?
of Republic Act No. 10022 amending Section 10
of Republic Act No. 8042 is declared RULING: No. He is not entitled to the
unconstitutional and, therefore, null and void. separation pay under the retrenchment program.
Separation pay was extended only to those who
Manuel Sosito vs. Aguinaldo Development were in the active service of the company as of
Corp. (Art 4 of the Labor Code) June 30, 1976.

While the Constitution is committed to the policy Being on indefinite leave, he was not in the
of social justice and the protection of the active service of the private respondent
working class, it should not be supposed that although, if one were to be technical, he was still
every labor dispute will be automatically in its employ.
decided in favor of labor. Management also has
its own rights which, as such, are entitled to Under the law then in force the private
respect and enforcement in the interest of simple respondent could have validly reduced its work
fair play. force because of its financial reverses without
the obligation to grant separation pay. This was
FACTS: Petitioner Manuel Sosito was permitted under the original Article 272(a), of
employed by the private respondent, a logging the Labor Code, which was in force at the time.
company, when he went on indefinite leave with
the consent of the company on January 16, 1976. While the Constitution is committed to the
policy of social justice and the protection of the
On July 20, 1976, the private respondent, working class, it should not be supposed that
through its president, announced a retrenchment every labor dispute will be automatically
program and offered separation pay to decided in favor of labor. Management also has
employees in the active service as of June 30, its own rights which, as such, are entitled to
1976, who would tender their resignations not respect and enforcement in the interest of simple
later than July 31, 1976. fair play. Out of its concern for those with less
privileges in life, this Court has inclined more
The petitioner decided to accept this offer and often than not toward the worker and upheld his
submitted his resignation on July 29, 1976, "to cause in his conflicts with the employer. Such
avail himself of the gratuity benefits" promised. favoritism, however, has not blinded us to the
However, his resignation was not acted upon rule that justice is in every case for the
and he was never given the separation pay he deserving, to be dispensed in the light of the
expected. established facts and the applicable law and
doctrine.
Department of Labor ordered the company to
pay Sosito the sum of P4,387.50, representing
his salary for six and a half months. On appeal
to the National Labor Relations Commission,
this decision was reversed and it was held that
Dee Jay’s Inn and Café et. al vs. Rañeses (In respondent’s employment on February 5, 2005.
this case, Nightowl case was cited which Respondent submitted the Joint Affidavit of
involves the same factual background) Mercy Joy Christine Bura-ay (Mercy) and Mea
(Illegal Dismissal and Abandonment) Tormo (Mea) to corroborate her allegations.

In a case where the employee was neither found Petitioners countered that respondent and
to have been dismissed nor to have abandoned Moonyeen were not terminated from
his/her work, the general course of action is for employment. According to petitioners, petitioner
the Court to dismiss the complaint, direct the DJIC incurred a shortage of P400.00 in its
employee to return to work, and order the earnings for February 4, 2005. That same day,
employer to accept the employee. However, the petitioner Ferraris called respondent and
Court recognized in Nightowl that when a Moonyeen for a meeting but the two employees
considerable length of time had already passed denied incurring any shortage. Petitioner
rendering it impossible for the employee to Ferraris lost her temper and scolded respondent
return to work, the award of separation pay is and Moonyeen, and required them to produce
proper. the missing P400.00. However, respondent and
Moonyeen merely walked out and did not report
FACTS: Petitioner Ferraris, the owner and back to work anymore. To support their version
manager of petitioner DJIC, engaged the of events, petitioners submitted the affidavit of
services of respondent and a certain Moonyeen Ma. Eva Gorospe (Eva), another employee of
J. Bura-ay (Moonyeen) as cashier and petitioners.
cashier/receptionist, respectively, for a monthly
salary of P3,000.00 each. Petitioners further claimed that it was
respondent herself who requested that the SSS
Respondent filed before the Social Security contributions not be deducted from her salary
System (SSS) Office a complaint against because it would only diminish her take-home
petitioner Ferraris for non-remittance of SSS pay. Thus, respondent received from petitioners
contributions. Respondent also filed before the the amount of SSS contributions, with the
NLRC City Arbitration Unit (CAU) XII, undertaking that she would comply with the law
Cotabato City, a complaint against petitioners by paying the SSS premiums herself as self
for underpayment/nonpayment of wages, employed. Respondent recorded her weekly
overtime pay, holiday pay, service incentive wages and payment of SSS premiums in a
leave pay, 13th month pay, and moral and notebook, which had since been missing.
exemplary damages.
The LA ruled in favor of petitioners, to which
Respondent averred that sometime in January the NLRC also affirmed. The argument of both
2005, she asked from petitioner Ferraris the quasi-judicial agencies hinges on respondents
latter’s share as employer in the SSS failure to prove the fact of his termination.
contributions and overtime pay for the 11 hours Respondent then filed a petition for certiorari
of work respondent rendered per day at with CA alleging grave abuse of discretion on
petitioner DJIC. Petitioner Ferraris got infuriated the part of NLRC in its decision. CA held that
and told respondent to seek another respondent was illegally dismissed. CA ruled
employment. This prompted respondent to file that since there is failure on the part of petitioner
her complaints before the SSS Office and NLRC to also prove abandonment by substantial
CAU XII. After learning of respondent’s evidence. It is a well-settled doctrine, that if
complaints, petitioner Ferraris terminated
doubts exist between the evidence presented by which justified her dismissal from employment.
the employer and the employee, the scales of Petitioners merely alleged the fact that
justice must be tilted in favor of the latter. Hence respondent, after being scolded on February 4,
the petition to this Court. 2005, no longer returned to work beginning
February 5, 2005, which was corroborated by
ISSUES: 1.) WON there is Illegal Dismissal? one of petitioners’ employees, Eva, in her
affidavit. Similar to this case is the factual
2.) WON there is Abandonment?
background in Nightowl Watchman & Security
RULING: 1.) NO, there is no Illegal Dismissal Agency, Inc. v. Lumahan, to which the Court
in this case. ruled that;

In several cases2 this Court held that “In illegal In every employee dismissal case, the employer bears the
burden of proving the validity of the employee’s dismissal,
dismissal cases, the employer has the burden of
i.e., the existence of just or authorized cause for the
proving that the employee’s dismissal was legal. dismissal and the observance of the due process
However, to discharge this burden, the employee requirements. The employer’s burden of proof, however,
must first prove, by substantial evidence, that he presupposes that the employee had in fact been dismissed,
had been dismissed from employment.” with the burden to prove the fact of dismissal resting on the
employee. Without any dismissal action on the part of the
Respondent failed to prove that she had been employer, valid or otherwise, no burden to prove just or
dismissed from employment. authorized cause arises.

Given the jurisprudence cited in the preceding As no dismissal was carried out in this case, any
paragraphs, the application by the Court of consideration of abandonment — as a defense raised by an
employer in dismissal situations — was clearly misplaced.
Appeals of the equipoise doctrine and the rule
To our mind, the CA again committed a reversible error in
that all doubts should be resolved in favor of considering that Nightowl raised abandonment as a
labor was misplaced. Without the joint affidavit defense.
of Mercy and Mea, there only remained the bare
Abandonment, as understood under our labor laws, refers
allegation of respondent that she was dismissed
to the deliberate and unjustified refusal of an employee to
by petitioners on February 5, 2005, which hardly resume his employment. It is a form of neglect of duty
constitute substantial evidence of her dismissal. that constitutes just cause for the employer to dismiss the
As both the Labor Arbiter and the NLRC held, employee.
since respondent was unable to establish with
Under this construct, abandonment is a defense available
substantial evidence her dismissal from against the employee who alleges a dismissal. Thus, for the
employment, the burden of proof did not shift to employer “to successfully invoke abandonment, whether as
petitioners to prove that her dismissal was for a ground for dismissing an employee or as a defense, the
just or authorized cause. employer bears the burden of proving the employee’s
unjustified refusal to resume his employment.” This
burden, of course, proceeds from the general rule that
2.) NO, there is no Abandonment of
places the burden on the employer to prove the validity of
employment in this case. the dismissal.

As pointed out by petitioners, they never raised The critical point the CA missed, however, was the fact that
abandonment as a defense as there was no Nightowl never raised abandonment as a defense. What
dismissal in the first place. Petitioners did not Nightowl persistently argued was that Lumahan stopped
reporting for work beginning April 22, 1999; and that it
argue that respondent abandoned her work
had been waiting for Lumahan to show up so that it could
2
impose on him the necessary disciplinary action for
Exodus International Construction Corp vs. Biscocho, Cañedo vs.
abandoning his post at Steelwork, only to learn that
Kampilan Security and Detective Agency, Inc., and Brown
Madonna Press, Inc. vs. Casas. Lumahan had filed an illegal dismissal complaint.
Nightowl did not at all argue that Lumahan had Agabon vs. NLRC (Statutory Due Process
abandoned his work, thereby warranting the termination of under the Labor Code)
his employment. Significantly, the CA construed these
arguments as abandonment of work under the labor law
Note: In Agabon v. NLRC promulgated on
construct. We find it clear, however, that Nightowl did not
dismiss Lumahan; hence, it never raised the defense of November 14, 2004, the Court reverted to the
abandonment. doctrine in Wenphil v. National Labor Relations
Commission. According to that doctrine, a
Besides, Nightowl did not say that Lumahan “abandoned
dismissal based on a just cause is legal, even
his work”; rather, Nightowl stated that Lumahan
“abandoned his post” at Steelwork. When read together when made without notice to the employee
with its arguments, what this phrase simply means is that concerned; but because of the breach of the
Lumahan abandoned his assignment at Steelwork; statutory notice requirement, the employer must
nonetheless, Nightowl still considered him as its employee be sanctioned by being made to pay indemnity --
whose return they had been waiting for.
in this case, nominal damages of P30,000 for
Finally, failure to send notices to Lumahan to report back each petitioner. Thus, the Court abandoned
to work should not be taken against Nightowl despite the Serrano v. NLRC.
fact that it would have been prudent, given the
circumstance, had it done so. Report-to-work notices are Where the dismissal is for a just cause, the lack
required, as an aspect of procedural due process, only in
of statutory due process should not nullify the
situations involving the dismissal, or the possibility of
dismissal, of the employee. Verily, report-to-work notices dismissal but the employer should indemnify the
could not be required when dismissal or the possibility of employee for the violation of his statutory rights
dismissal, of the employee does not exist.
FACTS: Riviera Home Improvements, Inc.,
(Emphasis supplied, citations omitted) which was in the business of selling and
installing ornamental and construction materials,
In a case where the employee was neither found
employed Petitioners Virgilio Agabon and Jenny
to have been dismissed nor to have abandoned
Agabon on January 2, 1992, as cornice and
his/her work, the general course of action is for
gypsum board installers. On February 23, 1999,
the Court to dismiss the complaint, direct the
they were dismissed, without any termination
employee to return to work, and order the
notice, for allegedly abandoning their work. The
employer to accept the employee. However, the
Agabons sued their employer for illegal
Court recognized in Nightowl that when a
dismissal and payment of money claims. They
considerable length of time had already passed
filed the case before the labor arbiter, from
rendering it impossible for the employee to
whom they scored an initial victory. On appeal,
return to work, the award of separation pay is
however, the NLRC found that they had
proper. Considering that more than ten (10)
abandoned their work; hence, they were not
years had passed since respondent stopped
entitled to back wages and separation pay or to
reporting for work on February 5, 2005, up to
the other money claims awarded by the labor
the date of this judgment, it is no longer possible
arbiter. This ruling was sustained by the Court
and reasonable for the Court to direct respondent
of Appeals.
to return to work and order petitioners to accept
her. Under the circumstances, it is just and ISSUES: WON Petitioners were illegally
equitable for the Court instead to award dismissed?
respondent separation pay in an amount
equivalent to one (1) month salary for every year RULING: NO, petitioners were not illegally
of service, computed up to the time she stopped dismissed. By a vote of 8 to 6, the Court,
working, or until February 4, 2005. through Mme. Justice Consuelo Ynares-
Santiago, held that there was a just cause for the FACTS: Respondents were hired by JAKA until
termination of the employment of the their termination on August 29, 1997 because
petitioners, as their abandonment of work had the Corporation was “in dire financial straits”. It
clearly been established. However, the company was not disputed that they were terminated
did not comply with the twin-notice requirement without complying with the requirement under
in Book VI, Rule I, Section 2(d) of the Omnibus Art. 283 of the Labor Code regarding the service
Rules Implementing the Labor Code. This rule of notice upon the employees and DOLE at least
mandates the sending of the notices to the last one month before the intended date of
known addresses of the employees. Where the termination.
dismissal is for a just cause, the lack of statutory
due process should not nullify the dismissal but Respondents filed a complaint for illegal
the employer should indemnify the employee for dismissal against JAKA. JAKA was defeated on
the violation of his statutory rights. The appeal in the lower court hence this petition.
indemnity should be stiffer to discourage the ISSUE: WON full backwages and separation
abhorrent practice of “dismiss now, pay later” pay be awarded to respondents when employers
which we sought to deter in Serrano ruling. The effected termination without complying with the
violation of employees’ rights warrants the twin notice rule?
payment of nominal damages. For failing to
comply procedural due process, the employer in RULING: No, full backwages and separation
this case was directed to pay each petitioner an pay cannot be awarded. The dismissal of the
indemnity in the form of nominal damages of respondents was for an authorized cause under
P30,000. Article 283. A dismissal for authorized cause
does not necessarily imply delinquency or
Jaka Food Processing Corporation vs. Pacot culpability on the part of the employee. Instead,
(Award of Nominal Damages, Compare with the dismissal process is initiated by the
Agabon Case) employer’s exercise of his management
1) if the dismissal is based on a just cause but prerogative, i.e. when the employer opts to
the employer failed to comply with the notice install labor-saving devices, when he decides to
requirement, the sanction to be imposed upon cease business operations or when he undertakes
him should be tempered because the dismissal to implement a retrenchment program.
was initiate by an act imputable to the Accordingly, it is wise to hold that:
employee.
1) if the dismissal is based on a just cause but
2) if the dismissal is based on an authorized the employer failed to comply with the notice
cause but the employer fails to comply with the requirement, the sanction to be imposed upon
notice requirement, the sanction should be him should be tempered because the dismissal
stiffer because the dismissal process was was initiate by an act imputable to the employee.
initiated by the employer’s exercise of his
management prerogative. Thus, dismissal was 2) if the dismissal is based on an authorized
upheld but ordered JAKA to pay each of the cause but the employer fails to comply with the
respondents the amount of Php 50,000.00 notice requirement, the sanction should be stiffer
representing nominal damages for non- because the dismissal process was initiated by
compliance with statutory due process. the employer’s exercise of his management
prerogative. Thus, dismissal was upheld but
ordered JAKA to pay each of the respondents During Alcarazs pre-employment orientation,
the amount of Php 50,000.00 representing petitioner Allan G. Almazar (Almazar), Hospiras
nominal damages for non-compliance with Country Transition Manager, briefed her on her
statutory due process. duties and responsibilities as Regulatory Affairs
Manager. Petitioner Kelly Walsh (Walsh),
JAKA, however should not pay separation pay Manager of the Literature Drug Surveillance
because where it is true that the rule is to grant Drug Safety of Hospira, will be her immediate
separation pay to employees terminated due to supervisor. Petitioner Maria Olivia T. Yabut-
authorized causes, the EXCEPTION is where Misa (Misa), Abbotts Human Resources (HR)
the closure of business or cessation of operations Director, sent Alcaraz an e-mail which contained
is due to serious business losses or financial an explanation of the procedure for evaluating
reverses, duly proved, as in this case. the performance of probationary employees.
Abbot Laboratories Phil et. al. vs. Alcaraz During the course of her employment, Alcaraz
(Contractual Due Process) noticed that some of the staff had disciplinary
problems. Thus, she would reprimand them for
In this light, while there lies due cause to
their unprofessional behavior such as non-
terminate Alcaraz probationary employment for
observance of the dress code, moonlighting, and
her failure to meet the standards required for
disrespect of Abbott officers. However, Alcaraz
her regularization, and while it must be further
method of management was considered by
pointed out that Abbott had satisfied its
Walsh to be "too strict."
statutory duty to serve a written notice of
termination, the fact that it violated its own Alcaraz was called to a meeting with Walsh and
company procedure renders the termination of Terrible, Abbotts former HR Director, where she
Alcaraz employment procedurally infirm, was informed that she failed to meet the
warranting the payment of nominal damages. regularization standards for the position of
Regulatory Affairs Manager. Walsh, Almazar,
FACTS: Petitioner Abbott Laboratories,
and Bernardo personally handed to Alcaraz a
Philippines (Abbott) caused the publication in a
letter stating that her services had been
major broadsheet newspaper of its need for a
terminated effective May 19, 2005. The letter
Medical and Regulatory Affairs Manager.
Alcaraz - who was then a Regulatory Affairs and detailed the reasons for Alcaraz termination.
Alcaraz felt that she was unjustly terminated
Information Manager at Aventis Pasteur
from her employment and thus, filed a complaint
Philippines, Incorporated (another
for illegal dismissal and damages against Abbott
pharmaceutical company like Abbott) showed
and its officers, namely, Misa, Bernardo,
interest and submitted her application.
Almazar, Walsh, Terrible, and Feist. She
In Abbotts offer sheet, it was stated that Alcaraz claimed that she should have already been
was to be employed on a probationary basis. considered as a regular and not a probationary
Later that day, she accepted the said offer and employee given Abbotts failure to inform her of
received an electronic mail (e-mail) from the reasonable standards for her regularization
Abbotts Recruitment Officer, petitioner Teresita upon her engagement as required under Article
C. Bernardo (Bernardo), confirming the same. 295of the Labor Code.
Attached to Bernardos e-mail were Abbotts
LA dismissed Alcarazs complaint for lack of
organizational chart and a job description of
merit. The LA rejected Alcarazs argument that
Alcarazs work.
she was not informed of the reasonable incidents which point out to the efforts made by
standards to qualify as a regular employee. The Abbott but also those circumstances which
NLRC reversed the findings of the LA and ruled would show that Alcaraz was well-apprised of
that there was no evidence showing that Alcaraz her employers expectations that would, in turn,
had been apprised of her probationary status and determine her regularization.
the requirements which she should have
complied with in order to be a regular employee. Abbott caused the publication in a major
On appeal, CA affirmed the NLRC decision. broadsheet newspaper of its need for a
Hence, this petition. Regulatory Affairs Manager, indicating therein
the job description for as well as the duties and
ISSUE: WON Alcaraz was illegally dismissed? responsibilities attendant to the aforesaid
position. In Abbotts December 7, 2004 offer
RULING: NO, Alcaraz was not illegally sheet, it was stated that Alcaraz was to be
dismissed. The probationary employee may also employed on a probationary status. On the day
be terminated for failure to qualify as a regular Alcaraz accepted Abbotts employment offer,
employee in accordance with the reasonable Bernardo sent her copies of Abbotts
standards made known by the employer to the organizational structure and her job description
employee at the time of the engagement. through e-mail. Alcaraz was made to undergo a
pre-employment orientation where Almazar
A probationary employee, like a regular
informed her that she had to implement Abbotts
employee, enjoys security of tenure. However,
Code of Conduct and office policies on human
in cases of probationary employment, aside from
resources and finance and that she would be
just or authorized causes of termination, an
reporting directly to Walsh. Alcaraz received
additional ground is provided under Article 295
copies of Abbotts Code of Conduct and
of the Labor Code, i.e., the probationary
Performance Modules from Misa who explained
employee may also be terminated for failure to
to her the procedure for evaluating the
qualify as a regular employee in accordance with
performance of probationary employees; she
the reasonable standards made known by the
was further notified that Abbott had only one
employer to the employee at the time of the
evaluation system for all of its employees.
engagement. Thus, the services of an employee
who has been engaged on probationary basis Considering the totality of the above-stated
may be terminated for any of the following: (a) a circumstances, it cannot, therefore, be doubted
just or (b) an authorized cause; and (c) when he that Alcaraz was well-aware that her
fails to qualify as a regular employee in regularization would depend on her ability and
accordance with reasonable standards prescribed capacity to fulfill the requirements of her
by the employer. position as Regulatory Affairs Manager and that
her failure to perform such would give Abbott a
A punctilious examination of the records reveals
valid cause to terminate her probationary
that Abbott had indeed complied with the above-
employment.
stated requirements. This conclusion is largely
impelled by the fact that Abbott clearly An employer who terminates an employee for a
conveyed to Alcaraz her duties and valid cause but does so through invalid
responsibilities as Regulatory Affairs Manager procedure is liable to pay the latter nominal
prior to, during the time of her engagement, and damages.
the incipient stages of her employment. On this
score, the Court finds it apt to detail not only the
Despite the existence of a sufficient ground to fact that it violated its own company procedure
terminate Alcaraz employment and Abbotts renders the termination of Alcaraz employment
compliance with the Labor Code termination procedurally infirm, warranting the payment of
procedure, it is readily apparent that Abbott nominal damages.
breached its contractual obligation to Alcaraz
when it failed to abide by its own procedure in Lopez vs. Alturas (Right to Counsel)
evaluating the performance of a probationary The right to counsel and the assistance of one in
employee. investigations involving termination cases is
Records show that Abbotts PPSE procedure neither indispensable nor mandatory, except
mandates, inter alia, that the job performance of when the employee himself requests for one or
a probationary employee should be formally that he manifests that he wants a formal hearing
reviewed and discussed with the employee at on the charges against him.
least twice: first on the third month and second FACTS: Quirico Lopez was hired by
on the fifth month from the date of employment. respondent Alturas Group of Companies in 1997
Abbott is also required to come up with a as truck driver. Ten years later or sometime in
Performance Improvement Plan during the third November 2007, he was dismissed after he was
month review to bridge the gap between the allegedly caught by respondent’s security guard
employee’s performance and the standards set, if in the act of attempting to smuggle out of the
any. In addition, a signed copy of the PPSE form company premises 60 kilos of scrap iron worth
should be submitted to Abbotts HRD as the P840 aboard respondents’ Isuzu Cargo
same would serve as basis for recommending Aluminum Van with Plate Number PHP 271
the confirmation or termination of the that was then assigned to him. When
probationary employment. questioned, petitioner allegedly admitted to the
In this case, it is apparent that Abbott failed to security guard that he was taking out the scrap
follow the above-stated procedure in evaluating iron consisting of lift springs out of which he
Alcaraz. For one, there lies a hiatus of evidence would make axes.
that a signed copy of Alcaraz PPSE form was Petitioner, in compliance with the Show Cause
submitted to the HRD. It was not even shown Notice dated December 5, 2007 issued by
that a PPSE form was completed to formally respondent company’s Human Resource
assess her performance. Neither was the Department Manager, denied the allegations by
performance evaluation discussed with her a handwritten explanation written in the Visayan
during the third and fifth months of her dialect.
employment. Nor did Abbott come up with the
necessary Performance Improvement Plan to Finding petitioner’s explanation unsatisfactory,
properly gauge Alcaraz performance with the set respondent company terminated his employment
company standards. by Notice of Termination effective December
14, 2007 on the grounds of loss of trust and
In this light, while there lies due cause to confidence, and of violation of company rules
terminate Alcaraz probationary employment for and regulations. In issuing the Notice,
her failure to meet the standards required for her respondent company also took into account the
regularization, and while it must be further result of an investigation showing that petitioner
pointed out that Abbott had satisfied its statutory had been smuggling out its cartons which he had
duty to serve a written notice of termination, the sold, in conspiracy with one Maritess Alaba, for
his own benefit to thus prompt it to file a may also include a request that a formal hearing
criminal case for Qualified Theft against him or conference be held. In such a case, the
before the Regional Trial Court (RTC) of Bohol. conduct of a formal hearing or conference
It had in fact earlier filed another criminal case becomes mandatory, just as it is where there
for Qualified Theft against petitioner arising exist substantial evidentiary disputes or where
from the theft of the scrap iron. company rules or practice requires an actual
hearing as part of employment pretermination
ISSUE: WON Lopez was afforded procedural procedure.
due process?
Lopez argued that his right to be represented by
RULING: YES, Lopez was afforded due counsel under the constitution was violated. He
process. This Court has held that there is no argues that such right is mandatory.
violation of due process even if no hearing was
conducted, where the party was given a chance The Court does not agree. The right to counsel
to explain his side of the controversy. What is and the assistance of one in investigations
frowned upon is the denial of the opportunity to involving termination cases is neither
be heard. indispensable nor mandatory, except when the
employee himself requests for one or that he
Petitioner was given the opportunity to explain manifests that he wants a formal hearing on the
his side when he was informed of the charge charges against him.
against him and required to submit his written
explanation with which he complied. Note: To summarize, there are two kinds of due
process that may be asserted. Procedural Due
The above rulings are a clear recognition that the Process which involves, Statutory Due Process
employer may provide an employee with ample (Agabon case) and Contractual Due Process
opportunity to be heard and defend himself with (Abbot Case) and Constitutional Due Process.
the assistance of a representative or counsel in
ways other than a formal hearing. The employee In cases where the company also provides its
can be fully afforded a chance to respond to the own policies and guidelines on termination, such
charges against him, adduce his evidence or policies and guidelines must also be followed. It
rebut the evidence against him through a wide is not enough that the employer complied with
array of methods, verbal or written. Statutory Due Process; there must also be
compliance with the Contractual Due Process.
After receiving the first notice apprising him of Failure to comply will not result in the
the charges against him, the employee may invalidation of the dismissal but will entitle the
submit a written explanation (which may be in employee to nominal damages.
the form of a letter, memorandum, affidavit or
position paper) and offer evidence in support Constitutional Due Process should only be
thereof, like relevant company records (such as invoked against the State and not against the
his 201 file and daily time records) and the Private Employer. (People vs. Marti) The only
sworn statements of his witnesses. For this time an employee may invoke such is when the
purpose, he may prepare his explanation case has already been filed with the Labor
personally or with the assistance of a Arbiter, NLRC and/or with the Higher Courts.
representative or counsel. He may also ask the
employer to provide him copy of records In Agabon, just cause dismissal without due
material to his defense. His written explanation process entitles the EE payment of 30k nominal
damages. services, effective July 16, 1976. The stated
In JAKA, authorized cause dismissal without ground for termination was “completion of
due process entitles EE payment of 50k nominal contract, expiration of the definite period of
damages. employment.”

Brent School vs. Zamora (Guidelines for Alegre protested the announced termination of
Fixed-term EE’s) his employment. He argued that although his
contract did stipulate that the same would
Accordingly, and since the entire purpose terminate on July 17, 1976, since his services
behind the development of legislation were necessary and desirable in the usual
culminating in the present Article 280 of the business of his employer, and his employment
Labor Code clearly appears to have been, as had lasted for five years, he had acquired the
already observed, to prevent circumvention of status of regular employee and could not be
the employee's right to be secure in his tenure, removed except for valid cause.
the clause in said article indiscriminately and
completely ruling out all written or oral The employment contract of 1971 was executed
agreements conflicting with the concept of when the Labor Code of the Philippines had not
regular employment as defined therein should yet been promulgated, which came into effect
be construed to refer to the substantive evil that some 3 years after the perfection of the contract.
the Code itself has singled out: agreements
entered into precisely to circumvent security of ISSUE: WON provisions of the Labor Code as
tenure. It should have no application to amended (regarding probationary/regular
instances where a fixed period of employment employees), have anathematized "fixed period
was agreed upon knowingly and voluntarily by employment" or employment for a term.
the parties, without any force, duress or RULING: NO. Before the Labor Code, there
improper pressure being brought to bear upon was no doubt about the validity of term
the employee and absent any other employment. It was impliedly but clearly
circumstances vitiating his consent, or where it recognized by the Termination Pay law, RA
satisfactorily appears that the employer and 1052.
employee dealt with each other on more or less
equal terms with no moral dominance whatever The employment contract between Brent School
being exercised by the former over the latter. and Alegre was executed on July 18, 1971, at a
time when the Labor Code of the Philippines
FACTS: Alegre was an athletic director at (P.D. 442) had not yet been promulgated.
Brent, at a yearly compensation of P20,000. His Indeed, the Code did not come into effect until
contract fixed a specific term of 5 years for its November 1, 1974, some three years after the
existence, from July, 1971, to July, 1976. perfection of the employment contract, and
Subsequent subsidiary agreements in March rights and obligations there under had arisen and
1973, August 1973, and Sept. 1974 reiterated the been mutually observed and enforced.
same terms and conditions, including the expiry
date, as those contained in the original contract At that time, i.e., before the advent of the Labor
of July, 1971.- 3 months before the expiration of Code, there was no doubt whatever about the
the stipulated period, in April 1976, Alegre was validity of term employment. It was impliedly
given a copy of the report filed by Brent with the but nonetheless clearly recognized by the
Dep. of Labor advising of the termination of his Termination Pay Law, R.A. 1052, 11 as
amended by R.A. 1787. 12 Basically, this statute without any force, duress or improper pressure
provided that— being brought to bear upon the employee and
absent any other circumstances vitiating his
In cases of employment, without a definite period, in a
consent, or where it satisfactorily appears that
commercial, industrial, or agricultural establishment or
enterprise, the employer or the employee may terminate at the employer and employee dealt with each
any time the employment with just cause; or without just other on more or less equal terms with no moral
cause in the case of an employee by serving written notice dominance whatever being exercised by the
on the employer at least one month in advance, or in the
former over the latter. Unless thus limited in its
case of an employer, by serving such notice to the
employee at least one month in advance or one-half month purview, the law would be made to apply to
for every year of service of the employee, whichever is purposes other than those explicitly stated by its
longer, a fraction of at least six months being considered framers; it thus becomes pointless and arbitrary,
as one whole year. unjust in its effects and apt to lead to absurd and
The employer, upon whom no such notice was served in unintended consequences.
case of termination of employment without just cause, may
hold the employee liable for damages.

The employee, upon whom no such notice was served in

case of termination of employment without just cause, shall
be entitled to compensation from the date of termination of
his employment in an amount equivalent to his salaries or
wages corresponding to the required period of notice.

There was, to repeat, clear albeit implied

recognition of the licitness of term employment.
RA 1787 also enumerated what it considered to Note: To summarize, the guidelines to be
be just causes for terminating an employment followed for a valid fixed term employment
without a definite period, either by the employer contract are the following: 1.) That such fixed
or by the employee without incurring any period of employment was agreed upon
liability therefor. knowingly and voluntarily by the parties,
without any force, duress or improper pressure
Accordingly, and since the entire purpose behind being brought to bear upon the employee and
the development of legislation culminating in absent any other circumstances vitiating his
the present Article 280 of the Labor Code consent, 2.) That employer and employee dealt
clearly appears to have been, as already with each other on more or less equal terms with
observed, to prevent circumvention of the no moral dominance whatever being exercised
employee's right to be secure in his tenure, the by the former over the latter, and lastly 3.) That
clause in said article indiscriminately and such contract was not entered into for the
completely ruling out all written or oral purpose of circumventing security of tenure as
agreements conflicting with the concept of guaranteed under the law and constitution.
regular employment as defined therein should be
construed to refer to the substantive evil that the IPAMS vs. De Vera (Application of Foreign
Code itself has singled out: agreements entered Law)
into precisely to circumvent security of tenure. It
As an exception, the parties may agree that a
should have no application to instances where a
foreign law shall govern the employment
fixed period of employment was agreed upon
contract. A synthesis of the existing laws and
knowingly and voluntarily by the parties,
jurisprudence reveals that this exception is
subject to the following requisites: 1.) That it is Thirty Six Dollars and Eight Centavos
expressly stipulated in the overseas employment (CA$2,636.80), based on Canadian labor law.
contract that a specific foreign law shall
govern; 2.) That the foreign law invoked must be Aggrieved, Arriola filed a complaint against the
proven before the courts pursuant to the petitioners for illegal dismissal and non-payment
Philippine rules on evidence; 3.) That the of overtime pay, vacation leave and sick leave
foreign law stipulated in the overseas pay before the Labor Arbiter (LA). He claimed
employment contract must not be contrary to that SNC-Lavalin still owed him unpaid salaries
law, morals, good customs, public order, or equivalent to the three-month unexpired portion
public policy of the Philippines; and 4.) That the of his contract, amounting to, more or less, One
overseas employment contract must be Million Sixty-Two Thousand Nine Hundred
processed through the POEA. The Court is of Thirty-Six Pesos (P1,062,936.00). He asserted
the view that these four (4) requisites must be that SNC-Lavalin never offered any valid reason
complied with before the employer could invoke for his early termination and that he was not
the applicability of a foreign law to an overseas given sufficient notice regarding the same.
employment contract. Arriola also insisted that the petitioners must
prove the applicability of Canadian law before
FACTS: Industrial Personnel & Management the same could be applied to his employment
Services, Inc. (IPAMS) is a local placement contract.
agency duly organized and existing under
Philippine laws. Petitioner SNC Lavalin The petitioners asserted that Arriola’s
Engineers & Contractors, Inc. (SNC-Lavalin), a employment documents were processed in
Canadian company with business interests in Canada, not to mention that SNC-Lavalin’s
several countries, is the principal of IPAMS. office was in Ontario, so that the principle of lex
loci celebrationis was applicable.
Respondent Alberto Arriola, a licensed general
surgeon in the Philippines, was hired by SNC- They relied on a copy of the Employment
Lavalin, through its local manning agency, Standards Act (ESA) of Ontario, which was duly
IPAMS, as a safety officer in its Ambatovy authenticated by the Canadian authorities and
Project site in Madagascar. He was then hired certified by the Philippine Embassy. Hence, they
and his overseas employment contract was insisted that Canadian laws governed the
processed with the Philippine Overseas contract.
Employment Agency (POEA) According to ISSUE: WON Canadian law applies in this
Arriola, he signed the contract of employment in case?
the Philippines. Arriola started working in
Madagascar. RULING: NO, Canadian law cannot apply in
this case.
After three months, Arriola received a notice of
pre-termination of employment due to RA. No. 8042, or the Migrant Workers Act, was
diminishing workload in the area of his expertise enacted to institute the policies on overseas
and the unavailability of alternative assignments. employment and to establish a higher standard
Consequently, Arriola was repatriated. SNC- of protection and promotion of the welfare of
Lavalin deposited in Arriola's bank account his migrant workers.
pay amounting to Two Thousand Six Hundred
It emphasized that while recognizing the employment abroad, it does not strip him of his
significant contribution of Filipino migrant rights to security of tenure, humane conditions
workers to the national economy through their of work and a living wage under our
foreign exchange remittances, the State does not Constitution.
promote overseas employment as a means to
sustain economic growth and achieve national As an exception, the parties may agree that a
development. foreign law shall govern the employment
contract. A synthesis of the existing laws and
Although it acknowledged claims arising out of jurisprudence reveals that this exception is
law or contract involving Filipino workers, it subject to the following requisites: 1.) That it is
does not categorically provide that foreign laws expressly stipulated in the overseas employment
are absolutely and automatically applicable in contract that a specific foreign law shall govern;
overseas employment contracts. 2.) That the foreign law invoked must be proven
before the courts pursuant to the Philippine rules
A contract freely entered into should, of course, on evidence; 3.) That the foreign law stipulated
be respected, since a contract is the law between in the overseas employment contract must not be
the parties. The principle of party autonomy in contrary to law, morals, good customs, public
contracts is not, however, an absolute principle. order, or public policy of the Philippines; and 4.)
The rule in Article 1306, of our Civil Code is That the overseas employment contract must be
that the contracting parties may establish such processed through the POEA. The Court is of
stipulations as they may deem convenient, the view that these four (4) requisites must be
"provided they are not contrary to law, morals, complied with before the employer could invoke
good customs, public order or public policy." the applicability of a foreign law to an overseas
Thus, counterbalancing the principle of employment contract.
autonomy of contracting parties is the equally
general rule that provisions of applicable law, With these requisites, the State would be able to
especially provisions relating to matters affected abide by its constitutional obligation to ensure
with public policy, are deemed written into the that the rights and well-being of our OFWs are
contract. Put a little differently, the governing fully protected.
principle is that parties may not contract away
applicable provisions of law especially If the first requisite is absent, or that no foreign
peremptory provisions dealing with matters law was expressly stipulated in the employment
heavily impressed with public interest. The law contract which was executed in the Philippines,
relating to labor and employment is clearly such then the domestic labor laws shall apply in
an area and parties are not at liberty to insulate accordance with the principle of lex loci
themselves and their relationships from the contractus.
impact of labor laws and regulations by simply If the second requisite is lacking, or that the
contracting with each other. foreign law was not proven pursuant to Sections
The general rule is that Philippine laws apply 24 and 25 of Rule 132 of the Revised Rules of
even to overseas employment contracts. This Court, then the international law doctrine of
rule is rooted in the constitutional provision of processual presumption operates. The said
Section 3, Article XIII that the State shall afford doctrine declares that "[w]here a foreign law is
full protection to labor, whether local or not pleaded or, even if pleaded, is not proved,
overseas. Hence, even if the OFW has his the presumption is that foreign law is the same
as ours."
If the third requisite is not met, or that the Granting arguendo that the labor contract
foreign law stipulated is contrary to law, morals, expressly stipulated the applicability of
good customs, public order or public policy, Canadian law, still, Arriola’s employment
then Philippine laws govern. This finds legal cannot be governed by such foreign law because
bases in the Civil Code, specifically: (1) Article the third requisite is not satisfied. A perusal of
17, which provides that laws which have, for the ESA will show that some of its provisions
their object, public order, public policy and good are contrary to the Constitution and the labor
customs shall not be rendered ineffective by laws of the Philippines.
laws of a foreign country; and (2) Article 1306,
which states that the stipulations, clauses, terms First, the ESA does not require any ground for
and conditions in a contract must not be contrary the early termination of employment. Article 54
to law, morals, good customs, public order, or thereof only provides that no employer should
public policy. terminate the employment of an employee
unless a written notice had been given in
Finally, if the fourth requisite is missing, or that advance. Necessarily, the employer can dismiss
the overseas employment contract was not any employee for any ground it so desired. At its
processed through the POEA, then Article 18 of own pleasure, the foreign employer is endowed
the Labor Code is violated. Article 18 provides with the absolute power to end the employment
that no employer may hire a Filipino worker for of an employee even on the most whimsical
overseas employment except through the boards grounds.
and entities authorized by the Secretary of
Labor. In relation thereto, Section 4 of R.A. No. Second, the ESA allows the employer to
8042, as amended, declares that the State shall dispense with the prior notice of termination to
only allow the deployment of overseas Filipino an employee. Article 65 (4) thereof indicated
workers in countries where the rights of Filipino that the employer could terminate the
migrant workers are protected. Thus, the POEA, employment without notice by simply paying
through the assistance of the Department of the employee a severance pay computed on the
Foreign Affairs, reviews and checks whether the basis of the period within which the notice
countries have existing labor and social laws should have been given. The employee under the
protecting the rights of workers, including ESA could be immediately dismissed without
migrant workers giving him the opportunity to explain and
defend himself.
Unless processed through the POEA, the State
has no effective means of assessing the The provisions of the ESA are patently
suitability of the foreign laws to our migrant inconsistent with the right to security of tenure.
workers. Thus, an overseas employment contract Both the Constitution and the Labor Code
that was not scrutinized by the POEA definitely provide that this right is available to any
cannot be invoked as it is an unexamined foreign employee. In a host of cases, the Court has
law. upheld the employee’s right to security of tenure
in the face of oppressive management behavior
In other words, lacking any one of the four and management prerogative. Security of tenure
requisites would invalidate the application of the is a right which cannot be denied on mere
foreign law, and the Philippine law shall govern speculation of any unclear and nebulous basis.
the overseas employment contract.
Not only do these provisions collide with the
right to security of tenure, but they also deprive
the employee of his constitutional right to due provided for a monthly salary of nine hundred
process by denying him of any notice of dollars (US$900.00) net of taxes, payable
termination and the opportunity to be heard. fourteen (14) times a year. From June 8 to 29,
Glaringly, these disadvantageous provisions 1989, respondent Santos was in the Philippines
under the ESA produce the same evils which the on vacation leave. He returned to China and
Court vigorously sought to prevent in the cases reassumed his post on July 17, 1989.
of Pakistan International and Sameer Overseas.
On July 22, 1989, Mr. Shmidt's Executive
Thus, the Court concurs with the CA that the Secretary, a certain Joanna suggested in a
ESA is not applicable in this case as it is against handwritten note that respondent Santos be
our fundamental and statutory laws. given one (1) month notice of his release from
employment. On August 10, 1989, the Palace
In fine, as the petitioners failed to meet all the Hotel informed respondent Santos by letter
four requisites on the applicability of a foreign signed by Mr. Shmidt that his employment at the
law, then the Philippine labor laws must govern Palace Hotel print shop would be terminated due
the overseas employment contract of Arriola. to business reverses brought about by the
political upheaval in China. We quote the letter:
Manila Hotel vs. NLRC (Forum non
("After the unfortunate happenings in China and
conveniens)
especially Beijing (referring to Tiannamen
Under the rule of forum non conveniens, a Square incidents), our business has been
Philippine court or agency may assume severely affected. To reduce expenses, we will
jurisdiction over the case if it chooses to do so not open/operate printshop for the time being.)
provided: (1) that the Philippine court is one to On September 5, 1989, the Palace Hotel
which the parties may conveniently resort to; (2) terminated the employment of respondent
that the Philippine court is in a position to make Santos and paid all benefits due him, including
an intelligent decision as to the law and the his plane fare back to the Philippines.
facts; and (3) that the Philippine court has or is
On February 20, 1990, respondent Santos filed a
likely to have power to enforce its decision.
complaint for illegal dismissal with the
FACTS: During his employment with the Arbitration Branch, National Capital Region,
Mazoon Printing Press in the Sultanate of Oman, National Labor Relations Commission (NLRC).
respondent Santos received a letter dated May 2, He prayed for an award of nineteen thousand
1988 from Mr. Gerhard R. Shmidt, General nine hundred and twenty three dollars
Manager, Palace Hotel, Beijing, China. Mr. (US$19,923.00) as actual damages, forty
Schmidt informed respondent Santos that he was thousand pesos (P40,000.00) as exemplary
recommended by one Nestor Buenio, a friend of damages and attorney's fees equivalent to 20%
his. Mr. Shmidt offered respondent Santos the of the damages prayed for. The complaint
same position as printer, but with a higher named MHC, MHICL, the Palace Hotel and Mr.
monthly salary and increased benefits. The Shmidt as respondents.
position was slated to open on October 1, 1988.
The Palace Hotel and Mr. Shmidt were not
He then signified his acceptance of the offer.
served with summons and neither participated in
The employment contract of June 4, 1988 stated the proceedings before the Labor Arbiter. Labor
that his employment would commence Arbiter Ceferina J. Diosana, decided the case
September 1, 1988 for a period of two years. It against petitioners. Petitioners appealed to the
NLRC, arguing that the POEA, not the NLRC correspondence sent to the Sultanate of Oman,
had jurisdiction over the case. NLRC where respondent Santos was then employed. He
promulgated a resolution, stating that the was hired without the intervention of the POEA
Decision be, as it is hereby, declared null and or any authorized recruitment agency of the
void for want of jurisdiction. government.

On September 18, 1992, respondent Santos Under the rule of forum non conveniens, a
moved for reconsideration arguing that the case Philippine court or agency may assume
was not cognizable by the POEA as he was not jurisdiction over the case if it chooses to do so
an "overseas contract worker." The NLRC provided: (1) that the Philippine court is one to
granted the motion and reversed itself. The which the parties may conveniently resort to; (2)
NLRC directed Labor Arbiter Emerson that the Philippine court is in a position to make
Tumanon to hear the case on the question of an intelligent decision as to the law and the
whether private respondent was retrenched or facts; and (3) that the Philippine court has or is
dismissed. Subsequently, Labor Arbiter likely to have power to enforce its decision.
Tumanon was re-assigned as trial Arbiter of the
National Capital Region, Arbitration Branch, The conditions are unavailing in the case at bar.
and the case was transferred to Labor Arbiter We fail to see how the NLRC is a convenient
Jose G. de Vera. Labor Arbiter de Vera forum given that all the incidents of the case —
submitted his report. He found that respondent from the time of recruitment, to employment to
Santos was illegally dismissed from dismissal occurred outside the Philippines. The
employment and recommended that he be paid inconvenience is compounded by the fact that
actual damages equivalent to his salaries for the the proper defendants, the Palace Hotel and
unexpired portion of his contract. NLRC ruled in MHICL are not nationals of the Philippines.
favor of Private Respondent. Neither are they "doing business in the
Petitioners filed a motion for reconsideration Philippines." Likewise, the main witnesses, Mr.
arguing that Labor Arbiter de Vera's Shmidt and Mr. Henk are non-residents of the
recommendation had no basis in law and in fact, Philippines.
the NLRC denied the motion for Neither can an intelligent decision be made as to
reconsideration. Hence, this petition. the law governing the employment contract as
ISSUE: WON NLRC correctly assumed such was perfected in foreign soil. This calls to
jurisdiction over the case? fore the application of the principle of lex loci
contractus (the law of the place where the
RULING: NO, NLRC was a seriously contract was made).
inconvenient forum. The case transpired in two
foreign jurisdictions and the case involves The employment contract was not perfected in
purely foreign elements. The only link that the the Philippines. Respondent Santos signified his
Philippines has with the case is that respondent acceptance by writing a letter while he was in
Santos is a Filipino citizen. The Palace Hotel the Republic of Oman. This letter was sent to the
and MHICL are foreign corporations. Not all Palace Hotel in the People's Republic of China.
cases involving our citizens can be tried here. Neither can the NLRC determine the facts
Respondent Santos was hired directly by the surrounding the alleged illegal dismissal as all
Palace Hotel, a foreign employer, through acts complained of took place in Beijing,
People's Republic of China. The NLRC was not Respondents became Temporary and then
in a position to determine whether the eventually Permanent Flight Attendants; they
Tiannamen Square incident truly adversely entered into the necessary Cabin Attendant
affected operations of the Palace Hotel as to Contracts with Saudi.
justify respondent Santos' retrenchment.
Respondents were released from service on
Even assuming that a proper decision could be separate dates in 2006; claimed that such release
reached by the NLRC, such would not have any was illegal since the basis of termination of
binding effect against the employer, the Palace contract was solely because they were pregnant.
Hotel. The Palace Hotel is a corporation They claim that they had informed Saudia of
incorporated under the laws of China and was their respective pregnancies and had gone
not even served with summons. Jurisdiction over through the necessary procedures to process
its person was not acquired. their maternity leaves and while initially, Saudia
had given its approval, they ultimately reneged
This is not to say that Philippine courts and and rather required them to file for resignation.
agencies have no power to solve controversies
involving foreign employers. Neither are we Respondents claim that Petitioner Airlines
saying that we do not have power over an threatened that if they would not resign, they
employment contract executed in a foreign would be terminated along with loss of benefits,
country. If Santos were an "overseas contract separation pay, and ticket discount entitlements;
worker", a Philippine forum, specifically the they anchored such on its “Unified Employment
POEA, not the NLRC, would protect him. He is Contract for Female Cabin Attendants" which
not an "overseas contract worker" a fact which provides that “if the Air Hostess becomes
he admits with conviction. pregnant at any time during the term of this
contract, this shall render her employment
Saudi Arabian Airlines vs. Rebesencio contract as void and she will be terminated due
to lack of medical fitness. “
Article II, Sections 1 and 14 of the 1987
Constitution ensures the equal protection of November 8,2007 - Respondents filed a
persons, and the equality between men and Complaint with the Labor Arbiter against Saudia
women. Though pregnancy does present and its officers for illegal dismissal and for
physical limitations that may render difficult the underpayment, along with moral and exemplary
performance of functions associated with being damages, and attorney's fees. Petitioner Airlines
a flight attendant, it would be the height of contests the Labor Arbiter’s jurisdiction, as the
iniquity to view pregnancy as a disability so contract’s points referred to foreign law and that
permanent and immutable that, it must entail the Respondents had no cause of action since they
termination of one's employment already voluntarily resigned.
FACTS: Petitioner Saudi Arabian Airlines is a Executive Labor Arbiter dismissed the
foreign corporation established and existing complaint, but on appeal the NLRC reversed the
under the Royal Decree No. M/24 of Jeddah, Labor Arbiter’s decision and denied Petitioner
who hired Respondents as flight attendants. Airlines’ Motion for Reconsideration, hence the
After undergoing seminars required by the current appeal.
Philippine Overseas Employment
Administration for deployment overseas, as well
as training modules offered by Saudia,
ISSUE: WON the Labor Arbiter and NLRC has women. Though pregnancy does present
jurisdiction over petitioner and can acquire physical limitations that may render difficult the
jurisdiction over the dispute? performance of functions associated with being
a flight attendant, it would be the height of
RULING: YES, the LA and NLRC has iniquity to view pregnancy as a disability so
jurisdiction and can acquire jurisdiction over the permanent and immutable that, it must entail the
dispute. No doubt that the pleadings were served termination of one's employment.
to Petitioner Airlines through their counsel,
however they claim that the NLRC and Labor Furthermore, contracts relating to labor and
Arbiter had no jurisdiction since summons were employment are impressed with public interest.
served to Saudi Airlines Manila and not to them, Article 1700 of the Civil Code provides that "the
Saudi Airlines Jeddah. Saudi Airlines Manila relation between capital and labor are not merely
was neither a party to the Cabin attendant contractual. They are so impressed with public
contracts nor funded the Respondents, and it was interest that labor contracts must yield to the
to Saudi Jeddah that they filed their resignations. common good.
Court ruled however that by its own admission,
Saudia, while a foreign corporation has a Under the Pakistan Airlines case this Court held
Philippine office, and that under the Foreign that, the relationship between capital and labor is
Investments act of 1991, they are a foreign much affected with public interest and that the
corporation doing business in the Phililppines otherwise applicable Philippine laws and
and therefore are subject to Philippine regulations cannot be rendered illusory by the
jurisdiction. parties agreeing upon some other law to govern
their relationship.
Petitioner Airlines also asserts that the Cabin
Attendant Contracts require the application of As the present dispute relates to (what the
the laws of Saudi Arabia rather than those of the respondents allege to be) the illegal termination
Philippines. It claims that the difficulty of of respondents' employment, this case is
ascertaining foreign law calls into operation the immutably a matter of public interest and public
principle of forum non conveniens, thereby policy. Consistent with clear pronouncements in
rendering improper the exercise of jurisdiction law and jurisprudence, Philippine laws properly
by Philippine tribunals. find application in and govern this case.

The Court disagrees. Forum non conveniens Oddly enough, the petitioner Saudia themselves
finds no application and does not operate to stated that the Saudi law does not allow the
divest Philippine tribunals of jurisdiction and to termination of employment of women who take
require the application of foreign law. Though maternity leaves;
Article 1306 of the Civil Code provides that Consistent with lex loci intentionis, to the extent that it is
Parties may stipulate terms they may deem proper and practicable (i.e., “to make an intelligent
convenient, Philippine tribunals may not lose decision”), Philippine tribunals may apply the foreign law
sight of considerations of law, morals, good selected by the parties. In fact, (albeit without meaning to
make a pronouncement on the accuracy and reliability of
customs, public order, or public policy that respondents’ citation) in this case, respondents themselves
underlie the contract. have made averments as to the laws of Saudi Arabia. In
their Comment, respondents write:
Article II, Sections 1 and 14 of the 1987
Constitution ensures the equal protection of Under the Labor Laws of Saudi Arabia and the
Philippines[,] it is illegal and unlawful to terminate the
persons, and the equality between men and
employment of any woman by virtue of pregnancy. The law Taiwan. She further alleges that the 2-year
in Saudi Arabia is even more harsh and strict [sic] in that extension of her employment contract was with
no employer can terminate the employment of a female
worker or give her a warning of the same while on
the consent and knowledge of Sunace. Sunace,
Maternity Leave, the specific provision of Saudi Labor on the other hand, denied all the allegations.
Laws on the matter is hereto quoted as follows: “An
employer may not terminate the employment of a female Ruling of the Labor Arbiter and Court of
worker or give her a warning of the same while on Appeals: The Labor Arbiter ruled in favor of
maternity leave.” (Article 155, Labor Law of the Kingdom Montehermozo and found Sunace liable thereof.
of Saudi Arabia, Royal Decree No. M/5
The National Labor Relations Commission and
Note: Applying the guidelines set in IPAMS vs. Court of Appeals affirmed the labor arbiter’s
De Vera, foreign law cannot apply because such decision. Hence, the filing of this appeal.
contract is contrary to our own laws and when a
ISSUE: Whether or not there is theory of
contract, although executed abroad, is contrary
imputed knowledge between the principal and
to our own laws, Philippine courts may refuse to
the agent
apply foreign law and apply domestic law
instead. This is because the protection afforded RULING: NO. As agent of its foreign principal,
by the constitution to workers extends even to [Sunace] cannot profess ignorance of such an
those working overseas. extension as obviously, the act of its principal
extending [Divina’s] employment contract
SUNACE International Management
necessarily bound it,it too is a misapplication, a
Services, Inc. vs. NLRC (Theory of Imputed
misapplication of the theory of imputed
Knowledge)
knowledge.
The theory of imputed knowledge ascribes the
The theory of imputed knowledge ascribes the
knowledge of the agent, Sunace, to the
knowledge of the agent, Sunace, to the principal,
principal, employer Xiong, not the other way
employer Xiong, not the other way around. The
around. The knowledge of the principal-foreign
knowledge of the principal-foreign employer
employer cannot, therefore, be imputed to its
cannot, therefore, be imputed to its agent
agent Sunace
Sunace.
FACTS: Respondent Divina Montehermozo is a
There being no substantial proof that Sunace
domestic helper deployed to Taiwan by Sunace
knew of and consented to be bound under the 2-
International Management Services (Sunace)
year employment contract extension, it cannot
under a 12-month contract. Such employment
be said to be privy thereto. As such, it and its
was made with the assistance of Taiwanese
“owner” cannot be held solidarily liable for any
broker Edmund Wang. After the expiration of
of Divina’s claims arising from the 2-year
the contract, Montehermozo continued her
employment extension. As the New Civil Code
employment with her Taiwanese employer Hang
provides, Contracts take effect only between the
Rui Xiong for another 2 years.
parties, their assigns, and heirs, except in case
When Montehermozo returned to the where the rights and obligations arising from the
Philippines, she filed a complaint against contract are not transmissible by their nature, or
Sunace, Wang, and her Taiwanese employer by stipulation or by provision of law.
before the National Labor Relations
Furthermore, as Sunace correctly points out,
Commission (NLRC). She alleges that she was
there was an implied revocation of its agency
underpaid and was jailed for three months in
relationship with its foreign principal when, Orozco insists that by applying the four-fold
after the termination of the original employment test, it can be seen that she is an employee of
contract, the foreign principal directly negotiated PDI; Orozco insists that PDI had been
with Divina and entered into a new and separate exercising the power of control over her
employment contract in Taiwan. Article 1924 because:
of the New Civil Code provides The agency is
revoked if the principal directly manages the a) PDI provides the guidelines as to what her
business entrusted to the agent, dealing directly article content should be;
with third persons, thus applies. b) PDI sets deadlines as to when Orozco must
Wilhelmina Orosco vs. CA (Control submit her article/s;
Test/Economic Reality Test) c) PDI controls the number of articles to be
Not all rules imposed by the hiring party on the submitted by Orozco;
hired party indicate that the latter is an
d) PDI requires a certain discipline from their
employee of the former. Rules which serve as writers so as to maintain their readership.
general guidelines towards the achievement of
the mutually desired result are not indicative of ISSUE: WON Orozco is an employee of PDI,
the power of control. and is yes, whether she was illegally dismissed.

FACTS: In March 1990, Wilhelmina Orozco RULING: No. Orosco is not an employee of
was hired as a writer by the Philippine Daily PDI.
Inquirer (PDI). She was the columnist of
“Feminist Reflections” under the Lifestyle We rule for PDI.
section of the publication. She writes on a
The existence of an employer-employee
weekly basis and on a per article basis (P250-
relationship is essentially a question of fact.
300/article).
Factual findings of quasi-judicial agencies like
In 1991, Leticia Magsanoc as the editor-in-chief the NLRC are generally accorded respect and
sought to improve the Lifestyle section of the finality if supported by substantial evidence.
paper. She said there were too many Lifestyle
Considering that the CA's findings are in direct
writers and that it was time to reduce the number
conflict with those of the Labor Arbiter and
of writers. Orozco’s column was eventually
NLRC, this Court must now make its own
dropped.
examination and evaluation of the facts of this
Orozco filed for a case for Illegal Dismissal case.
against PDI and Magsanoc. Orozco won in the
It is true the Orozco herself admitted that she
Labor Arbiter where the arbiter ruled that there
was not and had not been considered
exists an employer-employee relationship
respondent's employee because the terms of
between PDI and Orozco.
works were arbitrarily decided upon by PDI.
The case eventually reached the Court of
This Court has constantly adhered to the FOUR-
Appeals where the CA ruled that there is no such
FOLD TEST to determine whether there exists
relationship.
an employee-employer relationship between
parties. The four elements of an employee
relationship are the selection and engagement of
the employee; the payment of wages; the power product. The important factor to consider in the
of dismissal; and the employer's power to control test is still the elements of control over
control the employee's conduct. how the work itself is done, not just the end
result thereof.
Of these four elements, it is the power of control
which is most crucial and most determinative Where a person who works for another performs
factor, so important in fact the other elements his job more or less at his own pleasure, in the
may even be disregarded. In other words, the manner he sees fit, subject to definite hours or
test is whether the employer controls or has conditions of work, and is compensated
reserved the right to control the employee, not according to the result of his efforts and not the
only as to the work done, but also as to the amount thereof, no employer-employee
means and methods by which the same is relationship exists.
accomplished.
Aside from the control test, this Court has also
Orozco argues that several factors exist to prove used the ECONOMIC REALITY TEST. The
that PDI exercised control over her and her economic realities prevailing within the activity
work. But as to whether this is the form of or between the parties are examined, taking into
control that our labor laws contemplate such as consideration the totality of the circumstances
to establish an employer-employee relationship surrounding the true nature of the relationship
between Orozco and PDI, it is not. between the parties.

Orozco has misconstrued the CONTROL TEST Orozco's main occupation is not as a columnist
as did the Labor Arbiter and the NLRC. for respondent but as women's rights advocate
working in various women' organizations. She
Not all rules imposed by the hiring party on the also contributes articles to other publications.
hired party indicate that the latter is an employee Thus, it cannot be said that Orozco was
of the former. Rules which serve as general dependent on PDI for her continued employment
guidelines towards the achievement of the in PDI's line of business.
mutually desired result are not indicative of the
power of control. The inevitable conclusion is that Orozco was not
PDI's employee but an INDEPENDENT
Orozco has not shown the PDI, acting through CONTRACTOR, engaged to do independent
its editors, dictated how she was to write or work.
produce her articles each week. Aside from the
constraints presented by the space allocation of ANGELINA FRANCISCO VS. NLRC,
her column, there were no restraints on her KASEI CORP. ETC. (Two Tiered Test)
creativity. The perceived constraint on Orozco's
column was dictated by her own choice of her The better approach would therefore be to adopt
column's perspective. a two-tiered test involving: (1) the putative
employer’s power to control the employee with
The newspaper's power to approve or reject respect to the means and methods by which the
publication of any specific article she wrote for work is to be accomplished; and (2) the
her column cannot be the control contemplated underlying economic realities of the activity or
in the control test as it is but logical that one relationship.
who commissions another to do a piece of work
should have the right to accept or reject the
FACTS: Petitioner was hired by Kasei The better approach would therefore be to adopt
Corporation during the incorporation stage. She a two-tiered test involving: (1) the putative
was designated as accountant and corporate employer’s power to control the employee with
secretary and was assigned to handle all the respect to the means and methods by which the
accounting needs of the company. She was also work is to be accomplished; and (2) the
designated as Liason Officer to the City of underlying economic realities of the activity or
Manila to secure permits for the operation of the relationship. Petitioner was selected and
company. In 1996, Petitioner was designated as engaged by the company for compensation, and
Acting Manager. She was assigned to handle is economically dependent upon respondent for
recruitment of all employees and perform her continued employment in that line of
management administration functions. In 2001, business. There is no doubt that petitioner is an
Liza Fuentes replaced her as Manager. Kasei employee of Kasei Corporation because she was
Corporation reduced her salary toP2,500 per under the direct of it.
month which was until September. She asked for
her salary but was informed that she was no Manila Golf Country Club vs. NLRC
longer connected to the company. She did not (Control Test)
anymore report to work since she was not paid The regulations, does not circumscribe the
for her salary. She filed an action for actions or judgment of the caddies concerned as
constructive dismissal with the Labor Arbiter. to leave them little or no freedom of choice
The Labor Arbiter found that the petitioner was whatsoever in the manner of carrying out their
illegally dismissed. NLRC affirmed the decision services. In the very nature of things, caddies
while CA reversed it. must submit to some supervision of their
ISSUE: WON there was employer-employee conduct while enjoying the privilege of pursuing
relationship? their occupation within the premises and
grounds of whatever club they do their work in.
RULING: Yes, Francisco is an employee of
Kasei. FACTS: This case involves three separate
proceedings all initiated by or on behalf of
Petitioner is an employee of Kasei Corporation. herein private respondent and his fellow caddies
The court held that in this jurisdiction, there has namely: (1) A case in the Social Security
been no uniform test to determine the existence Comission (SSC) via petition of seventeen (17)
of an employer-employee relation. Generally, persons who styled themselves as "Caddies of
courts have relied on the so-called right of Manila Golf and Country Club-PTCCEA
control test where the person for whom the (Philippine Technical, Clerical, Commercial
services are performed reserves a right to control Employees Association) against the petitioner.
not only the end to be achieved but also the
means to be used in reaching such end. In the case before SSC, petitioner asserts that
there is no employer-employee relationship
In addition to the standard of right-of-control, between them. Later on, all but two of the 17
the existing economic conditions prevailing employees withdrew their claim namely the
between the parties, like the inclusion of the respondent and Ramundo Jomok. Thereafter, the
employee in the payrolls, can help in SSC decided in favor of the Manila Golf on two
determining the existence of an employer- grounds: (1) caddy's fees were paid by the golf
employee relationship. players themselves and not by respondent club
and (2) While respondent club promulgates rules
and regulations on the assignment, deportment distributed, the club has no way of compelling
and conduct of caddies the same are designed to the presence of a caddie. (3) On Fees, the Club
impose personal discipline among the caddies has no measure of control over the incidents of
but not to direct or conduct their actual work. the caddies' work and compensation that an
This lends credence to respondent's assertion employer would possess, as the fact suggests,
that the caddies are never their employees in the it’s a mere suggestion.
absence of two elements, namely, (1) payment
of wages and (2) control or supervision over Great Pacific Life Assurance Corporation vs.
them. Judico (Two types of insurance agents)

The IAC then reversed the decision in favor of An insurance company may have two classes of
the respondent (Jomok’s appeal was dismissed) agents who sell its insurance policies: (1)
by saying it passed the control test on the salaried employees who keep definite hours and
following grounds: (1) Promulgation rules and work under the control and supervision of the
regulations and any violation of any of which company; and (2) registered representatives
could subject him to disciplinary action. (2) who work on commission basis.
Enforcement of a group rotation system (3) FACTS: Honorato as a debit agent received a
"suggesting" the rate of fees payable to the definite minimum amount per week as his wage
caddies. known as “sales reserve.” He performed
ISSUE: WON persons rendering caddying canvassing and collection job about which he
services for members of golf clubs and their was required to make a regular report, but he
guests in said clubs' courses or premises are the was assigned an office when he was not in the
employees of such clubs and therefore within field.
the compulsory coverage of the Social Security An anemic performance would mean a
System (SSS)? dismissal; a faithful and productive service
RULING: No. There is no employer-employee would earn him a promotion. In September
relationship between the caddies and the golf 1981, Honorato was promoted to Zone
club. On the matter of an employer - employee Supervisor, but was reverted to his former
relationship, the court resolves that there is position in November. Finally, on June 28,
none. (1) The regulations, does not circumscribe 1982, his agency contract was terminated. When
the actions or judgment of the caddies concerned he complained of illegal dismissal, the company
as to leave them little or no freedom of choice averred that he was not an employee at all.
whatsoever in the manner of carrying out their The Labor Arbiter dismissed the complaint on
services. In the very nature of things, caddies the ground that employeremployee relationship
must submit to some supervision of their did not exist. The NLRC reversed the decision,
conduct while enjoying the privilege of pursuing ruling that Honorato was a regular employee.
their occupation within the premises and
grounds of whatever club they do their work in. ISSUE: WON Honorato is an employee of
They do not have to observe any working hours, GREPA life?
free to leave anytime they please, to stay away
for as long as they like. (2) The group rotation RULING: Yes, The Supreme Court affirmed
system is less a measure of employee control the decision of the NLRC. The element of
than an assurance that the work is fairly control by the company on Honorato was
present. He was controlled by the company not which the same is to be accomplished. An
only as to the kind of work, the amount of ordinary commission insurance agent works at
results, the kind of performance, but also by the his own volition or at his own leisure without
power of dismissal. fear of dismissal from the company and short of
committing acts detrimental to the business
Honorato, by the nature of his position and interest of the company or against the latter;
work, had been a regular employee and was whether he produces or not is of no moment as
therefore entitled to the protection of the law and his salary is based on his production, his anemic
could not just be terminated without valid and performance or even dead result does not
justifiable reason. become a ground for dismissal.
An insurance company may have two classes of Tongko vs. Manulife (Insurance Agent)
agents who sell its insurance policies: (1) (2011)
salaried employees who keep definite hours and
work under the control and supervision of the Note: For more clarity, please read all the
company; and (2) registered representatives who decisions, there is a 2008, and 2010 decision of
work on commission basis. the same case.

The agents who belong to the second category In the Supreme Courts June 29, 2010
are not required to report for work at anytime. Resolution, they noted that there are built-in
They do not have to devote their time elements of control specific to an insurance
exclusively to or work solely for the company agency, which do not amount to the elements of
since the time and the effort they spend in their control that characterize an employment
work depend entirely upon their own will and relationship governed by the Labor Code.
initiative. They are not required to account for
their time nor submit a report of their activities. FACTS: Taking from the November 2008
They shoulder their own selling expenses as decision, the facts are as follows:
well as transportation. They are paid their Manufacturers Life Insurance, Co. is a domestic
commission based on a certain percentage of corporation engaged in life insurance business.
their sales. One salient point in the De Dios was its President and Chief Executive
determination of employer-employee Officer. Petitioner Tongko started his
relationship which cannot be easily ignored is relationship with Manulife in 1977 by virtue of a
the fact that the compensation that these agents Career Agent's Agreement.
on commission received is not paid by the
insurance company but by the investor (or the Pertinent provisions of the agreement state that:
person insured). After determining the
commission earned by an agent on his sales, the It is understood and agreed that the Agent is an
agent directly deducts it from the amount he independent contractor and nothing contained
received from the investor or the person insured herein shall be construed or interpreted as
and turns over to the insurance company the creating an employer-employee relationship
amount invested after such deduction is made. between the Company and the Agent.
The test therefore is whether the ‘employer’
a) The Agent shall canvass for applications for
controls or has reserved the right to control the
Life Insurance, Annuities, Group policies and
‘employee’ not only as to the result of the work
other products offered by the Company, and
to be done but as to the means and methods by
collect, in exchange for provisional receipts
issued by the Agent, money due or to become De Dios subsequently sent Tongko a letter of
due to the Company in respect of applications or termination in accordance with Tongko's Agents
policies obtained by or through the Agent or Contract. Tongko filed a complaint with the
from policyholders allotted by the Company to NLRC against Manulife for illegal dismissal,
the Agent for servicing, subject to subsequent alleging that he had an employer-employee
confirmation of receipt of payment by the relationship with De Dios instead of a revocable
Company as evidenced by an Official Receipt agency by pointing out that the latter exercised
issued by the Company directly to the control over him through directives regarding
policyholder. how to manage his area of responsibility and
setting objectives for him relating to the
b) The Company may terminate this Agreement business. Tongko also claimed that his dismissal
for any breach or violation of any of the was without basis and he was not afforded due
provisions hereof by the Agent by giving written process. The NLRC ruled that there was an
notice to the Agent within fifteen (15) days from employer-employee relationship as evidenced by
the time of the discovery of the breach. No De Dios's letter which contained the manner and
waiver, extinguishment, abandonment, means by which Tongko should do his work.
withdrawal or cancellation of the right to The NLRC ruled in favor of Tongko, affirming
terminate this Agreement by the Company shall the existence of the employer-employee
be construed for any previous failure to exercise relationship.
its right under any provision of this Agreement.
The Court of Appeals, however, set aside the
c) Either of the parties hereto may likewise NLRC's ruling. It applied the four-fold test for
terminate his Agreement at any time without determining control and found the elements in
cause, by giving to the other party fifteen (15) this case to be lacking, basing its decision on the
days notice in writing. same facts used by the NLRC. It found that
Manulife did not exert control over Tongko,
Sometime in 2001, De Dios addressed a letter to
there was no employer-employee relationship
Tongko, then one of the Metro North Managers,
and thus the NLRC did not have jurisdiction
regarding meetings wherein De Dios found
over the case.
Tongko's views and comments to be unaligned
with the directions the company was taking. De The Supreme Court reversed the ruling of the
Dios also expressed his concern regarding the Court of Appeals and ruled in favor of Tongko.
Metro North Managers' interpretation of the However, the Supreme Court issued another
company's goals. He maintains that Tongko's Resolution dated June 29, 2010, reversing its
allegations are unfounded. Some allegations decision. Tongko filed a motion for
state that some Managers are unhappy with their reconsideration, which is now the subject of the
earnings, that they're earning less than what they instant case.
deserve and that these are the reasons why
Tonko's division is unable to meet agency ISSUE: WON Supreme Court erred in issuing
development objectives. However, not a single the June 29, 2010 resolution, reversing its earlier
Manager came forth to confirm these decision that an employer-employee relationship
allegations. Finally, De Dios related his worries existed?
about Tongko's inability to push for company
development and growth. RULING: No, Supreme Court did not err.
Tongko is not an employee of Manulife.
The Supreme Court finds no reason to reverse through its agents. Manulife’s codes of conduct,
the June 29, 2010 decision. Control over the likewise, do not necessarily intrude into the
performance of the task of one providing service insurance agents means and manner of
both with respect to the means and manner, and conducting their sales. Codes of conducts are
the results of the service is the primary element norms or standards of behavior rather than
in determining whether an employment employer directives into how specific tasks are
relationship exists. The Supreme Court ruled to be done. In sum, the Supreme Court found
petitioners Motion against his favor since he absolutely no evidence of labor law control.
failed to show that the control Manulife DENIED.
exercised over him was the control required to
exist in an employer-employee relationship; Sevilla vs. CA (Agent of Employer not an
Manulife’s control fell short of this norm and Employee)
carried only the characteristic of the relationship A true employee cannot be made to part with his
between an insurance company and its agents, as own money in pursuance of his employer's
defined by the Insurance Code and by the law of business, or otherwise, assume any liability
agency under the Civil Code. thereof.
In the Supreme Courts June 29, 2010 In a contract of agency, the essence of the
Resolution, they noted that there are built-in contract that the agent renders services "in
elements of control specific to an insurance representation or on behalf of another”. In the
agency, which do not amount to the elements of case at bar, Sevilla solicited airline fares, but
control that characterize an employment she did so for and on behalf of her principal,
relationship governed by the Labor Code. The Tourist World Service, Inc.
Insurance Code provides definite parameters in
the way an agent negotiates for the sale of the FACTS: On Oct. 19, 1960, Mrs. Noguera leased
company’s insurance products, his collection her property to Tourist World Service (TWS)
activities and his delivery of the insurance represented by Eliseo Canilao in Mabini st.,
contract or policy. They do not reach the level of Manila with Lina Sevilla holding herself
control into the means and manner of doing an solidarily liable for the payment of the monthly
assigned task that invariably characterizes an rentals agreed on. A branch was opened in said
employment relationship as defined by labor property by TWS, the same was run by the
law. herein appellant payable to Tourist World
Service Inc. by any airline for any fare brought
To reiterate, guidelines indicative of labor law in on the efforts of Mrs. Lina Sevilla, 4% was to
"control" do not merely relate to the mutually go to Lina Sevilla and 3% was to be withheld by
desirable result intended by the contractual TWS. However on November 24, 1961, the
relationship; they must have the nature of board of TWS decided to abolish said branch on
dictating the means and methods to be employed the ground that it was losing and the alleged
in attaining the result. Tested by this norm, connection of Sevilla with a rival firm,
Manulife’s instructions regarding the objectives Philippine Travel Bureau. The board also
and sales targets, in connection with the training authorized the corporate secretary (Gabino
and engagement of other agents, are among the Canilao) to receive the properties of the Tourist
directives that the principal may impose on the World Service then located at the said branch
agent to achieve the assigned tasks. They are office. Later on, the corporate secretary went to
targeted results that Manulife wishes to attain the branch and upon the finding that it was
locked and being unable to contact Sevilla, he result of the enterprise or as to the means used in
padlocked the premises of the branch. When connection therewith for the following reasons:
neither the appellant Lina Sevilla nor any of her
employees could enter the locked premises, a (1) She bound herself in solidum (solidary) and
complaint was filed by the herein appellants for rental payments of the Mabini property
against the appellees with a prayer for the although the lower court reduced such in to a
issuance of mandatory preliminary injunction mere guaranty this does not make her an
(with claim for damages invoking the provisions employee of TWS. A true employee cannot be
of the NCC on human relations). Both appellees made to part with his own money in pursuance
answered with counterclaims. For apparent lack of his employer's business, or otherwise, assume
of interest of the parties therein, the trial court any liability thereof.
ordered the dismissal of the case without (2) As found by the Appellate Court, 'When the
prejudice. However, on June 17,1963 both branch office was opened, the same was run by
parties refiled their respective claims he court a the herein appellant Lina O. Sevilla payable to
quo ordered both cases to be dismissed for lack Tourist World Service, Inc. by any airline for
of merit. any fare brought in on the effort of Mrs. Lina
On appeal, petitioners claim that there was no Sevilla. Under these circumstances, it cannot be
employer - employee relationship between her said that Sevilla was under the control of Tourist
and TWS and what exists was that of one of a World Service, Inc. "as to the means used."
joint business venture and that TWS had no right Sevilla in pursuing the business obviously relied
to unilaterally evict Sevilla from the Mabini on her own gifts and capabilities.
Office. (3) Sevilla was not in the company's payroll. For
ISSUE: WON Sevilla is an employee of Tourist her efforts, she retained 4% in commissions
World Services rendering the lower court from airline bookings, the remaining 3% going
without jurisdiction for such case is within the to Tourist World.
ambit of the jurisdiction of the Bureau of Labor (4) Contrary to the claims of both parties, what
Relations. exist between them seems to be that of a contract
RULING: NO, Sevilla is not an employee of of agency since Sevilla had conceded certain
TWS. The court relied on the Right of Control rights in favor of TWS (TWS claims it was an
Test "where the person for whom the services employer-employee relationship while Sevilla
are performed reserves a right to control not claims that it was of a joint venture or
only the end to be achieved but also the means partnership). A joint venture presupposes an
to be used in reaching such end.” In addition to equal standing between the joint partners, in
the standard of right-of control, the existing which each party has an equal proprietary
economic conditions prevailing between the interest in the capital or property contributed and
parties, like the inclusion of the employee in the where each party exercises equal rights in the
payrolls, in determining the existence of an conduct of the business. Furthermore, both
employer-employee relationship. The records parties never held themselves as partners for the
will show that the petitioner, Lina Sevilla, was branch was embellished with the sign of TWS
not subject to control by the private respondent instead of a distinct partner name. In a contract
Tourist World Service, Inc., either as to the of agency, the essence of the contract that the
agent renders services "in representation or on
behalf of another” In the case at bar, Sevilla
solicited airline fares, but she did so for and on FACTS: On October 2, 1995, under talent
behalf of her principal, Tourist World Service, contract no. NT95-1805, private respondent
Inc. But unlike simple grants of a power of Associated Broadcasting Company (ABC) hired
attorney, the agency that we hereby declare to be petitioner Thelma Dumpit-Murillo as a
compatible with the intent of the parties, cannot newscaster and co-anchor of Balitang-Balita, an
be revoked at will. The reason is that it is one early evening news program. The contract was
coupled with an interest, the agency having been for a period of 3 months. It renewed under talent
created for mutual interest, of the agent and the contract nos. NT95-1915, NT96-3002, NT98-
principal *remember that she had a solidary 4984, and NT99-5649. In addition, petitioner’s
obligation for the payment of rentals. services were engaged for the program “Live on
Five.” On September 30, 1999, after 4 years of
In this same vein the lower court must likewise repeated renewals, petitioner’s talent contract
be held to be in error with respect to the expired. Two weeks after the expiration of the
padlocking incident. For the fact that Tourist last contract, petitioner sent a letter to Mr. Jose
World Service, Inc. was the lessee named in the Javier, Vice President for news and public
lease contract did not accord it any authority to affairs of ABC, informing the latter that she was
terminate that contract without notice to its still interested in renewing her contract subject
actual occupant, and to padlock the premises in to a salary increase, thereafter, petitioner
such fashion. As this Court has ruled, the stopped reporting for work. On November 5,
petitioner, Lina Sevilla, had acquired a personal 1999 she wrote Mr. Javier another letter.
stake in the business itself, and necessarily, in
the equipment pertaining thereto. Furthermore, ISSUE: WON the continuous renewal of
Sevilla was not a stranger to that contract having petitioner’s talent contracts constitute regularity
been explicitly named therein as a third party in in the employment status?
charge of rental payments (solidarily with
Tourist World, Inc.). She could not be ousted RULING: Yes. An employer-employee
from possession as summarily as one would relationship was created when the private
eject an interloper. respondents started to merely renew the
contracts repeatedly 15 times for 4 consecutive
Petition Granted, Respondents, with the years. Petitioner was a regular employee under
exception of Noguera, were ordered to pay contemplation of law. The practice of having
jointly and severally sum of 25,00.00 as and for fixed-term contracts in the industry does not
moral damages, the sum of P10,000.00, as and automatically make all talent contracts valid and
for exemplary damages, and the sum of compliant with labor law. The assertion that a
P5,000.00, as and for nominal and/or temperate talent contract exists does not necessarily
damages. prevent a regular employment status.

The elements to determine the existence of an

employment relationship are: a.) The selection
Thelma Dumpit Murillo vs. CA (Fixed-Term and engagement of the employee; b.) The
EE rehired 15 times in 4 years) payment of wages; c.) The power of dismissal;
and d.) The employer’s control of the
The practice of having fixed-term contracts in
employee’s conduct, not only as to the result of
the industry does not automatically make all
the work to be done, but also as to the means
talent contracts valid and compliant with labor
and methods to accomplish it.
law.
The duties of petitioner as enumerated in her FACTS: In May 1994, ABS-CBN signed an
employment contract indicate that ABC had agreement with the Mel and Jay Management
control over the work or petitioner. Aside from and Development Corporation (MJMDC). ABS-
control, ABC also dictated the work assignments CBN was represented by its corporate officers
and payment of petitioner’s wages. ABC also while MJMDC was represented by Sonza, as
had power to dismiss her. All these being President and general manager, and Tiangco as
present, clearly there existed an employment its EVP and treasurer. Referred to in the
relationship between petitioner and ABC. agreement as agent, MJMDC agreed to provide
Sonza’s services exclusively to ABS-CBN as
Concerning regular employment, the law talent for radio and television.
provides for 2 kinds of employees, namely: 1.)
Those who are engaged to perform activities ABS-CBN agreed to pay Sonza a monthly talent
which are usually necessary or desirable in the fee of P310, 000 for the first year and P317, 000
usual business or trade of the employer; and 2.) for the second and third year. On April 1996,
Those who have rendered at least one year of Sonza wrote a letter to ABS-CBN where he
service, whether continuous or broken with irrevocably resigned in view of the recent events
respect to the activity in which they are concerning his program and career.
employed. In other words, regular status arises
from either the nature of work of the employee After the said letter, Sonza filed with the
or the duration of his employment. Department of Labor and Employment a
complaint alleging that ABS-CBN did not pay
The primary standard of determining regular his salaries, separation pay, service incentive
employment is the reasonable connection pay,13th month pay, signing bonus, travel
between the particular activity performed by the allowance and amounts under the Employees
employee vis-a-vis the usual trade or business of Stock Option Plan (ESOP).
the employer. This connection can be
determined by considering the nature of the ABS-CBN contended that no employee-
work performed and its relation to the scheme of employer relationship existed between the
the particular business or trade in its entirety. If parties. However, ABS-CBN continued to remit
the employee has been performing the job for at Sonza’s monthly talent fees but opened another
least a year, even if the performance is not account for the same purpose.
continuous and merely intermittent, the law The Labor Arbiter dismissed the complaint and
deems repeated and continuing need for its found that there is no employee-employer
performance as sufficient evidence of the relationship. NLRC affirmed the decision of the
necessity if not indispensability of that activity Labor Arbiter. CA also affirmed the decision of
to the business. NLRC.
JOSE SONZA vs. ABS-CBN ISSUE: WON there was employer-employee
BROADCASTING CORPORATION relationship between the parties?
(Individuals as Independent Contractor)
RULING: No, there was no employer-employee
Individuals with special skills, expertise or relationship between the parties.
talent enjoy the freedom to offer their services
as independent contractors. Case law has consistently held that the elements
of an employee-employer relationship are
selection and engagement of the employee, the ratings. Clearly, ABS-CBN did not exercise
payment of wages, the power of dismissal and control over the means and methods of
the employer’s power to control the employee performance of Sonza’s work.
on the means and methods by which the work is
accomplished. The last element, the so-called A radio broadcast specialist who works under
"control test", is the most important element. minimal supervision is an independent
contractor. Sonza’s work as television and radio
Sonza’s services to co-host its television and program host required special skills and talent,
radio programs are because of his peculiar which SONZA admittedly possesses. ABS-CBN
talents, skills and celebrity status. Independent claims that there exists a prevailing practice in
contractors often present themselves to possess the broadcast and entertainment industries to
unique skills, expertise or talent to distinguish treat talents like Sonza as independent
them from ordinary employees. The specific contractors. The right of labor to security of
selection and hiring of SONZA, because of his tenure as guaranteed in the Constitution arises
unique skills, talent and celebrity status not only if there is an employer-employee
possessed by ordinary employees, is a relationship under labor laws. Individuals with
circumstance indicative, but not conclusive, of special skills, expertise or talent enjoy the
an independent contractual relationship. All the freedom to offer their services as independent
talent fees and benefits paid to SONZA were the contractors. The right to life and livelihood
result of negotiations that led to the Agreement. guarantees this freedom to contract as
For violation of any provision of the Agreement, independent contractors. The right of labor to
either party may terminate their relationship. security of tenure cannot operate to deprive an
individual, possessed with special skills,
Applying the control test to the present case, we expertise and talent, of his right to contract as an
find that SONZA is not an employee but an independent contractor.
independent contractor. The control test is the
most important test our courts apply in Fuji TV vs. Arlene Espiritu (Compare with
distinguishing an employee from an independent Sonza)
contractor. This test is based on the extent of
control the hirer exercises over a worker. The Employees under fixed-term contracts cannot be
greater the supervision and control the hirer independent contractors because in fixed-term
exercises, the more likely the worker is deemed contracts, an employer-employee relationship
an employee. The converse holds true as well – exists.
the less control the hirer exercises, the more Rules that merely serve as guidelines towards
likely the worker is considered an independent the achievement of a mutually desired result
contractor. To perform his work, SONZA only without dictating the means or methods to be
needed his skills and talent. How SONZA employed creates no employer-employee
delivered his lines, appeared on television, and relationship; whereas those that control or fix
sounded on radio were outside ABS-CBN’s the methodology and bind or restrict the party
control. ABS-CBN did not instruct SONZA how hired to the use of such means creates the
to perform his job. ABS-CBN merely reserved relationship.
the right to modify the program format and
airtime schedule "for more effective The successive renewals of her contract
programming." ABS-CBN’s sole concern was indicated the necessity and desirability of her
the quality of the shows and their standing in the work in the usual course of Fuji’s business.
Because of this, Arlene had become a regular employee since she continuously rendered
employee with the right to security of tenure. services that were necessary and desirable to
Fuji’s business.
FACTS: Arlene S. Espiritu (Arlene) was
engaged by Fuji Television Network, Inc. (Fuji) The Court of Appeals affirmed that NLRC
as a news correspondent/producer tasked to ruling with modification that Fuji immediately
report Philippine news to Fuji through its Manila reinstate Arlene to her position without loss of
Bureau field office. The employment contract seniority rights and that she be paid her
was initially for one year, but was successively backwages and other emoluments withheld from
renewed on a yearly basis with salary her. The Court of Appeals agreed with the
adjustments upon every renewal. NLRC that Arlene was a regular employee,
engaged to perform work that was necessary or
In January 2009, Arlene was diagnosed with desirable in the business of Fuji, and the
lung cancer. She informed Fuji about her successive renewals of her fixed-term contract
condition, and the Chief of News Agency of resulted in regular employment. The case of
Fuji, Yoshiki Aoki, informed the former that the Sonza does not apply in the case because Arlene
company had a problem with renewing her was not contracted on account of a special talent
contract considering her condition. Arlene or skill. Arlene was illegally dismissed because
insisted she was still fit to work as certified by Fuji failed to comply with the requirements of
her attending physician. substantive and procedural due process. Arlene,
in fact, signed the non-renewal contract under
After a series of verbal and written
protest as she was left without a choice.
communications, Arlene and Fuji signed a non-
renewal contract. In consideration thereof, Fuji filed a petition for review on certiorari
Arlene acknowledged the receipt of the total under Rule 45 before the Supreme Court,
amount of her salary from March-May 2009, alleging that Arlene was hired as an independent
year-end bonus, mid-year bonus and separation contractor; that Fuji had no control over her
pay. However, Arlene executed the non-renewal work; that the employment contracts were
contract under protest. renewed upon Arlene’s insistence; that there was
no illegal dismissal because she freely agreed
Arlene filed a complaint for illegal dismissal
with the NCR Arbitration Branch of the NLRC, not to renew her fixed-term contract as
evidenced by her email correspondences.
alleging that she was forced to sign the non-
renewal contract after Fuji came to know of her ISSUES:
illness. She also alleged that Fuji withheld her
salaries and other benefits when she refused to 1.) WON Arlene an independent
sign, and that she was left with no other recourse contractor?
but to sign the non-renewal contract to get her 2.) WON Arlene a regular employee?
salaries. 3.) WON Arlene was illegally dismissed?

Labor Arbiter dismissed the complaint and held RULING:

that Arlene was not a regular employee but an
independent contractor. 1.) Arlene was not an independent contractor.

The NLRC reversed the Labor Arbiter’s Fuji alleged that Arlene was an independent
decision and ruled that Arlene was a regular contractor citing the Sonza case. She was hired
because of her skills. Her salary was higher than position to make demands upon the prospective
the normal rate. She had the power to bargain employer, such prospective employee needs less
with her employer. Her contract was for a fixed protection than the ordinary worker. Lesser
term. It also stated that Arlene was not forced to limitations on the parties’ freedom of contract
sign the non-renewal agreement, considering are thus required for the protection of the
that she sent an email with another version of employee.
her non-renewal agreement.
For as long as the guidelines laid down in Brent
Arlene argued (1) that she was a regular are satisfied, this court will recognize the
employee because Fuji had control and validity of the fixed-term contract. (GMA
supervision over her work; (2) that she based her Network, Inc. vs. Pabriga)
work on instructions from Fuji; (3) that the
successive renewal of her contracts for four Independent Contractor
years indicated that her work was necessary and One who carries on a distinct and independent
desirable; (4) that the payment of separation pay business and undertakes to perform the job,
indicated that she was a regular employee; (5) work, or service on its own account and under
that the Sonza case is not applicable because she one’s own responsibility according to one’s own
was a plain reporter for Fuji; (6) that her illness manner and method, free from the control and
was not a ground for her dismissal; (7) that she direction of the principal in all matters
signed the non-renewal agreement because she connected with the performance of the work
was not in a position to reject the same. except as to the results thereof.
Distinctions among fixed-term employees, No employer-employee relationship exists
independent contractors, and regular employees between the independent contractors and their
Fixed Term Employment principals.

1) The fixed period of employment was Art. 106. Contractor or subcontractor.

knowingly and voluntarily agreed upon by the Whenever an employer enters into a contract
parties without any force, duress, or improper with another person for the performance of the
pressure being brought to bear upon the former’s work, the employees of the contractor
employee and absent any other circumstances and of the latter’s subcontractor, if any, shall be
vitiating his consent; or paid in accordance with the provisions of this
Code.
2) It satisfactorily appears that the employer and
the employee dealt with each other on more or XXX
less equal terms with no moral dominance The Secretary of Labor and Employment may,
exercised by the former or the latter. by appropriate regulations, restrict or prohibit
These indications, which must be read together, the contracting-out of labor to protect the rights
make the Brent doctrine applicable only in a few of workers established under this Code. In so
special cases wherein the employer and prohibiting or restricting, he may make
employee are on more or less in equal footing in appropriate distinctions between labor-only
entering into the contract. The reason for this is contracting and job contracting as well as
evident: when a prospective employee, on differentiations within these types of contracting
account of special skills or market forces, is in a and determine who among the parties involved
shall be considered the employer for purposes of contractor himself or herself performs the work
this Code, to prevent any violation or for the principal. In other words, the relationship
circumvention of any provision of this Code. is bilateral.

There is “labor-only” contracting where the XXX

person supplying workers to an employer does
not have substantial capital or investment in the There are different kinds of independent
form of tools, equipment, machineries, work contractors: those engaged in legitimate job
premises, among others, and the workers contracting and those who have unique skills
recruited and placed by such person are and talents that set them apart from ordinary
performing activities which are directly related employees.
to the principal business of such employer. In Since no employer-employee relationship exists
such cases, the person or intermediary shall be between independent contractors and their
considered merely as an agent of the employer principals, their contracts are governed by the
who shall be responsible to the workers in the Civil Code provisions on contracts and other
same manner and extent as if the latter were applicable laws.
directly employed by him.
Regular Employees
Department Order No. 18-A, Series of 2011,
Section 3 Contracts of employment are different and have
a higher level of regulation because they are
(c) . . . an arrangement whereby a principal impressed with public interest. Article 13,
agrees to put out or farm out with a contractor Section 3 of the 1987 Constitution provides full
the performance or completion of a specific job, protection to labor.
work or service within a definite or
predetermined period, regardless of whether Apart from the Constitutional guarantee, Article
such job, work or service is to be performed or 1700 of the Civil Code states that : The relations
completed within or outside the premises of the between capital and labor are not merely
principal. contractual. They are so impressed with public
interest that labor contracts must yield to the
This department order also states that there is a common good. Therefore, such contracts are
trilateral relationship in legitimate job subject to the special laws on labor unions,
contracting and subcontracting arrangements collective bargaining, strikes and lockouts,
among the principal, contractor, and employees closed shop, wages, working conditions, hours
of the contractor. There is no employer- of labor and similar subjects.
employee relationship between the contractor
and principal who engages the contractor’s In contracts of employment, the employer and
services, but there is an employer-employee the employee are not on equal footing. Thus, it
relationship between the contractor and workers is subject to regulatory review by the labor
hired to accomplish the work for the principal. tribunals and courts of law. The law serves to
equalize the unequal. The labor force is a special
Jurisprudence has recognized another kind of class that is constitutionally protected because of
independent contractor: individuals with unique the inequality between capital and labor. This
skills and talents that set them apart from presupposes that the labor force is weak.
ordinary employees. There is no trilateral
relationship in this case because the independent
The level of protection to labor should vary from party hired to the use of such means creates
case to case. When a prospective employee, on the relationship.
account of special skills or market forces, is in a
position to make demands upon the prospective In application, Arlene was hired by Fuji as a
employer, such prospective employee needs less news producer, but there was no evidence that
protection than the ordinary worker. she was hired for her unique skills that would
distinguish her from ordinary employees. Her
The level of protection to labor must be monthly salary appeared to be a substantial sum.
determined on the basis of the nature of the Fuji had the power to dismiss Arlene, as
work, qualifications of the employee, and other provided for in her employment contract. The
relevant circumstances such as but not limited to contract also indicated that Fuji had control over
educational attainment and other special her work as she was required to report for 8
qualifications. hours from Monday to Friday. Fuji gave her
instructions on what to report and even her mode
Fuji’s argument that Arlene was an independent of transportation in carrying out her functions
contractor under a fixed-term contract is was controlled.
contradictory. Employees under fixed-term
contracts cannot be independent contractors Therefore, Arlene could not be an independent
because in fixed-term contracts, an employer- contractor.
employee relationship exists. The test in this
kind of contract is not the necessity and 2.) Arlene was a regular employee with a
desirability of the employee’s activities, “but the fixed-term contract.
day certain agreed upon by the parties for the In determining whether an employment should
commencement and termination of the be considered regular or non-regular, the
employment relationship.” For regular applicable test is the reasonable connection
employees, the necessity and desirability of their between the particular activity performed by the
work in the usual course of the employer’s employee in relation to the usual business or
business are the determining factors. On the trade of the employer. The standard, supplied by
other hand, independent contractors do not have the law itself, is whether the work undertaken is
employer-employee relationships with their necessary or desirable in the usual business or
principals. trade of the employer, a fact that can be assessed
To determine the status of employment, the by looking into the nature of the services
existence of employer-employee relationship rendered and its relation to the general scheme
must first be settled with the use of the four-fold under which the business or trade is pursued in
test, especially the qualifications for the power the usual course. It is distinguished from a
to control. specific undertaking that is divorced from the
normal activities required in carrying on the
The distinction is in this guise: particular business or trade.

Rules that merely serve as guidelines towards However, there may be a situation where an
the achievement of a mutually desired result employee’s work is necessary but is not always
without dictating the means or methods to be desirable in the usual course of business of the
employed creates no employer-employee employer. In this situation, there is no regular
relationship; whereas those that control or fix employment.
the methodology and bind or restrict the
Fuji’s Manila Bureau Office is a small unit213 dismissal. Further, Arlene was asked to sign a
and has a few employees. Arlene had to do all letter of resignation prepared by Fuji. The
activities related to news gathering. existence of a fixed-term contract should not
mean that there can be no illegal dismissal. Due
A news producer “plans and supervises newscast process must still be observed.
[and] works with reporters in the field planning
and gathering information, including monitoring Moreover, disease as a ground for termination
and getting news stories, rporting interviewing under Article 284 of the Labor Code and Book
subjects in front of a video camera, submission VI, Rule 1, Section 8 of the Omnibus Rules
of news and current events reports pertaining to Implementing the Labor Code require two
the Philippines, and traveling to the regional requirements to be complied with: (1) the
office in Thailand.” She also had to report for employee’s disease cannot be cured within six
work in Fuji’s office in Manila from Mondays to months and his continued employment is
Fridays, eight hours per day. She had no prohibited by law or prejudicial to his health as
equipment and had to use the facilities of Fuji to well as to the health of his co-employees; and
accomplish her tasks. (2) certification issued by a competent public
health authority that even with proper medical
The successive renewals of her contract treatment, the disease cannot be cured within six
indicated the necessity and desirability of her months. The burden of proving compliance with
work in the usual course of Fuji’s business. these requisites is on the employer. Non-
Because of this, Arlene had become a regular compliance leads to illegal dismissal.
employee with the right to security of tenure.
Arlene was not accorded due process. After
Arlene’s contract indicating a fixed term did not informing her employer of her lung cancer, she
automatically mean that she could never be a was not given the chance to present medical
regular employee. For as long as it was the certificates. Fuji immediately concluded that
employee who requested, or bargained, that the Arlene could no longer perform her duties
contract have a “definite date of termination,” or because of chemotherapy. Neither did it suggest
that the fixed-term contract be freely entered for her to take a leave. It did not present any
into by the employer and the employee, then the certificate from a competent public health
validity of the fixed-term contract will be authority.
upheld.
Therefore, Arlene was illegally dismissed.
3.) Arlene was illegally dismissed.

As a regular employee, Arlene was entitled to

security of tenure under Article 279 of the Labor Consulta vs. CA (Independent Agent)
Code and could be dismissed only for just or
authorized causes and after observance of due The manner in which Consulta was to pursue
process. her tasked activities was not subject to the
control of PAMANA. Consulta failed to show
The expiration of the contract does not negate that she worked definite hours. The amount of
the finding of illegal dismissal. The manner by time, the methods and means, the management
which Fuji informed Arlene of non-renewal and maintenance of her sales division were left
through email a month after she informed Fuji of to her sound judgment.
her illness is tantamount to constructive
Finally, Pamana paid Consulta not for labor or from being connected with any other
she performed but only for the results of her company, for as long as the business or
labor company did not compete with Pamana’s
business. The exclusivity clause was a
FACTS: Consulta was Managing Associate of reasonable restriction to prevent similar acts
Pamana. On 1987 she was issued a certification prejudicial to Pamana’s business interest. Article
authorizing her to negotiate for and in behalf of 1306 of the Civil Code provides that “[t]he
PAMANA with the Federation of Filipino contracting parties may establish such
Civilian Employees Association. Consulta was stipulation, clauses, terms and conditions as they
able to secure an account with FFCEA in behalf may deem convenient, provided that they are not
of PAMANA. However, Consulta claimed that contrary to law, morals, good customs, public
PAMANA did not pay her commission for the order, or public policy.
PPCEA account and filed a complaint for unpaid
wages or commission. There being no employer-employee relationship
between Pamana and Consulta, the Labor
ISSUE: WON Consulta was an employee of Arbiter and the NLRC had no jurisdiction to
PAMANA. entertain and rule on Consulta’s money claim.
Consulta’s remedy is to file an ordinary civil
RULING: The SC held that Pamana was an
action to litigate her claim
independent agent and not an employee.
Petition is dismissed.
The power of control in the four fold test is
missing. The manner in which Consulta was to Tabas vs. California Manufacturing
pursue her tasked activities was not subject to Company, Inc. (LOC)
the control of PAMANA. Consulta failed to
show that she worked definite hours. The On the other hand, we have likewise held, based
amount of time, the methods and means, the on Article 106 of the Labor Code, x x x that
management and maintenance of her sales notwithstanding the absence of a direct
division were left to her sound judgment. employer-employee relationship between the
employer in whose favor work had been
Finally, Pamana paid Consulta not for labor she contracted out by a “labor-only” contractor,
performed but only for the results of her labor. and the employees, the former has the
Without results, Consulta’s labor was her own responsibility, together with the “labor-only”
burden and loss. Her right to compensation, or to contractor for any valid labor claims, by
commission, depended on the tangible results of operation of law. The reason, so we held, is that
her work - whether she brought in paying the “labor-only” contractor is considered
recruits. “merely an agent of the employer,” and liability
must be shouldered by either one or shared by
The fact that the appointment required Consulta
both.
to solicit business exclusively for Pamana did
not mean Pamana exercised control over the FACTS: The petitioner employees were
means and methods of Consulta’s work as the employees of Livi Manpower Services, Inc.
term control is understood in labor (Livi), which assigned them to work as
jurisprudence. Neither did it make Consulta an “promotional merchandisers” of California
employee of Pamana. Pamana did not prohibit Manufacturing under a manpower supply
Consulta from engaging in any other business, agreement. The agreement provided that
California has no control or supervision they alone are bound by it, and the petitioners
whatsoever over (Livi’s) workers with respect to cannot be made to suffer from its adverse
how they accomplish their work, that Livi is an consequences.
independent contractor and that “it is hereby
agreed that it is the sole responsibility of [Livi] This Court has consistently ruled that the
to comply with all existing as well as future determination of whether or not there is an
laws, rules and regulations pertinent to employer-employee relation depends upon four
employment of labor.” It was further expressly standards: (1) the manner of selection and
stipulated that the assignment of workers to engagement of the putative employee; (2) the
California shall be on a “seasonal and mode of payment of wages; (3) the presence or
contractual basis.” The petitioner employees absence of a power of dismissal; and (4) the
were made to sign employment contracts with presence or absence of a power to control the
duration of six months, upon the expiration of putative employee’s conduct. Of the four, the
which they signed new agreements with the right-of-control test has been held to be the
same period, and so on. Unlike regular decisive factor.
California employees, who received not less On the other hand, we have likewise held, based
than P2,823.00 a month in addition to a host of on Article 106 of the Labor Code, x x x that
fringe benefits and bonuses, they received notwithstanding the absence of a direct
P38.56 plus P15.00 in allowance daily. The employer-employee relationship between the
petitioners now allege that they had become employer in whose favor work had been
regular California employees and demand, as a contracted out by a “labor-only” contractor, and
consequence whereof, similar benefits. They the employees, the former has the responsibility,
likewise claim that they were notified by together with the “labor-only” contractor for any
California that they would not be rehired, hence, valid labor claims, by operation of law. The
they filed an amended complaint charging reason, so we held, is that the “labor-only”
California with illegal dismissal. contractor is considered “merely an agent of the
ISSUE: WON the labor arbiter’s decision, employer,” and liability must be shouldered by
which was affirmed by NLRC on appeal that no either one or shared by both.
employer-employee relation exists between the There is no doubt that in the case at bar, Livi
petitioners and California is correct? performs “manpower services,” meaning to say,
RULING: No, it is not correct. We reverse. The it contracts out labor in favor of clients. We hold
existence of an employer-employee relation is a that it is one notwithstanding its vehement
question of law and being such, it cannot be claims to the contrary, and notwithstanding the
made the subject of agreement. Hence, the fact provision of the contract that it is “an
that the manpower supply agreement between independent contractor.” The nature of one’s
Livi and California had specifically designated business is not determined by self-serving
the former as the petitioner’s employer and had appellations one attaches thereto but by the tests
absolved the latter from any liability as an provided by statute and prevailing case law. The
employer, will not erase either party’s bare fact that Livi maintains a separate line of
obligations as an employer, if an employer- business does not extinguish the equal fact that it
employee relation otherwise exists between the has provided California with workers to pursue
workers and either firm. At any rate, since the the latter’s own business. In this connection, we
agreement was between Livi and California, do not agree that the petitioners had been made
to perform activities “which are not directly There is labor-only contracting where the
related to the general business of person supplying workers to an employee does
manufacturing,” California’s purported not have substantial capital or investment in the
“principal operation activity.” The petitioners form of tools, equipment, machineries, work
had been charged with “merchandizing [sic] premises, among others, and the workers
promotion or sale of the products of [California] recruited and placed by such persons are
in the different sales outlets in Metro Manila performing activities which are directly related
including task and occasional [sic] price to the principal business of such employer.
tagging,” an activity that is, doubtless, an Thus, performing activities directly related to
integral part of the manufacturing business. It is the principal business of the employer is only
not, then, as if Livi had served as its one of the two indicators that labor-only
(California’s) promotions or sales arm or agents, contracting exists; the other is lack of
or otherwise, rendered a piece of work it substantial capital or investment.
(California) could not have itself done; Livi as a
placement agency, had simply supplied it with FACTS: Agito, et al. are salesmen assigned at
the manpower necessary to carry out its the Lagro Sales Office of Coca-Cola for a
(California) merchandising activities, using its number of years but were not regularized. Their
(California’s) premises and equipment. employment was terminated without just cause
and due process. They filed complaints against
The fact that the petitioners have been hired on a Coca-Cola, Interserve, Peerless Integrated
“temporary or seasonal” basis merely is no Services, Inc. Better Builders, Inc., and
argument either. As we held in Philippine Bank Excellent Partners, Inc. However, they failed to
of Communications vs. NLRC , a temporary or state a reason for filing complaints against
casual employee, under Article 281 of the Labor Interserve, Peerless, Better Builders and
Code, becomes regular after service of one year, Excellent Partners.
unless he has been contracted for a specific
project. And we cannot say that merchandising Coca-Cola averred that Agito, et al. were
is a specific project for the obvious reason that it employees of Interserve who were tasked to
is an activity related to the day-to-day operations perform contracted services in accordance with
of California. It would have been different, we the provision of the Contract of Services. The
believe, had Livi been discretely a promotions contract covering the period of April 1, 2002 to
firm, and that California had hired it to perform September 30, 2002 constituted legitimate job
the latter’s merchandising activities. For then, contracting.
Livi would have been truly the employer of its To prove that Interserve is an independent
employees, and California, its client. The client, contractor, Coca-Cola presented the following:
in that case, would have been a mere patron, and (1) AOI of Interserve; (2) Certificate of
not an employer. The employees would not in Registration of Interserve with BIR; (3) ITR
that event be unlike waiters, who, although at with Audited Financial Statements of Interserve
the service of customers, are not the latter’s for 2001; and (4) Certificate of Registration of
employees, but of the restaurant. Interserve as an independent contractor issued
Note: After reading this case, read Department by DOLE.
Order No. 174 Series of 2017 As a result, Coca-Cola asserted that Agito, et al.
Coca-Cola vs. Agito et. al (LOC) were employees of Interserve since it was the
latter which hired them, paid their wages and
supervised their work, as proven by: (1) PDFs employees is maintained. In legitimate job
are in the records of Interserve; (2) Contracts of contracting, the law creates an employer-
Temporary Employment with Interserve; and (3) employee relationship between the employer and
payroll records of Interserve. the contractors employees only for a limited
purpose, i.e., to ensure that the employees are
LA found for Coca-Cola and held that Interserve paid their wages. The employer becomes jointly
was a legitimate job contractor. The complaint and severally liable with the job contractor only
against Peerless, Better Building and Excellent for the payment of the employee’s wages
Partners was dismissed for failure to pursue the whenever the contractor fails to pay the same.
case. Other than that, the employer is not responsible
for any claim made by the contractor’s
On appeal, NLRC affirmed LA's decision.
employees.
CA reversed the NLRC decision and ruled that
On the other hand, labor-only contracting is an
Interserve was a labor-only contractor with
arrangement wherein the contractor merely acts
insufficient capital and investments for the
as an agent in recruiting and supplying the
services which it was contracted to perform.
principal employer with workers for the purpose
Additionally, CA determined that Coca-Cola
of circumventing labor law provisions setting
had effective control over the means and method
down the rights of employees. It is not condoned
of Agito, et al.'s work as evidenced by the Daily
by law. A finding by the appropriate authorities
Sales Monitoring Report, the Conventional
that a contractor is a labor-only contractor
Route System Proposed Set-Up, and the
establishes an employer-employee relationship
memoranda issued by the supervisor of
between the principal employer and the
petitioner addressed to workers. Respondents'
contractor’s employees and the former becomes
tasks were directly related and necessary to the
solidarily liable for all the rightful claims of the
main business of Coca-Cola. Finally, certain
employees.
provisions of the Contract of Service between
Coca-Cola and Interserve suggested that the Section 5 of the Rules Implementing Articles
latter's undertaking did not involve a specific job 106-109 of the Labor Code, as amended,
but rather the supply of manpower. provides the guidelines in determining whether
ISSUE: WON Interserve is a legitimate job labor-only contracting exists:
contractor? Section 5. Prohibition against labor-only
contracting. Labor-only contracting is hereby
RULING: No, Interserve is not a legitimate job
declared prohibited. For this purpose, labor-
contractor.
only contracting shall refer to an arrangement
Legitimate Contracting vs. Labor-Only where the contractor or subcontractor merely
Contracting3 recruits, supplies, or places workers to perform
a job, work or service for a principal, and any
A legitimate job contract, wherein an employer of the following elements are [is] present:
enters into a contract with a job contractor for
the performance of the formers work, is i) The contractor or subcontractor does not
permitted by law. Thus, the employer-employee have substantial capital or investment which
relationship between the job contractor and his relates to the job, work, or service to be
performed and the employees recruited,
3
See Article 106 of the Labor Code supplied or placed by such contractor or
subcontractor are performing activities which The principal shall be deemed the employer of
are directly related to the main business of the the contractual employee in any of the following
principal; or case, as declared by a competent authority:

ii) The contractor does not exercise the right to a. Where there is labor-only contracting; or
control the performance of the work of the
contractual employee. b. where the contracting arrangement falls
within the prohibitions provided in Section 6
The foregoing provisions shall be without (Prohibitions) hereof.
prejudice to the application of Article 248(C) of
the Labor Code, as amended. According to the foregoing provision, labor-only
contracting would give rise to: (1) the creation
Substantial capital or investment refers to of an employer-employee relationship between
capital stocks and subscribed capitalization in the principal and the employees of the contractor
the case of corporations, tools, equipment, or sub-contractor; and (2) the solidary liability
implements, machineries and work premises, of the principal and the contractor to the
actually and directly used by the contractor or employees in the event of any violation of the
subcontractor in the performance or completion Labor Code.
of the job, work, or service contracted out.
Even if employees are not performing
The right to control shall refer to the right activities indispensable to the business of the
reversed to the person for whom the services of principal, labor-contracting may still exist if
the contractual workers are performed, to the contractor does not demonstrate
determine not only the end to be achieved, but substantial capital or investment.
also the manner and means to be used in
reaching that end. (Emphasis supplied.) The law clearly establishes an employer-
employee relationship between the principal
When there is labor-only contracting, there is employer and the contractor’s employee upon a
employer-employee relationship between the finding that the contractor is engaged in labor-
principal and the contractual employee. only contracting. Article 106 of the Labor Code
categorically states: There is labor-only
When there is labor-only contracting, Section 7 contracting where the person supplying workers
of the same implementing rules describes the to an employee does not have substantial capital
consequences thereof: or investment in the form of tools, equipment,
machineries, work premises, among others, and
Section 7. Existence of an employer-employee
the workers recruited and placed by such
relationship. The contractor or subcontractor
persons are performing activities which are
shall be considered the employer of the
directly related to the principal business of such
contractual employee for purposes of enforcing
employer. Thus, performing activities directly
the provisions of the Labor Code and other
related to the principal business of the employer
social legislation. The principal, however, shall
is only one of the two indicators that labor-only
be solidarily liable with the contractor in the
contracting exists; the other is lack of substantial
event of any violation of any provision of the
capital or investment.
Labor Code, including the failure to pay wages.
The Court finds that both indicators exist in
the case at bar
Interserve has no substantial capital; it is The contractor, not the employee, has the burden
impossible to measure whether or not there is of proof that it has the substantial capital,
substantial capital because the Contract between investment, and tool to engage in job
Coca-Cola and Interserve does not specify the contracting. Although not the contractor itself
work or the project that needs to be performed or (since Interserve no longer appealed the
completed. judgment against it by the Labor Arbiter), said
burden of proof herein falls upon petitioner who
At the outset, the Court clarifies that although is invoking the supposed status of Interserve as
Interserve has an authorized capital stock an independent job contractor. Noticeably,
amounting to P2,000,000.00, only P625,000.00 petitioner failed to submit evidence to establish
thereof was paid up as of 31 December 2001. that the service vehicles and equipment of
The Court does not set an absolute figure for Interserve, valued at P510,000.00 and
what it considers substantial capital for an P200,000.00, respectively, were sufficient to
independent job contractor, but it measures the carry out its service contract with petitioner.
same against the type of work which the Certainly, petitioner could have simply provided
contractor is obligated to perform for the the courts with records showing the deliveries
principal. However, this is rendered impossible that were undertaken by Interserve for the Lagro
in this case since the Contract between petitioner area, the type and number of equipment
and Interserve does not even specify the work or necessary for such task, and the valuation of
the project that needs to be performed or such equipment. Absent evidence which a
completed by the latter’s employees, and uses legally compliant company could have easily
the dubious phrase tasks and activities that are provided, the Court will not presume that
considered contractible under existing laws and Interserve had sufficient investment in service
regulations. Even in its pleadings, petitioner vehicles and equipment, especially since
carefully sidesteps identifying or describing the respondents allegation that they were using
exact nature of the services that Interserve was equipment, such as forklifts and pallets
obligated to render to petitioner. The importance belonging to petitioner, to carry out their jobs
of identifying with particularity the work or task was uncontroverted.
which Interserve was supposed to accomplish
for petitioner becomes even more evident, Interserve did not exercise the right to
considering that the Articles of Incorporation of control the performance of the work of the
Interserve states that its primary purpose is to respondents
operate, conduct, and maintain the business of
janitorial and allied services. But respondents The lack of control of Interserve over the
were hired as salesmen and leadsman for respondents can be gleaned from the Contract of
petitioner. The Court cannot, under such Services between Interserve (as the
ambiguous circumstances, make a reasonable CONTRACTOR) and petitioner (as the
determination if Interserve had substantial CLIENT).
capital or investment to undertake the job it was Paragraph 3 of the Contract specified that the
contracting with petitioner. personnel of contractor Interserve, which
Burden of proof of substantial capital rests in included the respondents, would comply with
the contractor, or in its absence, the principal CLIENT as well as CLIENTs policies, rules and
claiming it to be an independent contractor regulations. It even required Interserve
personnel to subject themselves to on-the-spot
searches by petitioner or its duly authorized guarantee to said principal the daily attendance
guards or security men on duty every time the of the workers assigned to the latter. An
said personnel entered and left the premises of independent job contractor would surely have
petitioner. Said paragraph explicitly established the discretion over the pace at which the work is
the control of petitioner over the conduct of performed, the number of employees required to
respondents. Although under paragraph 4 of the complete the same, and the work schedule which
same Contract, Interserve warranted that it its employees need to follow.
would exercise the necessary and due
supervision of the work of its personnel, there is As the Court previously observed, the Contract
a dearth of evidence to demonstrate the extent or of Services between Interserve and petitioner did
degree of supervision exercised by Interserve not identify the work needed to be performed
over respondents or the manner in which it was and the final result required to be accomplished.
actually exercised. There is even no showing Instead, the Contract specified the type of
that Interserve had representatives who workers Interserve must provide petitioner
supervised respondents work while they were in (Route Helpers, Salesmen, Drivers, Clericals,
the premises of petitioner. Encoders & PD) and their qualifications
(technical/vocational course graduates,
Also significant was the right of petitioner under physically fit, of good moral character, and have
paragraph 2 of the Contract to request the not been convicted of any crime). The Contract
replacement of the CONTRACTORS personnel. also states that, to carry out the undertakings
True, this right was conveniently qualified by specified in the immediately preceding
the phrase if from its judgment, the jobs or the paragraph, the CONTRACTOR shall employ the
projects being done could not be completed necessary personnel, thus, acknowledging that
within the time specified or that the quality of Interserve did not yet have in its employ the
the desired result is not being achieved, but such personnel needed by petitioner and would still
qualification was rendered meaningless by the pick out such personnel based on the criteria
fact that the Contract did not stipulate what work provided by petitioner. In other words,
or job the personnel needed to complete, the Interserve did not obligate itself to perform an
time for its completion, or the results desired. identifiable job, work, or service for petitioner,
The said provision left a gap which could enable but merely bound itself to provide the latter with
petitioner to demand the removal or replacement specific types of employees. These contractual
of any employee in the guise of his or her provisions strongly indicated that Interserve was
inability to complete a project in time or to merely a recruiting and manpower agency
deliver the desired result. The power to providing petitioner with workers performing
recommend penalties or dismiss workers is the tasks directly related to the latter’s principal
strongest indication of a company’s right of business.
control as direct employer.
Certification issued by DOLE is not sufficient
Paragraph 4 of the same Contract, in which to prove independent contractorship
Interserve warranted to petitioner that the former
would provide relievers and replacements in The certification issued by the DOLE stating
case of absences of its personnel, raises another that Interserve is an independent job contractor
red flag. An independent job contractor, who is does not sway this Court to take it at face value,
answerable to the principal only for the results since the primary purpose stated in the Articles
of a certain work, job, or service need not of Incorporation of Interserve is misleading.
According to its Articles of Incorporation, the CC maintained that respondent Interserve was
principal business of Interserve is to provide the employer of the complainants with whom it
janitorial and allied services. The delivery and has a service agreement.
distribution of Coca-Cola products, the work for
which respondents were employed and assigned LA and NLRC were consistent in holding that
to petitioner, were in no way allied to janitorial ER-EE relationship exists and, consequently,
services. While the DOLE may have found that complainants were illegally dismissed. CA,
that the capital and/or investments in tools however, overturned.
and equipment of Interserve were sufficient ISSUES:
for an independent contractor for janitorial
services, this does not mean that such capital (1) Does an employment relationship exist
and/or investments were likewise sufficient to between the route helpers and CC even if during
maintain an independent contracting business the course of their employment they were
for the delivery and distribution of Coca-Cola transferred to a labor contractor?
products.
(2) Can a contractor be considered engaged in
Quintanar vs. Coca-Cola (LOC) labor only contracting despite its registration
with the DOLE as an independent contractor and
Labor-only contracting exists when any of the possession of substantial capital?
two elements is present, that is, such employees
are performing activities directly related to the (3) Was there a valid termination and thereby a
principal business of the employer, and lack of valid severance of employment relationship
substantial capital or investment. Thus, even if when complainants were transferred to
the Court would indulge Coca-Cola and admit manpower agencies?
that Interserve had more than sufficient capital
or investment in the form of tools, equipment,
machineries, work premises, still, it cannot be
denied that the petitioners were performing
activities which were directly related to the RULING:
principal business of such employer.
[Issue 1] Yes. In this case, the SC, guided by
FACTS: Complainants were former employees stare decisis, applied its position in prior cases
of Coca-Cola (CC) as regular Route Helpers,* involving the Routine Helpers and CC. The
they were direct hires of the company during the Court ruled that that an employment relationship
period of 1984 to 2000. After sometime, the existed between the parties for the following
complainants were transferred successively as reasons: 1) Routine Helpers perform functions
agency workers to the different manpower necessary and desirable, even indispensable, in
agencies, the latest being respondent Interserve the usual business or trade of Coca- Cola
Management and Manpower Resources, Inc. Philippines, Inc; 2) SC pronouncements in prior
cases that Interserve is a labor-only
Complainants filed a case for illegal dismissal
contractor;** 3) the employees performed work
against CC. They contended that they were
which was directly related to the principal
regular employees of the latter and could only be
business of petitioner; and 4) in the service
dismissed for just and authorized cause. CC,
agreements between CC and the manpower
however, denied the existence of an employer-
employee relationship with the complainants.
agencies, CC still exercised the right of control of the elements of LOC is enough to make the
over the employees. contract into Labor-only contracting.

[Issue 2] Yes. The possession of substantial Under previous Department Orders issued by
capital is only one element. Labor-only DOLE, contracting out functions directly
contracting exists when any of the two elements related to the business of the principal for as
is present, that is, such employees are long as there is good faith and there are
performing activities directly related to the legitimated business reasons is allowed.
principal business of the employer, and lack of However under Department Order No. 174-17,
substantial capital or investment. Thus, even if such provision was removed, and in fact under
the Court would indulge Coca-Cola and admit Sec. 6 (f) such is now prohibited. (No
that Interserve had more than sufficient capital jurisprudence yet on the matter)
or investment in the form of tools, equipment,
machineries, work premises, still, it cannot be Buiser vs. Leogardo
denied that the petitioners were performing While the Labor Code, specifically Article 282,
activities which were directly related to the provides that probationary periods cannot
principal business of such employer. Also, it has exceed 6 months, it still allows the both
been ruled that no absolute figure is set for what employer and employee to stipulate the terms of
is considered 'substantial capital' because the the employment, provided that they can come
same is measured against the type of work into agreement.
which the contractor is obligated to perform for
the principal. FACTS: Petitioners Iluminada Buiser, Ma.
Cecilia Rilloacuña, and Ma. Mercedes Intengan
[Issue 3] No. Even granting that the petitioners all entered into an eighteen-month probationary
were last employed by Interserve, the record is employment contract with private respondent
bereft of any evidence that would show that the General Telephone Directory Company (GTPD),
petitioners voluntarily resigned from their as sales representatives charged with soliciting
employment with Coca-Cola only to be later advertisements to include in the telephone
hired by Interserve. Other than insisting that the directories. All petitioners were terminated after
petitioners were last employed by Interserve, the provisionary period (May 1981), on the
Coca-Cola failed not only to show by ground of failing to meet their sales quotas that
convincing evidence how it severed its employer were set by respondent company. In response to
relationship with the petitioners, but also to their termination, petitioners filed before the
prove that the termination of its relationship NCR Ministry of Labor of and Employment a
with them was made through any of the grounds complaint for illegal dismissal with claims for
sanctioned by law. backwages. However, the petition was denied in
Notes: An unregistered contractor is presumed a decision by the Regional Director and the
to be a Labor-only contractor. Registration same was affirmed by herein respondent Deputy
should be made with DOLE. Minister of Labor Vicente Leogardo, ruling that
(a) they have not attained regular status; (b) the
Prior to this case, both elements must concur in stipulated probationary period was valid; and
order for the contract to be considered as Labor- (c), that the termination was valid because they
only contracting. In this case, however the SC have not reached their required sales quotas set
has laid down the rule that presence of any one by the GTPD.
Petitioners filed before the Supreme Court a account to compel it to keep on its payroll one
petition for certiorari, contending that who could not perform according to its work
respondent Deputy Minister Leogardo standards.
committed grave abuse of discretion in
rendering the decision in favor of the private FACTS: Joaquin A. Dequila (or Dequilla) was
respondent and that as provided for by the Labor hired on probation by Mariwasa Manufacturing,
Code, probationary period cannot exceed 6 Inc. as a general utility worker on January 10,
months, therefore the probationary period of 1979. After 6 months, he was informed that his
GTPD was illegal. work was unsatisfactory and had failed to meet
the required standards. To give him another
ISSUE: WON the stipulated eighteen month chance, and with Dequila’s written consent,
probationary period is violative of the Labor Mariwasa extended Dequila’s probationary
Code? period for another three months: from July 10 to
October 9, 1979. Dequila’s performance,
RULING: No, it is not violative of the Labor however, did not improve and Mariwasa
Code. The Supreme Court rejects the terminated his employment at the end of the
petitioner’s contentions. While the Labor Code, extended period.
specifically Article 282, provides that
probationary periods cannot exceed 6 months, it Dequila filed a complaint for illegal dismissal
still allows the both employer and employee to against Mariwasa and its VP for Administration,
stipulate the terms of the employment, provided Angel T. Dazo, and violation of Presidential
that they can come into agreement. Given that Decrees Nos. 928 and 1389.
both petitioner and private respondent came into
agreement (by signing and agreeing) that the 18 DIRECTOR OF MINISTRY OF LABOR:
month probationary period is the law between Complaint is dismissed. Termination is justified.
them, petitioners cannot impugn this by Thus, Dequila appeals to the Minister of Labor.
invoking the provision of the Labor Code in MINISTER OF LABOR: Deputy Minister
their favor. Additionally, the grounds for their Vicente Leogardo, Jr. held that Dequila was
dismissal were just, because it was proven in the already a regular employee at the time of his
records that they did in fact failed to meet their dismissal, thus, he was illegally dismissed.
sales quotas set by private respondent GTPD in (Initial order is Reinstatement with full
the employment contract. Hence, petition is backwages, then it was later amended to direct
dismissed for lack of merit. payment of Dequila’s backwages from the date
Mariwasa vs. Leogardo (Cited Buiser, of his dismissal to December 20, 1982 only.)
Probationary Period of more than 6 months) ISSUE: WON employer and employee may, by
In this case, the extension given to Dequila agreement, extend the probationary period of
could not have been pre-arranged to avoid the employment beyond the six months prescribed
legal consequences of a probationary period in Art. 282 of the Labor Code?
satisfactorily completed. In fact, it was ex RULING: YES, agreements stipulating longer
gratia, an act of liberality on the part of his probationary periods may constitute lawful
employer affording him a second chance to exceptions to the statutory prescription limiting
make good after having initially failed to prove such periods to six months.
his worth as an employee. Such an act cannot
now unjustly be turned against said employer’s
The SC in its decision in Buiser vs. Leogardo, The principal test for determining whether a
Jr. (1984) said that “Generally, the probationary particular employee is a project employee or a
period of employment is limited to six (6) regular employee is whether the project
months. The exception to this general rule is employee was assigned to carry out a specific
when the parties to an employment contract may project or undertaking, the duration and scope
agree otherwise, such as when the same is of which were specified at the time the employee
established by company policy or when the is engaged for the project. ‘Project’ may refer to
same is required by the nature of work to be a particular job or undertaking that is within the
performed by the employee. In the latter case, regular or usual business of the employer, but
there is recognition of the exercise of managerial which is distinct and separate and identifiable
prerogatives in requiring a longer period of as such from the undertakings of the company.
probationary employment, such as in the present Such job or undertaking begins and ends at
case where the probationary period was set for determined or determinable times.
eighteen (18) months, i.e. from May, 1980 to
October, 1981 inclusive, especially where the FACTS: Complainant Rene R. Relos filed a
employee must learn a particular kind of work complaint for illegal dismissal with monetary
such as selling, or when the job requires certain claims against defendant Alcatel Philippines.
qualifications, skills experience or training.” Previously, complainant was repeatedly rehired
in various capacities (estimator/draftsman, civil
In this case, the extension given to Dequila works inspector, civil engineer, etc.) for several
could not have been pre-arranged to avoid the projects of defendant from January 1988 to
legal consequences of a probationary period December 1993 (with different periods, from 1
satisfactorily completed. In fact, it was ex to 11 months). On 31 December 1995,
gratia, an act of liberality on the part of his complainant’s last contract terminated. In March
employer affording him a second chance to 1997, he instituted the labor case claiming that
make good after having initially failed to prove he was illegally dismissed as he was a regular
his worth as an employee. Such an act cannot employee.
now unjustly be turned against said employer’s
account to compel it to keep on its payroll one Alcatel argues that respondent was a project
who could not perform according to its work employee because he worked on distinct projects
standards. with the terms of engagement and the specific
project made known to him at the time of the
By voluntarily agreeing to an extension of the engagement. Alcatel clarifies that
probationary period, Dequila in effect waived [complainant’s] employment was coterminous
any benefit attaching to the completion of said with the project for which he was hired and,
period if he still failed to make the grade during therefore, [complainant] was not illegally
the period of extension. By reasonably dismissed but was validly dismissed upon the
extending the period of probation, the expiration of the term of his project
questioned agreement actually improved the employment. Alcatel explains that its business
probationary employee’s prospects of relies mainly on the projects it enters into and
demonstrating his fitness for regular thus, it is constrained to hire project employees
employment. to meet the demands of specific projects.

Alcatel Philippines vs. Relos On the other hand, [complainant] insists that he
is a regular employee because he was assigned
by Alcatel on its various projects since 4 January was not continuously rehired by Alcatel after the
1988 performing functions desirable or cessation of every project. Records show that
necessary to Alcatel’s business. [Complainant] respondent was hired by Alcatel from 1988 to
adds that his employment contracts were 1995 for three projects, namely the PLDT X-5
renewed successively by Alcatel for seven years. project, the PLDT X-4 IOT project and the
[Complainant] contends that, even assuming that PLDT 1342 project. On 30 April 1988, upon the
he was a project employee, he became a regular expiration of respondent’s contract for the PLDT
employee because he was re-hired every X-4 IOT project, Alcatel did not rehire
termination of his employment contract and he respondent until 1 February 1991, or after a
performed functions necessary to Alcatel’s lapse of 33 months, for the PLDT 1342 project.
business. [Complainant] also claims that he was Alcatel’s continuous rehiring of respondent in
illegally dismissed because he was dismissed various capacities from February 1991 to
during the existence of the project. December 1995 was done entirely within the
framework of one and the same project ― the
ISSUE: WON respondent is a project PLDT 1342 project. This did not make
employee? [complainant] a regular employee of Alcatel as
respondent was not continuously rehired after
RULING: Yes respondent is a project
the cessation of a project. [Complainant]
employee. Petitioner is not liable as complainant
remained a project employee of Alcatel working
was a project employee. The principal test for
on the PLDT 1342 project.
determining whether a particular employee is a
project employee or a regular employee is The employment of a project employee ends on
whether the project employee was assigned to the date specified in the employment contract.
carry out a specific project or undertaking, the Therefore, respondent was not illegally
duration and scope of which were specified at dismissed but his employment terminated upon
the time the employee is engaged for the project. the expiration of his employment contract.
‘Project’ may refer to a particular job or
undertaking that is within the regular or usual Notes: Stipulate clearly the parameters for
business of the employer, but which is distinct project or fixed-period employment – In order to
and separate and identifiable as such from the avoid doubts on the status of an employee, the
undertakings of the company. Such job or employment contract should clearly stipulate the
undertaking begins and ends at determined or terms and conditions for the project
determinable times. employment. In particular, the project should be
clearly specified.
The complainant was a project employee. “The
specific projects for which respondent was hired Refrain from continuous rehiring of the same
and the periods of employment were specified in project employee – While project employment is
his employment contracts. The services he valid, a continuous rehiring of the same project
rendered, the duration and scope of each employee who performs work that is vital,
employment are clear indications that necessary and indispensable to the usual
respondent was hired as a project employee. business or trade of the employer, may result in
the latter becoming a regular employee by
While complainant was continuously rehired by operation of law.
Alcatel and he “performed tasks that were
clearly vital, necessary and indispensable to the However as in this case, rehiring of the same
usual business or trade of Alcatel, respondent employee not after cessation of each project but
after a while (33 months in this case) does not include payments for unworked regular
convert the employee to regular status. holidays. The use of the factor 303 indicates the
number of ordinary working days in a year
Insular Bank of Asia and America (which normally has 365 calendar days),
Employees’ Union (IBAA-EU) vs.HON. excluding the 52 Sundays and the 10 regular
Amado G. Inciong, and IBAA (1984) holidays. The use of 251 as a factor (365
(Monthly Paid vs. Daily Paid employees) calendar days less 52 Saturdays, 52 Sundays,
and 10 regular holidays) gives rise likewise to
The law clearly states that every worker shall be
the same presumption that the unworked
paid their regular holiday pay.
Saturdays, Sundays and regular holidays are
FACTS: On August 25, 1975, Labor Arbiter unpaid. This being the case, it is not amiss to
Ricarte T. Soriano rendered a decision in the state with certainty that the instant claim for
above-entitled case, granting petitioner's wages on regular unworked holidays is found to
complaint for payment of holiday pay. Pertinent be tenable and meritorious.
portions of the decision read:
WHEREFORE, judgment is hereby rendered “
“The records disclosed that employees of
The Department of Labor promulgated the rules
respondent bank were not paid their wages on
and regulations for the implementation of
unworked regular holidays as mandated by the
holidays with pay. The controversial section
Code, particularly Article 208, to wit:
thereof reads: “Sec. 2. Status of employees paid
Art. 208. Right to holiday pay. by the month. — Employees who are uniformly
paid by the month, irrespective of the number of
(a) Every worker shall be paid his regular daily working days therein, with a salary of not less
wage during regular holidays, except in retail than the statutory or established minimum wage
and service establishments regularly employing shall be presumed to be paid for all days in the
less than 10 workers. month whether worked or not. For this purpose,
the monthly minimum wage shall not be less
(b) The term "holiday" as used in this chapter,
than the statutory minimum wage multiplied by
shall include: New Year's Day, Maundy
365 days divided by twelve”
Thursday, Good Friday, the ninth of April the
first of May, the twelfth of June, the fourth of Later, Policy Instruction No. 9 was issued by the
July, the thirtieth of November, the twenty-fifth then Secretary of Labor interpreting the above-
and the thirtieth of December and the day quoted rule, pertinent portions of which read:
designated by law for holding a general
election. “The ten (10) paid legal holidays law, to start
with, is intended to benefit principally daily
This conclusion is deduced from the fact that the employees. In the case of monthly, only those
daily rate of pay of the bank employees was whose monthly salary did not yet include
computed in the past with the unworked regular payment for the ten (10) paid legal holidays are
holidays as excluded for purposes of entitled to the benefit.”
determining the deductible amount for absences
incurred Thus, if the employer uses the factor Respondent IBAA by reason of the ruling laid
303 days as a divisor in determining the daily down by the aforecited rule implementing
rate of monthly paid employee, this gives rise to Article 94 of the Labor Code and by Policy
a presumption that the monthly rate does not
Instruction No. 9, stopped the payment of authority. Monthly paid employees are also
holiday pay to all its employees. entitled to holiday pay.

Writ of execution of the previously decided case Since the private respondent premises its action
for them to be paid their holiday pay was filed on the invalidated rule and policy instruction, it
by the petitioner. Labor arbiter and NLRC ruled is clear that the employees belonging to the
in their favor. IBAA filed an MR to the Office petitioner association are entitled to the payment
of the Minister of Labor which set aside the of ten (10) legal holidays under Articles 82 and
decision of NLRC. Hence this petition. 94 of the Labor Code, aside from their monthly
salary. They are not among those excluded by
ISSUE: WON holiday pay applies to monthly- law from the benefits of such holiday pay.
paid employees.
Presidential Decree No. 850 states who are
RULING: Yes. excluded from the holiday provisions of that
law. It states:
Section 2, Rule IV, Book III of the
implementing rules and Policy Instruction No. 9 ART. 82. Coverage. The provision of this Title
issued by the then Secretary of Labor are null shall apply to employees in all establishments
and void since in the guise of clarifying the and undertakings, whether for profit or not, but
Labor Code’s provisions on holiday pay, they in not to government employees, managerial
effect amended them by enlarging the scope of employees, field personnel members of the
their exclusion. family of the employer who are dependent on
him for support, domestic helpers, persons in
The provisions of the Labor Code on the
the personal service of another, and workers
entitlement to the benefits of holiday pay are
who are paid by results as determined by the
clear and explicit – it provides for both the
Secretary of Labor in appropriate regulations.
coverage of and exclusion from the benefits. In
(Emphasis supplied).
Policy Instruction No. 9, the then Secretary of
Labor went as far as to categorically state that The questioned Section 2, Rule IV, Book III of
the benefit is principally intended for daily paid the Integrated Rules and the Secretary's Policy
employees, when the law clearly states that Instruction No. 9 add another excluded group,
every worker shall be paid their regular holiday namely, "employees who are uniformly paid by
pay. the month." While the additional exclusion is
only in the form of a presumption that all
Note: Daily paid employees are those
monthly paid employees have already been paid
employees who are only paid on the days they
holiday pay, it constitutes a taking away or a
actually worked while monthly paid employees
deprivation which must be in the law if it is to
are those presumed to be paid for all days in the
be valid. An administrative interpretation which
month whether worked or not.
diminishes the benefits of labor more than what
Chartered Bank Employees Association vs. the statute delimits or withholds is obviously
Ople and The Chartered Bank (1985) involves ultra vires.
the same facts and same issue, Policy Instruction
It is argued that even without the presumption
No. 9 of the Secretary of Labor was also
found in the rules and in the policy instruction,
questioned which this Court ruled that such
the company practice indicates that the monthly
instruction was null and void for exceeding his
salaries of the employees are so computed as to
include the holiday pay provided by law. The monthly salaries only because the collective
petitioner contends otherwise. bargaining agreement so provides is itself an
argument in favor of the petitioner stand. It
One strong argument in favor of the petitioner's shows that the Collective Bargaining
stand is the fact that the Chartered Bank, in Agreement already contemplated a divisor of
computing overtime compensation for its 251 days for holiday pay computations before
employees, employs a "divisor" of 251 days. the questioned presumption in the Integrated
The 251 working days divisor is the result of Rules and the Policy Instruction was
subtracting all Saturdays, Sundays and the ten formulated. There is furthermore a similarity
(10) legal holidays from the total number of between overtime pay, which is computed on the
calendar days in a year. If the employees are basis of 251 working days a year, and holiday
already paid for all non-working days, the pay, which should be similarly treated
divisor should be 365 and not 251. notwithstanding the public respondents'
issuances. In both cases overtime work and
The situation is muddled somewhat by the fact
holiday work- the employee works when he is
that, in computing the employees' absences from
supposed to be resting. In the absence of an
work, the respondent bank uses 365 as divisor.
express provision of the CBA or the law to the
Any slight doubts, however, must be resolved in
contrary, the computation should be similarly
favor of the workers. This is in keeping with the
handled.
constitutional mandate of promoting social
justice and affording protection to labor We are not unmindful of the fact that the
(Sections 6 and 9, Article II, Constitution). The respondent's employees are among the highest
Labor Code, as amended, itself provides: paid in the industry. It is not the intent of this
Court to impose any undue burdens on an
ART. 4. Construction in favor of labor. All
employer which is already doing its best for its
doubts in the implementation and interpretation
personnel. We have to resolve the labor dispute
of the provisions of this Code, including its
in the light of the parties' own collective
implementing rules and regulations, shall be
bargaining agreement and the benefits given by
resolved in favor of labor.
law to all workers. When the law provides
Any remaining doubts which may arise from the benefits for "employees in all establishments and
conflicting or different divisors used in the undertakings, whether for profit or not" and lists
computation of overtime pay and employees' specifically the employees not entitled to those
absences are resolved by the manner in which benefits, the administrative agency
work actually rendered on holidays is paid. implementing that law cannot exclude certain
Thus, whenever monthly paid employees work employees from its coverage simply because
on a holiday, they are given an additional 100% they are paid by the month or because they are
base pay on top of a premium pay of 50%. If the already highly paid. The remedy lies in a clear
employees' monthly pay already includes their redrafting of the collective bargaining agreement
salaries for holidays, they should be paid only with a statement that monthly pay already
premium pay but not both base pay and includes holiday pay or an amendment of the
premium pay. law to that effect but not an administrative rule
or a policy instruction.
The contention of the respondent that 100% base
pay and 50% premium pay for work actually
rendered on holidays is given in addition to
Union of FILIPRO Employees (UFE) vs. Petitioner UFE answered that the award should
Nestle Philippines Inc. and Vivar (1992) be made effective from the date of effectivity of
(Divisor, Field Workers) the Labor Code, that their sales personnel are not
field personnel and are therefore entitled to
Under Article 82, field personnel are not holiday pay, and that the use of 251 as divisor is
entitled to holiday pay. Said article defines field an established employee benefit which cannot be
personnel as “non-agritultural employees who diminished.
regularly perform their duties away from the
principal place of business or branch office of Arbitrator Vivar: On January 14, 1986, the
the employer and whose actual hours of work in respondent arbitrator issued an order declaring
the field cannot be determined with reasonable that the effectivity of the holiday pay award
certainty.” shall retroact to November 1, 1974, the date of
effectivity of the Labor Code. He adjudged,
The respondent arbitrator’s order to change the however, that the company’s sales personnel are
divisor from 251 to 261 days would result in a field personnel and, as such, are not entitled to
lower daily rate which is violative of the holiday pay. He likewise ruled that with the
prohibition on non-diminution of benefits found grant of 10 days’ holiday pay, the divisor should
in Article 100 of the Labor Code. To maintain be changed from 251 to 261 and ordered the
the same daily rate if the divisor is adjusted to reimbursement of overpayment for overtime,
261 days, then the dividend, which represents night differential, vacation and sick leave pay
the employee’s annual salary, should due to the use of 251 days as divisor.
correspondingly be increased to incorporate the
holiday pay. ISSUES:

FACTS: On November 8, 1985, respondent 1) WON Nestle’s sales personnel are entitled to
Filipro, Inc. (now Nestle Philippines, Inc.) filed holiday pay; and
with the National Labor Relations Commission
(NLRC) a petition for claims of its monthly paid 2) WON concomitant with the award of holiday
employees for holiday pay. pay, the divisor should be changed from 251 to
261 days and whether or not the previous use of
Abitrator Vivar: Filipro to pay its monthly paid 251 as divisor resulted in overpayment for
employees holiday pay pursuant to Art 94 of overtime, night differential, vacation and sick
Labor Code, subject to exclusions and leave pay.
limitations in Art 82.
RULING:
Filipro filed a motion for clarification seeking
(1) the limitation of the award to three years, (2) 1. Sales personnel are not entitled to holiday
the exclusion of salesmen, sales representatives, pay.
truck drivers, merchandisers and medical Under Article 82, field personnel are not entitled
representatives (hereinafter referred to as sales to holiday pay. Said article defines field
personnel) from the award of the holiday pay, personnel as “non-agritultural employees who
and (3) deduction from the holiday pay award of regularly perform their duties away from the
overpayment for overtime, night differential, principal place of business or branch office of
vacation and sick leave benefits due to the use of the employer and whose actual hours of work in
251 divisor.
the field cannot be determined with reasonable reimburse the amounts overpaid by Filipro due
certainty.” to the use of 251 days’ divisor.

The law requires that the actual hours of work in The 251 working days divisor is the result of
the field be reasonably ascertained. The subtracting all Saturdays, Sundays and the ten
company has no way of determining whether or (10) legal holidays from the total number of
not these sales personnel, even if they report to calendar days in a year. If the employees are
the office before 8:00 a.m. prior to field work already paid for all non-working days, the
and come back at 4:30 p.m, really spend the divisor should be 365 and not 251.
hours in between in actual field work.
In the petitioner’s case, its computation of daily
Moreover, the requirement that “actual hours of ratio since September 1, 1980, is as follows:
work in the field cannot be determined with
reasonable certainty” must be read in monthly rate x 12 months / 251 days
conjunction with Rule IV, Book III of the
The use of 251 days’ divisor by respondent
Implementing Rules which provides: Filipro indicates that holiday pay is not yet
Rule IV Holidays with Pay included in the employee’s salary, otherwise the
divisor should have been 261.
Sec. 1. Coverage — This rule shall apply to all
employees except: It must be stressed that the daily rate, assuming
there are no intervening salary increases, is a
(e) Field personnel and other employees whose constant figure for the purpose of computing
time and performance is unsupervised by the overtime and night differential pay and
employer . . commutation of sick and vacation leave credits.
Necessarily, the daily rate should also be the
Hence, in deciding whether or not an same basis for computing the 10 unpaid
employee’s actual working hours in the field can holidays.
be determined with reasonable certainty, query
must be made as to whether or not such The respondent arbitrator’s order to change the
employee’s time and performance is constantly divisor from 251 to 261 days would result in a
supervised by the employer. lower daily rate which is violative of the
prohibition on non-diminution of benefits found
2. The divisor in computing the award of in Article 100 of the Labor Code. To maintain
holiday pay should still be 251 days. the same daily rate if the divisor is adjusted to
261 days, then the dividend, which represents
While in that case the issue was whether or not
the employee’s annual salary, should
salesmen were entitled to overtime pay, the
correspondingly be increased to incorporate the
same rationale for their exclusion as field
holiday pay.
personnel from holiday pay benefits also
applies. To illustrate, if prior to the grant of holiday pay,
the employee’s annual salary is P25,100, then
The petitioner union also assails the respondent
dividing such figure by 251 days, his daily rate
arbitrator’s ruling that, concomitant with the
is P100.00 After the payment of 10 days’
award of holiday pay, the divisor should be
holiday pay, his annual salary already includes
changed from 251 to 261 days to include the
holiday pay and totals P26,100 (P25,100 +
additional 10 holidays and the employees should
1,000). Dividing this by 261 days, the daily rate Applying the aforementioned doctrine to the
is still P100.00. There is thus no merit in case at bar, it is not far-fetched that Nestle,
respondent Nestle’s claim of overpayment of relying on the implicit validity of the
overtime and night differential pay and sick implementing rule and policy instruction before
and vacation leave benefits, the computation this Court nullified them, and thinking that it
of which are all based on the daily rate, since was not obliged to give holiday pay benefits to
the daily rate is still the same before and after its monthly paid employees, may have been
the grant of holiday pay. moved to grant other concessions to its
employees, especially in the collective
In Insular Bank of Asia and America bargaining agreement. This possibility is
Employees' Union (IBAAEU) v. Inciong, 132 bolstered by the fact that respondent Nestle's
SCRA 663 [1984], hereinafter referred to as the employees are among the highest paid in the
IBAA case, the Court declared that Section 2, industry. With this consideration, it would be
Rule IV, Book III of the implementing rules and unfair to impose additional burdens on Nestle
Policy Instruction No. 9, issued by the then when the non-payment of the holiday benefits
Secretary of Labor on February 16, 1976 and up to 1984 was not in any way attributed to
April 23, 1976, respectively, and which Nestle's fault.
excluded monthly paid employees from holiday
pay benefits, are null and void. The Court The Court thereby resolves that the grant of
therein reasoned that, in the guise of clarifying holiday pay be effective, not from the date of
the Labor Code's provisions on holiday pay, the promulgation of the Chartered Bank case or
aforementioned implementing rule and policy from the date of effectivity of the Labor Code,
instruction amended them by enlarging the but from October 23, 1984, the date of
scope of their exclusion. The Chartered Bank promulgation of the IBAA case.
case reiterated the above ruling and added the
"divisor" test. WHEREFORE, the order of the voluntary
arbitrator in hereby MODIFIED. The divisor to
However, prior to their being declared null and be used in computing holiday pay shall be 251
void, the implementing rule and policy days. The holiday pay as above directed shall be
instruction enjoyed the presumption of validity computed from October 23, 1984. In all other
and hence, Nestle's non-payment of the holiday respects, the order of the respondent arbitrator is
benefit up to the promulgation of the IBAA case hereby AFFIRMED.
on October 23, 1984 was in compliance with
these presumably valid rule and policy Note: During this time, there was only 10 legal
instruction. holidays. We now have 12 legal holidays as of
this date. So adjust accordingly if ever a
The "operative fact" doctrine realizes that in question about this is asked.
declaring a law or rule null and void, undue
harshness and resulting unfairness must be Cezar Odango vs. NLRC (2004) (Divisor)
avoided. It is now almost the end of 1991. To The use of a divisor less than 365 days cannot
require various companies to reach back to 1975 make ANTECO automatically liable for
now and nullify acts done in good faith is underpayment. The facts show that petitioners
unduly harsh. 1984 is a fairer reckoning period are required to work only from Monday to
under the facts of this case. Friday and half of Saturday. Thus, the minimum
allowable divisor is 287, which is the result of
365 days, less 52 Sundays and less 26 Saturdays NLRC Ruling
(or 52 half Saturdays). Any divisor below 287
days means that ANTECOs workers are On appeal, the NLRC reversed the Labor
deprived of their holiday pay for some or all of Arbiters ruling that ANTECO underpaid its
the ten legal holidays. The 304 days divisor used employees. The NLRC pointed out that the
by ANTECO is clearly above the minimum of Labor Arbiters own computation showed that
287 days. the daily wage rates of ANTECOs employees
were above the minimum daily wage of P124.
FACTS: Petitioners are monthly-paid The lowest paid employee of ANTECO was
employees of ANTECO whose workdays are then receiving a monthly wage of P3,788. The
from Monday to Friday and half of Saturday. NLRC applied the formula in Section 2 [(Daily
After a routine inspection, the Regional Branch Wage Rate = (Wage x 12)/365)] to the monthly
of the Department of Labor and Employment wage of P3,788 to arrive at a daily wage rate of
found ANTECO liable for underpayment of the P124.54, an amount clearly above the minimum
monthly salaries of its employees. On
wage.
September 1989, the DOLE directed ANTECO
to pay its employees wage differentials
The NLRC noted that while the reasoning in the
amounting to P1,427,412.75. ANTECO failed to
pay. On various dates in 1995, thirty-three (33) body of the Labor Arbiters decision supported
monthly-paid employees filed complaints with the view that ANTECO did not underpay, the
the NLRC praying for payment of wage conclusion arrived at was the opposite. Finally,
differentials, damages and attorney’s fees. the NLRC ruled that the use of 304 as a divisor
in converting leave credits is more favorable to
Labor Arbiters Ruling the employees since a lower divisor yields a
higher rate of pay.
The Labor Arbiter reasoned that ANTECO
failed to refute petitioners argument that CA Ruling
monthly-paid employees are considered paid for
all the days in a month under Section 2, Rule IV The Court of Appeals held that the petition was
of Book 3 of the Implementing Rules of the insufficient in form and substance since it does
Labor Code (Section 2). Petitioners claim that not allege the essential requirements of the
this includes not only the 10 legal holidays, but extra-ordinary special action of certiorari. The
also their unworked half of Saturdays and all of Court of Appeals faulted petitioners for failing
Sundays. to recite where and in what specific instance
public respondent abused its discretion. The
The Labor Arbiter gave credence to petitioners appellate court characterized the allegations in
arguments on the computation of their wages the petition as sweeping and clearly falling short
based on the 304 divisor used by ANTECO in of the requirement of Section 3, Rule 46 of the
converting the leave credits of its employees. Rules of Court.
The Labor Arbiter agreed with petitioners that
ANTECOs use of 304 as divisor is an admission ISSUE: WON Petitioners are entitled to their
that it is paying its employees for only 304 days Money Claim?
a year instead of the 365 days as specified in
RULING: No, Petitioners are not entitled to
Section 2. The Labor Arbiter concluded that
their Money Claim.
ANTECO owed its employees the wages for 61
days, the difference between 365 and 304, for
every year.
Petitioners claim that the Court of Appeals generally limited to the ten legal holidays in a
gravely erred in denying their claim for wage year. Petitioners claim is based on a mistaken
differentials. Petitioners base their claim on notion that Section 2, Rule IV of Book III gave
Section 2, Rule IV of Book III of the Omnibus rise to a right to be paid for un-worked days
Rules Implementing the Labor Code. Petitioners beyond the ten legal holidays. In effect,
argue that under this provision monthly-paid petitioners demand that ANTECO should pay
employees are considered paid for all days of the them on Sundays, the unworked half of
month including un-worked days. Petitioners Saturdays and other days that they do not work
assert that they should be paid for all the 365 at all. Petitioner’s line of reasoning is not only a
days in a year. They argue that since in the violation of the no work, no pay principle, it also
computation of leave credits, ANTECO uses a gives rise to an invidious classification, a
divisor of 304, ANTECO is not paying them 61 violation of the equal protection clause.
days every year.
Sustaining petitioner’s argument will make
We have long ago declared void Section 2, Rule monthly-paid employees a privileged class who
IV of Book III of the Omnibus Rules are paid even if they do not work.
Implementing the Labor Code. In Insular Bank
of Asia v. Inciong, we ruled as follows: The use of a divisor less than 365 days cannot
make ANTECO automatically liable for
Section 2, Rule IV, Book III of the underpayment. The facts show that petitioners
Implementing Rules and Policy Instructions No. are required to work only from Monday to
9 issued by the Secretary (then Minister) of Friday and half of Saturday. Thus, the minimum
Labor are null and void since in the guise of allowable divisor is 287, which is the result of
clarifying the Labor Codes provisions on 365 days, less 52 Sundays and less 26 Saturdays
holiday pay, they in effect amended them by (or 52 half Saturdays). Any divisor below 287
enlarging the scope of their exclusion. days means that ANTECOs workers are
deprived of their holiday pay for some or all of
The Labor Code is clear that monthly-paid the ten legal holidays. The 304 days divisor used
employees are not excluded from the benefits of by ANTECO is clearly above the minimum of
holiday pay. However, the implementing rules 287 days.
on holiday pay promulgated by the then
Secretary of Labor excludes monthly-paid Finally, petitioners cite Chartered Bank
employees from the said benefits by inserting, Employees Association v. Ople as an analogous
under Rule IV, Book III of the implementing situation.
rules, Section 2 which provides that monthly-
paid employees are presumed to be paid for all Petitioners have misread this case.
days in the month whether worked or not. In Chartered Bank, the workers sought payment
Thus, Section 2 cannot serve as basis of any for unworked legal holidays as a right
right or claim. Absent any other legal basis, guaranteed by a valid law. In this case,
petitioners claim for wage differentials must fail. petitioners seek payment of wages for unworked
non-legal holidays citing as basis a void
Even assuming that Section 2, Rule IV of Book implementing rule. The circumstances are also
III is valid, petitioners claim will still fail. The markedly different. In Chartered Bank, there
basic rule in this jurisdiction is no work, no pay. was a collective bargaining agreement that
The right to be paid for unworked days is prescribed the divisor. No CBA exists in this
case. In Chartered Bank, the employer was liable Arbitration Branch in San Fernando, Pampanga,
for underpayment because the divisor it used a complaint against Bonifacio Sia and Manila
was 251 days, a figure that clearly fails to Glass Supply (jointly referred hereafter as "Sia"
account for the ten legal holidays the law for easy reference). In the one-page complaint
requires to be paid. Here, the divisor ANTECO form of the NLRC, Damasco indicated that she
uses is 304 days. This figure does not deprive is suing her employer for illegal dismissal and
petitioners of their right to be paid on legal non-payment of overtime pay. However, in her
holidays. complaint affidavit and position paper filed later
before the labor arbiter, Damasco additionally
A final note, ANTECOs defense is likewise charged her employer with non-payment of 13th
based on Section 2, Rule IV of Book III of the month pay, service incentive leave pay, holiday
Omnibus Rules Implementing the Labor Code pay and night shift differential.
although ANTECOs interpretation of this
provision is opposite that of petitioners. It is On September 2, 1993, the labor arbiter rendered
deplorable that both parties premised their judgment in favor of Ms. Damasco. The labor
arguments on an implementing rule that the official declared that Sia has not shown any just
Court had declared void twenty years ago in or authorized cause in terminating the services
Insular Bank. This case is cited prominently in of Damasco, except for wild, generalized and
basic commentaries. And yet, counsel for both self-serving statements that Damasco committed
parties failed to consider this. This does not serious misconduct or willful disobedience of
speak well of the quality of representation they the lawful orders in connection with her work.
rendered to their clients. This controversy The labor arbiter also ruled that Damasco is
should have ended long ago had either counsel entitled to 13th month pay, service incentive
first checked the validity of the implementing leave pay, holiday pay, overtime pay, and
rule on which they based their contentions. disposed of the case.

Damasco vs. NLRC (OT pay) On appeal, the NLRC upheld the labor arbiter’s
finding that Damasco was illegally dismissed
Still, even assuming that Damasco received a but with modifications. (deleted overtime pay
wage which is higher than the minimum and reducing award of attorneys’ fees in favor of
provided by law, it does not follow that any petitioner)
additional compensation due her can be offset
by her pay in excess of the minimum, in the In her petition, Damasco alleged that the NLRC
absence of an express agreement to that effect. committed grave abuse of discretion:
Moreover, such arrangement, if there be any,
must appear in the manner required by law on "…IN DELETING THE AWARD FOR
how overtime compensation must be OVERTIME PAY AND REDUCING THE
determined. For it is necessary to have a clear ATTORNEY’S FEES IN FAVOR OF
and definite delineation between an employee’s PETITIONER”
regular and overtime compensation to thwart ISSUE: WON NLRC committed grave abuse of
violation of the labor standards provision of the discretion in deleting the overtime pay?
Labor Code.
RULING: Yes, NLRC committed grave abuse
FACTS: Ms. Imelda Damasco is was a regular of discretion.
sales clerk in Manila Glass Supply in Olongapo
City. Damasco filed before the NLRC Regional
Now, as regards Ms. Damasco’s contention that With regard to the award of attorney’s fees the
public respondent gravely abused its discretion ten percent (10%) attorney’s fees is provided for
in deleting the award for overtime pay for lack in Article 111 of the Labor Code. Considering
of factual basis, we find the same impressed the circumstances of this case, said award is in
with merit. We note that Sia has admitted in his order.
pleadings that Damasco’s work starts at 8:30 in
the morning and ends up at 6:30 in the evening Note: This case also involves illegal dismissal.
daily, except holidays and Sundays. However, Damasco was illegally dismissed and the Court
Sia claims that Damasco’s basic salary of did not warrant reinstatement because of
P140.00 a day is more than enough to cover the strained relations. (Read in full for the illegal
"one hour excess work" which is the dismissal issue)
compensation they allegedly agreed upon. Songco, et al. vs. National Labor Relations
Judicial admissions made by parties in the Commission (1990) (Sales Commissions)
pleadings, or in the course of the trial or other The Court takes judicial notice of the fact that
proceedings in the same case are conclusive, no some salesmen do not receive any basic salary
further evidence being required to prove the but depend on commissions and allowances or
same, and cannot be contradicted unless commissions alone, although an employer-
previously shown to have been made through employee relationship exists.
palpable mistake or that no such admission was
made. In view of Sia’s formal admission that If the opposite view is adopted, i.e., that
Ms. Damasco worked beyond eight hours daily, commission does not form part of the wage or
the latter is entitled to overtime compensation. salary, then in effect, we will be saying that this
No further proof is required. Sia already kind of salesmen does not receive any salary
admitted she worked an extra hour daily. Thus, and therefore, not entitled to separation pay in
public respondent gravely erred in deleting the the event of discharge from employment. This
award of overtime pay to Ms. Damasco on the narrow interpretation is not in accord with the
pretext that the claim has no factual basis. liberal spirit of the labor laws and considering
the purpose of separation pay which is, to
Still, even assuming that Damasco received a alleviate the difficulties which confront a
wage which is higher than the minimum dismissed employee thrown to the streets to face
provided by law, it does not follow that any the harsh necessities of life.
additional compensation due her can be offset by
her pay in excess of the minimum, in the FACTS: Zuelig terminated the services of
absence of an express agreement to that effect. Songco, and others, on the ground of
Moreover, such arrangement, if there be any, retrenchment due to financial losses. During the
must appear in the manner required by law on hearing, the parties agreed that the sole issue to
how overtime compensation must be be resolved was the basis of computation of the
determined. For it is necessary to have a clear separation pay. The salesmen received monthly
and definite delineation between an employee’s salaries of at least P400.00 [yes, P400] and
regular and overtime compensation to thwart commissions for every sale they made.
violation of the labor standards provision of the
Labor Code. The Collective Bargaining Agreement between
Zuelig and the union of which Songco, et al.
were members contained the following
provision: “Any employee who is separated commissions alone, although an employer-
from employment due to old age, sickness, death employee relationship exists.
or permanent lay-off, not due to the fault of said
employee, shall receive from the company a If the opposite view is adopted, i.e., that
retirement gratuity in an amount equivalent to commission does not form part of the wage or
one (1) month’s salary per year of service.” salary, then in effect, we will be saying that this
kind of salesmen does not receive any salary and
The Labor Arbiter ordered Zuelig to pay therefore, not entitled to separation pay in the
Songco, et al., separation pay equivalent to their event of discharge from employment. This
one month salary (exclusive of commissions, narrow interpretation is not in accord with the
allowances, etc.) for every year of service with liberal spirit of the labor laws and considering
the company. the purpose of separation pay which is, to
alleviate the difficulties which confront a
ISSUE: WON the earned sales commissions and dismissed employee thrown to the streets to face
allowances should be included in the monthly the harsh necessities of life.
salary of Songco, et al. for the purpose of
computing their separation pay? In Soriano vs. NLRC, 155 SCRA 124, we held
that the commissions also claimed by the
RULING: In the computation of backwages and employee (override commission plus net deposit
separation pay, account must be taken not only incentive) are not properly includible in such
of the basic salary of the employee but also of base figure since such commissions must be
the transportation and emergency living earned by actual market transactions attributable
allowances. to the petitioner [salesman]. Since the
commissions in the present case were earned by
Even if the commissions were in the form of
actual transactions attributable to Songco, et al.,
incentives or encouragement, so that the
these should be included in their separation pay.
salesman would be inspired to put a little more
In the computation thereof, what should be taken
industry on the jobs particularly assigned to
into account is the average commission earned
them, still these commissions are direct
during their last year of employment.
remunerations for services rendered which
contributed to the increase of income of the Boie-Takeda vs. De La Serna and Philippine
employer. Commission is the recompense Fuji Xerox vs. Trajano (1993) (Sales
compensation or reward of an agent, salesman, commissions for purposes of computing 13th
executor, trustee, receiver, factor, broker or month pay)
bailee, when the same is calculated as a
percentage on the amount of his transactions or Commissions are given for extra efforts exerted
on the profit to the principal. The nature of the in consummating sales or other related
work of a salesman and the reason for such type transactions. They are, as such, additional pay,
of remuneration for services rendered which this Court has made clear do not form
demonstrate that commissions are part of part of the "basic salary.
Songco, et al.’s wage or salary.
FACTS: 2 cases were consolidated involving
The Court takes judicial notice of the fact that similar issues. A routine inspection was
some salesmen do not receive any basic salary conducted in the premises of petitioner Boie-
but depend on commissions and allowances or Takeda Chemicals, Inc. Finding that Boie-
Takeda had not been including the commissions
earned by its medical representatives in the employee receives for a standard work period.
computation of their 13th month pay, The Commissions are given for extra efforts exerted
officer served a Notice of Inspection Results on in consummating sales or other related
Boie-Takeda requiring Boie-Takeda within ten transactions. They are, as such, additional pay,
(10) calendar days from notice to effect which this Court has made clear do not form
restitution or correction of "the underpayment of part of the "basic salary."
13th month pay for the year(s) 1986, 1987 and
1988 of Med Rep (Revised Guidelines on the Respondents would do well to distinguish this
Implementation of 13th month pay # 5) in the case from Songco vs. National Labor Relations
total amount of P558,810.89." Commission, supra, upon which they rely so
heavily. What was involved therein was the term
Boie-Takeda wrote the Labor Department "salary" without the restrictive adjective "basic".
contesting the Notice of Inspection Results Thus, in said case, we construed the term in its
because according to the law, only basic salary generic sense to refer to all types of "direct
is required4. Regional Director directed Boie- remunerations for services rendered," including
Takeda to pay the said amount. On appeal before commissions. In the same case, we also took
the Acting Labor Secretary, the commissions judicial notice of the fact "that some salesmen
shall be excluded in the computation of their do not receive any basic salary but depend on
13th month pay. A similar inspection was also commissions and allowances or commissions
conducted in the premises of Philippine Fuji alone, although an employer-employee
Xerox Corp. The two companies had the same relationship exists," which statement is quite
counsel who filed a complaint against labor significant in that it speaks of a "basic salary"
officials Hon. Dionisio dela Serna and apart and distinct from "commissions" and
Undersecretary Cresenciano B. Trajano in "allowances".
issuing the questioned Orders and attacked
Section 5 Revised Guidelines of P. D. 85125. Instead of supporting respondents' stand, it
would appear that Songco itself recognizes that
ISSUE: WON Commissions of Sales commissions are not part of "basic salary." In
Representatives excluded from the computation including commissions in the computation of the
of 13th month pay? 13th month pay, the second paragraph of Section
5 (a) of the Revised Guidelines on the
RULING: Yes. In remunerative schemes Implementation of the 13th Month Pay Law
consisting of a fixed or guaranteed wage plus unduly expanded the concept of "basic salary" as
commission, the fixed or guaranteed wage is defined in P.D. 851. It is a fundamental rule that
patently the "basic salary" for this is what the implementing rules cannot add to or detract
4 from the provisions of the law it is designed to
"Basic Salary" shall include all remunerations or earnings paid by
an employer to an employee for services rendered but may not implement. Administrative regulations adopted
include cost-of-living allowances granted pursuant to Presidential
Decree No. 525 or Letter of Instructions No. 174, profit-sharing
under legislative authority by a particular
payments, and all allowances and monetary benefits which are not department must be in harmony with the
considered or integrated as part of the regular or basic salary of the
employee at the time of the promulgation of the Decree on provisions of the law they are intended to carry
December 16, 1975.
5
into effect. They cannot widen its scope. An
5. 13th Month Pay for Certain Types of Employees. (a)
Employees Paid by Results.- Employees who are paid on piece
administrative agency cannot amend an act of
work basis are by law entitled to the 13th month pay. Employees Congress.
who are paid a fixed or guaranteed wage plus commission are also
entitled to the mandated 13th month pay based on their total
earnings during the calendar year, i.e., on both their fixed or
guaranteed wage and commission.
WHEREFORE, the consolidated petitions are provisions of Explanatory Bulletin No. 86-12,
hereby GRANTED. The second paragraph of Item No. 5 (a):
Section 5 (a) of the Revised Guidelines on the
Implementation of the 13th Month Pay Law . . . . Since the salesmen of Philippine
issued on November 16, 1987 by then Labor Duplicators are receiving a fixed basic wage
Secretary Franklin M. Drilon is declared null plus commission on sales and not purely on
and void as being violative of the law said commission basis, they are entitled to receive
Guidelines were issued to implement, hence 13th month pay provided they worked at least
issued with grave abuse of discretion correctible one (1) month during the calendar year. May we
by the writ of prohibition and certiorari. add at this point that in computing such 13th
month pay, the total commissions of said
salesmen for the calendar year shall be divided
by twelve (12).
Philippine Duplicators Inc. vs. NLRC (1993
and 1995) (Sales Commission) Notwithstanding Director Sanchez’ opinion or
ruling, petitioner refused to pay the claims of its
However, sales commissions which are salesmen for 13th month pay computed on the
effectively an integral portion of the basic salary basis of both fixed wage plus sales commissions
structure of an employee shall be included in
determining his 13th month pay. ISSUE: WON sales commission is included in
the coverage of basic salary for purposes of 13 th
A productivity bonus is something extra for month pay?
which no specific additional services are
rendered by any particular employee and hence RULING (1993): Yes, sales commissions are
not legally demandable, absent a contractual included.
undertaking to pay it. Sales commissions, on the
other hand, such as those paid in Duplicators, In the first place, Article 97 (f) of the Labor
are intimately related to or directly proportional Code defines the term “wage” (which is
to the extent or energy of an employee's equivalent to “salary,” as used in P.D. No. 851
endeavors. Commissions are paid upon the and Memorandum Order No. 28) in the
specific results achieved by a salesman- following terms:
employee. It is a percentage of the sales closed (f) “Wage“ paid to any employee shall mean the
by a salesman and operates as an integral part remuneration or earnings, however designated,
of such salesman's basic pay. capable of being expressed in terms of money,
1993 Case whether fixed or ascertained on a time, task,
piece, or commission basis, or other method of
FACTS: Petitioner corporation refused the calculating the same, which is payable by an
union’s request, but stated it would respect an employer to an employee under a written or
opinion from the MOLE. On 17 November unwritten contract of employment for work done
1987, acting upon a request for opinion or to be done, or for services rendered or to be
submitted by respondent union, Director rendered, and includes the fair and reasonable
Augusto G. Sanchez of the Bureau of Working value, as determined by the Secretary of Labor,
Conditions, MOLE, rendered an opinion to of board, lodging, or other facilities customarily
respondent union declaring applicable the furnished by the employer to the employee.
“Fair and reasonable value” shall not include
any profit to the employer or to any person night differential pay; and cost of living
affiliated with the employer. (Emphasis allowances. Sales commissions form part of the
supplied) "wage" or "salary" of salesmen and are not in
the nature of an "allowance" or "additional
In the instant case, there is no question that the fringe" benefit. Once more, we note that in the
sales commissions earned by salesmen who instant case, sales commissions form the bulk of
make or close a sale of duplicating machines the salaries or wages of petitioner's salesmen.
distributed by petitioner corporation constitute
part of the compensation or remuneration paid to In the 1995 MR
salesmen for serving as salesmen, and hence as
part of the “wage” or “salary” of petitioner’s Philippine Duplicators, Inc. (Duplicators) is
salesmen. Indeed, it appears that petitioner pays assailing the decision of the NLRC directing
its salesmen a small fixed or guaranteed wage; petitioner to pay 13th month pay to private
the greater part of the salesmen’s wages or respondent employees computed on the basis of
salaries being composed of the sales or incentive their fixed wages plus sales commissions. The
commissions earned on actual sales closed by Third Division denied with finality on 15
them. No doubt this particular salary structure December 1993 the Motion for Reconsideration
was intended for the benefit of petitioner filed (on 12 December 1993) by petitioner.
corporation, on the apparent assumption that On 17 January 1994, petitioner Duplicators filed
thereby its salesmen would be moved to greater (a) a Motion for Leave to Admit Second Motion
enterprise and diligence and close more sales in for Reconsideration and (b) a Second Motion for
the expectation of increasing their sales Reconsideration. This time, petitioner invoked
commissions. This, however, does not detract the decision handed down by this Court, through
from the character of such commissions as part its Second Division, on 10 December 1993 in
of the salary or wage paid to each of its the two (2) consolidated cases of Boie-Takeda
salesmen for rendering services to petitioner Chemicals, Inc. vs. Hon. Dionisio de la Serna
corporation. and Philippine Fuji Xerox Corp. vs. Hon.
The term "basic salary" used in P.D. No. 851 Cresenciano B. Trajano, in G.R. Nos. 92174 and
and Memorandum Order No. 28 is not to be 102552.
confused with the term "fixed or guaranteed ISSUE: WON the sales commission earned by
wage." The term "basic salary" is used to the salesmen who make or close a sale of
distinguish wage or salary from "fringe benefits" duplicating machines distributed by petitioner
which are not integrated into "basic salary" for corporation, constitute part of the compensation
certain specific purposes. In San Miguel or remuneration paid to salesmen for serving as
Corporation v. Inciong, the catch-all phrase salesmen, and hence as part of the 'wage' or
"allowances" and "monetary benefits'" which are salary of petitioner's salesmen?
deemed not considered or integrated as part of
"basic salary" was construed to refer to "any and RULING (1995): Yes, they are part of the basic
all additions which may be in the form of salary of the salesmen.
allowances or 'fringe' benefits." These fringe
benefits include payments for sick leave, The Third Division held, correctly, that the sales
vacation leave or maternity leave; premium pay commissions were an integral part of the basic
for work performed on rest day and special salary structure of Philippine Duplicators'
holidays; premium pay for regular holidays and employees-salesmen. These commissions are
not overtime payments, nor profit-sharing no specific additional services are rendered by
payments nor any other fringe benefit. Thus, the any particular employee and hence not legally
salesmen's commissions, comprising a pre- demandable, absent a contractual undertaking to
determined percent of the selling price of the pay it. Sales commissions, on the other hand,
goods sold by each salesman, were properly such as those paid in Duplicators, are
included in the term "basic salary" for purposes intimately related to or directly proportional
of computing their 13th month pay. to the extent or energy of an employee's
endeavors. Commissions are paid upon the
The Supplementary Rules and Regulations specific results achieved by a salesman-
Implementing P.D. No. 851 subsequently issued employee. It is a percentage of the sales closed
by former Labor Minister Ople sought to clarify by a salesman and operates as an integral part of
the scope of items excluded in the computation such salesman's basic pay.
of the 13th month pay; viz.
In Boie-Takeda the so-called commissions
"Sec. 4. Overtime pay, earnings and other “paid to or received by medical representatives
remunerations which are not part of the basic of Boie-Takeda Chemicals or by the rank and
salary shall not be included in the computation file employees of Philippine Fuji Xerox Co.,”
of the 13th month pay." were excluded from the term “basic salary”
because these were paid to the medical
We observe that the third item excluded from
representatives and rank-and-file employees as
the term "basic salary" is cast in open ended and
“productivity bonuses.” The Second Division
apparently circular terms: "other remunerations
characterized these payments as additional
which are not part of the basic salary." However,
monetary benefits not properly included in the
what particular types of earnings and
term “basic salary” in computing their 13th
remuneration are or are not properly included or
month pay. As a rule a bonus is an amount
integrated in the basic salary are questions to be
granted and paid to an employee for his industry
resolved on a case to case basis, in the light of
loyalty which contributed to the success of the
the specific and detailed facts of each case. In
employer’s business and made possible the
principle, where these earnings and
realization of profits. It is an act of generosity of
remuneration are closely akin to fringe benefits,
the employer for which the employee ought to
overtime pay or profit-sharing payments, they
be thankful and grateful. It is also granted by an
are properly excluded in computing the 13th
enlightened employer to spur the employee to
month pay. However, sales commissions which
greater efforts for the success of the business
are effectively an integral portion of the basic
and realization of bigger profits. From the legal
salary structure of an employee shall be included
point of view a bonus is not a demandable and
in determining his 13th month pay.
enforceable obligation. It is only so when It is
We recognize that both productivity bonuses and made part of the wage or salary or
sales commissions may have an incentive effect. compensation.
But there is reason to distinguish one from the
Note: The difference between the Boie Takeda
other here. Productivity bonuses are generally
case and Philippine Duplicators is that the sales
tied to the productivity or profit generation of
commission in the former case, are in the form
the employer corporation. Productivity bonuses
of productivity bonus, which are not included in
are not directly dependent on the extent an
the computation of the 13th month pay, while in
individual employee exerts himself. A
the latter case, the sales commission are effort
productivity bonus is something extra for which
based which forms part of the salesman’s basic physical labor. That is the sense in which the
pay which can be included in the computation of courts generally apply the term as applied in
the 13th month pay. exemption acts, since persons of that class
usually look to the reward of a day’s labor for
GAA vs. CA (Wages vs. Salary) immediate or present support and so are more in
need of the exemption than are other.
Only wages, according to the law, are exempt
from execution. Salaries may be subject to Article 1708 used the word “wages” and not
execution. “salary” in relation to “laborer” when it declared
what are to be exempted from attachment and
FACTS: In 1976, Rosario Gaa, the building
execution. The term “wages” as distinguished
administrator of Trinity Building and manager
from “salary”, applies to the compensation for
of the El Grande Hotel lost a case filed against
manual labor, skilled or unskilled, paid at stated
her by the Europhil Industries Corporation. Gaa
times, and measured by the day, week, month, or
was adjudged to pay damages to Europhil.
season, while “salary” denotes a higher degree
Eventually, a writ of garnishment was issued
of employment, or a superior grade of services,
upon Gaa’s salary with El Grande Hotel. She
and implies a position of office: by contrast, the
now moves for the quashal of the writ on the
term wages ” indicates considerable pay for a
ground that the garnishment on her salary is
lower and less responsible character of
prohibited by Article 1708 of the Civil Code.
employment, while “salary” is suggestive of a
ISSUE: WON salaries may be garnished? larger and more important service.

RULING: Yes. Article 1708 of the Civil Code Only wages, according to the law, are exempt
reads: from execution. Salaries may be subject to
execution.
The laborer’s wage shall not be subject to
execution or attachment, except for debts Special Steel Products vs. Lutgardo Villareal
incurred for food, shelter, clothing and medical and Frederick So (Withholding of wages)
attendance.
What an employee has worked for, his employer
Gaa’s functions as El Grande Hotel’s manager must pay. Thus, an employer cannot simply
include “responsible for planning, directing, refuse to pay the wages or benefits of its
controlling, and coordinating the activities of all employee because he has either defaulted in
housekeeping personnel”; “ensure the paying a loan guaranteed by his employer; or
cleanliness, maintenance and orderliness of all violated their memorandum of agreement; or
guest rooms, function rooms, public areas, and failed to render an accounting of his employer’s
the surroundings of the hotel.” Gaa is a property.
responsibly placed employee and not a mere
FACTS: Petitioner Special Steels Products, Inc.
laborer. As such, Gaa is not receiving a laborer’s
is a domestic corporation engaged in the
wage. She is receiving salary.
business of importation, sale and marketing of
In its broadest sense, the word “laborer” BOHLER steel products. Respondent Villareal
includes everyone who performs any kind of and So, worked for petitioner as assistant sales
mental or physical labor, but as commonly and manager and salesman, respectively.
customarily used and understood, it only applies
to one engaged in some form of manual or
Sometime in May 1993, respondent Villareal Petitioner contends that as a guarantor, it could
obtained a car loan from Bank of Commerce, legally withhold respondent Villareal’s
with petitioner as surety, as shown by a monetary benefits as a preliminary remedy
continuing suretyship agreement and promissory pursuant to Art. 2071 of the Civil Code. As to
note. In 1997, respondent Villareal resigned and respondent So, petitioner citing Article 113 of
thereafter joined another company. the Labor Code, in relation to Art. 1706 of the
Civil Code, maintains that it could withhold his
Sometime in August 1994, petitioner monetary benefits being authorized by the
“sponsored” respondent So to attend a training memorandum he signed.
course in Austria conducted by BOHLER. This
training was reward for respondent So’s ISSUE: WON the petitioner has legal authority
outstanding sales performances. When to withhold respondent’s monetary benefits?
respondent returned 9 months thereafter,
petitioner directed him to sign a memorandum RULING: NO, the employer cannot withhold
providing that BOHLER requires trainees from respondent’s 13th month pay and other
Austria to continue working with petitioner for a monetary benefits.
period of 3 years after the training. Otherwise, Article 116 of the Labor Code, as amended,
each training shall refund to BOHLER the provides:
training expenses by way of set-off or
compensation. After 2 years and 4 months, “Withholding of wages and kickbacks
respondent So resigned from petitioner. prohibited. – It shall be unlawful for any person,
directly or indirectly, to withhold any amount
Immediately, petitioner order respondents to from the wages (and benefits) of a worker or
render an accounting of its various Christmas induce him to give up any part of his wages by
giveaways they received. These were intended force, stealth, intimidation, threat or by any
for distribution to petitioner’s customer. other means whatsoever without the worker’s
In protest, respondents demanded from consent.”
petitioner payment of their separation benefits, The above provision is clear and needs no
commissions, vacation and sick leave benefits, further elucidation. Indeed, petitioner has no
and proportionate 13th month. But petitioner legal authority to withhold respondents’ 13th
refused, and instead, withheld the 13th month month pay and other benefits.
pay and other benefits.
What an employee has worked for, his employer
Respondents filed a complaint with the LA for must pay. Thus, an employer cannot simply
payment of their monetary benefits. refuse to pay the wages or benefits of its
LA ruled in favor of respondents, ordering employee because he has either defaulted in
petitioner-company and its president jointly and paying a loan guaranteed by his employer; or
severally liable to pay the monetary benefits of violated their memorandum of agreement; or
Villareal and So failed to render an accounting of his employer’s
property.
On appeal, NLRC affirmed the LA decision, but
exempted the petitioner’s president from any There is no guaranty involved herein, and
liability, which was affirmed by the CA. Hence, therefore Art. 2071 does not apply. The contract
this petition. executed by petitioner and respondent Villareal
(in favor of the Bank of Commerce) is a contract January 18, 2006 with a monthly salary of
of surety. In fact, it is denominated as a P100,000.00.
“continuing suretyship agreement.” Hence,
petitioner could not just unilaterally withhold Manuel’s Probationary Employment Contract
respondent’s wages or benefits as a preliminary contained his job description and his tasks.
remedy under Article 2071. It must file an action Aside from the Contract, Hartmannshenn also
against respondent Villareal. Thus, the Appellate instructed Manuel to report to the SHS office
Court aptly ruled that petitioner „may only and plant at least two (2) days every work week
protect its right as surety by instituting an to observe technical processes involved in the
“action to demand a security.” manufacturing of perforated materials, and to
learn about the products of the company, which
As to respondent So, petitioner maintains that respondent was hired to market and sell.
there can be a set-off or legal compensation
between them. Consequently, it can withhold his Hartmannshenn was often abroad so
13th month pay and other benefits. In the communication with Manuel was usually
present case, set-off or legal compensation through e-mail or phone. There was no close
cannot take place between petitioner and supervision over Manuel.
respondent So because they are not mutually In the Statement of Facts of the case, SHS and
creditor and debtor of each other. Manuel give conflicting accounts of the days
A careful reading of the Memorandum reveals leading up to Manuel’s resignation. On the one
that the “lump sum compensation of not less hand, SHS wanted Manuel to explain his
than US $6,000.00 will have to be refunded” by absences and return company property before
each trainee to BOHLER, not to petitioner. they would give him his salary for the period
November 16-30, 2005. And on the other hand,
In fine, we rule that petitioner has no legal right when Manuel’s salary was withheld, he resigned
to withhold respondents’ 13th month pay and on November 30, 2005 citing the withholding of
other benefits to recompense for whatever his salary as an “illegal and unfair labor
amount it paid as security for respondent practice.” In his letter he demanded that SHS
Villareal’s car loan; and for the expenses give him his salary and 13 th month pay. On
incurred by respondent So in his training abroad. December 9, 2005, Manuel filed a Complaint
against SHS for illegal dismissal, non-payment
SHS Perforated vs. Diaz (Withholding of of salaries/wages and 13th month pay with prayer
wages) for reinstatement and full backwages, exemplary
damages and attorney’s fees, costs of suit and
The Supreme Court said that management
legal interest.
prerogative refers to “the right to regulate all
aspects of employment,” it cannot be LA found respondent constructively dismissed.
understood to include the right to temporarily On the other hand, the NLRC found otherwise,
withhold salary/wages without the consent of and reversed said decision stating that the
the employee. withholding of wages was a valid exercise of
management prerogative.
FACTS: SHS Perforated Materials, Inc.
(“SHS”) hired Manuel Diaz (“Manuel”) as the The CA reversed the NLRC resolutions, the CA
company’s Business Development Manger on held that withholding respondent’s salary was
probationary status from July 18, 2005 to not a valid exercise of management prerogative
as there is no such thing as a management recognized by the employer or authorized in
prerogative to withhold wages temporarily. The writing by the individual worker concerned; and
malicious withholding of respondent’s salary
made it impossible or unacceptable for (c) In cases where the employer is authorized by
respondent to continue working, thus, law or regulations issued by the Secretary of
compelling him to resign. The respondent’s Labor.
immediate filing of a complaint for illegal Further, Manuel’s duties as manager for
dismissal could only mean that his resignation business development entailed cultivating
was not voluntary. As a probationary employee business ties, connections, and clients in order to
entitled to security of tenure, respondent was make sales. Thus because of the nature of his
illegally dismissed. The CA ruled out actual job, he was frequently outside of the office and
reinstatement, because antagonism had caused a did not report to the office on a regular schedule.
severe strain in their relationship and instead, The Supreme Court said just because he failed to
separation pay equivalent to at least one month answer e-mails and take Hartmannshenn’s calls
pay, plus full backwages and other privileges mean that he wasn’t working on November 16-
and benefits, or their monetary equivalent would 30, 2005. However, the consistent rule is that if
be a more equitable disposition. doubt exists between the evidence presented by
ISSUE: WON employer can exercise the employer and that by the employee, the
management prerogative in withholding scales of justice must be tilted in favor of the
respondent’s wages? latter in line with the policy mandated by
Articles 2 and 3 of the Labor Code to afford
RULING: No, employer cannot withhold the protection to labor and construe doubts in favor
wages. of labor. SHS failed to satisfy their burden of
proof, so Manuel is presumed to have worked
The Supreme Court said that management during the period in question and is,
prerogative refers to “the right to regulate all accordingly, entitled to his salary. Therefore, the
aspects of employment,” it cannot be understood withholding of respondent’s salary by
to include the right to temporarily withhold petitioners is contrary to Article 116 of the
salary/wages without the consent of the Labor Code and, thus, unlawful.
employee.
The Court agrees with the LA and the CA that
To allow this would be contrary to Article 116 the unlawful withholding of respondent’s salary
of the Labor Code which prohibits withholding amounts to constructive dismissal, which is an
of wages and kickbacks. act of clear discrimination, insensibility, or
disdain by an employer becomes so unbearable
The only allowable deductions are in Art. 113 of
on the part of the employee that it would
the Labor Code:
foreclose any choice by him except to forego his
(a) In cases where the worker is insured with his continued employment. It exists where there is
consent by the employer, and the deduction is to cessation of work because continued
recompense the employer for the amount paid employment is rendered impossible,
by him as premium on the insurance; unreasonable or unlikely, as an offer involving a
demotion in rank and a diminution in pay.
(b) For union dues, in cases where the right of
the worker or his union to check-off has been The Supreme Court affirmed the CA’s decision
with some modifications. Separation Pay of
P50,000.00 and no 13th month pay because it argued that their accrued benefits and separation
was already included in the monthly wages. pay should not be withheld because their
payment is based on company policy and
Milan vs. NLRC practice. Moreover, the 13th month pay is based
on law. Their possession of Solid Mills property
The return of the property’s possession became
is not an accountability that is subject to
an obligation or liability on the part of the
clearance procedures.
employees when the employer-employee
relationship ceased. Thus, respondent Solid Petitioners argue that respondent Solid Mills and
Mills has the right to withhold petitioners’ NAFLU’s memorandum of agreement has no
wages and benefits because of this existing debt provision stating that benefits shall be paid only
or liability. upon return of the possession of respondent
Solid Mills’ property. It only provides that the
FACTS: Petitioners are Solid Mills, Inc.’s
benefits shall be “less accountabilities,” which
employees. They are represented by the National
should not be interpreted to include such
Federation of Labor Unions (NAFLU), their
possession.
collective bargaining agent.
ISSUE: WON PAYMENT OF THE
Petitioners and their families were allowed to
MONETARY CLAIMS OF PETITIONERS
occupy SMI Village, a property owned by Solid
SHOULD BE HELD IN ABEYANCE
Mills out of liberality and for the convenience of
PENDING COMPLIANCE OF THEIR
its employees . . . [and] on the condition that the
ACCOUNTABILITIES TO RESPONDENT
employees . . . would vacate the premises
SOLID MILLS BY TURNING OVER THE
anytime the Company deems fit.”
SUBJECT LOTS THEY RESPECTIVELY
Petitioners were informed that effective October OCCUPY AT SMI VILLAGE, SUCAT,
10, 2003, Solid Mills would cease its operations MUNTINLUPA CITY.
due to serious business losses. NAFLU
RULING: YES.
recognized Solid Mills’ closure due to serious
business losses in the memorandum of Requiring clearance before the release of last
agreement. The memorandum of agreement payments to the employee is a standard
provided for Solid Mills’ grant of separation pay procedure among employers, whether public or
less accountabilities, accrued sick leave benefits, private. Clearance procedures are instituted to
vacation leave benefits, and 13th month pay to ensure that the properties, real or personal,
the employees. belonging to the employer but are in the
possession of the separated employee, are
Later, Solid Mills, sent to petitioners individual
returned to the employer before the employee’s
notices to vacate SMI Village. They were
departure.
required to sign a memorandum of agreement
with release and quitclaim before their pay As a general rule, employers are prohibited from
would be released. Petitioners refused to sign the withholding wages from employees. The Labor
documents and demanded to be paid their Code provides:
benefits and separation pay.
Art. 116. Withholding of wages and kickbacks
Hence, petitioners filed complaints before the prohibited.
Labor Arbiter for alleged non-payment. They
Art. 100. Prohibition against elimination or of the employer-employee relationship.
diminution of benefits. Petitioners’ possession should, therefore, be
included in the term “accountability.”
Art. 113. Wage deduction. No employer, in his
own behalf or in behalf of any person, shall The return of the property’s possession became
make any deduction from the wages of his an obligation or liability on the part of the
employees, except: employees when the employer-employee
relationship ceased. Thus, respondent Solid
3. In cases where the employer is authorized by Mills has the right to withhold petitioners’
law or regulations issued by the Secretary of wages and benefits because of this existing debt
Labor and Employment. or liability.
The Civil Code provides that the employer is The law does not sanction a situation where
authorized to withhold wages for debts due: employees who do not even assert any claim
over the employer’s property are allowed to take
Article 1706. Withholding of the wages, except
all the benefits out of their employment while
for a debt due, shall not be made by the
they simultaneously withhold possession of their
employer.
employer’s property for no rightful reason.
“Debt” in this case refers to any obligation due
Withholding of payment by the employer does
from the employee to the employer. It includes
not mean that the employer may renege on its
any accountability that the employee may have
obligation to pay employees their wages,
to the employer. There is no reason to limit its
termination payments, and due benefits. The
scope to uniforms and equipment, as petitioners
employees’ benefits are also not being reduced.
would argue.
It is only subjected to the condition that the
“Accountability,” in its ordinary sense, means employees return properties properly belonging
obligation or debt. As long as the debt or to the employer. This is only consistent with the
obligation was incurred by virtue of the equitable principle that “no one shall be unjustly
employer-employee relationship, generally, it enriched or benefited at the expense of another.”
shall be included in the employee’s
Mabeza vs. NLRC (Guidelines for deduction
accountabilities that are subject to clearance
of facilities)
procedures.
Without satisfying these requirements, the
In this case, respondent Solid Mills claims that
employer simply cannot deduct the value from
its properties are in petitioners’ possession by
the employee's wages. First, proof must be
virtue of their status as its employees.
shown that such facilities are customarily
Respondent Solid Mills allowed petitioners to
furnished by the trade. Second, the provision of
use its property as an act of liberality. Put in
deductible facilities must be voluntarily
other words, it would not have allowed
accepted in writing by the employee. Finally,
petitioners to use its property had they not been
facilities must be charged at fair and reasonable
its employees.
value.
It may be true that not all employees enjoyed the
FACTS: Petitioner Norma Mabeza contends
privilege of staying in respondent Solid Mills’
that on the first week of May 1991, she and her
property. However, this alone does not imply
co-employees at the Hotel Supreme in Baguio
that this privilege when enjoyed was not a result
City were asked by the hotel's management to her work. He maintained that there was no basis
sign an instrument attesting to the latter's for the money claims for underpayment and
compliance with minimum wage and other labor other benefits as these were paid in the form of
standard provisions of law. Petitioner signed the facilities to petitioner and the hotel's other
affidavit but refused to go to the City employees.
Prosecutor's Office to swear to the veracity and
contents of the affidavit as instructed by Labor Arbiter dismissed the complaint. On April
management. The affidavit was nevertheless 1994, respondent NLRC promulgated its
submitted on the same day to the Regional assailed Resolution affirming the Labor Arbiter's
Office of the Department of Labor and decision.
Employment in Baguio City. ISSUE: WON the employer’s exerted pressure,
The affidavit was drawn by management for the in the form of restraint, interference or coercion,
sole purpose of refuting findings of the Labor against his employee's right to institute
Inspector of DOLE apparently adverse to the concerted action for better terms and conditions
private respondent. After she refused to proceed of employment constitutes unfair labor practice.
to the City Prosecutor's Office, petitioner states RULING: The Court ruled that there was unfair
that she was ordered by the hotel management to labor practice.
turn over the keys to her living quarters and to
remove her belongings from the hotel premises. Without doubt, the act of compelling employees
According to her, respondent strongly chided to sign an instrument indicating that the
her for refusing to proceed to the City employer observed labor standards provisions of
Prosecutor's Office to attest to the affidavit. She law when he might have not, together with the
thereafter reluctantly filed a leave of absence act of terminating or coercing those who refuse
from her job which was denied by management. to cooperate with the employer's scheme
When she attempted to return to work on May constitutes unfair labor practice. The first act
1991, the hotel's cashier informed her that she clearly preempts the right of the hotel's workers
should not report to work and, instead, continue to seek better terms and conditions of
with her unofficial leave of absence. employment through concerted action. For
refusing to cooperate with the private
Consequently, three days after her attempt to respondent's scheme, petitioner was obviously
return to work, petitioner filed a complaint for held up as an example to all of the hotel's
illegal dismissal before the Arbitration Branch employees, that they could only cause trouble to
of the National Labor Relations Commission — management at great personal inconvenience.
CAR Baguio City. In addition to her complaint Implicit in the act of petitioner's termination and
for illegal dismissal, she alleged underpayment the subsequent filing of charges against her was
of wages, non-payment of holiday pay, service the warning that they would not only be
incentive leave pay, 13th month pay, night deprived of their means of livelihood, but also
differential and other benefits. possibly, their personal liberty.
Responding to the allegations for illegal Granting that meals and lodging were provided
dismissal, private respondent Peter Ng alleged and indeed constituted facilities, such facilities
before Labor Arbiter that petitioner could not be deducted without the employer
surreptitiously left her job without notice to the complying first with certain legal requirements.
management and that she actually abandoned Without satisfying these requirements, the
employer simply cannot deduct the value from It has an existing CBA with the company to
the employee's wages. First, proof must be expire in the year 2004 with a Side Agreement
shown that such facilities are customarily signed on September 3, 2001.
furnished by the trade. Second, the provision of
deductible facilities must be voluntarily In essence, the labor dispute was a spin-off of
accepted in writing by the employee. Finally, the company’s plan to defer payment of the
facilities must be charged at fair and reasonable 2003 14th, 15th and 16th month bonuses
value. These requirements were not met in the sometime in April 2004. The company’s main
instant case. ground in postponing the payment of bonuses is
due to allege continuing deterioration of
More significantly, the food and lodging, or the company’s financial position which started in
electricity and water consumed by the petitioner the year 2000. However, ETPI while postponing
were not facilities but supplements. A benefit or payment of bonuses sometime in April 2004,
privilege granted to an employee for the such payment would also be subject to
convenience of the employer is not a facility. availability of funds.
The criterion in making a distinction between
the two not so much lies in the kind (food, Invoking the Side Agreement of the existing
lodging) but the purpose. Considering that hotel CBA for the period 2001-2004 between ETPI
workers are required to work different shifts and and ETEU, the union strongly opposed the
are expected to be available at various odd deferment in payment of the bonuses by filing a
hours, their ready availability is a necessary preventive mediation complaint with the
matter in the operations of a small hotel, such as NCMB.
the private respondent's hotel. Later, the company made a sudden turnaround in
its position by declaring that they will no longer
pay the bonuses until the issue is resolved
Eastern Telecoms Phil. Inc. vs. Eastern through compulsory arbitration.
Telecom Employees Union (14th, 15th and 16th
month pay included in the CBA, Company Thus ETEU filed a Notice of Strike on the
Practice) ground of unfair labor practice for failure of
ETPI to pay the bonuses in gross violation of the
Verily, by virtue of its incorporation in the CBA economic provision of the existing CBA.
Side Agreements, the grant of 14th, 15th and
16th month bonuses has become more than just ETPI insists that it is under no legal compulsion
an act of generosity on the part of ETPI but a to pay 14th, 15th and 16th month bonuses for
contractual obligation it has undertaken. From the year 2003 and 14th month bonus for the year
the foregoing, ETPI cannot insist on business 2004 contending that they are not part of the
losses as a basis for disregarding its demandable wage or salary and that their grant
undertaking. is conditional based on successful business
performance and the availability of company
FACTS: Eastern Telecommunications Phils., profits from which to source the same. To thwart
Inc. (ETPI) is a corporation engaged in the ETEU’s monetary claims, it insists that the
business of providing telecommunications distribution of the subject bonuses falls well
facilities. Eastern Telecoms Employees Union within the company’s prerogative, being an act
(ETEU) is the certified exclusive bargaining of pure gratuity and generosity on its part. Thus,
agent of the company’s rank and file employees. it can withhold the grant thereof especially since
it is currently plagued with economic difficulties such as success of business or greater production
and financial losses. or output, then it is part of the wage. But if it is
paid only if profits are realized or if a certain
ETPI further avers that the act of giving the level of productivity is achieved, it cannot be
subject bonuses did not ripen into a company considered part of the wage. Where it is not
practice arguing that it has always been a payable to all but only to some employees and
contingent one dependent on the realization of only when their labor becomes more efficient or
profits and, hence, the workers are not entitled to more productive, it is only an inducement for
bonuses if the company does not make profits efficiency, a prize therefore, not a part of the
for a given year. It asseverates that the 1998 and wage.
2001 CBA Side Agreements did not
contractually afford ETEU a vested property In the case at bench, it is indubitable that ETPI
right to a perennial payment of the bonuses. It and ETEU agreed on the inclusion of a provision
opines that the bonus provision in the Side for the grant of 14th, 15th and 16th month
Agreement allows the giving of benefits only at bonuses in the 1998-2001 CBA Side Agreement,
the time of its execution. For this reason, it as well as in the 2001-2004 CBA Side
cannot be said that the grant has ripened into a Agreement, which was signed on September 3,
company practice. 2001. The provision, which was similarly
worded, states:
ISSUE: Is ETPI is liable to pay 14th, 15th and
16th month bonuses for the year 2003 and 14th The Company confirms that the 14th, 15th and
month bonus for the year 2004 to the members 16th month bonuses (other than the 13th month
of respondent union? pay) are granted.

RULING: Yes, ETPI is liable to pay. A reading of the above provision reveals that the
same provides for the giving of 14th, 15th and
From a legal point of view, a bonus is a gratuity 16th month bonuses without qualification. The
or act of liberality of the giver which the wording of the provision does not allow any
recipient has no right to demand as a matter of other interpretation. There were no conditions
right. The grant of a bonus is basically a specified in the CBA Side Agreements for the
management prerogative which cannot be forced grant of the benefits contrary to the claim of
upon the employer who may not be obliged to ETPI that the same is justified only when there
assume the onerous burden of granting bonuses are profits earned by the company. Thus, it is
or other benefits aside from the employee’s clear, the said provision does not state that the
basic salaries or wages. subject bonuses shall be made to depend on the
ETPI’s financial standing or that their payment
A bonus, however, becomes a demandable or
was contingent upon the realization of profits.
enforceable obligation when it is made part of
the wage or salary or compensation of the Neither does it state that if the company derives
employee. no profits, no bonuses are to be given to the
employees.
Whether or not a bonus forms part of wages
depends upon the circumstances and conditions In fine, the payment of these bonuses was not
for its payment. If it is additional compensation related to the profitability of business
which the employer promised and agreed to give operations. In the absence of any proof that
without any conditions imposed for its payment, ETPI’s consent was vitiated by fraud, mistake or
duress, it is presumed that it entered into the indicates a unilateral and voluntary act on its
Side Agreement voluntarily, that it had full part to continue giving said benefits knowing
knowledge of the contents thereof and that it that such act was not required by law.
was aware of its commitment under the contract. Accordingly, a company practice in favor of the
employees has been established and the
Verily, by virtue of its incorporation in the CBA payments made by ETPI pursuant thereto
Side Agreements, the grant of 14th, 15th and ripened into benefits enjoyed by the employees.
16th month bonuses has become more than just
an act of generosity on the part of ETPI but a Note: If the bonus is provided under the CBA,
contractual obligation it has undertaken. From the company has a contractual obligation to give
the foregoing, ETPI cannot insist on business such bonus, provided that such provision is
losses as a basis for disregarding its undertaking. unqualified. If it is qualified then it becomes a
non-demandable right, absent the conditions
Granting arguendo that the CBA Side prescribed.
Agreement does not contractually bind
petitioner ETPI to give the subject bonuses, Honda Phils., Inc. vs. Samahan ng mga
nevertheless, the Court finds that its act of Malayang Manggagawa sa Honda (Pro-rated
granting the same has become an established 13th month pay)
company practice such that it has virtually
become part of the employees’ salary or wage. A The IRR also provide for a pro-ration of this
bonus may be granted on equitable consideration benefit ONLY in cases of resignation or
when the giving of such bonus has been the separation from work. In the present case, there
company’s long and regular practice. In being no resignation/separation, the
Philippine Appliance Corporation v. CA, it was computation of the 13th month pay should not
pronounced: be pro-rated but should be given in full.

To be considered a “regular practice,” FACTS: The case stems from the collective
however, the giving of the bonus should have bargaining agreement between Honda and the
been done over a long period of time, and must respondent union that it granted the computation
be shown to have been consistent and of 14th month pay as the same as 13th month
deliberate. The test or rationale of this rule on pay. Honda continues the practice of granting
long practice requires an indubitable showing financial assistance covered every December
that the employer agreed to continue giving the each year of not less than 100% of the basic
benefits knowing fully well that said employees salary. In the latter part of 1998, the parties
are not covered by the law requiring payment started to re-negotiate for the fourth and fifth
thereof. years of the CBA. The union filed a notice of
strike on the ground of unfair labor practice for
The records show that ETPI, aside from deadlock.
complying with the regular 13th month
bonus, has been further giving its employees DOLE assumed jurisdiction over the case and
14th month bonus every April as well as 15th certified it to the NLRC for compulsory
and 16th month bonuses every December of arbitration. The striking employees were ordered
the year, without fail, from 1975 to 2002 or to return to work and management to accept
for 27 years whether it earned profits or not. them back under the same terms prior to the
The considerable length of time ETPI has been strike staged. Honda issued a memorandum of
giving the special grants to its employees the new computation of the 13th month and 14th
month pay to be granted to all its employees The pro-rated computation of Honda as a
whereby the 31 long strikes shall be considered company policy has not ripened into a company
unworked days for purpose of computing the practice and it was the first time they
said benefits. The amount equivalent to ½ of the implemented such practice.
employees’ basic salary shall be deducted from
these bonuses, with a commitment that in the The payment of the 13th month pay in full
event that the strike is declared legal, Honda month payment by Honda has become an
shall pay the amount. established practice. The length of time where it
should be considered in practice is not being laid
The respondent union opposed the pro-rated down by jurisprudence. The voluntary act of the
computation of bonuses. This issue was employer cannot be unilaterally withdrawn
submitted to voluntary arbitration where it ruled without violating Article 100 of the Labor Code.
that the company’s implementation of the pro-
rated computation is invalid. The court also rules that the withdrawal of the
benefit of paying a full month salary for 13th
ISSUE: WON the pro-rated computation of the month pay shall constitute a violation of Article
13th and 14th month pays and other bonuses in 100 of the Labor Code.
question are valid and lawful?
Arco Metal Products Co. Inc. vs. Samahan ng
RULING: The pro-rated computation is invalid. mga Manggagawa sa Arco Metal

13th month pay should be based on the length of In the years 1992, 1993, 1994, 1999, 2002 and
service and not on the actual wage earned by the 2003, petitioner had adopted a policy of freely,
worker. PD 851 or the 13th Month Pay Law was voluntarily and consistently granting full
issued to protect the level of wages of workers benefits to its employees regardless of the length
from worldwide inflation. The Court has of service rendered. True, there were only a
interpreted “basic salary” to mean, NOT the total of seven employees who benefited from
amount actually received by an employee, but such a practice, but it was an established
1/12 of their standard monthly wage multiplied practice nonetheless
by their length of service within a given calendar
year. The IRR also provide for a pro-ration of FACTS: Petitioner is a company engaged in the
this benefit ONLY in cases of resignation or manufacture of metal products, whereas
separation from work. In the present case, there respondent is the labor union of petitioner’s rank
being no resignation/separation, the computation and file employees. Sometime in December
of the 13th month pay should not be pro-rated 2003, petitioner paid the 13th month pay, bonus,
but should be given in full. Moreover, it has not and leave encashment of three union members in
been proven that Honda has been implementing amounts proportional to the service they actually
pro-rating of the 13th month pay before the rendered in a year, which is less than a full
present case. It is not a company practice. In twelve (12) months. Respondent protested the
fact, there was an implicit acceptance that prior prorated scheme, claiming that on several
to the strike, a full month basic pay computation occasions petitioner did not prorate the payment
was the “present practice” intended in the CBA. of the same benefits to seven (7) employees who
It was the second strike that prompted the had not served for the full 12 months. According
company to adopt the pro-rata computation. to respondent, the prorated payment violates the
rule against diminution of benefits under Article
100 of the Labor Code. Thus, they filed a
complaint before the National Conciliation and In the years 1992, 1993, 1994, 1999, 2002 and
Mediation Board (NCMB) 2003, petitioner had adopted a policy of freely,
voluntarily and consistently granting full
ISSUE: WON the grant of 13th month pay, benefits to its employees regardless of the length
bonus, and leave encashment in full regardless of service rendered. True, there were only a total
of actual service rendered constitutes voluntary of seven employees who benefited from such a
employer practice and, consequently, whether or practice, but it was an established practice
not the prorated payment of the said benefits nonetheless. Jurisprudence has not laid down
constitute diminution of benefits under Article any rule specifying a minimum number of years
100 of the Labor Code. within which a company practice must be
exercised in order to constitute voluntary
RULING: Any benefit and supplement being
company practice. Thus, it can be six (6) years,
enjoyed by employees cannot be reduced,
three (3) years, or even as short as two (2) years.
diminished, discontinued or eliminated by the
Petitioner cannot shirk away from its
employer.
responsibility by merely claiming that it was a
The principle of non-diminution of benefits is mistake or an error, supported only by an
founded on the Constitutional mandate to affidavit of its manufacturing group head.
"protect the rights of workers and promote their
Note: Art. 100 Non-diminution rule is violated
welfare and to afford labor full protection. Said
when: 1) the grant of benefits is founded on a
mandate in turn is the basis of Article 4 of the
policy or ripened into a practice over a long
Labor Code which states that all doubts in the
period, 2) practice is consistent and deliberate,
implementation and interpretation of this Code,
3) practice is not due to error in the construction
including its implementing rules and regulations
or application of a difficult or doubtful question
shall be rendered in favor of labor.
of law, 4) the diminution is done unilaterally.
Jurisprudence is replete with cases which
Prubankers Association v. Prudential Bank
recognize the right of employees to benefits
and Trust Co. (Wage Distortion)
which were voluntarily given by the employer
and which ripened into company practice. Thus A disparity in wages between employees holding
in Davao Fruits Corporation v. Associated Labor similar positions but in different regions does
Unions, et al. where an employer had freely and not constitute wage distortion as contemplated
continuously included in the computation of the by law
13th month pay those items that were expressly
excluded by the law, we held that the act which FACTS: The Regional Tripartite Wages and
was favorable to the employees though not Productivity Board of Region V issued Wage
conforming to law had thus ripened into a Order No. RB 05-03 which provided for a Cost
practice and could not be withdrawn, reduced, of Living Allowance (COLA) to workers in the
diminished, discontinued or eliminated. In private sector who ha[d] rendered service for at
Sevilla Trading Company v. Semana, we ruled least three (3) months, P17.50 in Naga and
that the employer’s act of including non-basic Legaspi; P15.50 in Tabaco, Daraga, Pili and
benefits in the computation of the 13th month Iriga; and P10.00 for all other areas in the Bicol
pay was a voluntary act and had ripened into a Region.
company practice which cannot be peremptorily
withdrawn. The Regional Tripartite Wages and Productivity
Board of Region VII issued Wage Order No. RB
VII-03, which directed the integration of the employees on some relevant or legitimate basis.
COLA mandated pursuant to Wage Order No. This classification is reflected in a differing
RO VII-02-A into the basic pay of all workers. wage rate for each of the existing classes of
It also established an increase in the minimum employees”
wage rates for all workers and employees in the
private sector as follows: by P10.00 in Cebu, Wage distortion involves four elements: (1) An
Mandaue and Lapulapu; P5.00 in Compostela, existing hierarchy of positions with
Liloan, Consolacion, Cordova, Talisay, corresponding salary rates; (2) A significant
Minglanilla, Naga and Davao, Toledo, change in the salary rate of a lower pay class
Dumaguete, Bais, Canlaon, and Tagbilaran. without a concomitant increase in the salary rate
of a higher one; (3) The elimination of the
PBTC granted a COLA of P17.50 to its distinction between the two levels; and (4) The
employees at its Naga Branch, the only branch existence of the distortion in the same region of
covered by Wage Order No. RB 5-03, and the country.
integrated the P150.00 per month COLA into the
basic pay of its rank-and-file employees at its In the present case, it is clear that no wage
Cebu, Mabolo and P. del Rosario branches, the distortion resulted when respondent
branches covered by Wage Order No. RB VII- implemented the subject Wage Orders in the
03. covered branches. In the said branches, there
was an increase in the salary rates of all pay
Prubankers Association then demanded that the classes. Furthermore, the hierarchy of positions
PBTC extend the application of the wage orders based on skills, length of service and other
to its employees outside Regions V and VII, logical bases of differentiation was preserved.
claiming that the regional implementation of the In other words, the quantitative difference in
said orders created a wage distortion in the wage compensation between different pay classes
rates of PBTC’s employees nationwide. The remained the same in all branches in the affected
grievance was not settled in the meetings and the region.
parties resorted to voluntary arbitration.
A disparity in wages between employees
The arbitrators ruled that there was wage holding similar positions but in different regions
distortion nationwide, as per Art. 124 of the does not constitute wage distortion as
Labor Code. However, the CA reversed it saying contemplated by law. As previously enunciated,
that the variance in the salary rates of employees it is the hierarchy of positions and the disparity
in different regions of the country was justified of their corresponding wages and other
by RA 6727. emoluments that are sought to be preserved by
the concept of wage distortion. Put differently, a
ISSUE: Was there wage distortion when PBTC wage distortion arises when a wage order
applied the two wage orders to only those engenders wage parity between employees in
regions mentioned and not including others different rungs of the organizational ladder of
regions in the country? the same establishment. It bears emphasis that
wage distortion involves a parity in the salary
RULING: No, there is no wage distortion
rates of different pay classes which, as a result,
The concept of wage distortion assumes an eliminates the distinction between the different
existing grouping or classification of employees ranks in the same region.
which establishes distinctions among such
The difference in wages between employees in PBTC’s nationwide uniform wage policy of the
the same pay scale in different regions is not the Bank had been adopted prior to the enactment of
mischief sought to be banished by the law. In RA 6727. After the passage of said law, the
fact, Republic Act No. 6727 (the Wage Bank was mandated to regionalize its wage
Rationalization Act), recognizes “existing structure. Although the Bank implemented
regional disparities in the cost of living.” Wage Order Nos. NCR-01 and NCR-02
nationwide instead of regionally even after the
A disparity in wages between employees with effectivity of RA 6727, the Bank at the time was
similar positions in different regions is still uncertain about how to follow the new law.
necessarily expected. In insisting that the In any event, that single instance cannot be
employees of the same pay class in different constitutive of “management practice.”
regions should receive the same compensation,
petitioner has apparently misunderstood both the Metropolitan Bank & Trust Company
meaning of wage distortion and the intent of the Employees Union vs. NLRC (Wage
law to regionalize wage rates. Distortion)

It must be understood that varying in each wage distortion occurs when an increase in
region of the country are controlling factors such prescribed wage rates results in the elimination
as the cost of living; supply and demand of basic or severe contraction of intentional quantitative
goods, services and necessities; and the differences in wage or salary rates between and
purchasing power of the peso. Other among employee groups in an establishment as
considerations underscore the necessity of the to effectively obliterate the distinctions
law. Wages in some areas may be increased in embodied in such wage structure based on
order to prevent migration to the National skills, length of service, or other logical bases of
Capital Region and, hence, to decongest the differentiation
metropolis. Therefore, what the petitioner
herein bewails is precisely what the law FACTS: On May 25, 1989, Metro Bank entered
provides in order to achieve its purpose. into a collective bargaining agreement with the
MBTCEU, granting a monthly P900 wage
A uniform national wage structure is antithetical increase effective January 1, 1989, P600 on
to the purpose of RA 6727. 1990, and P200 on 1991. Subsequently, on July
1989, Republic Act 6727 (fixing new wage
Petitioner also avers that the implementation of rates, providing wage incentives for industrial
the Wage Order in only one region violates the dispersal to the countryside, and for other
equal-pay-for-equal-work principle. This is not purposes) took effect. Under section 4, “all
correct. At the risk of being repetitive, we stress workers and employees in the private sector,
that RA 6727 mandates that wages in every whether agricultural or non-agricultural, shall be
region must be set by the particular wage board increased by twenty-five pesos (P25) per day.”
of that region, based on the prevailing situation The law also provided that those already
therein. Necessarily, the wages in different receiving above the minimum wage rates up to
regions will not be uniform. Thus, under RA P100 shall also receive an increase of P25 per
6727, the minimum wage in Region 1 may be day. Lastly, it provided that increases in daily
different from that in Region 13, because the wage rates granted 3 months before the
socioeconomic conditions in the two regions are effectivity of RA 6727 shall be credited as
different. compliance, if such increase be less than what
was prescribed, the employer shall pay the establishment as to effectively obliterate the
difference. Pursuant to RA 6727, the bank gave distinctions embodied in such wage structure
the P25 increase per day, or P750 a month, to its based on skills, length of service, or other
probationary employees and to those who had logical bases of differentiation. The law did not
been promoted to regular or permanent status require that there be an elimination or total
before 01 July 1989 but whose daily rate was abrogation of quantitative wage or salary
P100 and below. The bank refused to give the differences; a severe contraction thereof is
same increase to its regular employees who were enough. As has been aptly observed by
receiving more than P100 per day and recipients Presiding Commissioner Edna Bonto Perez in
of the P900 CBA increase. her dissenting opinion, the contraction between
personnel groupings comes close to eighty-three
This resulted in the categorization of the (83%), which cannot, by any stretch of
employees into (a) the probationary employees imagination, be considered less than severe.
as of 30 June 1989 and regular employees
receiving P100 or less a day who had been The court however does not agree with the
promoted to permanent or regular status before suggestion of the labor arbiter that there be a
01 July 1989, and (b) the regular employees as P750 across the board increase to fix the
of January 1989, whose pay was over P100 a distortion, such increase would penalize
day, and that, between the two groups, there employers who grant their workers more than
emerged a substantially reduced salary gap. To the statutorily prescribed minimum rates of
quell an impending strike, Metro Bank sought increases. We find the formula suggested then
compulsory arbitration of the NLRC. The labor by Commissioner Bonto-Perez, which has also
arbiter held in favor of the union while the been the standard considered by the Regional
NLRC second division reversed the former Tripartite Wages and Productivity Commission
hence, this petition. for the correction of pay scale structures in cases
of wage distortion, to well be the appropriate
ISSUE: WON there was a wage distortion measure to balance the respective contentions of
which resulted to a severe contraction of an the parties in this instance. We also view it as
intentional quantitative difference in wage rates being just and equitable.
between employee groups?
*prescribed formula: Minimum Wage = % x
RULING: Yes, according to the rules Prescribed = Distortion Actual Salary Increase
implementing RA 6727, wage distortion occurs Adjustment
when an increase in prescribed wage rates
results in the elimination or severe contraction Bankard Employees Union-Worker Alliance
of intentional quantitative differences in wage or Trade Unions vs. NLRC (Salary Scale)
salary rates between and among employee
groups in an establishment as to effectively Petitioner cannot legally obligate Bankard to
obliterate the distinctions embodied in such correct the alleged “wage distortion” as the
wage structure based on skills, length of service, increase in the wages and salaries of the newly-
or other logical bases of differentiation. Such hired was not due to a prescribed law or wage
event results in the "elimination or severe order.
contraction of intentional quantitative FACTS: Bankard, Inc. classifies its employees
differences in wage or salary rates" would occur by levels, to wit: Level I, Level II, Level III,
"between and among employee groups in an Level IV, and Level V. Its Board of Directors
approved a “New Salary Scale”, made exists a grouping or classification of employees
retroactive for the purpose of making its hiring that establishes distinctions among them on
rate competitive in the industry’s labor market. some relevant or legitimate bases.
The “New Salary Scale” increased the hiring
rates of new employees, to wit: Levels I and V Thus the employees of private respondent have
by P1,000.00, and Levels II, III and IV by been “historically” classified into levels, i.e. I to
P900.00. The salaries of employees who fell V, and not on the basis of their length of service.
below the new minimum rates were also Put differently, the entry of new employees to
adjusted to reach such rates under their levels. the company ipso facto place[s] them under any
of the levels mentioned in the new salary scale
Bankard’s move drew the Bankard Employees which private respondent adopted retroactive
Union-WATU, the duly certified exclusive [to] April 1, 1993. Petitioner cannot make a
bargaining agent of the regular rank and file contrary classification of private respondent’s
employees of Bankard, to press for the increase employees without encroaching upon recognized
in the salary of its old, regular employees. management prerogative of formulating a wage
Bankard took the position that there was no structure, in this case, one based on level. It is
obligation on the part of the management to thus clear that there is no hierarchy of positions
grant to all its employees the same increase in an between the newly hired and regular employees
across-the-board manner. The Second Division of Bankard, hence, the first element of wage
of the NLRC, by Order of May 31, 1995, finding distortion provided in Prubankers is wanting.
no wage distortion, dismissed the case for lack
of merit. The petition was referred to the CA Even assuming that there is a decrease in the
which denied the same for lack of merit. wage gap between the pay of the old employees
and the newly hired employees, to our mind said
ISSUE: WON the unilateral adoption by an gap is not significant as to obliterate or result in
employer of an upgraded salary scale that severe contraction of the intentional quantitative
increased the hiring rates of new employees differences in the salary rates between the
without increasing the salary rates of old employee groups. As already stated, the
employees resulted in wage distortion within the classification under the wage structure is based
contemplation of Article 124 of the Labor Code? on the rank of an employee, not on seniority. For
this reason, wage distortion does not appear to
RULING: No. Prubankers Association v. exist.
Prudential Bank and Trust Company laid down
the four elements of wage distortion, to wit: (1.) Apart from the findings of fact of the NLRC and
An existing hierarchy of positions with the Court of Appeals that some of the elements
corresponding salary rates; (2) A significant of wage distortion are absent, petitioner cannot
change in the salary rate of a lower pay class legally obligate Bankard to correct the alleged
without a concomitant increase in the salary rate “wage distortion” as the increase in the wages
of a higher one; (3) The elimination of the and salaries of the newly-hired was not due to a
distinction between the two levels; and (4) The prescribed law or wage order.
existence of the distortion in the same region of
the country. Normally, a company has a wage If the compulsory mandate under Article
structure or method of determining the wages of 124 to correct “wage distortion” is applied to
its employees. In a problem dealing with “wage voluntary and unilateral increases by the
distortion,” the basic assumption is that there employer in fixing hiring rates which is
inherently a business judgment prerogative, then
the hands of the employer would be completely management find that such relationship poses a
tied even in cases where an increase in wages of possible conflict of interest, to resign from the
a particular group is justified due to a re- company. The Employee Code of Conduct of
evaluation of the high productivity of a Glaxo similarly provides that an employee is
particular group, or as in the present case, the expected to inform management of any existing
need to increase the competitiveness of or future relationship by consanguinity or
Bankard’s hiring rate. An employer would be affinity with co-employees or employees of
discouraged from adjusting the salary rates of a competing drug companies.
particular group of employees for fear that it
would result to a demand by all employees for a Tecson was initially assigned to market Glaxo’s
similar increase, especially if the financial products in the Camarines Sur-Camarines Norte
conditions of the business cannot address an sales area. Subsequently, Tecson entered into a
across-the-board increase. romantic relationship with Bettsy, an employee
of Astra, a competitor of Glaxo. She was Astra’s
Note: Wage distortion is present only in cases of Branch Coordinator in Albay and supervised the
distortions cause by a WAGE ORDER. An district managers and medical representatives of
employer’s salary scheme will not amount to her company and prepared marketing strategies
Wage Distortion. for Astra in that area. The two married even with
the several reminders given by the District
Manager to Tecson. In January 1999, Tecson’s
superiors informed him that his marriage to
Bettsy gave rise to a conflict of interest.
Tecson’s superiors reminded him that he and
Bettsy should decide which one of them would
Duncan Assoc. vs. Glaxo (Prohibition from resign from their jobs, although they told him
marrying an employee of a competitor that they wanted to retain him as much as
company) possible because he was performing his job well.
This situation eventually led to his constructive
The prohibition against personal or marital
dismissal.
relationships with employees of competitor
companies upon Glaxo’s employees is ISSUE: WON Glaxo’s policy prohibiting its
reasonable under the circumstances because employees from marrying an employee of a
relationships of that nature might compromise competitor company is valid?
the interests of the company.
RULING: Yes it is valid. Glaxo’s policy
FACTS: Petitioner Pedro Tecson was hired by prohibiting an employee from having a
respondent Glaxo as medical representative, relationship with an employee of a competitor
after Tecson had undergone training and company is a valid exercise of management
orientation. Thereafter, Tecson signed a contract prerogative.
of employment which stipulates, among others,
that he agrees to study and abide by existing Tecson’s contract of employment with Glaxo
company rules; to disclose to management any being questioned, stipulates that Tescon agrees
existing or future relationship by consanguinity to abide by the existing company rules of Glaxo,
or affinity with co-employees or employees of and to study and become acquainted with such
competing drug companies and should policies. In this regard, the Employee Handbook
of Glaxo expressly informs its employees of its
rules regarding conflict of interest. No reversible FACTS: Simbol was employed by the company
error can be ascribed to the Court of Appeals on Oct 1993. He met Alma Dayrit, also an
when it ruled that Glaxo’s policy prohibiting an employee of the company, whom he married.
employee from having a relationship with an Prior to the marriage, Ongsitco advised the
employee of a competitor company is a valid couple that should they decide to get married,
exercise of management prerogative. Glaxo has one of them should resign pursuant to a
a right to guard its trade secrets, manufacturing company policy to which Simbol complied.
formulas, marketing strategies and other
confidential programs and information from 1. New applicants will not be allowed to be
competitors, especially so that it and Astra are hired if in case he/she has [a] relative, up to [the]
rival companies in the highly competitive 3rd degree of relationship, already employed by
pharmaceutical industry. the company.

The prohibition against personal or marital 2. In case of two of our employees (both singles
relationships with employees of competitor [sic], one male and another female) developed a
companies upon Glaxo’s employees is friendly relationship during the course of their
reasonable under the circumstances because employment and then decided to get married,
relationships of that nature might compromise one of them should resign to preserve the policy
the interests of the company. In laying down the stated above.
assailed company policy, Glaxo only aims to ISSUE: WON the policy of the employer
protect its interests against the possibility that a banning spouses from working in the same
competitor company will gain access to its company violates the rights of the employee
secrets and procedures. That Glaxo possesses under the Constitution and the Labor Code or is
the right to protect its economic interests cannot a valid exercise of management prerogative?
be denied. No less than the Constitution
recognizes the right of enterprises to adopt and RULING: Petitioners’ sole contention that "the
enforce such a policy to protect its right to company did not just want to have two or more
reasonable returns on investments and to of its employees related between the third degree
expansion and growth. Indeed, while our laws by affinity and/or consanguinity" is lame.
endeavor to give life to the constitutional policy
on social justice and the protection of labor, it Article 136 of the Labor Code which provides:
does not mean that every labor dispute will be
It shall be unlawful for an employer to require
decided in favor of the workers. The law also
as a condition of employment or continuation of
recognizes that management has rights which
employment that a woman employee shall not
are also entitled to respect and enforcement in
get married, or to stipulate expressly or tacitly
the interest of fair play.
that upon getting married a woman employee
Note: Reasonable business necessity rule shall be deemed resigned or separated, or to
actually dismiss, discharge, discriminate or
Star Paper vs. Simbol (Compare with Glaxo) otherwise prejudice a woman employee merely
by reason of her marriage.
The requirement is that a company policy must
be reasonable under the circumstances to The requirement is that a company policy must
qualify as a valid exercise of management be reasonable under the circumstances to qualify
prerogative as a valid exercise of management prerogative.
It is significant to note that in the case at bar, concealment of civil status and defalcation of
respondents were hired after they were found fit company funds as grounds to terminate the
for the job, but were asked to resign when they services of an employee. That employee, herein
married a co-employee. Petitioners failed to private respondent Grace de Guzman, contrarily
show how the marriage of Simbol, then a argues that what really motivated PT&T to
Sheeting Machine Operator, to Alma Dayrit, terminate her services was her having contracted
then an employee of the Repacking Section, marriage during her employment, which is
could be detrimental to its business operations. prohibited by petitioner in its company policies.
The policy is premised on the mere fear that She thus claims that she was discriminated
employees married to each other will be less against in gross violation of law, such a
efficient. If we uphold the questioned rule proscription by an employer being outlawed by
without valid justification, the employer can Article 136 of the Labor Code.
create policies based on an unproven
presumption of a perceived danger at the ISSUE: WON the policy of not accepting or
expense of an employee’s right to security of considering as disqualified from work any
tenure. woman worker who contracts marriage is valid?

The questioned policy may not facially violate RULING: Petitioner’s policy of not accepting
Article 136 of the Labor Code but it creates a or considering as disqualified from work any
disproportionate effect and under the disparate woman worker who contracts marriage runs
impact theory, the only way it could pass afoul of the test of, and the right against,
judicial scrutiny is a showing that it is discrimination, afforded all women workers by
reasonable despite the discriminatory, albeit our labor laws and by no less than the
disproportionate, effect. The failure of Constitution.
petitioners to prove a legitimate business The Constitution, cognizant of the disparity in
concern in imposing the questioned policy rights between men and women in almost all
cannot prejudice the employee’s right to be free phases of social and political life, provides a
from arbitrary discrimination based upon gamut of protective provisions. Acknowledged
stereotypes of married persons working together as paramount in the due process scheme is the
in one company. constitutional guarantee of protection to labor
Philippine Telegraph and Telephone Co. vs. and security of tenure. Thus, an employer is
NLRC required, as a condition sine qua non prior to
severance of the employment ties of an
The Constitution, cognizant of the disparity in individual under his employ, to convincingly
rights between men and women in almost all establish, through substantial evidence, the
phases of social and political life, provides a existence of a valid and just cause in dispensing
gamut of protective provisions. Acknowledged with the services of such employee, one’s labor
as paramount in the due process scheme is the being regarded as constitutionally protected
constitutional guarantee of protection to labor property. The government, to repeat, abhors any
and security of tenure. stipulation or policy in the nature of that adopted
by petitioner PT&T. The Labor Code states, in
FACTS: Seeking relief through the no uncertain terms, as follows:
extraordinary writ of certiorari, petitioner
Philippine Telegraph and Telephone Company “ART. 136. Stipulation against marriage. - It
(hereafter, PT&T) invokes the alleged shall be unlawful for an employer to require as
a condition of employment or continuation of Zialcita vs. PAL
employment that a woman shall not get married,
or to stipulate expressly or tacitly that upon Article 136's protection of women is broader
getting married, a woman employee shall be and more powerful than the regulation provided
deemed resigned or separated, or to actually under Article 132.
dismiss, discharge, discriminate or otherwise FACTS: Zialcita is a stewardess of PAL. She
prejudice a woman employee merely by reason was fired from work because she had gotten
of marriage.” married. PAL argued and cited its policy that
In the case at bar, it can easily be seen from the stewardesses must be single. The policy also
memorandum sent to private respondent by the states that subsequent marriage of a stewardess
branch supervisor of the company, with the shall automatically terminate employment.
reminder, that “you’re fully aware that the Zialcita anchored on Article 136 of the Labor
company is not accepting married women Code. PAL sought refuge from Article 132.
employee (sic), as it was verbally instructed to
you.” Again, in the termination notice sent to her Article 132 provides, "Article 132. Facilities for
by the same branch supervisor, private women. The Secretary of Labor and
respondent was made to understand that her Employment shall establish standards that will
severance from the service was not only by ensure the safety and health of women
reason of her concealment of her married status employees. In appropriate cases, he shall, by
but, over and on top of that, was her violation of regulations, require any employer to: To
the company’s policy against marriage (“and determine appropriate minimum age and other
even told you that married women employees standards for retirement or termination in special
are not applicable [sic] or accepted in our occupations such as those of flight attendants
company.” and the like."

Petitioner’s policy is not only in derogation of Article 136 provides, "Article 136. Stipulation
the provisions of Article 136 of the Labor Code against marriage. It shall be unlawful for an
on the right of a woman to be free from any kind employer to require as a condition of
of stipulation against marriage in connection employment or continuation of employment that
with her employment, but it likewise assaults a woman employee shall not get married, or to
good morals and public policy, tending as it stipulate expressly or tacitly that upon getting
does to deprive a woman of the freedom to married, a woman employee shall be deemed
choose her status, a privilege that by all accounts resigned or separated, or to actually dismiss,
inheres in the individual as an intangible and discharge, discriminate or otherwise prejudice a
inalienable right. Hence, while it is true that the woman employee merely by reason of her
parties to a contract may establish any marriage."
agreements, terms, and conditions that they may
deem convenient, the same should not be ISSUE: WON Zialcita’s termination is
contrary to law, morals, good customs, public improper?
order, or public policy. Carried to its logical
RULING: Yes, the termination was improper.
consequences, it may even be said that
petitioner’s policy against legitimate marital First of all, during the time Zialcita was
bonds would encourage illicit or common-law terminated, no regulation had yet been issued by
relations and subvert the sacrament of marriage. the Secretary of Labor to implement Article 132.
Second, even assuming that the Secretary of supervisor, agent of the employer, teacher,
Labor had already issued such a regulation and instructor, professor, coach, trainor, or any
to the effect that stewardesses should remain other person who, having authority, influence or
single, such would be in violation of Article 136 moral ascendancy over another in a work or
of the Labor Code. training or education environment, demands,
requests or otherwise requires any sexual favor
Article 136's protection of women is broader and from the other, regardless of whether the
more powerful than the regulation provided demand, request or requirement for submission
under Article 132. is accepted by the object of said Act.
Domingo vs. Rayala (Sexual Harassment) (a) In a work-related or employment
environment, sexual harassment is committed
It is true that this provision calls for a “demand,
when:
request or requirement of a sexual favor.” But it
is not necessary that the demand, request or (1) The sexual favor is made as a condition in
requirement of a sexual favor be articulated in a the hiring or in the employment, re-employment
categorical oral or written statement. It may be or continued employment of said individual, or
discerned, with equal certitude, from the acts of in granting said individual favorable
the offender compensation, terms, conditions, promotions, or
privileges; or the refusal to grant the sexual
FACTS: Ma. Lourdes T. Domingo (Domingo),
favor results in limiting, segregating or
then Stenographic Reporter III at the NLRC,
classifying the employee which in a way would
filed a Complaint for sexual harassment against
discriminate, deprive or diminish employment
Rayala, the chairman of NLRC.
opportunities or otherwise adversely affect said
She alleged that Rayala called her in his office employee;
and touched her shoulder, part of her neck then
(2) The above acts would impair the employee’s
tickled her ears. Rayala argued that his acts do
rights or privileges under existing labor laws;
not constitute sexual harassment because for it
or
to exist there must be a demand, request or
requirement of sexual favor. (3) The above acts would result in an
intimidating, hostile, or offensive environment
ISSUE: WON Rayala committed Sexual
for the employee.
Harassment?
Even if we were to test Rayala’s acts strictly by
RULING: Yes. Rayala committed Sexual
the standards set in Section 3, RA 7877, he
Harassment.
would still be administratively liable. It is true
The law penalizing sexual harassment in our that this provision calls for a “demand, request
jurisdiction is RA 7877. Section 3 thereof or requirement of a sexual favor.” But it is not
defines work-related sexual harassment in this necessary that the demand, request or
wise: requirement of a sexual favor be articulated in a
categorical oral or written statement. It may be
Sec. 3. Work, Education or Training-related discerned, with equal certitude, from the acts of
Sexual Harassment Defined. – Work, education the offender. Holding and squeezing Domingo’s
or training-related sexual harassment is shoulders, running his fingers across her neck
committed by an employer, manager, and tickling her ear, having inappropriate
conversations with her, giving her money In the morning of February 14, 2001, respondent
allegedly for school expenses with a promise of called complainant, requesting her to go to his
future privileges, and making statements with office. She then asked Ruby Lanuza, a clerk in
unmistakable sexual overtones – all these acts of the Records Section, to accompany her.
Rayala resound with deafening clarity the Fortunately, when they reached his chambers,
unspoken request for a sexual favor. respondent had left.

Atty. Susan Aquino vs. Hon. Ernesto D. The last incident happened the next day. At
Acosta (Beso-Beso) around 8:30 a.m., respondent called complainant
and asked her to see him in his office to discuss
A mere casual buss on the cheek is not a sexual the Senate bill on the CTA. She again requested
conduct or favor and does not fall within the Ruby to accompany her. The latter agreed but
purview of sexual harassment under R.A. No. suggested that they should act as if they met by
7877. accident in respondents office. Ruby then
approached the secretary’s table which was
FACTS: n November 21, 2000, she reported for
separated from respondent’s office by a
work after her vacation in the U.S., bringing
transparent glass. For her part, complainant sat
gifts for the three judges of the CTA, including
in front of respondent's table and asked him
respondent. In the afternoon of the same day, he
what he wanted to know about the Senate bill.
entered her room and greeted her by shaking her
Respondent seemed to be at a loss for words and
hand. Suddenly, he pulled her towards him and
kept glancing at Ruby who was searching for
kissed her on her cheek.
something at the secretary's desk. Forthwith,
On December 28, 2000, while respondent was respondent approached Ruby, asked her what
on official leave, he called complainant by she was looking for and stepped out of the
phone, saying he will get something in her office. When he returned, Ruby said she found
office. Shortly thereafter, he entered her room, what she was looking for and left. Respondent
shook her hand and greeted her, "Merry then approached complainant saying, “me gusto
Christmas." Thereupon, he embraced her and akong gawin sa iyo kahapon pa”. Thereupon, he
kissed her. She was able to free herself by tried to grab her. Complainant instinctively
slightly pushing him away. raised her hands to protect herself but
respondent held her arms tightly, pulled her
On the first working day in January, 2001, towards him and kissed her. She pushed him
respondent phoned complainant, asking if she away, and then slumped on a chair trembling.
could see him in his chambers in order to Meantime, respondent sat on his chair and
discuss some matters. When complainant arrived covered his face with his hands. Thereafter,
there, respondent tried to kiss her but she was complainant left crying and locked herself inside
able to evade his sexual attempt. a comfort room. After that incident, respondent
went to her office and tossed a note stating,
Weeks later, after the Senate approved the
sorry, it won’t happen again.
proposed bill expanding the jurisdiction of the
CTA, while complainant and her companions ISSUE: WON respondent is guilty of Sexual
were congratulating and kissing each other, Harassment?
respondent suddenly placed his arms around her
shoulders and kissed her. RULING: No, Judge Acosta is not guilty of
sexual harassment. He is exonerated of the
charges against him and is advised to be more 1) The employer, employee, manager,
circumspect in his deportment. supervisor, agent of the employer, teacher,
instructor, professor, coach, trainor, or any
A mere casual buss on the cheek is not a sexual other person has authority, influence or moral
conduct or favor and does not fall within the ascendancy over another;
purview of sexual harassment under R.A. No.
7877. Section 3 (a) thereof provides, to wit: 2) The authority, influence or moral ascendancy
exists in a working environment;
Sec. 3. Work, Education or Training - related
Sexual Harassment Defined. - Work, education 3) The employer ,employee, manager,
or training-related sexual harassment is supervisor, agent of the employer, teacher,
committed by an employer, employee, manager, instructor, professor, coach, or any other person
supervisor, agent of the employer, teacher, having authority, influence or moral ascendancy
instructor, professor, coach, trainor, or any makes a demand, request or requirement of a
other person who, having authority, influence or sexual favor.
moral ascendancy over another in a work or
training or education environment, demands, Indeed, from the records on hand, there is no
requests or otherwise requires any sexual favor showing that respondent judge demanded,
from the other, regardless of whether the requested or required any sexual favor from
demand, request or requirement for submission complainant in exchange for favorable
is accepted by the object of said Act. compensation, terms, conditions, promotion or
privileges specified under Section 3 of R.A.
a) In a work-related or employment 7877. Nor did he, by his actuations, violate the
environment, sexual harassment is committed Canons of Judicial Ethics or the Code of
when: Professional Responsibility.

1) The sexual favor is made as a condition in the Note: Dubious ruling. According to Attorney
hiring or in the employment, re-employment or Marquez, the mere creation of a hostile,
continued employment of said individual, or in oppressive and intimidating environment in
granting said individual favorable places of work, education or training is enough
compensation, terms, conditions, promotions or to be considered liable for sexual harassment.
privileges; or the refusal to grant sexual favor
results in limiting, segregating or classifying the So if the circumstance in this case arises in a
employee which in anyway would discriminate, question, there is sexual harassment.
deprive or diminish employment opportunities However, take note of this case. If ever the same
or otherwise adversely affect said employees; set of facts arises in a question you may also cite
2) The above acts would impair the employee's this case as an answer.
right or privileges under existing labor laws; or APEX Mining vs. NLRC (Domestic Helper as
3) The above acts would result in an Regular Employee)
intimidating, hostile, or offensive environment The definition cannot be interpreted to include
for the employee. househelper or laundrywomen working in
Clearly, under the foregoing provisions, the staffhouses of a company, like private
elements of sexual harassment are as follows: respondent who attends to the needs of the
company's guest and other persons availing of renders services in and about the employer's
said facilities. home and which services are usually
necessary or desirable for the maintenance
FACTS: Private respondent Sinclita Candida and enjoyment thereof, and ministers
was employed by petitioner Apex Mining exclusively to the personal comfort and
Company, Inc to perform laundry services at its enjoyment of the employer's family.
staff house.
The definition cannot be interpreted to include
On December 18, 1987, while she was attending househelper or laundrywomen working in
to her assigned task and she was hanging her staffhouses of a company, like private
laundry, she accidentally slipped and hit her respondent who attends to the needs of the
back on a stone. As a result of the accident she company's guest and other persons availing of
was not able to continue with her work. She was said facilities.
permitted to go on leave for medication.
The mere fact that the househelper or domestic
De la Rosa offered her the amount of P 2,000.00 servant is working within the premises of the
which was eventually increased to P5,000.00 to business of the employer and in relation to or in
persuade her to quit her job, but she refused the connection with its business, as in its staffhouses
offer and preferred to return to work. for its guest or even for its officers and
employees, warrants the conclusion that such
Petitioner did not allow her to return to work
househelper or domestic servant is and should
and dismissed her on February 4, 1988.
be considered as a regular employee.
Private respondent filed a request for assistance
GSIS vs. Alegre (24-hour doctrine) (Cited in
with the Department of Labor and Employment,
this case are, Hinoguin, ECC vs. CA and
which the latter rendered its Decision by
Nitura case)
ordering the Apex Mining Co. to pay Candida
the total amount of P55,161.42 for salary Taking together jurisprudence and the pertinent
differential, emergency living allowance, 13th guidelines of the ECC, with respect to claims for
month pay differential and separation pay. death benefits, namely (a) that the employee
must be at the place where his work requires
Petitioner appealed the case before the NLRC,
him to be; (b) that the employee must have been
which was subsequently dismissed for lack of
performing his official functions; and (c) that if
merit.
the injury is sustained elsewhere, the employee
ISSUE: WON private respondent should be must have been executing an order for the
treated as a house helper or domestic servant or employer
a regular employee?
In other words, the 24-hour duty doctrine
RULING: Private respondent is a regular should not be sweepingly applied to all acts and
employee. circumstances causing the death of a police
officer but only to those which, although not on
Under Rule XIII, Section l(b), Book 3 of the official line of duty, are nonetheless, basically
Labor Code, as amended, the term police service in character.
"househelper" as used herein is synonymous to
the term "domestic servant" and shall refer to FACTS: SPO2 Alegre, a police officer was
any person, whether male or female, who driving his tricycle and ferrying passengers
within the vicinity of a commercial Complex lend some semblance of viability to the
when SPO4 A. Tenorio, Jr., Team/Desk Officer, argument that he was not in the performance of
confronted him regarding his tour of duty. official duty at the time.
Alegre allegedly snubbed Tenorio and even
directed curse words upon the latter. A verbal However, the argument, though initially
tussle ensued between the two which led to the plausible, overlooks the fact that policemen, by
fatal shooting of SPO2 Alegre. the nature of their function, are deemed to be on
a round-the-clock duty.”
The widow filed a claim for death benefits with
GSIS which denied the claim on the ground that GSIS goes to the SC on petition for review on
at the time of his death, Alegre was performing a certiorari reiterating its position that SPO2
personal activity which was not work-connected. Alegre’s death lacks the requisite element of
The Employees’ Compensation Commission compensability which is, that the activity being
(ECC) affirmed the ruling of the GSIS. performed at the time of death must be work-
connected.
But the Court of Appeals reversed the ECC’s
decision and ruled that Alegre’s death was work- ISSUE: WON SPO2 Alegre’s death is
connected, hence, compensable. Citing Nitura compensable?
vs. Employees’ Compensation Commission and RULING: No, it is not compensable.
Employees’ Compensation Commission vs.
Court of Appeals, the appellate court explained We grant the petition. Under the pertinent
its conclusion, thus: guidelines of the ECC on compensability, for the
injury and the resulting disability or death to be
“[T]he Supreme Court held that the concept of compensable, the injury must be the result of an
a ‘workplace’ cannot always be literally applied employment accident satisfying all of the
to a person in active duty status, as if he were a following conditions:
machine operator or a worker in an assembly
line in a factory or a clerk in a particular fixed (1) The employee must have been injured at the
office. place where his work requires him to be;

It is our considered view that, as applied to a (2) The employee must have been performing
peace officer, his work place is not confined to his official functions; and
the police precinct or station but to any place
where his services, as lawman, to maintain (3) If the injury is sustained elsewhere, the
peace and security, are required. employee must have been executing an order for
the employer.
At the time of his death, Alegre was driving a
tricycle at the northeastern part of the Imelda Owing to the similarity of functions, that is, to
Commercial Complex where the police keep peace and order, and the risks assumed, the
assistance center is located. There can be Court has treated police officers similar to
dispute therefore that he met his death literally members of the Armed Forces of the Philippines
in his place of work. with regard to the compensability of their
deaths.
It is true that the deceased was driving his
tricycle, with passengers aboard, when he was Thus, echoing Hinoguin vs. Employees’
accosted by another police officer. This would Compensation Commission, a case involving a
soldier who was accidentally fired at by a fellow instant case, Aritao, Nueva Vizcaya was not of
soldier, we held in Employees’ Compensation course, Carranglan, Nueva Ecija, Aritao, being
Commission vs. Court of Appeals, that approximately 1-1/2 hours away from the latter
“members of the national police are by the by public transportation. But Sgt. Hinoguin,
nature of their functions technically on duty 24 Cpl. Clavo and Dft. Alibuyog had permission
hours a day” because “policemen are subject to from their Commanding Officer to proceed to
call at any time and may be asked by their Aritao, and it appears to us that a place which
superiors or by any distressed citizen to assist in soldiers have secured lawful permission to be at
maintaining the peace and security of the cannot be very different, legally speaking, from
community.” a place where they are required to go by their
commanding officer. We note that the three (3)
Upon examination of the Court of Appeals’ soldiers were on an overnight pass which,
reasoning, we believe that the appellate court notably, they did not utilize in full. They were
committed reversible error in applying the not on vacation leave. Moreover, they were
precepts enunciated in the cited cases. While we required or authorized to carry their firearms
agree that policemen, like soldiers, are at the with which presumably they were to defend
beck and call of public duty as peace officers themselves if NPA elements happened to attack
and technically on duty round-the-clock, the them while en route to and from Aritao or with
same does not justify the grant of compensation which to attack and seek to capture such NPA
benefits for the death of SPO2 Alegre based on elements as they might encounter. Indeed, if the
the facts disclosed by the records. For clarity, a three (3) soldiers had in fact encountered NPAs
review of the cases relevant to the matter at hand while on their way to or from Aritao and been
is in order. fired upon by them and if Sgt. Hinoguin had
been killed by an NPA bullet, we do not believe
In Hinoguin, the deceased Philippine Army
that respondent GSIS would have had any
soldier, Sgt. Limec Hinoguin, together with two
difficulty in holding the death a compensable
other members of his detachment, sought and
one.”
were orally granted permission by the
commanding officer of their company to leave Then came the case of Nitura, likewise
their station in Carranglan, Nueva Ecija to go on involving a member of the Philippine Army,
overnight pass to Aritao, Nueva Vizcaya. As Pfc. R.S. Nitura, who was assigned at Basagan,
they were returning to their headquarters, one of Katipunan, Zamboanga del Norte. At the time he
his companions, not knowing that his M-16 rifle met his death, he was instructed by his battalion
was on “semi-automatic” mode, accidentally commander to check on several personnel of his
pulled the trigger and shot Sgt. Hinoguin who command post who were then attending a dance
then died as a result thereof. Ruling for the grant party in Barangay San Jose, Dipolog City. But
of death compensation benefits this Court held: on his way back to the camp, he passed, crossed
and fell from a hanging wooden bridge which
“The concept of a ‘workplace’ referred to in
accident caused his death. Reversing the ECC
Ground 1, for instance, cannot always be
which earlier denied death benefits to the
literally applied to a soldier on active duty
deceased’s widow, the Court ruled:
status, as if he were a machine operator or a
worker in assembly line in a factory or a clerk “A soldier must go where his company is
in a particular fixed office. Obviously, a soldier stationed. In the case at bar, Pfc. Nitura’s
must go where his company is stationed. In the station was at Basagan, Katipunan, Zamboanga
del Norte. But then his presence at the site of the that by analogy and for purposes of granting
accident was with the permission of his superior compensation under P.D. No. 626, as amended,
officer... As to the question of whether or not he policemen should be treated in the same manner
was performing an official function at the time as soldiers. While it is true that,
of the incident, it has been held that a soldier on “geographically” speaking, P/Sgt. Alvaran was
active duty status is really on a 24 hours a day not actually at his assigned post at the Pasig
official duty status and is subject to military Provincial Jail when he was attacked and killed,
discipline and military law 24 hours a day. He it could not also be denied that in bringing his
is subject to call and to the orders of his son — as a suspect in a case — to the police
superior officers at all times, seven (7) days a station for questioning to shed light on a
week, except, of course, when he is on vacation stabbing incident, he was not merely acting as
leave status...” father but as a peace officer.”

The more recent case which was cited by the From the foregoing cases, it can be gleaned that
appellate court in support of its decision is the Court did not justify its grant of death
Employees’ Compensation Commission vs. benefits merely on account of the rule that
Court of Appeals. This time, the claim for soldiers or policemen, as the case may be, are
death compensation benefits was made in behalf virtually working round-the-clock. Note that the
of a deceased police officer, P/Sgt. W. Alvaran, Court likewise attempted in each case to find a
who, at the time of his death, was a member of reasonable nexus between the absence of the
the Mandaluyong Police Station but assigned to deceased from his assigned place of work and
the Pasig Provincial Jail. Findings showed that the incident that led to his death. Taking
the deceased brought his son to the together jurisprudence and the pertinent
Mandaluyong Police Station for interview guidelines of the ECC, with respect to claims
because the latter was involved in a stabbing for death benefits, namely (a) that the
incident. While in front of the said station, the employee must be at the place where his work
deceased was approached by another policeman requires him to be; (b) that the employee
[who] shot him to death. Both the GSIS and the must have been performing his official
ECC denied the claim by the deceased’s widow functions; and (c) that if the injury is
on the ground that Sgt. Alvaran was plainly sustained elsewhere, the employee must have
acting as a father to his son and that he was in a been executing an order for the employer, it is
place where he was not required to be. The not difficult to understand then why SPO2
Court of Appeals reversed said denial which Alegre’s widow should be denied the claims
decision was affirmed by this Court, declaring otherwise due her. Obviously, the matter SPO2
that: Alegre was attending to at the time he met his
death, that of ferrying passengers for a fee, was
“But for clarity’s sake and as a guide for future intrinsically private and unofficial in nature
cases, we hereby hold that members of the proceeding as it did from no particular directive
national police, like P/Sgt. Alvaran, are by the or permission of his superior officer. In the
nature of their functions technically on duty 24 absence of such prior authority as in the cases of
hours a day. Except when they are on vacation Hinoguin and Nitura, or peacekeeping nature of
leave, policemen are subject to call all anytime the act attended to by the policeman at the time
and may be asked by their superiors or by any he died even without the explicit permission or
distressed citizen to assist in maintaining the directive of a superior officer, as in the case of
peace and security of the community. We hold P/Sgt. Alvaran, there is no justification for
holding that SPO2 Alegre met the requisites set connection between his injuries and his work as
forth in the ECC guidelines. That he may be a firetruck driver.
called upon at any time to render police work as
he is considered to be on a round-the-clock duty FACTS: C.S. Valeriano was employed as a fire
and was not on an approved vacation leave will truck driver assigned at the San Juan Fire
not change the conclusion arrived at considering Station. On the evening of July 3, 1985, he was
that he was not placed in a situation where he standing along Santolan Road, Quezon City,
was required to exercise his authority and duty when he met a friend. They decided to proceed
as a policeman. In fact, he was refusing to render to Bonanza Restaurant in EDSA, Quezon City,
one, pointing out that he already complied with for dinner. On their way home at around 9:30
duty detail. At any rate, the 24-hour duty PM, the owner-type jeepney they were riding in
doctrine, as applied to policemen and soldiers, figured in a head-on collision with another
serves more as an after-the-fact validation of vehicle at the intersection of N. Domingo and
their acts to place them within the scope of the Broadway streets in Quezon City. Valeriano,
guidelines rather than a blanket license to benefit thrown out of the vehicle, was severely injured.
them in all situations that may give rise to their Pursuing his EC claim, Valeriano argued that the
deaths. In other words, the 24-hour duty doctrine exigency of his job as a fireman requires a
should not be sweepingly applied to all acts and constant observance of his duties as such; thus,
circumstances causing the death of a police he should be considered to have been “on call”
officer but only to those which, although not on when he met the accident. He underscored the
official line of duty, are nonetheless, basically applicability of Hinoguin vs. ECC and Nitura vs.
police service in character. ECC to his case.

Note: To sum it up, the employee must, at the ISSUE: WON Valeriano’s claim will prosper?
time of death, be performing an official act, not RULING: No. Petitioner Valeriano was not able
mere proprietary acts in order for their death to to demonstrate solidly how his job as a firetruck
be compensable. driver was related to the injuries he had suffered.
The 24-hour doctrine should not be sweepingly That he sustained the injuries after pursuing a
applied to all acts and circumstances. purely personal and social function — having
dinner with some friends — is clear from the
Valeriano vs. ECC (24-hour doctrine) records of the case. His injuries were not
acquired at his work place; nor were they
The circumstances in the present case do not sustained while he was performing an act within
call for the application of Hinoguin and Nitura. the scope of his employment or in pursuit of an
Following the rationalization in GSIS vs. Alegre order of his superior. Thus his injuries and
the 24-hour-duty doctrine cannot be applied to consequent disability were not work-connected
petitioner’s case, because he was neither at his and thus not compensable.
assigned work place nor in pursuit of the orders
of his superiors when he met an accident. But The circumstances in the present case do not call
the more important justification for the Court’s for the application of Hinoguin and Nitura.
stance is that he was not doing an act within his Following the rationalization in GSIS vs. Alegre
duty and authority as a firetruck driver, or any the 24-hour-duty doctrine cannot be applied to
other act of such nature, at the time he sustained petitioner’s case, because he was neither at his
his injuries. There is no any reasonable assigned work place nor in pursuit of the orders
of his superiors when he met an accident. But
the more important justification for the Court’s Galopez, another employee, who, like Pablo,
stance is that he was not doing an act within his had finished overtime work at 5:00 p.m. and was
duty and authority as a firetruck driver, or any going home. From the main IDECO gate to the
other act of such nature, at the time he sustained spot where Pablo was killed, there were four
his injuries. There is no any reasonable “carinderias” on the left side of the road and two
connection between his injuries and his work as “carinderias” and a residential house on the right
a firetruck driver. side. The entire length of the road is nowhere
stated in the record.
Iloilo Dock and Eng’g Co. vs WCC et. al.
(Ingress-Egress/Proximity Rule) The principal issue is whether Pablo’s death
comes within the meaning and intendment of
The general rule in workmen’s compensation that “deceptively simple and litigiously prolific”
law known as the “going and coming rule,” phrase “arising out of and in the course of
simply stated, is that “in the absence of special employment.”
circumstances, an employee injured in, going to,
or coming from, his place of work is excluded ISSUE: WON Pablo’s death is compensable?
from the benefits of workmen’s compensation
acts.” This rule, however, admits four well RULING: Yes, it is compensable.
recognized exceptions, to wit: (1) where the The general rule in workmen’s compensation
employee is proceeding to or from his work on law known as the “going and coming rule,”
the premises of his employer; (2) where the simply stated, is that “in the absence of special
employee is about to enter or about to leave the circumstances, an employee injured in, going to,
premises of his employer by way of the exclusive or coming from, his place of work is excluded
or customary means of ingress and egress; (3) from the benefits of workmen’s compensation
where the employee is charged, while on his acts.” This rule, however, admits four well
way to or from his place of employment or at his recognized exceptions, to wit: (1) where the
home, or during his employment, with some duty employee is proceeding to or from his work on
or special errand connected with his the premises of his employer; (2) where the
employment; and (4) where the employer, as an employee is about to enter or about to leave the
incident of the employment, provides the means premises of his employer by way of the
of transportation to and from the place of exclusive or customary means of ingress and
employment. egress; (3) where the employee is charged, while
FACTS: At about 5:02 in the afternoon of on his way to or from his place of employment
January 29, 1960, Pablo, who was employed as or at his home, or during his employment, with
a mechanic of the IDECO, while walking on his some duty or special errand connected with his
way home, was shot to death in front of, and employment; and (4) where the employer, as an
about 20 meters away from, the main IDECO incident of the employment, provides the means
gate, on a private road commonly called the of transportation to and from the place of
IDECO road. The slayer, Martin Cordero, was employment.
not heard to say anything before or after the We address ourselves particularly to an
killing. The motive for the crime was and still is examination and consideration of the second
unknown as Cordero was himself killed before exception, i.e., injuries sustained off the
he could be tried for Pablo’s death. At the time premises of the employer, but while using a
of the killing, Pablo’s companion was Rodolfo customary means of ingress and egress.
This exception, known as the “proximity rule,” (1) The act of the employee of going to, or
was applied in Philippine Fiber Processing coming from, the workplace, must have been a
Co., Inc. vs. Ampil. There, the employee, at continuing act, that is, he had not been diverted
about 5:15 a.m., while proceeding to his place of therefrom by any other activity, and he had not
work and running to avoid the rain, slipped and departed from his usual route to, or from, his
fell into a ditch fronting the main gate of workplace; and
employer’s factory, as a result of which he died
the next day. The sole question was whether or (2) Re: an employee on an special errand, the
not the accident which caused the employee’s special errand must have been official and in
death arose out of and in the course of his connection with his work.
employment. The Court ruled in favor of the The compensability is sometimes called the
claimant. “street peril”principle
The point where Pablo was shot was barely Alano vs. ECC (Accident on the Way to
twenty meters away from the main IDECO gate, Work)
certainly nearer than a stone’s throw therefrom.
The spot is immediately proximate to the She was at the place where her job necessarily
IDECO’s premises. Considering this fact, and required her to be if she was to reach her place
the further facts that Pablo has just finished of work on time. There was nothing private or
overtime work at the time, and was killed barely personal about her being at the place of the
two minutes after dismissal from work, the accident. She was there because her
Ampil case is squarely applicable here. We may employment required her to be there
say, as we did in Ampil, that the place where the
employee was injured being “immediately FACTS: Dedication was a school principal
proximate to his place of work, the accident in whose tour of duty was from 7:30 a.m. to 5:30
question must be deemed to have occurred p.m. While waiting for a ride at a public plaza
within the zone of his employment and therefore on her way to school, she was bumped and run
arose out of and in the course thereof.” Our over by a speeding bus which caused her death.
principal question is whether the injury was The Employees’ Compensation Commission
sustained in the course of employment. We find denied the claim filed by her heirs on the ground
that it was, and so conclude that the assault arose that the injury was not an employment accident
out of the employment, even though the said satisfying all the conditions prescribed by law.
assault is unexplained.
ISSUE: WON Death is compensable?
Note: Going to and Coming from Work Rule
RULING: Yes. The deceased died while going
The ECC passed Resolution No. 3914-A on July to her place of work. She was at the place where
5, 1988, extending the compensable coverage of her job necessarily required her to be if she was
off premises injury from near the premises up to to reach her place of work on time. There was
the residence of the employee. The resolution nothing private or personal about her being at
provides that an injury or death of a covered the place of the accident. She was there because
member in an accident while he is going to, or her employment required her to be there. The
coming from, the workplace, shall henceforth be GSIS, as the ultimate implementing agency of
duly considered compensable provided the the Employees’ Compensation Commission, is
following conditions are established definitively: ordered to pay the claimants.
Lazo vs. ECC (Accident on the Way Home) while the employee was engaged in his work at
the place of its performance.
There is no evidence that he deviated from his
usual, regular homeward route or that Note: The extra-premises rule is otherwise
interruptions occurred in the journey. called the “Shuttle bus” rule.

FACTS: Lazo is a security guard of the Central This rule is the same as that in the old
Bank assigned to its main office. His regular workmen’s compensation jurisprudence, where
tour of duty is from 2 o’clock in the afternoon to the company which provides the means of
10 o’clock in the evening. On June 18, 1986, he transportation in going to and coming from the
rendered duty from 2 o’clock in the afternoon to place of work is liable for the injury sustained
10 o’clock in the evening. But as the security by employees while on board said means of
guard who was to relieve him failed to arrive, he transportation. This is because the company
rendered overtime duty up to 5 o’clock in the vehicle is an extension of its premises.
morning of June 19. On his way home, at about
6 o’clock that morning, the passenger jeepney Special Errand Rule
the petitioner was riding on turned turtle due to An injury sustained by an employee outside the
slippery road. As a result, he sustained injuries company premises is compensable if his being
and was taken to the hospital for treatment. out is covered by an office order or a locator slip
ISSUE: WON he is entitled to compensation for or a pass for official business.
his injuries? While travelling to buy school supplies, the
RULING: Yes, he is entitled to compensation. employee was ambushed along the way. It was
The claim is compensable. Here, Lazo left his ruled that where claimant was performing
station at the Central Bank several hours after official functions, it hardly matters that she was
his regular time off, because the reliever did not injured outside regular working hours and
arrive, and so he was asked to go on overtime. beyond her place of work.
After permission to leave was given, he went If an employee is injured outside the work
home. There is no evidence that he deviated premises, and is doing an act for the benefit of
from his usual, regular homeward route or the employer, then he is entitled to
that interruptions occurred in the journey. compensation for such injuries.
Employment includes not only the actual doing Dual Purpose Doctrine
of the work, but a reasonable margin of time and
space necessary to be used in passing to and An employee’s status of acting in the course of
from the place where the work is to be done. If his employment is not destroyed by the fact that
the employee be injured while passing, with the he may be pursuing a dual purpose. The dual
express or implied consent of the employer, to purpose doctrine allowing compensation applies
or from his work by a way over the employer’s where a special trip would have had to be made
premises, or over those of another in such for the employer if the employee had not
proximity and relation as to be in practical effect combined the service for the employer with his
a part of the employer’s premises, the injury is own going or coming trip.
one arising out of and in the course of the
employment as much as though it had happened Stated briefly, the “dual purpose” doctrine,
considers as compensable an injury that an
employee sustains while on a trip undertaken for exception in the so-called “positional and local
the benefit of the employer even if in the course risks” doctrine so that if an employee, by reason
thereof the employee pursues also a personal of his duties, is exposed to a special or peculiar
purpose. danger from the elements, that is, one greater
than that to which other persons in the
“The test that is ordinarily employed for community are exposed, and an unexpected
determining liability in such a case is that if the injury is sustained by reason of the elements,
work of the employee tends to create necessity the injury constitutes an accident arising out
for travel, he or she is deemed in the course of of and in the course of the employment within
employment, albeit the employee serves at the the meaning of the workmen’s compensation
same time some personal purpose. The acts. Stated otherwise, when one in the course of
requirement is that the service of the employer is his employment is reasonably required to be at a
at least a concurrent cause of the trip of the particular place at a particular time and there
employee” meets an accident, although one which any other
person then and there present would have met
Special Engagement Rule
irrespective of his employment, that accident is
In determining whether an injury suffered by an one “arising out of the employment” of the
employee in the course of recreation is person so injured.
compensable, the test is whether the recreation
was for the employee’s exclusive benefit, or
whether the employer had some interest in the
activity. Where an employee is injured while at
recreation during a temporary cessation of work,
the injury is compensable as arising out of and
in the course of employment where the
recreation indulged in was fostered and
encouraged by the employer to the end of
efficiency of their service. Theory of Increased Risk

Recreational activities fall under the so-called This applies when the sickness is not one of
“special engagement rule” which is one of the those listed in Annex A list of occupational
exceptions to the “direct premises rule.” This diseases.
exception covers field trips, intramurals, outings,
and picnics when initiated or sanctioned by the The claimant has the burden to prove that the
employer. Accidents befalling employees on nature of the work increased the risk of
those occasions are compensable. contracting the disease.

Local and Positional Doctrine This was applied in the Raro case.

The generally accepted doctrine is that the Raro vs. ECC (Cancer not always
employer is not responsible for accidents arising compensable)
from force majeure or an act of God, as it is
Cancer is a disease of still unknown origin
usually called, when the employee has not been
which strikes people in all walks of life,
exposed to a greater danger than usual.
employed or unemployed. Unless it be shown
However, this general rule recognizes an
that a particular form of cancer is caused by
specific working conditions (e.g., chemical RULING: No. Cancer is a disease that strikes
fumes, nuclear radiation, asbestos dust, etc.), people in general. The nature of a person’s
the Court cannot conclude that it was the employment appears to have no relevance.
employment which increased the risk of Cancer can strike a lowly paid laborer or a
contracting the disease. highly paid executive or one who works on land,
in water, or in the bowels of the earth. It makes
FACTS: The petitioner states that she was in no difference whether the victim is employed or
perfect health when employed as a clerk by the unemployed, a white collar employee or a blue
Bureau of Mines and Geo-Sciences at its Daet, collar worker, a housekeeper, an urban dweller
Camarines Norte regional office on March or a resident of a rural area.
17,1975. About four years later, she began
suffering from severe and recurrent headaches Jurisprudence on the compensability of cancer
coupled with blurring of vision. Forced to take ailments has of late become a source of
sick leaves every now and then, she sought confusion among the claimants and the
medical treatment in Manila. The petitioner was government agencies enforcing the employees’
diagnosed at the Makati Medical Center to be compensation law. The strongly lingering
suffering from brain tumor. By that time, her influence of the principles of “presumption of
memory, sense of time, vision, and reasoning compensability” and “aggravation” found in the
power had been lost. A claim for disability defunct Workmen’s Compensation Act but
benefits filed by her husband with the expressly discarded under the present
Government Service Insurance System (GSIS) compensation scheme has led to conflict and
was denied. A motion for reconsideration was inconsistency in employees’ compensation
similarly denied. An appeal to the Employees' decisions.
Compensation Commission resulted in the
Commission's affirming the GSIS decision. On The problem is attributable to the inherent
January 1, 1975, the Workmen's Compensation difficulty in applying the new principle of
Act was replaced by a novel scheme under the “proof of increased risk.” There are two
new Labor Code. The new law discarded, among approaches to a solution in cases where it cannot
others, the concepts of "presumption of be proved that the risk of contracting an illness
compensability" and "aggravation" and not listed as an occupational disease was
substituted a system based on social security increased by the claimant’s working conditions.
principles. The present system is also One approach is that if a claimant cannot prove
administered by social insurance agencies — the the necessary work connection because the
Government Service Insurance System and causes of the disease are still unknown, it must
Social Security System — under the Employees' be presumed that working conditions increased
Compensation Commission. The intent was to the risk of contracting the ailment. The other
restore a sensible equilibrium between the approach is that if there is no proof of the
employer's obligation to pay workmen's required work connection, the disease is not
compensation and the employee's right to compensable because the law says so.
receive reparation for work-connected death or It is not correct to say that all cancers are not
disability. compensable. The list of occupational diseases
ISSUE: WON the claim will prosper? prepared by the Employees’ Compensation
Commission includes some cancers as
compensable. There is no arbitrariness in the
Commission’s allowing vinyl chloride workers void. Respondent, therefore, is entitled to
or plastic workers to be compensated for brain compensation, consistent with the social
cancer. There are certain cancers which are legislation’s intended beneficial purpose.
reasonably considered as strongly induced by
specific causes. Heavy doses of radiation as in FACTS: On March 6, 1974, Abraham Cate
Chernobyl, USSR, cigarette smoke over a long (Abraham) joined the military service as a
period for lung cancer, certain chemicals for Rifleman of the Philippine Navy. On January 2,
specific cancers, and asbestos dust, among 1991, he was absorbed in the Philippine
others, are generally accepted as increasing the National Police (PNP) with the rank of Senior
risks of contracting specific cancers. What the Police Officer IV (SPO4).
law requires for others is proof. In 1993, Abraham complained of a mass on his
Cancer is a disease of still unknown origin left cheek which gradually increased in size. A
which strikes people in all walks of life, biopsy was done at the Philippine General
employed or unemployed. Unless it be shown Hospital (PGH). The histopath report revealed
that a particular form of cancer is caused by that he was suffering from Osteoblastic
specific working conditions (e.g., chemical Osteosarcoma. He was admitted at the PGH
fumes, nuclear radiation, asbestos dust, etc.), the payward, and on October 28, 1993, he
Court cannot conclude that it was the underwent "Total Maxillectomy with Orbital
employment which increased the risk of Exenteration," which operation removed the
contracting the disease. mass on his left cheek. In April 1994, another
biopsy revealed the recurrence of the ailment.
For the guidance of the administrative agencies
and practicing lawyers concerned, the decision On June 9, 1994, Abraham underwent debulking
of the Supreme Court in Raro vs. Employees’ of the recurrent tumor at the PGH. Post-
Compensation Commission, G.R. No. 58445, operative course was uneventful and he
April 27, 1989, en banc, Gutierrez, Jr., J. underwent radiotherapy.
supersedes the decisions in Panotes vs. On December 1, 1994, Abraham was
Employees’ Compensation Commission (128 compulsorily retired from the PNP.
SCRA 473 [1984]); Mercado vs. Employees’
Compensation Commission (127 SCRA 664 On December 20, 1994, Abraham filed a claim
[1984]); Ovenson vs. Employees’ Compensation for income benefits with the Government
Commission (156 SCRA 2 [1987]); Nemaria vs. Service Insurance System (GSIS) under P.D.
Employees’ Compensation Commission (155 No. 626,3 as amended.
SCRA 166 [1987]) and other cases with
conclusions different from those stated in Raro In a letter dated December 27, 1994, GSIS
vs. Employees’ Compensation Commission. denied the claim on the ground that
Osteosarcoma is not considered an occupational
GSIS vs. CATE (Cancer Compensable, disease under P.D. No. 626, and there is no
Contrary to Raro case) showing that his duties as SPO4 in the Armed
Forces of the Philippines had increased the risk
As earlier noted, however, in the specific case of of contracting said ailment. GSIS denied
respondent, the requirement is impossible to Abraham’s request for reconsideration of the
comply with, given the present state of scientific decision in a letter dated March 22, 1995.
knowledge. The obligation to present such as an
impossible evidence must, therefore, be deemed
On May 2, 1995, Abraham died at the age of 45. the rules would mean that absent any proof that
He was survived by his wife, Dorothy Cate, and the risk of contracting the ailment was increased
two children. The heirs of Abraham appealed the by the working conditions of the late Abraham,
decision of GSIS to the ECC. private respondents would not be entitled to
compensation.
In a Decision dated September 7, 1995, ECC
affirmed the decision of GSIS and dismissed the Considering, however, that it is practically
case for lack of merit. undisputed that under the present state of
science, the proof referred by the law to be
The heirs of Abraham filed a petition for review presented by the deceased private respondent
of the decision of ECC with the CA. claimant was unavailable and impossible to
comply with, the condition must be deemed as
In a Decision promulgated on March 13, 1996,
not imposed.
the CA reversed and set aside the decision of
ECC. For this reason, the CA held, thus:
ISSUE: WON CA is correct in ruling that the In all due respect and with the least of intention
late Abraham’s ailments are compensable under of committing contempt and discourtesy but
the ECC? rather solely moved by the time-honored
principle that the Employees Compensation Act
RULING: Yes, CA is correct.
is basically a social legislation designed to
In this case, Osteosarcoma is not listed as an afford relief to our working men (Santos v.
occupational disease in the Amended Rules on ECC, 221 SCRA 182 [1993] and that labor,
Employees’ Compensation. Hence, it is social welfare legislations should be liberally
supposed to be upon the claimant or private construed in favor of the applicant (Tira v.
respondents to prove by substantial evidence ECC, 208 SCRA 834 [1992]), We have to rule in
that the risk of contracting Osteosarcoma was favor of herein petitioners.
increased by the working conditions of the late
The plight of any cancer patient deserves some
Abraham. Substantial evidence means such
serious considerations. We were not to be told
relevant evidence as a reasonable mind might
that no one is a willing victim of cancer.
accept as adequate to support a conclusion. The
Inflicted with this dreadful malady, the patient
records show that Abraham failed to present
suffers from the trauma of an impending death
evidence to establish that the development of his
not to mention the high cost of medical
ailment was traceable to his working conditions
attendance required, only to prolong one’s
in the Philippine Navy, the now defunct
agony and the hopelessness of any definite cure
Philippine Constabulary and the PNP. Further,
simply because the origin and cause of cancer
private respondents’ allegation in their petition
are farfetched unresolved.
for review with the CA that Abraham, as a
rifleman in the Philippine Navy, may have been The present case at bench is no different.
exposed to elements like a virus which could Petitioners’ failure to present positive evidence
have contributed to his ailment does not satisfy of a causal relation of the illness and his
the requirement of substantial evidence. The rule working conditions is due to the pure and simple
is that awards of compensation cannot rest on lack of available proof to be offered in evidence.
speculations and presumptions as the claimant Verily, to deny compensation to osteosarcoma
must prove a positive thing. The application of victims who will definitely be unable to produce
a single piece of proof to that effect, is it, when experts themselves are ignorant as to
unrealistic, illogical and unfair. At the very what brings it about. I do not believe, finally,
least, on a very exceptional circumstance, the that the question is a matter of legislation.
rule on compensability should be relaxed and be Compassion, it is my view, is reason enough."
allowed to apply to such situations. To disallow (J. Sarmiento)
the benefit will even more add up to the
sufferings, this time, for the ignorance of the "While ‘brain tumor’ is not expressly or
inability of mankind to discover the real truth specifically referred to as an occupational
about cancer. disease, and while admittedly it precise causes
are still unknown, We may say that the disease
It is not the intention of this decision to is akin to ‘cancer of the brain’ and should
challenge the wisdom of the Raro case. What is therefore be regarded as either compensable or
being hoped for is to have a second look on the borderline case. At any rate, the precise work of
issue of compensability of those inflicted with the petitioner at the Bureau of Mines and Geo-
osteosarcoma or like disease, where the origin Sciences consisted of the following: "As Mining
or cause is still virtually not ascertained. The Recorded II, to record and file mining
protection of the stability and integrity of the instruments and documents in the Mining
State Insurance Fund against non-compensable Recorder’s Section and to type correspondence
claims, is much to be desired. Nonetheless, to and other documents pertaining to the same
allow the presumption of compensability to action. It will readily be seen that her work
Osteosarcoma victims, will not adversely required at times mental concentration. Whether
prejudice such state policy. In fact, it will give this is specifically causative of brain tumor is of
more meaning to the very purpose and essence course still unknown but doubts must generally
of the State Insurance Fund. Upon the other be resolved in favor whenever compensation for
hand, to deny the claim will not only defeat the disease is concerned. It would certainly be
very reason for its creation but will likewise absurd to throw upon petitioner the burden of
turn down benefits to the intended rightful showing that her work either caused or
beneficiary thereof. As employee’s aggravated the disease, particularly when both
compensation is based on social security the GSIS and ECC profess ignorance themselves
principles. We believe that in the meantime that of the causes of the disease." (Justice Paras).
osteosarcoma’s cause and origin are not yet
unearthed, the benefit of the doubt should be Stated otherwise, before the amendment, the law
resolved in favor of the claim. simply did not allow compensation for the
ailment of respondent. It is under this set-up that
In main, We subscribe to the more the Raro case was decided. However, as the
compassionate and humane considerations ECC decision noted, the law was amended and
contained in the dissenting opinions of Justices now "the present law on compensation allows
Sarmiento and Paras in the same Raro case and certain diseases to be compensable if it is
sufficiently proven that the risk of
We quote: contracting is increased by the working
conditions." It, therefore, now allows
"It must be likewise be noted that the petitioner
compensation subject to requirement of proving
is suffering from cancer (brain tumor), whose
by sufficient evidence that the risk of
cause medical science is yet to unravel. It would
contracting the ailment is increased by the
then be asking too much to make her prove that
working conditions.
her illness was cause by work or aggravated by
As earlier noted, however, in the specific case of medical conditions, they may, in good faith,
respondent, the requirement is impossible to make statements that tum out to be false. These
comply with, given the present state of scientific honest mistakes do not negate compensability
knowledge. The obligation to present such for disability arising from pre-existing illnesses
impossible evidence must, therefore, be deemed shown to be aggravated by their working
void. Respondent, therefore, is entitled to conditions. However, when a seafarer's proper
compensation, consistent with the social knowledge of pre-existing conditions and intent
legislation’s intended beneficial purpose. to deceive an employer are established,
compensability is negated.
In fine, the Court sees no reversible error in the
decision of the Court of Appeals. FACTS: On April 8, 2010, Manansalals
services were engaged by Marlow Navigation
Note: This case is contrary to Raro case, but it Phils., Inc., for and on behalf of its principal,
did not abandon the doctrine in Raro. The Marlow Navigation Co. Ltd./Cyprus, for him to
doctrine in Raro still stands. serve as a "fitter" on board the vessel M/V
Seaboxer.
So if a question arises where the cancer is not
those found in Annex A, then such calls for the Before boarding the vessel, Manansala
application of Theory of Increased Risk as held underwent a Pre Employment Medical
in the case of Raro in order for the sickness or Examination (PEME) on March 23, 20109 at
disease to be compensable. the EL ROI Medical Clinic and Diagnostic
Center, Inc.10 In his examination, Manansala
Claims under ECC by an employee may be
was required to disclose information regarding
denied if there is on his part:
all existing and prior medical conditions. The
1.) Notorious Negligence examination specifically required information on
29 illnesses and/or conditions, among which
2.) Intoxication were hypertension and diabetes. Manansala's
examination certificate indicates that he denied
3.) Willful intent to injure oneself (Suicide)
having hypertension and diabetes, specifically
XPN: Suicide may be compensable if: answering "NO" when asked about hypertension
and diabetes mellitus. Following his
1.) Stipulated in the contract, that examination, Manansala was declared fit for sea
suicide is compensable duty and was cieployed.

2.) If the employee is proven to have a On May 30, 2010, while on board the M/V
mental illness proven by medical Seaboxer, Manansala suffered a stroke. Because
findings, and commits suicide. of this, Manansala was repatriated on June 8,
2010.
Manansala vs. Marlow Navigation
(Misrepresentation of a pre-existing condition Manansala was confined at the De Los Santos
constitutes bad faith which negates Medical Center from June 10, 2010 to June 23,
compensation) 2010, under the primary care of company--
designated physician, Dr. Teresita Barrairo (Dr.
As laypersons, seafarers cannot be expected to
Barrairo). While under Dr. Barrairo's care, he
make completely accurate accounts of their
"repeatedly denied that he ha[d] any past history
state of health. Unaware of the nuances of
of diabetes and hypertension."
On September 7, 2010, Dr. Barrairo issued to POEA-SEC defines Work Related illness as -
Manansala an interim Grade 10 disability rating. any sickness resulting to disability or death as a
She issued a final Grade 10 Disability result of an occupational disease listed under
assessment on September 30, 2010. Section 32-A of this Contract with the
conditions set therein satisfied.
On October 21, 2010, Manansala filed a
Complaint against the respondents for total and Section 32-A of the POEA-SEC provides a non-
permanent disability benefits, as well as exhaustive list of diseases considered as
damages and attorney's fees. When the occupational. The mere occurrence of a listed
mandatory conferences failed, the parties were illness does not automatically engender
ordered to file their respective position papers compensability. The first paragraph of Section
and responsive pleadings. 32-A requires the satisfaction of all of its listed
general conditions "[f]or an occupational disease
Two (2) months after he filed his Complaint, on and the resulting disability or death to be
December 20, 2010, Manansala's own doctor, compensable":
Dr. Amado San Luis (Dr. San Luis), issued a
medical opinion stating that Manansala must be Section 32-A OCCUPATIONAL DISEASES
considered permanently disabled:
For an occupational disease and the resulting
Medical Opinion disability or death to be compensable, all of the
following conditions must be satisfied:
4. Patient should be permanently disabled (sic)
because of the inherent risk of his work as a (1)The seafarer's work must involve the risks
seaman that will predispose him to repeated described herein;
stroke or other cardiovascular attacks. Because
of the presence of diabetes, hypertension, (2)The disease was contracted as a result of the
hyperlipidemia and stroke, he is considered a seafarer's exposure to the described risks;
high risk of (sic) developing another stroke. (3)The disease was contracted within a period of
The same opinion indicated that Manansala exposure and under such other factors necessary
admitted to having had a long history of to contract it;
hypertension and diabetes, He even admitted to (4)There was no notorious negligence on the
taking Enalapril and Metformin as maintenance part of the seafarer.
medications.
To enable compensation, an occupational
On Apri1 20, 2011, the Labor Arbiter rendered a disease and ensuing death or disability must,
Decision finding that Manansala was suffering thus, be "work-related"; that is to say that there
from pre-existing, rather than work-related, must be a "reasonable linkage between the
ailments. Therefore, he was not entitled to disease suffered by the employee and his work."
disability benefits. NLRC affirmed the LA’s
decision. So did the CA. Hence this Petition. Common sense dictates that an illness could not
possibly have been "contracted as a result of the
ISSUE: WON Manansala is entitled to total seafarer's exposure to the described risks" if it
permanent disability benefits occasioned by has been existing before the seafarer's services
work-related illness? are engaged. Still, pre existing illnesses may be
RULING: No, he is not entitled. aggravated by the seafarer's working conditions.
To the extent that any such aggravation is However, in the medical opinion and evaluation
brought about by the work of the seafarer, prepared by his own physician, Dr. San Luis,
compensability ensues: petitioner was indicated to not only have
admitted that "he ha[d] a past history of
Settled is the rule that for illness to be hypertension and diabetes," but even that he was
compensable, it is not necessary that the nature "regularly taking Enalapril and Metformin
of the employment be the sole and only reason respectively to treat the said illnesses."
for the illness suffered by the seafarer. It is
sufficient that there is a reasonable linkage Petitioner's assertion is an admission that he
between the disease suffered by the employee fully knew of his conditions at the moment he
and his work to lead a rational mind to conclude was examined, rendering it pointless for this
that his work may have contributed to the Court to consider whether he was merely
establishment or, at the very least, aggravation confused at the time of his examination.
of any pre-existing condition he might have had. Additionally, his assertion burdens him with the
task of proving his claims. As he was duty-
The POEA-SEC bars the compensability of bound to truthfully answer questions during his
disability arising from a pre-existing illness examination, petitioner must show that despite
when attended by an employee's fraudulent his knowledge, he did not willfully or
misrepresentation. Section 20(E) of the POEA- deceptively withhold information. Likewise, his
SEC states: imputation of the examining physician's liability
despite the examination certificate's indication
E. A seafarer who knowingly conceals and does
that his responses were duly recorded is an
not disclose past medical condition, disability
affirmative defense or an alternative version of
and history in the pre-employment medical
events that becomes his burden to prove.
examination constitutes fraudulent
misrepresentation and shall disqualify him from Petitioner failed to discharge his burden. On the
any compensation and benefits. This may also contrary, the confluence of circumstances belies
be a valid ground for termination of employment his claims.
and imposition of the appropriate administrative
and legal sanctions. Petitioner adequately understood the
significance of the declarations attributed to him
This Court finds petitioner to have knowingly in his examination certificate. Petitioner's
and fraudulently misrepresented himself as not engagement aboard the MIV Seaboxer was not
afflicted with hypertension or diabetes. He did his first stint as a seafarer. He had been a
not merely make inaccuracies in good faith but seafarer since 1994, although he worked for
engaged in serial dishonesty. Thus, this Court respondents, on and off, only since 2007. His
affirms the Decision of the Court of Appeals. prolonged seafaring experience must have
familiarized him with the conduct of PEMEs
During his PEME, petitioner was recorded to
and the need for him to give truthful answers.
have "categorically answered 'No' when asked
He explicitly declared, too, that he was "aware
whether he has ever suffered from or has been
of the contents of Section 20.E [on
told to have hypertension and diabetes." After
misrepresentation] in the POEA [Standard
repatriation and while being treated by Dr.
Employment Contract]." Certainly, his
Barrairo, the company-designated physician, he
awareness of Section 20(E) must have impressed
again "denied that he ha[d] any past history of
upon him not only the potential complications of
diabetes and hypertension.”
what he claims to be a false declaration foisted medications he had been taking to address those
on him by the examining physician but also the illnesses.
urgency of rectifying that error. Instead, he
remained silent and did nothing. Petitioner's A measure of good faith can be appreciated on
concession by omission militates against him. the part of a seafarer who is unable to grasp the
nuances of his or her medical condition. This
This Court has nothing to rely on but petitioner's Court is unable to appreciate this good faith
bare recollection. This does not satisfy, He here. Petitioner knew that his illnesses were of
should have actively endeavored to demonstrate such severity that he needed to take maintenance
that the false declarations in his examination medicine. Despite this, he consistently
certificate were anomalous, stray errors. As a maintained that he had no history of
seafarer since 1994, he must have completed hypertension or diabetes. Finally confronted
several other medical examinations. His good with his own discrepant statements he denied
faith could have been substantiated by prior acts accountability by shifting the blame to a person
in analogous situations. He could have presented who was beyond the reach of the proceedings he
copies of the certificates for his previous had initiated.
medical examinations, but he did not These
would have shown that while the responses he Petitioner's disavowals were not statements
uttered about his conditions in prior instances made in good faith but were part of a serial
had been properly recorded, the examining utterance of lies.
physician during his March 23, 2010
examination failed to render an accurate
account.

It is, of course, possible that prior to his most

recent medical examination on March 23, 2010,
petitioner had not been diagnosed with
hypertension or diabetes. This would make it
impossible for him to present evidence of
countervailing prior declarations. However, even
conceding this, petitioners good faith is belied
by other circumstances attending this case.

Petitioner's good faith could have been

demonstrated by his subsequent acts. Knowing
full well that a false declaration was made on his
examination certificate, petitioner should, at the
very least, not have compounded it. Instead of
this, however, he maintained before Dr. Barrairo
upon repatriation that he had no history of either
hypertension or diabetes. It was only before his
personally chosen physician did petitioner admit
to not only a history of diabetes and
hypertension but even to the maintenance