COLLECTIVE BARGAINING CASES

Republic of the Philippines

SUPREME COURT

THIRD DIVISION

G.R. No. 155098 September 16, 2005

CAPITOL MEDICAL CENTER, INC. and DR. THELMA NAVARETTE-CLEMENTE, Petitioners,

vs.
DR. CESAR E. MERIS, Respondent.

DECISION

CARPIO MORALES, J.:

Subject of the present appeal is the Court of Appeals Decision1 dated February 15, 2002 reversing the NLRC
Resolution2 dated January 19, 1999 and Labor Arbiter Decision3 dated April 28, 1998 which both held that the
closure of the Industrial Service Unit of the

Capitol Medical Center, Inc., resulting to the termination of the services of herein respondent Dr. Cesar Meris as
Chief thereof, was valid.

On January 16, 1974, petitioner Capitol Medical Center, Inc. (Capitol) hired Dr. Cesar Meris (Dr. Meris),4 one of its
stockholders,5 as in charge of its Industrial Service Unit (ISU) at a monthly salary of ₱10,270.00.

Until the closure of the ISU on April 30, 1992,6 Dr. Meris performed dual functions of providing medical services to
Capitol’s more than 500 employees and health workers as well as to employees and workers of companies having
retainer contracts with it.7

On March 31, 1992, Dr. Meris received from Capitol’s president and chairman of the board, Dr. Thelma Navarette-
Clemente (Dr. Clemente), a notice advising him of the management’s decision to close or abolish the ISU and the
consequent termination of his services as Chief thereof, effective April 30, 1992.8 The notice reads as follows:

March 31, 1992

Dr. Cesar E. Meris

Chief, Industrial Service Unit

Capitol Medical Center

Dear Dr. Meris:

Greetings!

Please be formally advised that the hospital management has decided to abolish CMC’s Industrial Service Unit
as of April 30, 1992 in view of the almost extinct demand for direct medical services by the private and semi-
government corporations in providing health care for their employees. Such a decision was arrived at, after
considering the existing trend of industrial companies allocating their health care requirements to Health
Maintenance Organizations (HMOs) or thru a tripartite arrangement with medical insurance carriers and
designated hospitals.

As a consequence thereof, all positions in the unit will be decommissioned at the same time industrial services [are]
deactivated. In that event, you shall be entitled to return to your private practice as a consultant staff of the
institution and will become eligible to receive your retirement benefits as a former hospital employee. Miss
Jane Telan on the other hand will be transferred back to Nursing Service for reassignment at the CSR.

We wish to thank you for your long and faithful service to the institution and hope that our partnership in health care
delivery to our people will continue throughout the future. Best regards.

Very truly yours,

(SGD.) DR. THELMA NAVARETTE-CLEMENTE9 (Emphasis and underscoring supplied)

Dr. Meris, doubting the reason behind the management’s decision to close the ISU and believing that the ISU was
not in fact abolished as it continued to operate and offer services to the client companies with Dr. Clemente as its
head and the notice of closure was a mere ploy for his ouster in view of his refusal to retire despite Dr. Clemente’s
previous prodding for him to do so,10 sought his reinstatement but it was unheeded.

Dr. Meris thus filed on September 7, 1992 a complaint against Capitol and Dr. Clemente for illegal dismissal and
reinstatement with claims for backwages, moral and exemplary damages, plus attorney’s fees.11

Finding for Capitol and Dr. Clemente, the Labor Arbiter held that the abolition of the ISU was a valid and lawful
exercise of management prerogatives and there was convincing evidence to show that ISU was being operated at a
loss.12 The decretal text of the decision reads:

WHEREFORE, judgment is hereby rendered dismissing the complaint. Respondents are however ordered to pay
complainant all sums due him under the hospital retirement plan.

SO ORDERED.13 (Emphasis supplied)

On appeal by Dr. Meris, the National Labor Relations Commission (NLRC) modified the Labor Arbiter’s decision. It
held that in the exercise of Capitol’s management prerogatives, it had the right to close the ISU even if it was not
suffering business losses in light of Article 283 of the Labor Code and jurisprudence.14

And the NLRC set aside the Labor Arbiter’s directive for the payment of retirement benefits to Dr. Meris because he
did not retire. Instead, it ordered the payment of separation pay as provided under Article 283 as he was discharged
due to closure of ISU, to be charged against the retirement fund.15

Undaunted, Dr. Meris elevated the case to the Court of Appeals via petition for review16 which, in the interest of
substantial justice, was treated as one for certiorari.17

Discrediting Capitol’s assertion that the ISU was operating at a loss as the evidence showed a continuous trend of
increase in its revenue for three years immediately preceding Dr. Meris’s dismissal on April 30, 1992,18 and finding
that the ISU’s "Analysis of Income and Expenses" which was prepared long after Dr. Meris’s dismissal, hence, not
yet available, on or before April 1992, was tainted with irregular entries, the appellate court held that Capitol’s
evidence failed to meet the standard of a sufficient and adequate proof of loss necessary to justify the abolition of
the ISU.19

The appellate court went on to hold that the ISU was not in fact abolished, its operation and management having
merely changed hands from Dr. Meris to Dr. Clemente; and that there was a procedural lapse in terminating the
services of Dr. Meris, no written notice to the Department of Labor and Employment (DOLE) of the ISU abolition
having been made, thereby violating the requirement embodied in Article 283.20

The appellate court, concluding that Capitol failed to strictly comply with both procedural and substantive due
process, a condition sine qua non for the validity of a case of termination,21 held that Dr. Meris was illegally
dismissed. It accordingly reversed the NLRC Resolution and disposed as follows:

IN VIEW OF ALL THE FOREGOING, the assailed resolutions of the NLRC are hereby set aside, and another one
entered –
1 – declaring illegal the dismissal of petitioner as Chief of the Industrial Service Unit of respondent Medical Center;

2 – ordering respondents to pay petitioner

a) backwages from the date of his separation in April 1992 until this decision has attained finality;

b) separation pay in lieu of reinstatement computed at the rate of one (1) month salary for every year of service with
a fraction of at least six (6) months being considered as one year;

c) other benefits due him or their money equivalent;

d) moral damages in the sum of ₱50,000.00;

e) exemplary damages in the sum of ₱50,000.00; and

f) attorney’s fees of 10% of the total monetary award payable to petitioner.

SO ORDERED.22

Hence, the present petition for review assigning to the appellate court the following errors:

. . . IN OVERTURNING THE FACTUAL FINDINGS AND CONCLUSIONS OF BOTH THE NATIONAL LABOR
RELATIONS COMMISSION (NLRC) AND THE LABOR ARBITER.

II

. . . IN HOLDING, CONTRARY TO THE FINDINGS OF BOTH THE LABOR ARBITER AND THE NATIONAL
LABOR RELATIONS COMMISSION, THAT THE INDUSTRIAL UNIT (ISU) WAS NOT INCURRING LOSSES AND
THAT IT WAS NOT IN FACT ABOLISHED.

III

. . . IN NOT UPHOLDING PETITIONERS’ MANAGEMENT PREROGATIVE TO ABOLISH THE INDUSTRIAL

SERVICE UNIT (ISU).

IV

. . . IN REQUIRING PETITIONERS TO PAY RESPONDENT BACKWAGES AS WELL AS DAMAGES AND

ATTORNEY’S FEES.23

Capitol questions the appellate court’s deciding of the petition of Dr. Meris on the merits, instead of merely
determining whether the administrative bodies acted with grave abuse of discretion amounting to lack or excess of
jurisdiction.

The province of a special civil action for certiorari under Rule 65, no doubt the appropriate mode of review by the
Court of Appeals of the NLRC decision,24 is limited only to correct errors of jurisdiction or grave abuse of discretion
amounting to lack or excess of jurisdiction.25 In light of the merits of Dr. Meris’ claim, however, the relaxation by the
appellate court of procedural technicality to give way to a substantive determination of a case, as this Court has held
in several cases,26 to subserve the interest of justice, is in order.

Capitol argues that the factual findings of the NLRC, particularly when they coincide with those of the Labor Arbiter,
as in the present case, should be accorded respect, even finality.27
For factual findings of the NLRC which affirm those of the Labor Arbiter to be accorded respect, if not finality,
however, the same must be sufficiently supported by evidence on record.28 Where there is a showing that such
findings are devoid of support, or that the judgment is based on a misapprehension of facts,29 the lower tribunals’
factual findings will not be upheld.

As will be reflected in the following discussions, this Court finds that the Labor Arbiter and the NLRC overlooked
some material facts decisive of the instant controversy.

Capitol further argues that the appellate court’s conclusion that the ISU was not incurring losses is arbitrary as it was
based solely on the supposed increase in revenues of the unit from 1989-1991, without taking into account the
"Analysis of Income and Expenses" of ISU from July 1, 1990 to July 1, 1991 which shows that the unit operated at a
loss;30 and that the demand for the services of ISU became almost extinct in view of the affiliation of industrial
establishments with HMOs such as Fortunecare, Maxicare, Health Maintenance, Inc. and Philamcare and of
tripartite arrangements with medical insurance carriers and designated hospitals,31 and the trend resulted in losses
in the operation of the ISU.

Besides, Capitol stresses, the health care needs of the hospital employees had been taken over by other units
without added expense to it;32 the appellate court’s decision is at best an undue interference with, and curtailment of,
the exercise by an employer of its management prerogatives;33 at the time of the closure of the ISU, Dr. Meris was
already eligible for retirement under the Capitol’s retirement plan; and the appellate court adverted to the alleged
lack of notice to the DOLE regarding Dr. Meris’s dismissal but the latter never raised such issue in his appeal to the
NLRC or even in his petition for review before the Court of Appeals, hence, the latter did not have authority to pass
on the matter.34

Work is a necessity that has economic significance deserving legal protection. The social justice and protection to
labor provisions in the Constitution dictate so.

Employers are also accorded rights and privileges to assure their self-determination and independence and
reasonable return of capital. This mass of privileges comprises the so-called management prerogatives. Although
they may be broad and unlimited in scope, the State has the right to determine whether an employer’s privilege is
exercised in a manner that complies with the legal requirements and does not offend the protected rights of labor.
One of the rights accorded an employer is the right to close an establishment or undertaking.

The right to close the operation of an establishment or undertaking is explicitly recognized under the Labor Code as
one of the authorized causes in terminating employment of workers, the only limitation being that the closure must
not be for the purpose of circumventing the provisions on termination of employment embodied in the Labor Code.

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

The phrase "closures or cessation of operations of establishment or undertaking" includes a partial or total closure
or cessation.35

x x x Ordinarily, the closing of a warehouse facility and the termination of the services of employees there assigned
is a matter that is left to the determination of the employer in the good faith exercise of its management
prerogatives. The applicable law in such a case is Article 283 of the Labor Code which permits ‘closure or cessation
of operation of an establishment or undertaking not due to serious business losses or financial reverses,’ which, in
our reading includes both the complete cessation of operations and the cessation of only part of a company’s
business. (Emphasis supplied)

And the phrase "closures or cessation x x x not due to serious business losses or financial reverses" recognizes the
right of the employer to close or cease his business operations or undertaking even if he is not suffering from
serious business losses or financial reverses, as long as he pays his employees their termination pay in the amount
corresponding to their length of service.36

It would indeed be stretching the intent and spirit of the law if a court were to unjustly interfere in management’s
prerogative to close or cease its business operations just because said business operation or undertaking is not
suffering from any loss.37 As long as the company’s exercise of the same is in good faith to advance its interest
and not for the purpose of defeating or circumventing the rights of employees under the law or a valid
agreement, such exercise will be upheld.38

Clearly then, the right to close an establishment or undertaking may be justified on grounds other than business
losses but it cannot be an unbridled prerogative to suit the whims of the employer.

The ultimate test of the validity of closure or cessation of establishment or undertaking is that it must be bona fide in
character.39 And the burden of proving such falls upon the employer.40

In the case at bar, Capitol failed to sufficiently prove its good faith in closing the ISU.

From the letter of Dr. Clemente to Dr. Meris, it is gathered that the abolition of the ISU was due to the "almost extinct
demand for
direct medical service by the private and semi-government corporations in providing health care for their
employees;" and that such extinct demand was brought about by "the existing trend of industrial companies
allocating their health care requirements to Health Maintenance Organizations (HMOs) or thru a tripartite
arrangement with medical insurance carriers and designated hospitals."

The records of the case, however, fail to impress that there was indeed extinct demand for the medical services
rendered by the ISU. The ISU’s Annual Report for the fiscal years 1986 to 1991, submitted by Dr. Meris to Dr.
Clemente, and uncontroverted by Capitol, shows the following:

Fiscal Year No. of Industrial No of No. of Capitol

Patients Companies Employees

1986-1987 466 11 1445

1987-1988 580 17 1707

1988-1989 676 14 1888

1989-1990 571 16 2731

1990-1991 759 18 232041

If there was extinct demand for the ISU medical services as what Capitol and Dr. Clemente purport to convey, why
the number of client companies of the ISU increased from 11 to 18 from 1986 to 1991, as well as the number of
patients from both industrial corporations and Capitol employees, they did not explain.

The "Analysis of Income and Expenses" adduced by Capitol showing that the ISU incurred losses from July 1990 to
February 1992, to wit:

July 1, 1990 to July 1, 1991 to

June 30, 1991 February 29, 1992

INCOME ₱16, 772.00 ₱35, 236.00

TOTAL EXPENSES ₱225, 583.70 ₱169,244.34

NET LOSS ₱(208,811.70) ₱(134,008.34),42

was prepared by its internal auditor Vicenta Fernandez,43 a relative of Dr. Clemente, and not by an independent
external auditor, hence, not beyond doubt. It is the financial statements audited by independent external auditors
which constitute the normal method of proof of the profit and loss performance of a company.44

At all events, the claimed losses are contradicted by the accounting records of Capitol itself which show that ISU
had increasing revenue from 1989 to 1991.

Year In-Patient Out-Patient Total Income

1989 ₱230,316.38 ₱ 79,477.50 ₱309,793.88

1990 ₱278,438.10 ₱124,256.65 ₱402,694.75

1991 ₱305,126.35 ₱152,920.15 ₱458,046.5045

The foregoing disquisition notwithstanding, as reflected above, the existence of business losses is not required to
justify the closure or cessation of establishment or undertaking as a ground to terminate employment of employees.
Even if the ISU were not incurring losses, its abolition or closure could be justified on other grounds like that
proffered by Capitol – extinct demand. Capitol failed, however, to present sufficient and convincing evidence to
support such claim of extinct demand. In fact, the employees of Capitol submitted a petition46 dated April 21, 1992
addressed to Dr. Clemente opposing the abolition of the ISU.

The closure of ISU then surfaces to be contrary to the provisions of the Labor Code on termination of employment.

The termination of the services of Dr. Meris not having been premised on a just or authorized cause, he is entitled to
either reinstatement or separation pay if reinstatement is no longer viable, and to backwages.

Reinstatement, however, is not feasible in case of a strained employer-employee relationship or when the work or
position formerly held by the dismissed employee no longer exists, as in the instant case.47 Dr. Meris is thus entitled
to payment of separation pay at the rate of one (1) month salary for every year of his employment, with a fraction of
at least six (6) months being considered as one(1) year,48 and full backwages from the time of his dismissal from
April 30, 1992 until the expiration of his term as Chief of ISU or his mandatory retirement, whichever comes first.

The award by the appellate court of moral damages,49 however, cannot be sustained, solely upon the premise that
the employer fired his employee without just cause or due process. Additional facts must be pleaded and proven to
warrant the grant of moral damages under the Civil Code, such as that the act of dismissal was attended by bad
faith or fraud, or was oppressive to labor, or done in a manner contrary to morals, good customs, or public policy;
and of course, that social humiliation, wounded feelings, grave anxiety, etc., resulted therefrom.50 Such
circumstances, however, do not obtain in the instant case. More specifically on bad faith, lack of it is mirrored in Dr.
Clemente’s offer to Dr. Meris to be a consultant of Capitol, despite the abolition of the ISU.

There being no moral damages, the award of exemplary damages does not lie.51

The award for attorney’s fees, however, remains.52

WHEREFORE, the decision of the Court of Appeals dated February 15, 2002 is
hereby AFFIRMED with MODIFICATION. As modified, judgment is hereby rendered ordering Capitol Medical
Center, Inc. to pay Dr. Cesar Meris separation pay at the rate of One (1) Month salary for every year of his
employment, with a fraction of at least Six (6) Months being considered as One (1) Year, full backwages from the
time of his dismissal from April 30, 1992 until the expiration of his term as Chief of the ISU or his mandatory
retirement, whichever comes first; other benefits due him or their money equivalent; and attorney’s fees.

Costs against petitioners.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 192558 February 15, 2012

BITOY JAVIER (DANILO P. JAVIER), Petitioner,

vs.
FLY ACE CORPORATION/FLORDELYN CASTILLO, Respondents.

DECISION

MENDOZA, J.:

This is a petition under Rule 45 of the Rules of Civil Procedure assailing the March 18, 2010 Decision1 of the Court
of Appeals (CA) and its June 7, 2010 Resolution,2 in CA-G.R. SP No. 109975, which reversed the May 28, 2009
Decision3 of the National Labor Relations Commission (NLRC) in the case entitled Bitoy Javier v. Fly Ace/Flordelyn
Castillo,4 holding that petitioner Bitoy Javier (Javier) was illegally dismissed from employment and ordering Fly Ace
Corporation (Fly Ace) to pay backwages and separation pay in lieu of reinstatement.

Antecedent Facts

On May 23, 2008, Javier filed a complaint before the NLRC for underpayment of salaries and other labor standard
benefits. He alleged that he was an employee of Fly Ace since September 2007, performing various tasks at the
respondent’s warehouse such as cleaning and arranging the canned items before their delivery to certain locations,
except in instances when he would be ordered to accompany the company’s delivery vehicles, as pahinante; that he
reported for work from Monday to Saturday from 7:00 o’clock in the morning to 5:00 o’clock in the afternoon; that
during his employment, he was not issued an identification card and payslips by the company; that on May 6, 2008,
he reported for work but he was no longer allowed to enter the company premises by the security guard upon the
instruction of Ruben Ong (Mr. Ong), his superior;5 that after several minutes of begging to the guard to allow him to
enter, he saw Ong whom he approached and asked why he was being barred from entering the premises; that Ong
replied by saying, "Tanungin mo anak mo;" 6 that he then went home and discussed the matter with his family; that
he discovered that Ong had been courting his daughter Annalyn after the two met at a fiesta celebration in Malabon
City; that Annalyn tried to talk to Ong and convince him to spare her father from trouble but he refused to accede;
that thereafter, Javier was terminated from his employment without notice; and that he was neither given the
opportunity to refute the cause/s of his dismissal from work.

To support his allegations, Javier presented an affidavit of one Bengie Valenzuela who alleged that Javier was a
stevedore or pahinante of Fly Ace from September 2007 to January 2008. The said affidavit was subscribed before
the Labor Arbiter (LA).7

For its part, Fly Ace averred that it was engaged in the business of importation and sales of groceries. Sometime in
December 2007, Javier was contracted by its employee, Mr. Ong, as extra helper on a pakyaw basis at an agreed
rate of ₱ 300.00 per trip, which was later increased to ₱ 325.00 in January 2008. Mr. Ong contracted Javier roughly
5 to 6 times only in a month whenever the vehicle of its contracted hauler, Milmar Hauling Services, was not
available. On April 30, 2008, Fly Ace no longer needed the services of Javier. Denying that he was their employee,
Fly Ace insisted that there was no illegal dismissal.8 Fly Ace submitted a copy of its agreement with Milmar Hauling
Services and copies of acknowledgment receipts evidencing payment to Javier for his contracted services bearing
the words, "daily manpower (pakyaw/piece rate pay)" and the latter’s signatures/initials.

Ruling of the Labor Arbiter

On November 28, 2008, the LA dismissed the complaint for lack of merit on the ground that Javier failed to present
proof that he was a regular employee of Fly Ace. He wrote:
Complainant has no employee ID showing his employment with the Respondent nor any document showing that he
received the benefits accorded to regular employees of the Respondents. His contention that Respondent failed to
give him said ID and payslips implies that indeed he was not a regular employee of Fly Ace considering that
complainant was a helper and that Respondent company has contracted a regular trucking for the delivery of its
products.

Respondent Fly Ace is not engaged in trucking business but in the importation and sales of groceries. Since there is
a regular hauler to deliver its products, we give credence to Respondents’ claim that complainant was contracted on
"pakiao" basis.

As to the claim for underpayment of salaries, the payroll presented by the Respondents showing salaries of workers
on "pakiao" basis has evidentiary weight because although the signature of the complainant appearing thereon are
not uniform, they appeared to be his true signature.

xxxx

Hence, as complainant received the rightful salary as shown by the above described payrolls, Respondents are not
liable for salary differentials. 9

Ruling of the NLRC

On appeal with the NLRC, Javier was favored. It ruled that the LA skirted the argument of Javier and immediately
concluded that he was not a regular employee simply because he failed to present proof. It was of the view that
a pakyaw-basis arrangement did not preclude the existence of employer-employee relationship. "Payment by result
x x x is a method of compensation and does not define the essence of the relation. It is a mere method of computing
compensation, not a basis for determining the existence or absence of an employer-employee relationship.10 " The
NLRC further averred that it did not follow that a worker was a job contractor and not an employee, just because the
work he was doing was not directly related to the employer’s trade or business or the work may be considered as
"extra" helper as in this case; and that the relationship of an employer and an employee was determined by law and
the same would prevail whatever the parties may call it. In this case, the NLRC held that substantial evidence was
sufficient basis for judgment on the existence of the employer-employee relationship. Javier was a regular employee
of Fly Ace because there was reasonable connection between the particular activity performed by the employee (as
a "pahinante") in relation to the usual business or trade of the employer (importation, sales and delivery of
groceries). He may not be considered as an independent contractor because he could not exercise any judgment in
the delivery of company products. He was only engaged as a "helper."

Finding Javier to be a regular employee, the NLRC ruled that he was entitled to a security of tenure. For failing to
present proof of a valid cause for his termination, Fly Ace was found to be liable for illegal dismissal of Javier who
was likewise entitled to backwages and separation pay in lieu of reinstatement. The NLRC thus ordered:

WHEREFORE, premises considered, complainant’s appeal is partially GRANTED. The assailed Decision of the
labor arbiter is VACATED and a new one is hereby entered holding respondent FLY ACE CORPORATION guilty of
illegal dismissal and non-payment of 13th month pay. Consequently, it is hereby ordered to pay complainant
DANILO "Bitoy" JAVIER the following:

1. Backwages -₱ 45,770.83

2. Separation pay, in lieu of reinstatement - 8,450.00

3. Unpaid 13th month pay (proportionate) - 5,633.33

TOTAL -₱ 59,854.16

All other claims are dismissed for lack of merit.

SO ORDERED.11
Ruling of the Court of Appeals

On March 18, 2010, the CA annulled the NLRC findings that Javier was indeed a former employee of Fly Ace and
reinstated the dismissal of Javier’s complaint as ordered by the LA. The CA exercised its authority to make its own
factual determination anent the issue of the existence of an employer-employee relationship between the parties.
According to the CA:

xxx

In an illegal dismissal case the onus probandi rests on the employer to prove that its dismissal was for a valid cause.
However, before a case for illegal dismissal can prosper, an employer-employee relationship must first be
established. x x x it is incumbent upon private respondent to prove the employee-employer relationship by
substantial evidence.

xxx

It is incumbent upon private respondent to prove, by substantial evidence, that he is an employee of petitioners, but
he failed to discharge his burden. The non-issuance of a company-issued identification card to private respondent
supports petitioners’ contention that private respondent was not its employee.12

The CA likewise added that Javier’s failure to present salary vouchers, payslips, or other pieces of evidence to
bolster his contention, pointed to the inescapable conclusion that he was not an employee of Fly Ace. Further, it
found that Javier’s work was not necessary and desirable to the business or trade of the company, as it was only
when there were scheduled deliveries, which a regular hauling service could not deliver, that Fly Ace would contract
the services of Javier as an extra helper. Lastly, the CA declared that the facts alleged by Javier did not pass the
"control test."

He contracted work outside the company premises; he was not required to observe definite hours of work; he was
not required to report daily; and he was free to accept other work elsewhere as there was no exclusivity of his
contracted service to the company, the same being co-terminous with the trip only.13 Since no substantial evidence
was presented to establish an employer-employee relationship, the case for illegal dismissal could not prosper.

The petitioners moved for reconsideration, but to no avail.

Hence, this appeal anchored on the following grounds:

I.

WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER
WAS NOT A REGULAR EMPLOYEE OF FLY ACE.

II.

WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER IS
NOT ENTITLED TO HIS MONETARY CLAIMS.14

The petitioner contends that other than its bare allegations and self-serving affidavits of the other employees, Fly
Ace has nothing to substantiate its claim that Javier was engaged on a pakyaw basis. Assuming that Javier was
indeed hired on a pakyaw basis, it does not preclude his regular employment with the company. Even the
acknowledgment receipts bearing his signature and the confirming receipt of his salaries will not show the true
nature of his employment as they do not reflect the necessary details of the commissioned task. Besides, Javier’s
tasks as pahinante are related, necessary and desirable to the line of business by Fly Ace which is engaged in the
importation and sale of grocery items. "On days when there were no scheduled deliveries, he worked in petitioners’
warehouse, arranging and cleaning the stored cans for delivery to clients."15 More importantly, Javier was subject to
the control and supervision of the company, as he was made to report to the office from Monday to Saturday, from
7:00 o’clock in the morning until 5:00 o’clock in the afternoon. The list of deliverable goods, together with the
corresponding clients and their respective purchases and addresses, would necessarily have been prepared by Fly
Ace. Clearly, he was subjected to compliance with company rules and regulations as regards working hours,
delivery schedule and output, and his other duties in the warehouse.16

The petitioner chiefly relied on Chavez v. NLRC,17 where the Court ruled that payment to a worker on a per trip basis
is not significant because "this is merely a method of computing compensation and not a basis for determining the
existence of employer-employee relationship." Javier likewise invokes the rule that, "in controversies between a
laborer and his master, x x x doubts reasonably arising from the evidence should be resolved in the former’s favour.
The policy is reflected is no less than the Constitution, Labor Code and Civil Code."18

Claiming to be an employee of Fly Ace, petitioner asserts that he was illegally dismissed by the latter’s failure to
observe substantive and procedural due process. Since his dismissal was not based on any of the causes
recognized by law, and was implemented without notice, Javier is entitled to separation pay and backwages.

In its Comment,19 Fly Ace insists that there was no substantial evidence to prove employer-employee relationship.
Having a service contract with Milmar Hauling Services for the purpose of transporting and delivering company
products to customers, Fly Ace contracted Javier as an extra helper or pahinante on a mere "per trip basis." Javier,
who was actually a loiterer in the area, only accompanied and assisted the company driver when Milmar could not
deliver or when the exigency of extra deliveries arises for roughly five to six times a month. Before making a
delivery, Fly Ace would turn over to the driver and Javier the delivery vehicle with its loaded company products. With
the vehicle and products in their custody, the driver and Javier "would leave the company premises using their own
means, method, best judgment and discretion on how to deliver, time to deliver, where and [when] to start, and
manner of delivering the products."20

Fly Ace dismisses Javier’s claims of employment as baseless assertions. Aside from his bare allegations, he
presented nothing to substantiate his status as an employee. "It is a basic rule of evidence that each party must
prove his affirmative allegation. If he claims a right granted by law, he must prove his claim by competent evidence,
relying on the strength of his own evidence and not upon the weakness of his opponent."21 Invoking the case
of Lopez v. Bodega City,22 Fly Ace insists that in an illegal dismissal case, the burden of proof is upon the
complainant who claims to be an employee. It is essential that an employer-employee relationship be proved by
substantial evidence. Thus, it cites:

In an illegal dismissal case, the onus probandi rests on the employer to prove that its dismissal of an employee was
for a valid cause. However, before a case for illegal dismissal can prosper, an employer-employee relationship must
first be established.

Fly Ace points out that Javier merely offers factual assertions that he was an employee of Fly Ace, "which are
unfortunately not supported by proof, documentary or otherwise."23 Javier simply assumed that he was an employee
of Fly Ace, absent any competent or relevant evidence to support it. "He performed his contracted work outside the
premises of the respondent; he was not even required to report to work at regular hours; he was not made to
register his time in and time out every time he was contracted to work; he was not subjected to any disciplinary
sanction imposed to other employees for company violations; he was not issued a company I.D.; he was not
accorded the same benefits given to other employees; he was not registered with the Social Security
System (SSS)as petitioner’s employee; and, he was free to leave, accept and engage in other means of livelihood
as there is no exclusivity of his contracted services with the petitioner, his services being co-terminus with the trip
only. All these lead to the conclusion that petitioner is not an employee of the respondents."24

Moreover, Fly Ace claims that it had "no right to control the result, means, manner and methods by which Javier
would perform his work or by which the same is to be accomplished."25 In other words, Javier and the company driver
were given a free hand as to how they would perform their contracted services and neither were they subjected to
definite hours or condition of work.

Fly Ace likewise claims that Javier’s function as a pahinante was not directly related or necessary to its principal
business of importation and sales of groceries. Even without Javier, the business could operate its usual course as it
did not involve the business of inland transportation. Lastly, the acknowledgment receipts bearing Javier’s signature
and words "pakiao rate," referring to his earned salaries on a per trip basis, have evidentiary weight that the LA
correctly considered in arriving at the conclusion that Javier was not an employee of the company.

The Court affirms the assailed CA decision.

It must be noted that the issue of Javier’s alleged illegal dismissal is anchored on the existence of an employer-
employee relationship between him and Fly Ace. This is essentially a question of fact. Generally, the Court does not
review errors that raise factual questions. However, when there is conflict among the factual findings of the
antecedent deciding bodies like the LA, the NLRC and the CA, "it is proper, in the exercise of Our equity jurisdiction,
to review and re-evaluate the factual issues and to look into the records of the case and re-examine the questioned
findings."26 In dealing with factual issues in labor cases, "substantial evidence – that amount of relevant evidence
which a reasonable mind might accept as adequate to justify a conclusion – is sufficient."27

As the records bear out, the LA and the CA found Javier’s claim of employment with Fly Ace as wanting and
deficient. The Court is constrained to agree. Although Section 10, Rule VII of the New Rules of Procedure of the
NLRC28 allows a relaxation of the rules of procedure and evidence in labor cases, this rule of liberality does not mean
a complete dispensation of proof. Labor officials are enjoined to use reasonable means to ascertain the facts
speedily and objectively with little regard to technicalities or formalities but nowhere in the rules are they provided a
license to completely discount evidence, or the lack of it. The quantum of proof required, however, must still be
satisfied. Hence, "when confronted with conflicting versions on factual matters, it is for them in the exercise of
discretion to determine which party deserves credence on the basis of evidence received, subject only to the
requirement that their decision must be supported by substantial evidence."29 Accordingly, the petitioner needs to
show by substantial evidence that he was indeed an employee of the company against which he claims illegal
dismissal.

Expectedly, opposing parties would stand poles apart and proffer allegations as different as chalk and cheese. It is,
therefore, incumbent upon the Court to determine whether the party on whom the burden to prove lies was able to
hurdle the same. "No particular form of evidence is required to prove the existence of such employer-employee
relationship. Any competent and relevant evidence to prove the relationship may be
admitted.http://www.lawphil.net/judjuris/juri2009/may2009/gr_179652_2009.html - fnt31 Hence, while no particular
form of evidence is required, a finding that such relationship exists must still rest on some substantial evidence.
Moreover, the substantiality of the evidence depends on its quantitative as well as its qualitative aspects."30 Although
substantial evidence is not a function of quantity but rather of quality, the x x x circumstances of the instant case
demand that something more should have been proffered. Had there been other proofs of employment, such as x x
x inclusion in petitioner’s payroll, or a clear exercise of control, the Court would have affirmed the finding of
employer-employee relationship."31

In sum, the rule of thumb remains: the onus probandi falls on petitioner to establish or substantiate such claim by
the requisite quantum of evidence.32 "Whoever claims entitlement to the benefits provided by law should establish his
or her right thereto x x x."33 Sadly, Javier failed to adduce substantial evidence as basis for the grant of relief.

In this case, the LA and the CA both concluded that Javier failed to establish his employment with Fly Ace. By way
of evidence on this point, all that Javier presented were his self-serving statements purportedly showing his activities
as an employee of Fly Ace. Clearly, Javier failed to pass the substantiality requirement to support his claim. Hence,
the Court sees no reason to depart from the findings of the CA.

While Javier remains firm in his position that as an employed stevedore of Fly Ace, he was made to work in the
company premises during weekdays arranging and cleaning grocery items for delivery to clients, no other proof was
submitted to fortify his claim. The lone affidavit executed by one Bengie Valenzuela was unsuccessful in
strengthening Javier’s cause. In said document, all Valenzuela attested to was that he would frequently see Javier
at the workplace where the latter was also hired as stevedore.34 Certainly, in gauging the evidence presented by
Javier, the Court cannot ignore the inescapable conclusion that his mere presence at the workplace falls short in
proving employment therein. The supporting affidavit could have, to an extent, bolstered Javier’s claim of being
tasked to clean grocery items when there were no scheduled delivery trips, but no information was offered in this
subject simply because the witness had no personal knowledge of Javier’s employment status in the company.
Verily, the Court cannot accept Javier’s statements, hook, line and sinker.

The Court is of the considerable view that on Javier lies the burden to pass the well-settled tests to determine the
existence of an employer-employee relationship, viz: (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the power to control the employee’s conduct. Of these
elements, the most important criterion is whether the employer controls or has reserved the right to control the
employee not only as to the result of the work but also as to the means and methods by which the result is to be
accomplished.35
In this case, Javier was not able to persuade the Court that the above elements exist in his case. He could not
1avvphi1

submit competent proof that Fly Ace engaged his services as a regular employee; that Fly Ace paid his wages as an
employee, or that Fly Ace could dictate what his conduct should be while at work. In other words, Javier’s
allegations did not establish that his relationship with Fly Ace had the attributes of an employer-employee
relationship on the basis of the above-mentioned four-fold test. Worse, Javier was not able to refute Fly Ace’s
assertion that it had an agreement with a hauling company to undertake the delivery of its goods. It was also baffling
to realize that Javier did not dispute Fly Ace’s denial of his services’ exclusivity to the company. In short, all that
Javier laid down were bare allegations without corroborative proof.

Fly Ace does not dispute having contracted Javier and paid him on a "per trip" rate as a stevedore, albeit on
a pakyaw basis. The Court cannot fail to note that Fly Ace presented documentary proof that Javier was indeed paid
on a pakyaw basis per the acknowledgment receipts admitted as competent evidence by the LA. Unfortunately for
Javier, his mere denial of the signatures affixed therein cannot automatically sway us to ignore the documents
because "forgery cannot be presumed and must be proved by clear, positive and convincing evidence and the
burden of proof lies on the party alleging forgery."36

Considering the above findings, the Court does not see the necessity to resolve the second issue presented.

One final note. The Court’s decision does not contradict the settled rule that "payment by the piece is just a method
of compensation and does not define the essence of the relation."37 Payment on a piece-rate basis does not negate
regular employment. "The term ‘wage’ is broadly defined in Article 97 of the Labor Code as remuneration or
earnings, capable of being expressed in terms of money whether fixed or ascertained on a time, task, piece or
commission basis. Payment by the piece is just a method of compensation and does not define the essence of the
relations. Nor does the fact that the petitioner is not covered by the SSS affect the employer-employee relationship.
However, in determining whether the relationship is that of employer and employee or one of an independent
contractor, each case must be determined on its own facts and all the features of the relationship are to be
considered."38 Unfortunately for Javier, the attendant facts and circumstances of the instant case do not provide the
Court with sufficient reason to uphold his claimed status as employee of Fly Ace.

While the Constitution is committed to the policy of social justice and the protection of the working class, it should
not be supposed that every labor dispute will be automatically decided in favor of labor. Management also has its
rights which are entitled to respect and enforcement in the interest of simple fair play. Out of its concern for the less
privileged in life, the Court has inclined, more often than not, toward the worker and upheld his cause in his conflicts
with the employer. Such favoritism, however, has not blinded the Court to the rule that justice is in every case for the
deserving, to be dispensed in the light of the established facts and the applicable law and doctrine.39

WHEREFORE, the petition is DENIED. The March 18, 2010 Decision of the Court of Appeals and its June 7, 2010
Resolution, in CA-G.R. SP No. 109975, are hereby AFFIRMED.

SO ORDERED.

JOSE CATRAL MENDOZA

Associate Justice

WE CONCUR:
 Republic of the Philippines
SUPREME COURT
Baguio City

FIRST DIVISION

G.R. No. 192998 April 2, 2014

BERNARD A. TENAZAS, JAIME M. FRANCISCO and ISIDRO G. ENDRACA, Petitioners,

vs.
R. VILLEGAS TAXI TRANSPORT and ROMUALDO VILLEGAS, Respondents.

DECISION

REYES, J.:

This is a petition for review on certiorari1 filed under Rule 45 of the Rules of Court, assailing the Decision2 dated
March 11, 2010 and Resolution3 dated June 28, 2010 of the Court of Appeals (CA) in CA-G.R. SP No. 111150,
which affirmed with modification the Decision4 dated June 23, 2009 of the National Labor Relations Commission
(NLRC) in NLRC LAC Case No. 07-002648-08.

The Antecedent Facts

On July 4, 2007, Bernard A. Tenazas (Tenazas) and Jaime M. Francisco (Francisco) filed a complaint for illegal
dismissal against R. Villegas Taxi Transport and/or Romualdo Villegas (Romualdo) and Andy Villegas (Andy)
(respondents). At that time, a similar case had already been filed by Isidro G. Endraca (Endraca) against the same
respondents. The two (2) cases were subsequently consolidated.5

In their position paper,6 Tenazas, Francisco and Endraca (petitioners) alleged that they were hired and dismissed by
the respondents on the following dates:

Name Date of Hiring Date of Dismissal Salary

Bernard A. Tenazas 10/1997 07/03/07 Boundary System

Jaime M. Francisco 04/10/04 06/04/07 Boundary System

Isidro G. Endraca 04/2000 03/06/06 Boundary System7

Relaying the circumstances of his dismissal, Tenazas alleged that on July 1, 2007, the taxi unit assigned to him was
sideswiped by another vehicle, causing a dent on the left fender near the driver seat. The cost of repair for the
damage was estimated at ₱500.00. Upon reporting the incident to the company, he was scolded by respondents
Romualdo and Andy and was told to leave the garage for he is already fired. He was even threatened with physical
harm should he ever be seen in the company’s premises again. Despite the warning, Tenazas reported for work on
the following day but was told that he can no longer drive any of the company’s units as he is already fired.8

Francisco, on the other hand, averred that his dismissal was brought about by the company’s unfounded suspicion
that he was organizing a labor union. He was instantaneously terminated, without the benefit of procedural due
process, on June 4, 2007.9

Endraca, for his part, alleged that his dismissal was instigated by an occasion when he fell short of the required
boundary for his taxi unit. He related that before he was dismissed, he brought his taxi unit to an auto shop for an
urgent repair. He was charged the amount of ₱700.00 for the repair services and the replacement parts. As a result,
he was not able to meet his boundary for the day. Upon returning to the company garage and informing the
management of the incident, his driver’s license was confiscated and was told to settle the deficiency in his
boundary first before his license will be returned to him. He was no longer allowed to drive a taxi unit despite his
persistent pleas.10
For their part, the respondents admitted that Tenazas and Endraca were employees of the company, the former
being a regular driver and the latter a spare driver. The respondents, however, denied that Francisco was an
employee of the company or that he was able to drive one of the company’s units at any point in time.11

The respondents further alleged that Tenazas was never terminated by the company. They claimed that on July 3,
2007, Tenazas went to the company garage to get his taxi unit but was informed that it is due for overhaul because
of some mechanical defects reported by the other driver who takes turns with him in using the same. He was thus
advised to wait for further notice from the company if his unit has already been fixed. On July 8, 2007, however,
upon being informed that his unit is ready for release, Tenazas failed to report back to work for no apparent reason.12

As regards Endraca, the respondents alleged that they hired him as a spare driver in February 2001. They allow him
to drive a taxi unit whenever their regular driver will not be able to report for work. In July 2003, however, Endraca
stopped reporting for work without informing the company of his reason. Subsequently, the respondents learned that
a complaint for illegal dismissal was filed by Endraca against them. They strongly maintained, however, that they
could never have terminated Endraca in March 2006 since he already stopped reporting for work as early as July
2003. Even then, they expressed willingness to accommodate Endraca should he wish to work as a spare driver for
the company again since he was never really dismissed from employment anyway.13

On May 29, 2008, the petitioners, by registered mail, filed a Motion to Admit Additional Evidence.14 They alleged that
after diligent efforts, they were able to discover new pieces of evidence that will substantiate the allegations in their
position paper. Attached with the motion are the following: (a) Joint Affidavit of the petitioners;15 (2) Affidavit of Good
Faith of Aloney Rivera, a co-driver;16 (3) pictures of the petitioners wearing company shirts;17 and (4) Tenazas’
Certification/Record of Social Security System (SSS) contributions.18

The Ruling of the Labor Arbiter

On May 30, 2008, the Labor Arbiter (LA) rendered a Decision,19 which pertinently states, thus:

In the case of complainant Jaime Francisco, respondents categorically denied the existence of an employer-
employee relationship. In this situation, the burden of proof shifts to the complainant to prove the existence of a
regular employment. Complainant Francisco failed to present evidence of regular employment available to all
regular employees, such as an employment contract, company ID, SSS, withholding tax certificates, SSS
membership and the like.

In the case of complainant Isidro Endraca, respondents claim that he was only an extra driver who stopped reporting
to queue for available taxi units which he could drive. In fact, respondents offered him in their Position Paper on
record, immediate reinstatement as extra taxi driver which offer he refused.

In case of Bernard Tenazas, he was told to wait while his taxi was under repair but he did not report for work after
the taxi was repaired. Respondents[,] in their Position Paper, on record likewise, offered him immediate
reinstatement, which offer he refused.

We must bear in mind that the complaint herein is one of actual dismissal. But there was no formal investigations,
no show cause memos, suspension memos or termination memos were never issued. Otherwise stated, there is no
proof of overt act of dismissal committed by herein respondents.

We are therefore constrained to rule that there was no illegal dismissal in the case at bar.

The situations contemplated by law for entitlement to separation pay does [sic] not apply.

WHEREFORE, premises considered, instant consolidated complaints are hereby dismissed for lack of merit.

SO ORDERED.20

The Ruling of the NLRC

Unyielding, the petitioners appealed the decision of the LA to the NLRC. Subsequently, on June 23, 2009, the NLRC
rendered a Decision,21 reversing the appealed decision of the LA, holding that the additional pieces of evidence
belatedly submitted by the petitioners sufficed to establish the existence of employer-employee relationship and
their illegal dismissal. It held, thus:

In the challenged decision, the Labor Arbiter found that it cannot be said that the complainants were illegally
dismissed, there being no showing, in the first place, that the respondent [sic] terminated their services. A portion
thereof reads:

"We must bear in mind that the complaint herein is one of actual dismissal. But there were no formal investigations,
no show cause memos, suspension memos or termination memos were never issued. Otherwise stated, there is no
proof of overt act of dismissal committed by herein respondents.

We are therefore constrained to rule that there was no illegal dismissal in the case at bar."

Issue: [W]hether or not the complainants were illegally dismissed from employment.

It is possible that the complainants’ Motion to Admit Additional Evidence did not reach the Labor Arbiter’s attention
because he had drafted the challenged decision even before they submitted it, and thereafter, his staff attended only
to clerical matters, and failed to bring the motion in question to his attention. It is now up to this Commission to
consider the complainants’ additional evidence. Anyway, if this Commission must consider evidence submitted for
the first time on appeal (Andaya vs. NLRC, G.R. No. 157371, July 15, 2005), much more so must it consider
evidence that was simply overlooked by the Labor Arbiter.

Among the additional pieces of evidence submitted by the complainants are the following: (1) joint affidavit (records,
p. 51-52) of the three (3) complainants; (2) affidavit (records, p. 53) of Aloney Rivera y Aldo; and (3) three (3)
pictures (records, p. 54) referred to by the complainant in their joint affidavit showing them wearing t-shirts bearing
the name and logo of the respondent’s company.

xxxx

WHEREFORE, the decision appealed from is hereby REVERSED. Respondent Rom[u]aldo Villegas doing business
under the name and style Villegas Taxi Transport is hereby ordered to pay the complainants the following (1) full
backwages from the date of their dismissal (July 3, 2007 for Tena[z]as, June 4, 2004 for Francisco, and March 6,
2006 for Endraca[)] up to the date of the finality of this decision[;] (2) separation pay equivalent to one month for
every year of service; and (3) attorney’s fees equivalent to ten percent (10%) of the total judgment awards.

SO ORDERED.22

On July 24, 2009, the respondents filed a motion for reconsideration but the NLRC denied the same in its
Resolution23 dated September 23, 2009.

The Ruling of the CA

Unperturbed, the respondents filed a petition for certiorari with the CA. On March 11, 2010, the CA rendered a
Decision,24 affirming with modification the Decision dated June 23, 2009 of the NLRC. The CA agreed with the
NLRC’s finding that Tenazas and Endraca were employees of the company, but ruled otherwise in the case of
Francisco for failing to establish his relationship with the company. It also deleted the award of separation pay and
ordered for reinstatement of Tenazas and Endraca. The pertinent portions of the decision read as follows:

At the outset, We declare that respondent Francisco failed to prove that an employer-employee relationship exists
between him and R. Transport. If there is no employer-employee relationship in the first place, the duty of R.
Transport to adhere to the labor standards provisions of the Labor Code with respect to Francisco is questionable.

xxxx
Although substantial evidence is not a function of quantity but rather of quality, the peculiar environmental
circumstances of the instant case demand that something more should have been proffered. Had there been other
proofs of employment, such as Francisco’s inclusion in R.R.

Transport’s payroll, this Court would have affirmed the finding of employer-employee relationship. The NLRC,
1âwphi1

therefore, committed grievous error in ordering R. Transport to answer for Francisco’s claims.

We now tackle R. Transport’s petition with respect to Tenazas and Endraca, who are both admitted to be R.
Transport’s employees. In its petition, R. Transport puts forth the theory that it did not terminate the services of
respondents but that the latter deliberately abandoned their work. We cannot subscribe to this theory.

xxxx

Considering that the complaints for illegal dismissal were filed soon after the alleged dates of dismissal, it cannot be
inferred that respondents Tenazas and Endraca intended to abandon their employment. The complainants for
dismissal are, in themselves, pleas for the continuance of employment. They are incompatible with the allegation of
abandonment. x x x.

For R. Transport’s failure to discharge the burden of proving that the dismissal of respondents Tenazas and
Endraca was for a just cause, We are constrained to uphold the NLRC’s conclusion that their dismissal was not
justified and that they are entitled to back wages. Because they were illegally dismissed, private respondents
Tenazas and Endraca are entitled to reinstatement and back wages x x x.

xxxx

However, R. Transport is correct in its contention that separation pay should not be awarded because reinstatement
is still possible and has been offered. It is well[-]settled that separation pay is granted only in instances where
reinstatement is no longer feasible or appropriate, which is not the case here.

xxxx

WHEREFORE, the Decision of the National Labor Relations Commission dated 23 June 2009, in NLRC LAC Case
No. 07-002648-08, and its Resolution dated 23 September 2009 denying reconsideration thereof are AFFIRMED
with MODIFICATION in that the award of Jaime Francisco’s claims is DELETED. The separation pay granted in
favor of Bernard Tenazas and Isidro Endraca is, likewise, DELETED and their reinstatement is ordered instead.

SO ORDERED.25 (Citations omitted)

On March 19, 2010, the petitioners filed a motion for reconsideration but the same was denied by the CA in its
Resolution26 dated June 28, 2010.

Undeterred, the petitioners filed the instant petition for review on certiorari before this Court on July 15, 2010.

The Ruling of this Court

The petition lacks merit.

Pivotal to the resolution of the instant case is the determination of the existence of employer-employee relationship
and whether there was an illegal dismissal. Remarkably, the LA, NLRC and the CA had varying assessment on the
matters at hand. The LA believed that, with the admission of the respondents, there is no longer any question
regarding the status of both Tenazas and Endraca being employees of the company. However, he ruled that the
same conclusion does not hold with respect to Francisco whom the respondents denied to have ever employed or
known. With the respondents’ denial, the burden of proof shifts to Francisco to establish his regular employment.
Unfortunately, the LA found that Francisco failed to present sufficient evidence to prove regular employment such as
company ID, SSS membership, withholding tax certificates or similar articles. Thus, he was not considered an
employee of the company. Even then, the LA held that Tenazas and Endraca could not have been illegally
dismissed since there was no overt act of dismissal committed by the respondents.27
On appeal, the NLRC reversed the ruling of the LA and ruled that the petitioners were all employees of the
company. The NLRC premised its conclusion on the additional pieces of evidence belatedly submitted by the
petitioners, which it supposed, have been overlooked by the LA owing to the time when it was received by the said
office. It opined that the said pieces of evidence are sufficient to establish the circumstances of their illegal
termination. In particular, it noted that in the affidavit of the petitioners, there were allegations about the company’s
practice of not issuing employment records and this was not rebutted by the respondents. It underscored that in a
situation where doubt exists between evidence presented by the employer and the employee, the scales of justice
must be tilted in favor of the employee. It awarded the petitioners with: (1) full backwages from the date of their
dismissal up to the finality of the decision; (2) separation pay equivalent to one month of salary for every year of
service; and (3) attorney’s fees.

On petition for certiorari, the CA affirmed with modification the decision of the NLRC, holding that there was indeed
an illegal dismissal on the part of Tenazas and Endraca but not with respect to Francisco who failed to present
substantial evidence, proving that he was an employee of the respondents. The CA likewise dismissed the
respondents’ claim that Tenazas and Endraca abandoned their work, asseverating that immediate filing of a
complaint for illegal dismissal and persistent pleas for continuance of employment are incompatible with
abandonment. It also deleted the NLRC’s award of separation pay and instead ordered that Tenazas and Endraca
be reinstated.28

"Well-settled is the rule that the jurisdiction of this Court in a petition for review on certiorari under Rule 45 of the
Revised Rules of Court is limited to reviewing only errors of law, not of fact, unless the factual findings complained
of are completely devoid of support from the evidence on record, or the assailed judgment is based on a gross
misapprehension of facts."29 The Court finds that none of the mentioned circumstances is present in this case.

In reviewing the decision of the NLRC, the CA found that no substantial evidence was presented to support the
conclusion that Francisco was an employee of the respondents and accordingly modified the NLRC decision. It
stressed that with the respondents’ denial of employer-employee relationship, it behooved Francisco to present
substantial evidence to prove that he is an employee before any question on the legality of his supposed dismissal
becomes appropriate for discussion. Francisco, however, did not offer evidence to substantiate his claim of
employment with the respondents. Short of the required quantum of proof, the CA correctly ruled that the NLRC’s
finding of illegal dismissal and the monetary awards which necessarily follow such ruling lacked factual and legal
basis and must therefore be deleted.

The action of the CA finds support in Anonas Construction and Industrial Supply Corp., et al. v. NLRC, et al.,30where
the Court reiterated:

[J]udicial review of decisions of the NLRC via petition for certiorari under Rule 65, as a general rule, is confined only
to issues of lack or excess of jurisdiction and grave abuse of discretion on the part of the NLRC. The CA does not
assess and weigh the sufficiency of evidence upon which the LA and the NLRC based their conclusions. The issue
is limited to the determination of whether or not the NLRC acted without or in excess of its jurisdiction, or with grave
abuse of discretion in rendering the resolution, except if the findings of the NLRC are not supported by substantial
evidence.31 (Citation omitted and emphasis ours)

It is an oft-repeated rule that in labor cases, as in other administrative and quasi-judicial proceedings, "the quantum
of proof necessary is substantial evidence, or such amount of relevant evidence which a reasonable mind might
accept as adequate to justify a conclusion."32 "[T]he burden of proof rests upon the party who asserts the affirmative
of an issue."33 Corollarily, as Francisco was claiming to be an employee of the respondents, it is incumbent upon him
to proffer evidence to prove the existence of said relationship.

"[I]n determining the presence or absence of an employer-employee relationship, the Court has consistently looked
for the following incidents, to wit: (a) the selection and engagement of the employee; (b) the payment of wages; (c)
the power of dismissal; and (d) the employer’s power to control the employee on the means and methods by which
the work is accomplished. The last element, the so-called control test, is the most important element."34

There is no hard and fast rule designed to establish the aforesaid elements. Any competent and relevant evidence
to prove the relationship may be admitted. Identification cards, cash vouchers, social security registration,
appointment letters or employment contracts, payrolls, organization charts, and personnel lists, serve as evidence of
employee status.35
In this case, however, Francisco failed to present any proof substantial enough to establish his relationship with the
respondents. He failed to present documentary evidence like attendance logbook, payroll, SSS record or any
personnel file that could somehow depict his status as an employee. Anent his claim that he was not issued with
employment records, he could have, at least, produced his social security records which state his contributions,
name and address of his employer, as his co-petitioner Tenazas did. He could have also presented testimonial
evidence showing the respondents’ exercise of control over the means and methods by which he undertakes his
work. This is imperative in light of the respondents’ denial of his employment and the claim of another taxi operator,
Emmanuel Villegas (Emmanuel), that he was his employer. Specifically, in his Affidavit,36 Emmanuel alleged that
Francisco was employed as a spare driver in his taxi garage from January 2006 to December 2006, a fact that the
latter failed to deny or question in any of the pleadings attached to the records of this case. The utter lack of
evidence is fatal to Francisco’s case especially in cases like his present predicament when the law has been very
lenient in not requiring any particular form of evidence or manner of proving the presence of employer-employee
relationship.

In Opulencia Ice Plant and Storage v. NLRC,37 this Court emphasized, thus:

No particular form of evidence is required to prove the existence of an employer-employee relationship. Any
competent and relevant evidence to prove the relationship may be admitted. For, if only documentary evidence
would be required to show that relationship, no scheming employer would ever be brought before the bar of justice,
as no employer would wish to come out with any trace of the illegality he has authored considering that it should
take much weightier proof to invalidate a written instrument.38

Here, Francisco simply relied on his allegation that he was an employee of the company without any other evidence
supporting his claim. Unfortunately for him, a mere allegation in the position paper is not tantamount to
evidence.39Bereft of any evidence, the CA correctly ruled that Francisco could not be considered an employee of the
respondents.

The CA’s order of reinstatement of Tenazas and Endraca, instead of the payment of separation pay, is also well in
accordance with prevailing jurisprudence. In Macasero v. Southern Industrial Gases Philippines,40 the Court
reiterated, thus:

[A]n illegally dismissed employee is entitled to two reliefs: backwages and reinstatement. The two reliefs provided
1âwphi1

are separate and distinct. In instances where reinstatement is no longer feasible because of strained relations
between the employee and the employer, separation pay is granted. In effect, an illegally dismissed employee is
entitled to either reinstatement, if viable, or separation pay if reinstatement is no longer viable, and backwages.

The normal consequences of respondents’ illegal dismissal, then, are reinstatement without loss of seniority rights,
and payment of backwages computed from the time compensation was withheld up to the date of actual
reinstatement. Where reinstatement is no longer viable as an option, separation pay equivalent to one (1) month
salary for every year of service should be awarded as an alternative. The payment of separation pay is in addition to
payment of backwages.41 (Emphasis supplied)

Clearly, it is only when reinstatement is no longer feasible that the payment of separation pay is ordered in lieu
thereof. For instance, if reinstatement would only exacerbate the tension and strained relations between the parties,
or where the relationship between the employer and the employee has been unduly strained by reason of their
irreconcilable differences, it would be more prudent to order payment of separation pay instead of reinstatement.42

This doctrine of strained relations, however, should not be used recklessly or applied loosely43 nor be based on
impression alone. "It bears to stress that reinstatement is the rule and, for the exception of strained relations to
apply, it should be proved that it is likely that if reinstated, an atmosphere of antipathy and antagonism would be
generated as to adversely affect the efficiency and productivity of the employee concerned."44

Moreover, the existence of strained relations, it must be emphasized, is a question of fact. In Golden Ace Builders v.
Talde,45 the Court underscored:

Strained relations must be demonstrated as a fact, however, to be adequately supported by evidence—substantial

evidence to show that the relationship between the employer and the employee is indeed strained as a necessary
consequence of the judicial controversy.46 (Citations omitted and emphasis ours)
After a perusal of the NLRC decision, this Court failed to find the factual basis of the award of separation pay to the
petitioners. The NLRC decision did not state the facts which demonstrate that reinstatement is no longer a feasible
option that could have justified the alternative relief of granting separation pay instead.

The petitioners themselves likewise overlooked to allege circumstances which may have rendered their
reinstatement unlikely or unwise and even prayed for reinstatement alongside the payment of separation pay in their
position paper.47 A bare claim of strained relations by reason of termination is insufficient to warrant the granting of
separation pay. Likewise, the filing of the complaint by the petitioners does not necessarily translate to strained
relations between the parties. As a rule, no strained relations should arise from a valid and legal act asserting one’s
right.48 Although litigation may also engender a certain degree of hostility, the understandable strain in the parties’
relation would not necessarily rule out reinstatement which would, otherwise, become the rule rather the exception
in illegal dismissal cases.49 Thus, it was a prudent call for the CA to delete the award of separation pay and order for
reinstatement instead, in accordance with the general rule stated in Article 27950 of the Labor Code.

Finally, the Court finds the computation of the petitioners' backwages at the rate of ₱800.00 daily reasonable and
just under the circumstances. The said rate is consistent with the ruling of this Court in Hyatt Taxi Services, Inc. v.
Catinoy,51 which dealt with the same matter.

WHEREFORE, in view of the foregoing disquisition, the petition for review on certiorari is DENIED. The Decision
dated March 11, 2010 and Resolution dated June 28, 2010 of the Court of Appeals in CA-G.R. SP No. 111150 are
AFFIRMED.

SO ORDERED.

BIENVENIDO L. REYES
Associate Justice

WE CONCUR:

MARIA LOURDES P.A. SERENO

Chief Justice
Chairperson

TERESITA J. LEONARDO-DE CASTRO LUCAS P. BERSAMIN

Associate Justice Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been
reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice
 [G.R. No. 173489, February 25, 2013]

ALILEM CREDIT COOPERATIVE, INC., NOW KNOWN AS ALILEM MULTIPURPOSE COOPERATIVE,

INC., Petitioner, v. SALVADOR M. BANDIOLA, JR., Respondents.

DECISION

PERALTA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court filed by petitioner Alilem Credit Cooperative, Inc.
against respondent Salvador M. Bandiola, Jr. assailing the Court of Appeals (CA) Decision1 dated January 16, 2006 and
Resolution2 dated July 5, 2006 in CA-G.R. SP No. 64554.

The case stemmed from the following facts:

Respondent was employed by petitioner as bookkeeper. Petitioner’s Board of Directors (the Board) received a letter from a
certain Napoleon Gao-ay (Napoleon) reporting the alleged immoral conduct and unbecoming behavior of respondent by
having an illicit relationship with Napoleon’s sister, Thelma G. Palma (Thelma). This prompted the Board to conduct a
preliminary investigation.3

During the preliminary investigation, the Board received the following evidence of respondent’s alleged extramarital affair:

1. Melanie Gao-ay’s (Melanie) sworn statement declaring that sometime in December 1996, respondent slept on the
same bed with Thelma in a boarding house in San Fernando, La Union where she (Melanie) and Thelma resided. She
personally witnessed the intimacy of respondent and Thelma when they engaged in lovemaking as they slept in one
room and openly displayed their affection for each other.4

2. Rosita Tegon’s (Rosita) sworn statement that on May 23, 1997, she saw Thelma talk to respondent in petitioner’s
office asking him to accompany her in San Fernando, La Union.5

3. Emma Gao-ay Lubrin’s (Emma, Thelma’s sister) interview wherein she admitted that she and her family confronted
Thelma about the alleged extramarital affair which Thelma allegedly admitted.6

4. Napoleon’s interview with the Board wherein he claimed that their family tried to convince Thelma to end her
extramarital affair with respondent but instead of complying, she in fact lived together with respondent.7

The Board decided to form an Ad Hoc Committee to investigate the charges against respondent yielding the following
additional evidence:

1. Agustina Boteras’ (Agustina) sworn statement that she witnessed a confrontation between Thelma and her sister in
the latter’s residence concerning the alleged extramarital affair. At that time, respondent’s wife was allegedly
present who in fact pleaded Thelma to end her relationship with respondent but she supposedly said “No way!”8]

2. Milagros Villacorte’s sworn statement that while she was at the Bethany Hospital in San Fernando, La Union where
her husband was confined, respondent approached her and asked her to look for Thelma who was then having her
class. When he finally found her, respondent and Thelma met and talked in the hospital premises.9]

3. Julienne Marie L. Dalangey’s certification that on August 9 to 10, 1996, respondent attended a seminar on Internal
Control and Systems Design I at the Northern Luzon Federation of Cooperatives and Development Center (NORLU)
Pension House in Baguio City, together with a lady companion whom he introduced as his wife. Apparently, the lady
was not his wife because at that time, his wife reported for work in the Municipal Hall of Alilem.10]

Respondent, on the other hand, denied the accusation against him. He, instead, claimed that the accusation was a result of
the insecurity felt by some members of the cooperative and of the Board because of his growing popularity owing to his
exemplary record as an employee.11 Thelma executed an affidavit likewise denying the allegations of extra-marital affair.12

Meanwhile, on June 7, 1997, the Board received a petition from about fifty members of the cooperative asking the relief of
respondent due to his illicit affair with Thelma.13

In its Summary Investigation Report, the Ad Hoc Committee concluded that respondent was involved in an extra-marital
affair with Thelma. On July 10, 1997, the Chairman of the Board sent a letter14 to respondent informing him of the existence
of a prima facie case against him for “illicit marital affair, an act that brings discredit to the cooperative organization and a
cause for termination per AMPC (Alilem Multi-Purpose Cooperative) Personnel Policy. Respondent was directed to appear and
be present at the AMPC office for a hearing. He was likewise advised of his right to be assisted by counsel.
On the day of the hearing, respondent requested15 for postponement on the ground that his lawyer was not available. The
request was, however, denied and the hearing proceeded as scheduled.

In a Memorandum16 dated July 16, 1997, respondent was informed of Board Resolution No. 05, series of 199717 embodying
the Board’s decision to terminate his services as bookkeeper of petitioner, effective July 31, 1997, without any compensation
or benefit except the unpaid balance of his regular salary for services actually rendered.18

Aggrieved, respondent filed a Complaint for Illegal Dismissal against petitioner before the Regional Arbitration Branch of the
National Labor Relations Commission (NLRC).19

On April 30, 1998, the Labor Arbiter (LA) dismissed20 respondent’s complaint for lack of merit. The LA concluded that
respondent had been or might still be carrying on an affair with a married woman. The LA found it unforgiving in the case of
a married employee who sleeps with or has illicit relations with another married person for in such case, the employee sullies
not only the reputation of his spouse and his family but the reputation as well of the spouse of his paramour and the latter’s
family.21 As opposed to respondent’s claim that the accusation is a mere fabrication of some of the directors or cooperative
members who were allegedly envious of his growing popularity, the LA gave more credence to the testimonies of petitioner’s
witnesses who were relatives of Thelma and who had no motive to falsely testify because their family reputation was likewise
at a risk of being tarnished.22 The LA, thus, found respondent to have been validly dismissed from employment for violation
of the cooperative’s Personnel Policy, specifically “the commission of acts that bring discredit to the cooperative organization,
especially, but not limited to conviction of any crime, illicit marital affairs, scandalous acts inimical to established and
accepted social mores.” The LA also found no violation of respondent’s right to due process as he was given ample
opportunity to defend himself from the accusation against him.23

On appeal, the NLRC set aside24 the LA decision and rendered a judgment disposed in this wise:

WHEREFORE, the appealed Decision of the Executive Labor Arbiter is SET ASIDE. Judgment is hereby rendered:

1. declaring respondent Alilem Credit Cooperative, Inc. (ACCI) also known as Alilem Multi-Purpose Cooperative (AMPC)
guilty of illegal dismissal for the reasons above-discussed;

2. directing the said respondent to pay complainant Salvador Bandiola, Jr. full backwages computed from the time of
(sic) his wages were withheld until finality of this judgment;

3. directing, on account of strained relationship between the parties, the above-named respondent to pay complainant,
in lieu of reinstatement, separation pay computed at one (1) month pay for every year of service, a fraction of six
(6) months to be computed as one (1) whole year; [and]

4. directing respondent to pay complainant ten (10%) percent attorney’s fees based on the total monetary award.

SO ORDERED.25

The NLRC found petitioner’s Personnel Policy to be of questionable existence and validity because it was unnumbered.26 It
held that even assuming that respondent had an extra-marital affair with a married woman, the latter is not his fellow
worker in petitioner’s business establishment.27 It, thus, concluded that respondent’s dismissal was not founded on any of
the just causes for termination of employment under Article 282 of the Labor Code, as amended.28 It, likewise, declared that
respondent was not afforded his right to his counsel of choice as his request for postponement was not allowed.29 Therefore,
the NLRC declared respondent’s dismissal from employment illegal, entitling him to the payment of backwages, separation
pay, and attorney’s fees.30

Petitioner elevated the matter to the CA, but it failed to obtain a favorable decision. The CA found respondent’s dismissal
being founded on the serious misconduct he allegedly committed by carrying an illicit relationship with a married
woman.31 While considering said act a serious misconduct, it refused to consider it sufficient to justify respondent’s dismissal,
because it was not done in the performance of his duties as would make him unfit to continue working for
petitioner.32 Petitioner’s motion for reconsideration was likewise denied in the assailed July 5, 2006 resolution.

Unsatisfied, petitioner now comes before the Court in this petition for review on certiorari insisting on the validity of
respondent’s dismissal from employment.

We find merit in the petition.

It is undisputed that respondent was dismissed from employment for engaging in extramarital affairs, a ground for
termination of employment stated in petitioner’s Personnel Policy. This basis of termination was made known to respondent
as early as the first communication made by petitioner. In its June 20, 1997 letter, petitioner directed respondent to explain
in writing or personal confrontation why he should not be terminated for violation of Section 4.1.4 of the Personnel
Policy.33 Respondent merely denied the accusation against him34 and did not question the basis of such termination. When
the LA was called upon to decide the illegal dismissal case, it ruled in favor of petitioner and upheld the basis of such
dismissal which is the cited Personnel Policy. The NLRC, however, refused to recognize the existence and validity of
petitioner’s Personnel Policy on which the ground for termination was embodied.35

The existence of the Personnel Policy containing provisions on the grounds for termination of employees was not questioned
by respondent. In his position paper, respondent only assailed the effectivity of the policy, as for him as it was amended on
the same date as the letter-complaints against him. In other words, he claimed that the policy was amended in order to
include therein the ground for his termination to make sure that he is removed from his position.36

We do not subscribe to such an argument.

A comparison of petitioner’s old and new Personnel Policies attached by respondent himself to his Position Paper shows that
under the old policy, one of the grounds for termination of an employee is “commission of acts or commission (sic) of
duties that bring discredit to the organization,37” while under the new policy, one of the grounds is the “commission
of acts that brings (sic) discredit to the cooperative organization, especially, but not limited to, conviction of any
crime, illicit marital affairs, scandalous acts inimical to established and accepted social mores.”38 Contrary to
respondent’s claim, with the amendment of the Personnel Policy, petitioner did not create a new ground for the termination
of employment to make sure that respondent is removed from his position. The quoted ground under the old policy is similar
to that provided for in the new policy. The enumeration containing the specific act of “illicit marital affairs” is not an
additional ground, but an example of an act that brings discredit to the cooperative. It is merely an interpretation of what
petitioner considers as such. It is, thus, clear from the foregoing that engaging in extra-marital affairs is a ground for
termination of employment not only under the new but even under the old Personnel Policy of petitioner. The effectivity of
the policy as to respondent cannot, therefore, be questioned.

To be sure, an employer is free to regulate all aspects of employment.39 It may make reasonable rules and regulations for
the government of its employees which become part of the contract of employment provided they are made known to the
employee.40 In the event of a violation, an employee may be validly terminated from employment on the ground that an
employer cannot rationally be expected to retain the employment of a person whose lack of morals, respect and loyalty to his
employer, regard for his employer’s rules and application of the dignity and responsibility, has so plainly and completely been
bared.41

Applying now the above-discussed ground for termination, we now determine whether respondent was properly dismissed
from employment. In other words, did petitioner adequately prove that respondent indeed engaged in extra-marital affairs,
an act which petitioner considers as would bring discredit to the cooperative?

We answer in the affirmative.

The employer’s evidence consists of sworn statements of either relatives or friends of Thelma and respondent. They either
had direct personal knowledge of the illicit relationship or revealed circumstances indicating the existence of such
relationship. As aptly observed by the LA:

x x x Moreover, the credibility of the persons who bore witness against him can hardly be questioned because some of these
persons are relatives or friends of either [respondent] or his lover. In particular, it is hard to see how Napoleon Gao-ay, the
brother of his lover, Thelma, could have resorted to a lie just to destroy him when the same scandal could also result in
tarnishing the reputation of his own family. The motive of Napoleon in bringing the matter to the attention of the Board of
Directors, after all, was based on ethical grounds – he wanted a stop to the affair because it was a disgrace to the
community.

There is also no reason to doubt the statement of Melanie Gao-ay, the wife of Napoleon, who witnessed the embarrassing
“encounter”, to borrow the term she used, between [respondent] and Thelma in her own boarding house.42

While respondent’s act of engaging in extra--marital affairs may be considered personal to him and does not directly affect
the performance of his assigned task as bookkeeper, aside from the fact that the act was specifically provided for by
petitioner’s Personnel Policy as one of the grounds for termination of employment, said act raised concerns to petitioner as
the Board received numerous complaints and petitions from the cooperative members themselves asking for the removal of
respondent because of his immoral conduct.43

The next question is whether procedural due process was observed in the termination of respondent’s services. “Before the
services of an employee can be validly terminated, the employer must furnish him two written notices: (a) a written notice
served on the employee specifying the ground or grounds for termination, and giving the employee reasonable opportunity to
explain his side; and (b) a written notice of termination served on the employee indicating that upon due consideration of all
the circumstances, grounds have been established to justify his termination.”44 The employer must inform the employee of
the charges against him and to hear his defenses. A full adversarial proceeding is not necessary as the parties may be heard
through pleadings, written explanations, position papers, memorandum or oral argument.45

In this case, respondent was adequately afforded the opportunity to defend himself and explain the accusation against him.
Upon receipt of the complaint, petitioner conducted a preliminary investigation and even created an Ad Hoc Committee to
investigate the matter. Respondent was directed to explain either in writing or by a personal confrontation with the Board
why he should not be terminated for engaging in illicit affair.46 Not only did petitioner give him the opportunity but
respondent in fact informed petitioner that he opted to present his side orally47 and did so as promised when he specifically
denied such allegations before the AdHoc Committee.48 Moreover, respondent was also allowed to peruse the investigation
report prepared by the Ad Hoc Committee and was advised that he was entitled to assistance of counsel.49 Afterwhich,
hearing was conducted. It was only after thorough investigation and proper notice and hearing to respondent that petitioner
decided whether to dismiss the former or not. The decision to terminate respondent from employment was embodied in
Board Resolution No. 05, series of 1997 a copy of which was furnished respondent.50 With this resolution, respondent was
adequately notified of petitioner’s decision to remove him from his position. Respondent cannot now claim that his right to
due process was infringed upon.

WHEREFORE, premises considered, the petition is hereby GRANTED. The Court of Appeals Decision dated January 16, 2006
and Resolution dated July 5, 2006 in CA-G.R. SP No. 64554, are SET ASIDE. The Labor Arbiter’s Decision dated April 30,
1998 in NLRC Case No. RAB-I-08-1144-97 (IS) dismissing respondent Salvador M. Bandiola, Jr.’s complaint against petitioner
Alilem Credit Cooperative, Inc., is REINSTATED.

SO ORDERED.

Velasco, Jr., (Chairperson), Abad, Mendoza, and Leonen, JJ., concur.

Endnotes:
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

CHERRY J. PRICE, STEPHANIE G. DOMINGO AND G.R. No. 178505

LOLITA ARBILERA, Petitioners,
Present:
- versus -
YNARES-SANTIAGO, J.,
INNODATA PHILS. INC.,/ INNODATA CORPORATION, Chairperson,
LEO RABANG AND JANE NAVARETTE, Respondents.
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.

Promulgated:
September 30, 2008

x------------------------------------------------x

DECISION

CHICO-NAZARIO, J.:

This Petition for Review on Certiorari under Rule 45 of the Rules of Court assails the Decision 1 dated 25 September 2006
and Resolution2 dated 15 June 2007 of the Court of Appeals in CA-G.R. SP No. 72795, which affirmed the Decision dated
14 December 2001 of the National Labor Relations Commission (NLRC) in NLRC NCR Case No. 30-03-01274-2000
finding that petitioners were not illegally dismissed by respondents.

The factual antecedents of the case are as follows:

Respondent Innodata Philippines, Inc./Innodata Corporation (INNODATA) was a domestic corporation engaged in the
data encoding and data conversion business. It employed encoders, indexers, formatters, programmers, quality/quantity
staff, and others, to maintain its business and accomplish the job orders of its clients. Respondent Leo Rabang was its
Human Resources and Development (HRAD) Manager, while respondent Jane Navarette was its Project Manager.
INNODATA had since ceased operations due to business losses in June 2002.

Petitioners Cherry J. Price, Stephanie G. Domingo, and Lolita Arbilera were employed as formatters by INNODATA. The
parties executed an employment contract denominated as a "Contract of Employment for a Fixed Period," stipulating that
the contract shall be for a period of one year,3 to wit:

CONTRACT OF EMPLOYMENT FOR A FIXED PERIOD

xxxx

WITNESSETH: That

WHEREAS, the EMPLOYEE has applied for the position of FORMATTER and in the course thereof and represented
himself/herself to be fully qualified and skilled for the said position;

WHEREAS, the EMPLOYER, by reason of the aforesaid representations, is desirous of engaging that the (sic) services of
the EMPLOYEE for a fixed period;

NOW, THEREFORE, for and in consideration of the foregoing premises, the parties have mutually agreed as follows:
TERM/DURATION

The EMPLOYER hereby employs, engages and hires the EMPLOYEE and the EMPLOYEE hereby accepts such
appointment as FORMATTER effective FEB. 16, 1999 to FEB. 16, 2000 a period of ONE YEAR.

xxxx

TERMINATION

6.1 In the event that EMPLOYER shall discontinue operating its business, this CONTRACT shall also ipso facto terminate
on the last day of the month on which the EMPLOYER ceases operations with the same force and effect as is such last
day of the month were originally set as the termination date of this Contract. Further should the Company have no more
need for the EMPLOYEE’s services on account of completion of the project, lack of work (sic) business losses,
introduction of new production processes and techniques, which will negate the need for personnel, and/or overstaffing,
this contract maybe pre-terminated by the EMPLOYER upon giving of three (3) days notice to the employee.

6.2 In the event period stipulated in item 1.2 occurs first vis-à-vis the completion of the project, this contract shall
automatically terminate.

6.3 COMPANY’s Policy on monthly productivity shall also apply to the EMPLOYEE.

6.4 The EMPLOYEE or the EMPLOYER may pre-terminate this CONTRACT, with or without cause, by giving at least
Fifteen – (15) notice to that effect. Provided, that such pre-termination shall be effective only upon issuance of the
appropriate clearance in favor of the said EMPLOYEE.

6.5 Either of the parties may terminate this Contract by reason of the breach or violation of the terms and conditions
hereof by giving at least Fifteen (15) days written notice. Termination with cause under this paragraph shall be effective
without need of judicial action or approval.4

During their employment as formatters, petitioners were assigned to handle jobs for various clients of INNODATA, among
which were CAS, Retro, Meridian, Adobe, Netlib, PSM, and Earthweb. Once they finished the job for one client, they were
immediately assigned to do a new job for another client.

On 16 February 2000, the HRAD Manager of INNODATA wrote petitioners informing them of their last day of work. The
letter reads:

RE: End of Contract

Date: February 16, 2000

Please be informed that your employment ceases effective at the end of the close of business hours on February 16,
2000.5

According to INNODATA, petitioners’ employment already ceased due to the end of their contract.

On 22 May 2000, petitioners filed a Complaint6 for illegal dismissal and damages against respondents. Petitioners claimed
that they should be considered regular employees since their positions as formatters were necessary and desirable to the
usual business of INNODATA as an encoding, conversion and data processing company. Petitioners also averred that the
decisions in Villanueva v. National Labor Relations Commission 7 and Servidad v. National Labor Relations
Commission,8 in which the Court already purportedly ruled "that the nature of employment at Innodata Phils., Inc. is
regular,"9 constituted stare decisis to the present case. Petitioners finally argued that they could not be considered project
employees considering that their employment was not coterminous with any project or undertaking, the termination of
which was predetermined.

On the other hand, respondents explained that INNODATA was engaged in the business of data processing, typesetting,
indexing, and abstracting for its foreign clients. The bulk of the work was data processing, which involved data encoding.
Data encoding, or the typing of data into the computer, included pre-encoding, encoding 1 and 2, editing, proofreading,
and scanning. Almost half of the employees of INNODATA did data encoding work, while the other half monitored quality
control. Due to the wide range of services rendered to its clients, INNODATA was constrained to hire new employees for a
fixed period of not more than one year. Respondents asserted that petitioners were not illegally dismissed, for their
employment was terminated due to the expiration of their terms of employment. Petitioners’ contracts of employment with
INNODATA were for a limited period only, commencing on 6 September 1999 and ending on 16 February
2000.10 Respondents further argued that petitioners were estopped from asserting a position contrary to the contracts
which they had knowingly, voluntarily, and willfully agreed to or entered into. There being no illegal dismissal, respondents
likewise maintained that petitioners were not entitled to reinstatement and backwages.

On 17 October 2000, the Labor Arbiter11 issued its Decision12 finding petitioners’ complaint for illegal dismissal and
damages meritorious. The Labor Arbiter held that as formatters, petitioners occupied jobs that were necessary, desirable,
and indispensable to the data processing and encoding business of INNODATA. By the very nature of their work as
formatters, petitioners should be considered regular employees of INNODATA, who were entitled to security of tenure.
Thus, their termination for no just or authorized cause was illegal. In the end, the Labor Arbiter decreed:

FOREGOING PREMISES CONSIDERED, judgment is hereby rendered declaring complainants’ dismissal illegal and
ordering respondent INNODATA PHILS. INC./INNODATA CORPORATION to reinstate them to their former or equivalent
position without loss of seniority rights and benefits. Respondent company is further ordered to pay complainants their full
backwages plus ten percent (10%) of the totality thereof as attorney’s fees. The monetary awards due the complainants
as of the date of this decision are as follows:

A. Backwages

1. Cherry J. Price

2/17/2000 – 10/17/2000 at 223.50/day

P5,811.00/mo/ x 8 mos. P46,488.00

2. Stephanie Domingo 46,488.00

(same computation)

3. Lolita Arbilera 46,488.00

(same computation)

Total Backwages P139,464.00

B. Attorney’s fees (10% of total award) 13,946.40

Total Award P153,410.40

Respondent INNODATA appealed the Labor Arbiter’s Decision to the NLRC. The NLRC, in its Decision dated 14
December 2001, reversed the Labor Arbiter’s Decision dated 17 October 2000, and absolved INNODATA of the charge of
illegal dismissal.

The NLRC found that petitioners were not regular employees, but were fixed-term employees as stipulated in their
respective contracts of employment. The NLRC applied Brent School, Inc. v. Zamora 13 and St. Theresa’s School of
Novaliches Foundation v. National Labor Relations Commission, 14 in which this Court upheld the validity of fixed-term
contracts. The determining factor of such contracts is not the duty of the employee but the day certain agreed upon by the
parties for the commencement and termination of the employment relationship. The NLRC observed that the petitioners
freely and voluntarily entered into the fixed-term employment contracts with INNODATA. Hence, INNODATA was not
guilty of illegal dismissal when it terminated petitioners’ employment upon the expiration of their contracts on 16 February
2000.

The dispositive portion of the NLRC Decision thus reads:

WHEREFORE, premises considered, the decision appealed from is hereby REVERSED and SET ASIDE and a new one
entered DISMISSING the instant complaint for lack of merit.15
The NLRC denied petitioners’ Motion for Reconsideration in a Resolution dated 28 June 2002. 16

In a Petition for Certiorari under Rule 65 of the Rules of Court filed before the Court of Appeals, petitioners prayed for the
annulment, reversal, modification, or setting aside of the Decision dated 14 December 2001 and Resolution dated 28
June 2002 of the NLRC.lawphil.net

On 25 September 2006, the Court of Appeals promulgated its Decision sustaining the ruling of the NLRC that petitioners
were not illegally dismissed.

The Court of Appeals ratiocinated that although this Court declared in Villanueva and Servidad that the employees of
INNODATA working as data encoders and abstractors were regular, and not contractual, petitioners admitted entering into
contracts of employment with INNODATA for a term of only one year and for a project called Earthweb. According to the
Court of Appeals, there was no showing that petitioners entered into the fixed-term contracts unknowingly and
involuntarily, or because INNODATA applied force, duress or improper pressure on them. The appellate court also
observed that INNODATA and petitioners dealt with each other on more or less equal terms, with no moral dominance
exercised by the former on latter. Petitioners were therefore bound by the stipulations in their contracts terminating their
employment after the lapse of the fixed term.

The Court of Appeals further expounded that in fixed-term contracts, the stipulated period of employment is governing and
not the nature thereof. Consequently, even though petitioners were performing functions that are necessary or desirable
in the usual business or trade of the employer, petitioners did not become regular employees because their employment
was for a fixed term, which began on 16 February 1999 and was predetermined to end on 16 February 2000.

The appellate court concluded that the periods in petitioners’ contracts of employment were not imposed to preclude
petitioners from acquiring security of tenure; and, applying the ruling of this Court in Brent, declared that petitioners’ fixed-
term employment contracts were valid. INNODATA did not commit illegal dismissal for terminating petitioners’
employment upon the expiration of their contracts.

The Court of Appeals adjudged:

WHEREFORE, the instant petition is hereby DENIED and the Resolution dated December 14, 2001 of the National Labor
Relations Commission declaring petitioners were not illegally dismissed is AFFIRMED. 17

The petitioners filed a Motion for Reconsideration of the afore-mentioned Decision of the Court of Appeals, which was
denied by the same court in a Resolution dated 15 June 2007.

Petitioners are now before this Court via the present Petition for Review on Certiorari, based on the following assignment
of errors:

I.

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW AND GRAVE ABUSE OF
DISCRETION WHEN IT DID NOT APPLY THE SUPREME COURT RULING IN THE CASE OF NATIVIDAD &
QUEJADA THAT THE NATURE OF EMPLOYMENT OF RESPONDENTS IS REGULAR NOT FIXED, AND AS
SO RULED IN AT LEAST TWO OTHER CASES AGAINST INNODATA PHILS. INC.

II.

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN RULING THAT THE
STIPULATION OF CONTRACT IS GOVERNING AND NOT THE NATURE OF EMPLOYMENT AS DEFINED BY
LAW.

III.

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO

LACK OF JURISDICTION WHEN IT DID NOT CONSIDER THE EVIDENCE ON RECORD SHOWING THAT
THERE IS CLEAR CIRCUMVENTION OF THE LAW ON SECURITY OF TENURE THROUGH CONTRACT
MANIPULATION.18
The issue of whether petitioners were illegally dismissed by respondents is ultimately dependent on the question of
whether petitioners were hired by INNODATA under valid fixed-term employment contracts.

After a painstaking review of the arguments and evidences of the parties, the Court finds merit in the present Petition.
There were no valid fixed-term contracts and petitioners were regular employees of the INNODATA who could not be
dismissed except for just or authorized cause.

The employment status of a person is defined and prescribed by law and not by what the parties say it should
be.19 Equally important to consider is that a contract of employment is impressed with public interest such that labor
contracts must yield to the common good.20 Thus, provisions of applicable statutes are deemed written into the contract,
and the parties are not at liberty to insulate themselves and their relationships from the impact of labor laws and
regulations by simply contracting with each other.21

Regular employment has been defined by Article 280 of the Labor Code, as amended, which reads:

Art. 280. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has
been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific project or undertaking the completion or termination
of which has been determined at the time of engagement of the employee or where the work or services to be performed
is seasonal in nature and employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph. Provided, That, any
employee who has rendered at least one year of service, whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in which he is employed and his employment shall continue
while such activity exists. (Underscoring ours).

Based on the afore-quoted provision, the following employees are accorded regular status: (1) those who are engaged to
perform activities which are necessary or desirable in the usual business or trade of the employer, regardless of the length
of their employment; and (2) those who were initially hired as casual employees, but have rendered at least one year of
service, whether continuous or broken, with respect to the activity in which they are employed.

Undoubtedly, petitioners belong to the first type of regular employees.

Under Article 280 of the Labor Code, the applicable test to determine whether an employment should be considered
regular or non-regular is the reasonable connection between the particular activity performed by the employee in relation
to the usual business or trade of the employer. 22

In the case at bar, petitioners were employed by INNODATA on 17 February 1999 as formatters. The primary business of
INNODATA is data encoding, and the formatting of the data entered into the computers is an essential part of the process
of data encoding. Formatting organizes the data encoded, making it easier to understand for the clients and/or the
intended end users thereof. Undeniably, the work performed by petitioners was necessary or desirable in the business or
trade of INNODATA.

However, it is also true that while certain forms of employment require the performance of usual or desirable functions and
exceed one year, these do not necessarily result in regular employment under Article 280 of the Labor Code. 23 Under the
Civil Code, fixed-term employment contracts are not limited, as they are under the present Labor Code, to those by nature
seasonal or for specific projects with predetermined dates of completion; they also include those to which the parties by
free choice have assigned a specific date of termination.24

The decisive determinant in term employment is the day certain agreed upon by the parties for the commencement and
termination of their employment relationship, a day certain being understood to be that which must necessarily come,
although it may not be known when. Seasonal employment and employment for a particular project are instances of
employment in which a period, where not expressly set down, is necessarily implied.25

Respondents maintain that the contracts of employment entered into by petitioners with INNDOATA were valid fixed-term
employment contracts which were automatically terminated at the expiry of the period stipulated therein, i.e., 16 February
2000.
The Court disagrees.

While this Court has recognized the validity of fixed-term employment contracts, it has consistently held that this is the
exception rather than the general rule. More importantly, a fixed-term employment is valid only under certain
circumstances. In Brent, the very same case invoked by respondents, the Court identified several circumstances wherein
a fixed-term is anessential and natural appurtenance, to wit:

Some familiar examples may be cited of employment contracts which may be neither for seasonal work nor for specific
projects, but to which a fixed term is an essential and natural appurtenance: overseas employment contracts, for one, to
which, whatever the nature of the engagement, the concept of regular employment with all that it implies does not appear
ever to have been applied, Article 280 of the Labor Code notwithstanding; also appointments to the positions of dean,
assistant dean, college secretary, principal, and other administrative offices in educational institutions, which are by
practice or tradition rotated among the faculty members, and where fixed terms are a necessity without which no
reasonable rotation would be possible. Similarly, despite the provisions of Article 280, Policy Instructions No. 8 of the
Minister of Labor implicitly recognize that certain company officials may be elected for what would amount to fixed
periods, at the expiration of which they would have to stand down, in providing that these officials, "x x may lose their jobs
as president, executive vice-president or vice president, etc. because the stockholders or the board of directors for one
reason or another did not reelect them."26

As a matter of fact, the Court, in its oft-quoted decision in Brent, also issued a stern admonition that where, from the
circumstances, it is apparent that the period was imposed to preclude the acquisition of tenurial security by the employee,
then it should be struck down as being contrary to law, morals, good customs, public order and public policy. 27

After considering petitioners’ contracts in their entirety, as well as the circumstances surrounding petitioners’ employment
at INNODATA, the Court is convinced that the terms fixed therein were meant only to circumvent petitioners’ right to
security of tenure and are, therefore, invalid.

The contracts of employment submitted by respondents are highly suspect for not only being ambiguous, but also for
appearing to be tampered with.

Petitioners alleged that their employment contracts with INNODATA became effective 16 February 1999, and the first day
they reported for work was on 17 February 1999. The Certificate of Employment issued by the HRAD Manager of
INNODATA also indicated that petitioners Price and Domingo were employed by INNODATA on 17 February 1999.

However, respondents asserted before the Labor Arbiter that petitioners’ employment contracts were effective only on 6
September 1999. They later on admitted in their Memorandum filed with this Court that petitioners were originally hired on
16 February 1999 but the project for which they were employed was completed before the expiration of one year.
Petitioners were merely rehired on 6 September 1999 for a new project. While respondents submitted employment
contracts with 6 September 1999 as beginning date of effectivity, it is obvious that in one of them, the original beginning
date of effectivity, 16 February 1999, was merely crossed out and replaced with 6 September 1999. The copies of the
employment contracts submitted by petitioners bore similar alterations.

The Court notes that the attempt to change the beginning date of effectivity of petitioners’ contracts was very crudely
done. The alterations are very obvious, and they have not been initialed by the petitioners to indicate their assent to the
same. If the contracts were truly fixed-term contracts, then a change in the term or period agreed upon is material and
would already constitute a novation of the original contract.

Such modification and denial by respondents as to the real beginning date of petitioners’ employment contracts render the
said contracts ambiguous. The contracts themselves state that they would be effective until 16 February 2000 for a period
of one year. If the contracts took effect only on 6 September 1999, then its period of effectivity would obviously be less
than one year, or for a period of only about five months.

Obviously, respondents wanted to make it appear that petitioners worked for INNODATA for a period of less than one
year. The only reason the Court can discern from such a move on respondents’ part is so that they can preclude
petitioners from acquiring regular status based on their employment for one year. Nonetheless, the Court emphasizes that
it has already found that petitioners should be considered regular employees of INNODATA by the nature of the work they
performed as formatters, which was necessary in the business or trade of INNODATA. Hence, the total period of their
employment becomes irrelevant.
Even assuming that petitioners’ length of employment is material, given respondents’ muddled assertions, this Court
adheres to its pronouncement in Villanueva v. National Labor Relations Commission, 28 to the effect that where a contract
of employment, being a contract of adhesion, is ambiguous, any ambiguity therein should be construed strictly against the
party who prepared it. The Court is, thus, compelled to conclude that petitioners’ contracts of employment became
effective on 16 February 1999, and that they were already working continuously for INNODATA for a year.

Further attempting to exonerate itself from any liability for illegal dismissal, INNODATA contends that petitioners were
project employees whose employment ceased at the end of a specific project or undertaking. This contention is specious
and devoid of merit.

In Philex Mining Corp. v. National Labor Relations Commission, 29 the Court defined "project employees" as those workers
hired (1) for a specific project or undertaking, and wherein (2) the completion or termination of such project has been
determined at the time of the engagement of the employee.

Scrutinizing petitioners’ employment contracts with INNODATA, however, failed to reveal any mention therein of what
specific project or undertaking petitioners were hired for. Although the contracts made general references to a "project,"
such project was neither named nor described at all therein. The conclusion by the Court of Appeals that petitioners were
hired for the Earthweb project is not supported by any evidence on record. The one-year period for which petitioners were
hired was simply fixed in the employment contracts without reference or connection to the period required for the
completion of a project. More importantly, there is also a dearth of evidence that such project or undertaking had already
been completed or terminated to justify the dismissal of petitioners. In fact, petitioners alleged - and respondents failed to
dispute that petitioners did not work on just one project, but continuously worked for a series of projects for various clients
of INNODATA.

In Magcalas v. National Labor Relations Commission,30 the Court struck down a similar claim by the employer therein that
the dismissed employees were fixed-term and project employees. The Court here reiterates the rule that all doubts,
uncertainties, ambiguities and insufficiencies should be resolved in favor of labor. It is a well-entrenched doctrine that in
illegal dismissal cases, the employer has the burden of proof. This burden was not discharged in the present case.

As a final observation, the Court also takes note of several other provisions in petitioners’ employment contracts that
display utter disregard for their security of tenure. Despite fixing a period or term of employment, i.e., one year,
INNODATA reserved the right to pre-terminate petitioners’ employment under the following circumstances:

6.1 x x x Further should the Company have no more need for the EMPLOYEE’s services on account of completion of the
project, lack of work (sic) business losses, introduction of new production processes and techniques, which will negate the
need for personnel, and/or overstaffing, this contract maybe pre-terminated by the EMPLOYER upon giving of three (3)
days notice to the employee.

xxxx

6.4 The EMPLOYEE or the EMPLOYER may pre-terminate this CONTRACT, with or without cause, by giving at least
Fifteen – (15) [day] notice to that effect. Provided, that such pre-termination shall be effective only upon issuance of the
appropriate clearance in favor of the said EMPLOYEE. (Emphasis ours.)

Pursuant to the afore-quoted provisions, petitioners have no right at all to expect security of tenure, even for the
supposedly one-year period of employment provided in their contracts, because they can still be pre-terminated (1) upon
the completion of an unspecified project; or (2) with or without cause, for as long as they are given a three-day notice.
Such contract provisions are repugnant to the basic tenet in labor law that no employee may be terminated except for just
or authorized cause.

Under Section 3, Article XVI of the Constitution, it is the policy of the State to assure the workers of security of tenure and
free them from the bondage of uncertainty of tenure woven by some employers into their contracts of employment. This
was exactly the purpose of the legislators in drafting Article 280 of the Labor Code – to prevent the circumvention by
unscrupulous employers of the employee’s right to be secure in his tenure by indiscriminately and completely ruling out all
written and oral agreements inconsistent with the concept of regular employment.

In all, respondents’ insistence that it can legally dismiss petitioners on the ground that their term of employment has
expired is untenable. To reiterate, petitioners, being regular employees of INNODATA, are entitled to security of tenure. In
the words of Article 279 of the Labor Code:
ART. 279. Security of Tenure. – In cases of regular employment, the employer shall not terminate the services of an
employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall
be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld
from him up to the time of his actual reinstatement.

By virtue of the foregoing, an illegally dismissed employee is entitled to reinstatement without loss of seniority rights and
other privileges, with full back wages computed from the time of dismissal up to the time of actual reinstatement.

Considering that reinstatement is no longer possible on the ground that INNODATA had ceased its operations in June
2002 due to business losses, the proper award is separation pay equivalent to one month pay31 for every year of service,
to be computed from the commencement of their employment up to the closure of INNODATA.

The amount of back wages awarded to petitioners must be computed from the time petitioners were illegally dismissed
until the time INNODATA ceased its operations in June 2002.32

Petitioners are further entitled to attorney’s fees equivalent to 10% of the total monetary award herein, for having been
forced to litigate and incur expenses to protect their rights and interests herein.

Finally, unless they have exceeded their authority, corporate officers are, as a general rule, not personally liable for their
official acts, because a corporation, by legal fiction, has a personality separate and distinct from its officers, stockholders
and members. Although as an exception, corporate directors and officers are solidarily held liable with the corporation,
where terminations of employment are done with malice or in bad faith,33 in the absence of evidence that they acted with
malice or bad faith herein, the Court exempts the individual respondents, Leo Rabang and Jane Navarette, from any
personal liability for the illegal dismissal of petitioners.

WHEREFORE, the Petition for Review on Certiorari is GRANTED. The Decision dated 25 September 2006 and
Resolution dated 15 June 2007 of the Court of Appeals in CA-G.R. SP No. 72795are hereby REVERSED and SET
ASIDE. RespondentInnodata Philippines, Inc./Innodata Corporation is ORDERED to pay petitioners Cherry J. Price,
Stephanie G. Domingo, and Lolita Arbilera: (a) separation pay, in lieu of reinstatement, equivalent to one month pay for
every year of service, to be computed from the commencement of their employment up to the date respondent Innodata
Philippines, Inc./Innodata Corporation ceased operations; (b) full backwages, computed from the time petitioners’
compensation was withheld from them up to the time respondent Innodata Philippines, Inc./Innodata Corporation ceased
operations; and (3) 10% of the total monetary award as attorney’s fees. Costs against respondent Innodata Philippines,
Inc./Innodata Corporation.

SO ORDERED.
G.R. No. 175678

THIRD DIVISION

[ G.R. No. 175678, August 22, 2012 ]

BANK OF THE PHILIPPINE ISLANDS, PETITIONER, VS. BANK OF THE

PHILIPPINE ISLANDS EMPLOYEES UNION- METRO MANILA, 22 AUGUST 2012
RESPONDENT.

DECISION

PERALTA, J.:
For resolution of this Court is the Petition for Review under Rule 45 of the Revised
Rules of Court, dated January 20, 2007, of petitioner Bank of the Philippine Islands
(BPI) which seeks to reverse and set aside the Court of Appeals' (CA) Decision[1] and
Resolution,[2] dated June 8, 2006 and November 29, 2006, respectively, in CA-G.R. SP
No. 83387.

The antecedent facts follow.

Respondent Bank of the Philippine Islands Employees Union-Metro Manila (BPIEU-

MM), a legitimate labor organization and the sole and exclusive bargaining
representative of all the regular rank-and-file employees of petitioner BPI in Metro
Manila and petitioner BPI have an existing Collective Bargaining Agreement
(CBA)[3] which took effect on April 1, 2001. The CBA provides for loan benefits and
relatively low interest rates. The said provisions state:

Article VIII - Fringe Benefits

xxxx

Section 14. Multi-Purpose Loan, Real Estate Secured Housing Loan and Car Loan. -
The Bank agrees to continue and maintain its present policy and practice, embodied in
its Collective Bargaining Agreement with the Union which expired on 31 March 2001,
extending to qualified regular employees the multi-purpose and real estate secured
housing loans, subject to the increased limits and provisions hereinbelow, to wit:

(a) Multi-Purpose Loan not exceeding FORTY THOUSAND PESOS (P40,000.00),

payable within the period not exceeding three (3) years via semi-monthly salary
deductions, with interest at the rate of eight percent (8%) per annum computed on the
diminishing balance.

(b) Real Estate-Secured Housing Loan not exceeding FOUR HUNDRED FIFTY
THOUSAND " PESOS (P450,000.00), payable over a period not exceeding fifteen (15)
years via semi-monthly salary deductions, with interest at the rate of nine percent (9%)
per annum computed on the diminishing balance.

The rate of interest on real estate secured loans, however, may be reduced to six
percent (6%) per annum, subject to the following conditions:

1. If the loan is accepted for coverage by the Home Insurance and Guaranty
Corporation (HIGC).

2. The HIGC premium shall be paid by the borrower.

3. The borrower procures a Mortgage Redemption Insurance coverage from an

insurance company selected by the BANK.

4. The BANK may increase the six percent (6%) interest if the HIGC or the Government
imposes new conditions or restrictions necessitating a higher interest in order to
maintain the BANK'S position before such conditions or restrictions were imposed.

5. Such other terms or conditions imposed or which may be imposed by the HIGC.

6. It is distinctly understood that the rate of interest shall automatically revert to nine
percent (9%) per annum upon cancellation of the HIGC coverage for any cause.

The BANK shall make strong representations with the Bangko Sentral ng Pilipinas for a
second upgrade and/or availment under the Housing Loan Program.

(c) Car Loan. - The BANK shall submit a revised plan for the approval of the Bangko
Sentral ng Pilipinas which shall incorporate a car loan program in its existing Housing
Loan Program. The said car loan shall be a sub-limit under the program such that any
availment thereof shall operate to decrease the available housing loan limit. Therefore,
the combined amount of both housing and car loans that may be availed of shall not
exceed FOUR HUNDRED FIFTY THOUSAND PESOS (P450,000.00). This
supplemental revision of the loan program shall be subject to the rules and regulations
{e.g., amount of sub-limit, credit ratio, type and age of vehicle, interest rate, etc.) which
the BANK may promulgate, and to the terms of the approval of the Bangko Sentral ng
Pilipinas.

The multi-purpose and housing loans stated in the next preceding paragraphs, as well
as the car loan which shall be incorporated in the housing loan program, shall be
subject further to the applicable provisions, guidelines and restrictions set forth in the
Central Bank Circular No. 561, as amended by Central Bank Circular No. 689, and to
the rules, regulations and policies of the BANK on such loans insofar as they do not
violate the provisions, guidelines and restrictions set forth in said Central Bank
Circular No. 561, as amended.

Section 15. Emergency Loans. - The BANK agrees to increase the amount of emergency
loans assistance, upon approval by the Central Bank of the Philippines, from a
maximum amount of Ten Thousand Pesos (PI 0,000.00) to a maximum amount of
Fifteen Thousand Pesos (P15,000.00) to qualified employees intended to cover
emergencies only, i.e., expenses incurred but could not be foreseen such as those
arising from natural calamities, emergency medical treatment and/or hospitalization of
an employee and/or his immediate family and other genuine emergency cases of
serious hardship as the BANK may determine. Hospital expenses for caesarian delivery
of a female employee or an employee's wife not covered by the Group Hospitalization
Insurance Plan shall qualify for the emergency loan.

Emergency loans shall be playable in twenty-four (24) months via semi-monthly salary
deductions and shall be charged interest at the minimal rate of Seven percent (7%) per
annum for the first P10,000.00 and Nine percent (9%) for the additional P5.000.00
computed on the diminishing balance. The emergency loan assistance program shall be
governed by the rules, regulations and policies of the BANK and such amendments or
modifications thereof which the BANK may issue from time to time.[4]

Thereafter, petitioner issued a "no negative data bank policy"[5] for the
implementation/availment of the manpower loans which the respondent objected to,
thus, resulting into labor-management dialogues. Unsatisfied with the result of those
dialogues, respondent brought the matter to the grievance machinery and afterwards,
the issue, not having been resolved, the parties raised it to the Voluntary Arbitrator.

In his decision, the Voluntary Arbitrator found merit in the respondent's cause. Hence,
the dispositive portion of the said decision reads as follows:

WHEREFORE, viewed in the light of the foregoing circumstances, this Arbitrator

hereby rules:

1. That the imposition of the NO NEGATIVE DATA BANK as a new condition for the
implementation and availment of the manpower loan benefits by the employees
evidently violates the CBA;

2. That all employees who were not allowed or deprived of the manpower loan benefits
due to the NO NEGATIVE DATA BANK POLICY be immediately granted in accordance
with their respective loan benefits applied for;
3. That the respondent herein is ordered likewise to pay ten percent (10%) of the total
amount of all loans to be granted to all employees concerned as Attorney's Fees; and

4. That the parties herein are directed to report compliance with the above directives
within ten (10) days from receipt of this ORDER.

SO ORDERED.[6]

Aggrieved, petitioner appealed the case to the CA via Rule 43, but the latter affirmed
the decision of the Voluntary Arbitrator with the modification that the award of
attorney's fees be deleted. The dispositive portion states:

WHEREFORE, premises considered, the Voluntary Arbitrator's Decision dated April 5,

2004 is hereby AFFIRMED with the MODIFICATION that the award of attorney's fees
is hereby deleted.

SO ORDERED.[7]
Petitioner filed a motion for reconsideration, but it was denied in a Resolution[8] dated
November 29, 2006.

Hence, the present petition.

Petitioner raises the following arguments:

A. The "No NDB policy" is a valid and reasonable requirement that is consistent with
sound banking practice and is meant to inculcate among officers and employees of the
petitioner the need for fiscal responsibility and discipline, especially in an industry
where the element of trust is paramount.

B. The "No NDB policy" does not violate the parties' Collective Bargaining Agreement.

C. The "No NDB policy" conforms to existing BSP regulations and circulars, and to safe
and sound banking practices.[9]

Respondent, on the other hand, claims that the petition did not comply with Section 4,
Rule 45 of the Revised Rules of Court and must be dismissed outright in accordance
with Section 5 of the same rule; that the CA did not commit any reversible error in the
questioned judgment to warrant the exercise of its discretionary appellate jurisdiction;
and that the Voluntary Arbitrator and the CA duly passed upon the same issues raised
in the instant petition and their decisions are based on substantial evidence and are in
accordance with law and jurisprudence.[10]
Tn its Reply[11] dated September 21, 2007, petitioner reiterates the issues it presented in
its petition. It also argues that the present petition must not be dismissed based on
mere technicality.

Subsequently, the parties submitted their respective memoranda.

Petitioner's arguments are mere rehash of those it raised in the CA. It insists that the
rationale behind the use of the "no negative data bank policy" aims to encourage
employees of a banking institution to exercise the highest standards of conduct,
considering the bank's fiduciary relationship with its depositors and clients. It likewise
contends that a scrutiny of the CBA reveals an express conformity to petitioner's
prerogative to issue policies that would guide the parties in the availment of manpower
loans under the CBA.

Furthermore, petitioner avers that the subject policy does not only conform to the
provisions of the parties' CBA, but it is also in harmony with the circulars and
regulations of the Bangko Sentral ng Pilipinas.

The petition lacks merit.

In a petition for review on certiorari, this Court's jurisdiction is limited to reviewing

errors of law in the absence of any showing that the factual findings complained of are
devoid of support in the records or are glaringly erroneous.[13] Firm is the doctrine that
this Court is not a trier of facts, and this applies with greater force in labor cases.[14] The
issues presented by the petitioner are factual in nature. Nevertheless, the CA
committed no error in its questioned decision and resolution.

A CBA refers to the negotiated contract between a legitimate labor organization and the
employer concerning wages, hours of work and all other terms and conditions of
employment in a bargaining unit, including mandatory provisions for grievances and
arbitration machineries.[15] As in all other contracts, there must be clear indications
that the parties reached a meeting of the minds.[16] Therefore, the terms and conditions
of a CBA constitute the law between the parties.[17]

The CBA in this case contains no provision on the "no negative data bank policy" as a
prerequisite in the entitlement of the benefits it set forth for the employees. In fact, a
close reading of the CBA would show that the terms and conditions contained therein
relative to the availment of the loans are plain and clear, thus, all they need is the
proper implementation in order to reach their objective. The CA was, therefore, correct
when it ruled that, although it can be said that petitioner is authorized to issue rules
and regulations pertinent to the availment and administration of the loans under the
CBA, the additional rules and regulations, however, must not impose new conditions
which are not contemplated in the CBA and should be within the realm of
reasonableness. The "no negative data bank policy" is a new condition which is never
contemplated in the CBA and at some points, unreasonable to the employees because it
provides that before an employee or his/her spouse can avail of the loan benefits under
the CBA, the said employee or his/her spouse must not be listed in the negative data
bank, or if previously listed therein, must obtain a clearance at least one year or six
months as the case may be, prior to a loan application.

It must be remembered that negotiations between an employer and a union transpire

before they agree on the terms and conditions contained in the CBA. If the petitioner,
indeed, intended to include a "no negative data bank policy" in the CBA, it should have
presented such proposal to the union during the negotiations. To include such policy
after the effectivity of the CBA is deceptive and goes beyond the original agreement
between the contracting parties.

This Court also notes petitioner's argument that the "no negative data bank policy" is
intended to exact a high standard of conduct from its employees. However, the terms
and conditions of the CBA must prevail. Petitioner can propose the inclusion of the said
policy upon the expiration of the CBA, during the negotiations for a new CBA, but in
the meantime, it has to honor the provisions of the existing CBA.

Article 1702 of the New Civil Code provides that, in case of doubt, all labor legislation
and all labor contracts shall be construed in favor of the safety and decent living of the
laborer. Thus, this Court has ruled that any doubt or ambiguity in the contract between
management and the union members should be resolved in favor of the
latter.[18] Therefore, there is no doubt, in this case, that the welfare of the laborers
stands supreme.

WHEREFORE, the Petition for Review under Rule 45 of the Revised Rules of Court,
dated January 20, 2007, of petitioner Bank of the Philippine Islands, is
hereby DENIED and the Court of Appeals' Decision and Resolution, dated June 8,
2006 and November 29, 2006, respectively, are hereby AFFIRMED.

SO ORDERED.

Velasco, Jr., (Chairperson), Abad, Mendoza, and Perlas-Bernabe, JJ., concur.

 G.R. No. 192601, June 03, 2013

PHILIPPINE JOURNALISTS, INC., Petitioner, v. JOURNAL EMPLOYEES UNION (JEU), FOR ITS UNION MEMBER,
MICHAEL ALFANTE, Respondents.

DECISION

BERSAMIN, J.:

The coverage of the term legal dependent as used in a stipulation in a collective bargaining agreement (CBA) granting
funeral or bereavement benefit to a regular employee for the death of a legal dependent, if the CBA is silent about it, is to be
construed as similar to the meaning that contemporaneous social legislations have set. This is because the terms of such
social legislations are deemed incorporated in or adopted by the CBA.

The decision of the Court of Appeals (CA) under review summarizes the factual and procedural antecedents, as follows: c ralavvon linelaw lib rary

Complainant Judith Pulido alleged that she was hired by respondent as proofreader on 10 January 1991; that she was
receiving a monthly basic salary of P15,493.66 plus P155.00 longevity pay plus other benefits provided by law and their
Collective Bargaining Agreement; that on 21 February 2003, as union president, she sent two letters to President Gloria
Arroyo, regarding their complaint of mismanagement being committed by PIJ executive; that sometime in May 2003, the
union was furnished with a letter by Secretary Silvestre Afable, Jr. head of Presidential Management Staff (PMS), endorsing
their letter-complaint to Ombudsman Simeon V. Marcelo; that respondents took offense and started harassments to
complainant union president; that on 30 May 2003, complainant received a letter from respondent Fundador Soriano,
International Edition managing editor, regarding complainant’s attendance record; that complainant submitted her reply to
said memo on 02 June 2003; that on 06 June 2003, complainant received a memorandum of reprimand; that on 04 July
2003, complainant received another memo from Mr. Soriano, for not wearing her company ID, which she replied the next
day 05 July 2003; that on 04 August 2003, complainant again received a memo regarding complainant’s tardiness; that on
05 August 2003, complainant received another memorandum asking her to explain why she should not be accused of fraud,
which she replied to on 07 August 2003; and that on the same day between 3:00 to 4:00 P.M., Mr. Ernesto “Estong” San
Agustin, a staff of HRD handed her termination paper.

Complainant added that in her thirteen (13) years with the company and after so many changes in its management and
executives, she had never done anything that will cause them to issue a memorandum against her or her work attitude,
more so, reasons to terminate her services; that she got dismissed because she was the Union President who was very active
in defending and pursuing the rights of her union members, and in fighting against the abuses of respondent Corporate
Officers; and that she got the ire of respondents when the employees filed a complaint against the Corporate Officers before
Malacañang and which was later indorsed to the Office of the Ombudsman.

The second complainant Michael L. Alfante alleged that he started to work with respondents as computer technician at
Management Information System under manager Neri Torrecampo on 16 May 2000; that on 15 July 2001, he was
regularized receiving a monthly salary of P9,070.00 plus other monetary benefits; that sometime in 2001, Rico Pagkalinawan
replaced Torrecampo, which was opposed by complainant and three other co-employees; that Pagkalinawan took offense of
their objection; that on 22 October 2002, complainant Alfante received a memorandum from Pagkalinawan regarding his
excessive tardiness; that on 10 June 2003, complainant Alfante received a memorandum from Executive Vice-President
Arnold Banares, requiring him to explain his side on the evaluation of his performance submitted by manager Pagkalinawan;
that one week after complainant submitted his explanation, he was handed his notice of dismissal on the ground of “poor
performance”; and that complainant was dismissed effective 28 July 2003.

Complainant Alfante submitted that he was dismissed without just cause.

Respondents, in their position paper, averred that complainants Pulido and Alfante were dismissed for cause and with due
process.

With regard to complainant Pulido, respondents averred that in a memorandum dated 30 May 2003, directed complainant to
explain her habitual tardiness, at least 75 times from January to May of 2003. In a memorandum, dated 06 June 2003,
directed complainant to observe the 3 p.m. rule to avoid grammatical lapses, use of stale stories just to beat the 10:00 p.m.
deadline. In the same memorandum complainant was given the warning that any repeated violation of the rules shall be
dealt with more severely. Once again, in a memorandum, dated 04 August 2003, complainant Pulido was required to explain
why no disciplinary action should be taken against her for habitual tardiness – 18 times out of the 23 reporting days during
the period from 27 June – 27 July 2003 and on 05 August 2003, complainant was directed to explain in writing why
complainant should not be administratively sanctioned for committing fraud or attempting to commit fraud against
respondents. Respondents found complainant’s explanations unsatisfactory. On 07 August 2003, respondents dismissed
complainant Pulido for habitual tardiness, gross insubordination, utter disrespect for superiors, and committing fraud or
attempting to commit fraud which led to the respondents’ loss of confidence upon complainant Pulido.

In case of complainant Alfante, respondents averred in defense that complainant was dismissed for “poor performance” after
an evaluation by his superior, and after being forewarned that complainant may be removed if there was no showing of
improvement in his skills and knowledge on current technology.
In both instances, respondents maintained that they did not commit any act of unfair labor practices; that they did not
commit acts tantamount to interfering, restraining, or coercing employees in the exercise of their right to self-organization.

Respondents deny liabilities as far as complainants’ monetary claims are concerned. Concerning violations of the provision on
wage distortion under Wage Order No. 9, respondents stressed that complainants were not affected since their salary is way
over the minimum wage.

With respect to the alleged non-adjustment of longevity pay and burial aid, respondent PJI pointed out that it complies with
the provisions of the CBA and that both complainants have not claimed for the burial aid.

Respondents put forward the information that the alleged non-payment of rest days – every Monday for the past three (3)
years is a matter that is still at issue in NLRC Case No. 02-0402973-93, which case is still pending before this Commission.

Respondents asserted that the respondents Arturo Dela Cruz, Bobby Capco, Arnold Banares, Ruby Ruiz-Bruno and Fundador
Soriano should not be held liable on account of complainants’ dismissal as they merely acted as agents of respondent PJI.1

Upon the foregoing backdrop, Labor Arbiter Corazon C. Borbolla rendered her decision on March 29, 2006, disposing
thusly:cralavvon linel awlib rary

WHEREFORE, foregoing premises considered, judgment is hereby rendered, finding complainant Judith Pulido to have been
illegally dismissed. As such, she is entitled to reinstatement and backwages from 07 August 2003 up to her actual or payroll
reinstatement. To date, complainant’s backwages is P294,379.54.

Respondent Philippine Journalist, Inc. is hereby ordered to pay complainant Judith Pulido her backwages from 07 August
2003 up to her actual or payroll reinstatement and to reinstate her to her former position without loss of seniority right.

Respondent is further ordered to submit a report to this Office on complainant’s reinstatement ten (10) days from receipt of
this decision.

The charge of illegal dismissal by Michael Alfante is hereby dismissed for lack of merit.

The charge of unfair labor practice is dismissed for lack of basis.

SO ORDERED.2

Complainant Michael Alfante (Alfante), joined by his labor organization, Journal Employees Union (JEU), filed a partial appeal
in the National Labor Relations Commission (NLRC).3

In the meantime, on May 10, 2006, petitioner and Judith Pulido (Pulido), the other complainant, jointly manifested to the
NLRC that the decision of March 29, 2006 had been fully satisfied as to Pulido under the following terms, namely: (a) she
would be reinstated to her former position as editorial staffmember, or an equivalent position, without loss of seniority rights,
effective May 15, 2006; (b) she would go on maternity leave, and report to work after giving birth; (c) she would be entitled
to backwages of P130,000.00; and (d) she would execute the quitclaim and release on May 11, 2006 in favor of
petitioner. 4 This left Alfante as the remaining complainant.

On January 31, 2007, the NLRC rendered its decision dismissing the partial appeal for lack of merit.5

JEU and Alfante moved for the reconsideration of the decision, but the NLRC denied their motion on April 24, 2007.6

Thereafter, JEU and Alfante assailed the decision of the NLRC before the CA on certiorari (C.A.-G.R. SP No. 99407).

On February 5, 2010, the CA promulgated its decision in C.A.-G.R. SP No. 99407,7 decreeing: cra lavvonli nelawli bra ry

WHEREFORE, premises considered, the instant petition is PARTLY GRANTED.

The twin Resolutions dated January 31, 2007 and April 24, 2007, respectively, of the Third Division of the National Labor
Relations Commission (NLRC), in NLRC NCR CA No. 048785-06 (NLRC NCR Case No. 00-10-11413-04), are MODIFIED insofar
as the funeral or bereavement aid is concerned, which is hereby GRANTED, but only after submission of conclusive proofs
that the deceased is a parent, either father or mother, of the employees concerned, as well as the death certificate to
establish the fact of death of the deceased legal dependent.

The rest of the findings of fact and law in the assailed Resolutions are hereby AFFIRMED.

SO ORDERED.

Both parties moved for reconsideration, but the CA denied their respective motions for reconsideration on June 2, 2010.8

JEU and Alfante appealed to the Court (G.R. No. 192478) to challenge the CA’s dispositions regarding the legality of: (a)
Alfante’s dismissal; (b) the non-compliance with Minimum Wage Order No. 9; and (c) the non-payment of the rest day.9

On August 18, 2010, the Court denied due course to the petition in G.R. No. 192478 for failure of petitioners to sufficiently
show that the CA had committed any reversible error to warrant the Court’s exercise of its discretionary appellate
jurisdiction.10

The Court denied with finality JEU and Alfante’s ensuing motion for reconsideration through the resolution of December 8,
2010.11 The entry of judgment in G.R. No. 192478 issued in due course on February 1, 2011.12

On its part, petitioner likewise appealed (G.R. No. 192601), seeking the review of the CA’s disposition in the decision of
February 5, 2010 on the granting of the funeral and bereavement aid stipulated in the CBA.

In its petition for review, petitioner maintained that under Section 4, Article XIII of the CBA, funeral and bereavement aid
should be granted upon the death of a legal dependent of a regular employee; that consistent with the definition provided by
the Social Security System (SSS), the term legal dependentreferred to the spouse and children of a married regular
employee, and to the parents and siblings, 18 years old and below, of a single regular employee;13 that the CBA considered
the term dependents to have the same meaning as beneficiaries, as provided in Section 5, Article XIII of the CBA on the
payment of death benefits;14 that its earlier granting of claims for funeral and bereavement aid without regard to the
foregoing definition of the legal dependents of married or single regular employees did not ripen into a company policy whose
unilateral withdrawal would constitute a violation of Article 100 of the Labor Code,15 the law disallowing the non-diminution of
benefits;16 that it had approved only four claims from 1999 to 2003 based on its mistaken interpretation of the term legal
dependents, but later corrected the same in 2000;17 that the grant of funeral and bereavement aid for the death of an
employee’s legal dependent, regardless of the employee’s civil status, did not occur over a long period of time, was not
consistent and deliberate, and was partly due to its mistake in appreciating a doubtful question of law; and that its denial of
subsequent claims did not amount to a violation of the law against the non-diminution of benefits.18

In their comment,19 JEU and Alfante countered that the CBA was a bilateral contractual agreement that could not be
unilaterally changed by any party during its lifetime; and that the grant of burial benefits had already become a company
practice favorable to the employees, and could not anymore be reduced, diminished, discontinued or eliminated by
petitioner.

Issue

In view of the entry of judgment issued in G.R. No. 192478, JEU and Alfante’s submissions on the illegality of his dismissal,
the non-payment of his rest days, and the violation of Minimum Wage Order No. 9 shall no longer be considered and passed
upon.

The sole remaining issue is whether or not petitioner’s denial of respondents’ claims for funeral and bereavement aid granted
under Section 4, Article XIII of their CBA constituted a diminution of benefits in violation of Article 100 of the Labor Code.

Ruling

The petition for review lacks merit.

The nature and force of a CBA are delineated in Honda Phils., Inc. v. Samahan ng Malayang Manggagawa sa
Honda,20 thuswise: cralavvon linelawl ibra ry

A collective bargaining agreement (or CBA) refers to the negotiated contract between a legitimate labor organization and the
employer concerning wages, hours of work and all other terms and conditions of employment in a bargaining unit. As in all
contracts, the parties in a CBA may establish such stipulations, clauses, terms and conditions as they may deem convenient
provided these are not contrary to law, morals, good customs, public order or public policy. Thus, where the CBA is clear and
unambiguous, it becomes the law between the parties and compliance therewith is mandated by the express policy of the
law.
Accordingly, the stipulations, clauses, terms and conditions of the CBA, being the law between the parties, must be complied
with by them.21 The literal meaning of the stipulations of the CBA, as with every other contract, control if they are clear and
leave no doubt upon the intention of the contracting parties.22

Here, a conflict has arisen regarding the interpretation of the term legal dependent in connection with the grant of funeral
and bereavement aid to a regular employee under Section 4, Article XIII of the CBA,23which stipulates as follows: cralavvon line lawlib rary

SECTION 4. Funeral/Bereavement Aid. The COMPANY agrees to grant a funeral/bereavement aid in the following
instances:cralavvonl inelawl ibra ry

a. Death of a regular employee in line of duty – P50,000

b. Death of a regular employee not in line of duty – P40,000

c. Death of legal dependent of a regular employee – P15,000. (Emphasis supplied)

Petitioner insists that notwithstanding the silence of the CBA, the term legal dependent should follow the definition of it under
Republic Act (R.A.) No. 8282 (Social Security Law),24 so that in the case of a married regular employee, his or her legal
dependents include only his or her spouse and children, and in the case of a single regular employee, his or her legal
dependents include only his or her parents and siblings, 18 years old and below; and that the term dependents has the same
meaning as beneficiariesas used in Section 5, Article XIII of the CBA.

We cannot agree with petitioner’s insistence.

Social legislations contemporaneous with the execution of the CBA have given a meaning to the term legal dependent. First
of all, Section 8(e) of the Social Security Law provides that a dependent shall be the following, namely: (a) the legal spouse
entitled by law to receive support from the member; (b) the legitimate, legitimated, or legally adopted, and illegitimate child
who is unmarried, not gainfully employed and has not reached 21 of age, or, if over 21 years of age, is congenitally or while
still a minor has been permanently incapacitated and incapable of self-support, physically or mentally; and (c) the parent
who is receiving regular support from the member. Secondly, Section 4(f) of R.A. No. 7875, as amended by R.A. No.
9241,25 enumerates who are the legal dependents, to wit: (a) the legitimate spouse who is not a member; (b) the unmarried
and unemployed legitimate, legitimated, illegitimate, acknowledged children as appearing in the birth certificate; legally
adopted or step-children below 21 years of age; (c) children who are 21 years old and order but suffering from congenital
disability, either physical or mental, or any disability acquired that renders them totally dependent on the member of our
support; and (d) the parents who are 60 years old or older whose monthly income is below an amount to be determined by
the Philippine Health Insurance Corporation in accordance with the guiding principles set forth in Article I of R.A. No. 7875.
And, thirdly, Section 2(f) of Presidential Decree No. 1146, as amended by R.A. No. 8291,26 states that dependents shall
include: (a) the legitimate spouse dependent for support upon the member or pensioner; (b) the legitimate, legitimated,
legally adopted child, including the illegitimate child, who is unmarried, not gainfully employed, not over the age of majority,
or is over the age of majority but incapacitated and incapable of self-support due to a mental or physical defect acquired
prior to age of majority; and (c) the parents dependent upon the member for support.

It is clear from these statutory definitions of dependent that the civil status of the employee as either married or single is not
the controlling consideration in order that a person may qualify as the employee’s legal dependent. What is rather decidedly
controlling is the fact that the spouse, child, or parent is actually dependent for support upon the employee. Indeed, the
Court has adopted this understanding of the term dependent in Social Security System v. De Los Santos,27 viz: cralavvo nline lawlib ra ry

Social Security System v. Aguas is instructive in determining the extent of the required “dependency” under the SS Law.
In Aguas, the Court ruled that although a husband and wife are obliged to support each other, whether one is actually
dependent for support upon the other cannot be presumed from the fact of marriage alone.

Further, Aguas pointed out that a wife who left her family until her husband died and lived with other men, was not
dependent upon her husband for support, financial or otherwise, during the entire period.

Said the Court: cralavvonlinelawl ib rary

In a parallel case involving a claim for benefits under the GSIS law, the Court defined a dependent as “one who derives his or
her main support from another. Meaning, relying on, or subject to, someone else for support; not able to exist or sustain
oneself, or to perform anything without the will, power, or aid of someone else.” It should be noted that the GSIS law
likewise defines a dependent spouse as “the legitimate spouse dependent for support upon the member or pensioner.” In
that case, the Court found it obvious that a wife who abandoned the family for more than 17 years until her husband died,
and lived with other men, was not dependent on her husband for support, financial or otherwise, during that entire period.
Hence, the Court denied her claim for death benefits.

The obvious conclusion then is that a wife who is already separated de factofrom her husband cannot be said to be
“dependent for support” upon the husband, absent any showing to the contrary. Conversely, if it is proved that the husband
and wife were still living together at the time of his death, it would be safe to presume that she was dependent on the
husband for support, unless it is shown that she is capable of providing for herself.

Considering that existing laws always form part of any contract, and are deemed incorporated in each and every
contract,28 the definition of legal dependents under the aforecited social legislations applies herein in the absence of a
contrary or different definition mutually intended and adopted by the parties in the CBA. Accordingly, the concurrence of a
legitimate spouse does not disqualify a child or a parent of the employee from being a legal dependent provided substantial
evidence is adduced to prove the actual dependency of the child or parent on the support of the employee.

In this regard, the differentiation among the legal dependents is significant only in the event the CBA has prescribed a
hierarchy among them for the granting of a benefit; hence, the use of the terms primary beneficiaries and secondary
beneficiaries for that purpose. But considering that Section 4, Article XIII of the CBA has not included that differentiation,
petitioner had no basis to deny the claim for funeral and bereavement aid of Alfante for the death of his parent whose death
and fact of legal dependency on him could be substantially proved.

Pursuant to Article 100 of the Labor Code, petitioner as the employer could not reduce, diminish, discontinue or eliminate
any benefit and supplement being enjoyed by or granted to its employees. This prohibition against the diminution of benefits
is founded on the constitutional mandate to protect the rights of workers and to promote their welfare and to afford labor full
protection.29 The application of the prohibition against the diminution of benefits presupposes that a company practice, policy
or tradition favorable to the employees has been clearly established; and that the payments made by the employer pursuant
to the practice, policy, or tradition have ripened into benefits enjoyed by them.30 To be considered as a practice, policy or
tradition, however, the giving of the benefits should have been done over a long period of time, and must be shown to have
been consistent and deliberate.31 It is relevant to mention that we have not yet settled on the specific minimum number of
years as the length of time sufficient to ripen the practice, policy or tradition into a benefit that the employer cannot
unilaterally withdraw.32

The argument of petitioner that the grant of the funeral and bereavement benefit was not voluntary but resulted from its
mistaken interpretation as to who was considered a legal dependent of a regular employee deserves scant consideration. To
be sure, no doubtful or difficult question of law was involved inasmuch as the several cogent statutes existing at the time the
CBA was entered into already defined who were qualified as the legal dependents of another. Moreover, the voluntariness of
the grant of the benefit became even manifest from petitioner’s admission that, despite the memorandum it issued in
200033 in order to “correct” the interpretation of the term legal dependent, it still approved in 2003 the claims for funeral and
bereavement aid of two employees, namely: (a) Cecille Bulacan, for the death of her father; and (b) Charito Cartel, for the
death of her mother, based on its supposedly mistaken interpretation.34

It is further worthy to note that petitioner granted claims for funeral and bereavement aid as early as 1999, then issued a
memorandum in 2000 to correct its erroneous interpretation of legal dependentunder Section 4, Article XIII of the CBA. This
notwithstanding, the 2001-2004 CBA35 still contained the same provision granting funeral or bereavement aid in case of the
death of a legal dependent of a regular employee without differentiating the legal dependents according to the employee’s
civil status as married or single. The continuity in the grant of the funeral and bereavement aid to regular employees for the
death of their legal dependents has undoubtedly ripened into a company policy. With that, the denial of Alfante’s qualified
claim for such benefit pursuant to Section 4, Article XIII of the CBA violated the law prohibiting the diminution of benefits.

WHEREFORE, the Court AFFIRMS the decision promulgated on February 5, 2010; and ORDERSpetitioner to pay the costs
of suit.

SO ORDERED.

Sereno, C.J., Leonardo-De Castro, Villarama, Jr., and Reyes, JJ. concur

Endnotes:
G.R. No. 177524 July 23, 2014

NATIONAL UNION OF WORKERS IN HOTEL RESTAURANT AND ALLIED INDUSTRIES (NUWHRAIN-APL-

IUF), PHILIPPINE PLAZA CHAPTER, Petitioner,
vs.
PHILIPPINE PLAZA HOLDINGS, INC., Respondent.

DECISION

BRION, J.:

We resolve the petition for review on certiorari,1 challenging the January 31, 2007 decision2 and the April 20, 2007
resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 93698.

This CA decision reversed the July 4, 2005 decision4 of the National Labor Relations Commission (NLRC) in NLRC
NCR CA No. 031977-02 (NLRC NCR-30-05-02011-01) that in tum, reversed and set aside the April 30, 2002
decision5 of the Labor Arbiter (LA).

The LA dismissed the complaint for non-payment of service charges filed by petitioner National Union of Workers in
Hotel Restaurant and Allied Industries (NUWHRAIN-APL-IUF), Philippine Plaza Chapter (Union).

The Factual Antecedents

The Union is the collective bargaining agent of the rank-and-file employees of respondent Philippine Plaza Holdings,
Inc. (PPHI).

On November 24, 1998, the PPHI and the Union executed the "Third Rank-and-File Collective Bargaining
Agreement as Amended"6 (CBA). The CBA provided, among others, for the collection, by the PPHI, of a ten percent
(10%) service charge on the saleof food, beverage, transportation, laundry and rooms. The pertinent CBA
provisions read:

SECTION 68. COLLECTION. The HOTEL shall continue to collect ten percent (10%) service charge on the sale of
food, beverage, transportation, laundry and rooms except on negotiated contracts and special rates. [Emphasis
supplied]

SECTION 69. DISTRIBUTION. The service charge to be distributed shall consist of the following:

Effective Food & Beverage Room, Transportation & valet

1998 95% 100%
1997 95% 100%

The distributable amount will beshared equally by all HOTEL employees, including managerial employees but
excluding expatriates, with three shares to be given to PPHI Staff and three shares to the UNION (one for the
national and two for the local funds) that may be utilized by them for purposes for which the UNION may decide.

These provisions merely reiterated similar provisions found in the PPHIUnion’s earlier collective bargaining
agreement executed on August 29, 1995.7

On February 25, 1999, the Union’s Service Charge Committee informed the Union President, through an audit
report (1st audit report),8 of uncollected service charges for the last quarter of 1998 amounting to ₱2,952,467.61.
Specifically, the audit report referred to the service charges from the following items: (1) "Journal Vouchers;" (2)
"Banquet Other Revenue;" and (3) "Staff and Promo." The Union presented this audit report to the PPHI’s
management during the February 26, 1999 Labor Management Cooperation Meeting (LMCM).9 The PPHI’s
management responded that the Hotel Financial Controller would need to verify the audit report.
Through a letter dated June 9, 1999,10 the PPHI admitted liability for ₱80,063.88 out of the ₱2,952,467.61 thatthe
Union claimed as uncollected service charges. The PPHI denied the rest of the Union’s claims because: (1) they
were exempted from the service charge being revenues from "special promotions" (revenue from the Westin Gold
Card sales) or "negotiated contracts" (alleged revenue from the Maxi-Media contract); (2) the revenues did not
belong to the PPHI but to third-party suppliers; and (3) no revenue was realized from these transactions as they
were actually expenses incurred for the benefit of executives or by way of good-will to clients and government
officials.

During the July 12, 1999 LMCM,11 the Union maintained its position on uncollected service charges so that a
deadlock on the issue ensued. The parties agreed to refer the matter to a third party for the solution. They
considered two options – voluntary arbitration or court action – and promised to get back to each other on their
chosen option.

In its formal reply (to the PPHI’sJune 9, 1999 letter) dated July 21, 1999 (2nd audit report),12 the Union modified its
claims. It claimed uncollected service charges from: (1) "Journal Vouchers - Westin Gold Revenue and Maxi-Media"
(F&B and Rooms Barter); (2) "Banquet and Other Revenue;" and (3) "Staff and Promo."

On August 10, 2000, the Union’s Service Charge Committee made another service charge audit report for the years
1997, 1998 and 1999 (3rd audit report).13 This 3rd audit report reflected total uncollected service charges of
₱5,566,007.62 from the following entries: (1) "Journal Vouchers;" (2) "Guaranteed No Show;" (3) "Promotions;" and
(4) "F & B Revenue." The Union President presented the 3rd audit report to the PPHI on August 29, 2000.

When the parties failed to reachan agreement, the Union, on May 3, 2001, filed before the LA (Regional Arbitration
Branch of the NLRC) a complaint14 for non-payment of specified service charges. The Union additionally charged the
PPHI with unfair labor practice (ULP) under Article 248 of the Labor Code, i.e., for violation of their collective
bargaining agreement.

In its decision15 dated April 30, 2002, the LA dismissed the Union’s complaint for lack of merit. The LA declared that
the Union failed to show, by law, contract and practice, its entitlement to the payment of service charges from the
entries specified in its audit reports (specified entries/transactions).

The LA pointed out that Section 68 of the CBA explicitly requires, as a precondition for the distribution of service
charges in favor of the covered employees, the collection of the 10% service charge on the "sale of food, beverage,
transportation, laundry and rooms;" at the same time, the provision exempts from its coverage "negotiated
contracts" and "special rates" that the LA deemed as non-revenue generating transactions involving "food,
beverage, transportation, laundry and rooms." The Union failed to prove that the PPHI collected 10% service
charges on the specified entries/transactions that could have triggered the PPHI’s obligation under this provision.

Particularly, the LA pointed out that, first, the only evidence on record that could have formed the basis of the
Union’s claim for service charges was the PPHI’s admission that, as a matter of policy, it has been charging,
collecting and distributing to the covered employees 10% service charge on the fifty percent (50%) of the total
selling price of the "Maxi-Media F & B" and on the "Average House" rate of the "Maxi-Media Rooms." And it did so,
notwithstanding the fact that the "Maxi-Media F & B and Rooms Barter" is a "negotiated contract" and/or "special
rate" that Section 68 explicitly excludes from the service charge coverage.

Second,while the PPHI derived revenues from the sale of the Westin Gold Cards (Westin Gold Revenue), the PPHI
did not and could not have collected a 10% service charge as these transactions could not be considered as sale of
food, beverage, transportation, laundry and rooms that Section 68 contemplates.

Third, the "Staff and Business Promotion and Banquet" entry refers to the expenses incurred by the PPHI’s
Marketing Department and Department Heads and Hotel executives either as part of their perks or the PPHI’s
marketing tool/public relations. These are special rates that are essentially non-revenue generating items.

Fourth, the "Backdrop" entry refers to services undertaken by third parties payment for which were made of course
to them; hence, this entry/transaction could not likewise be considered as sale of services by PPHI for which
collection of the 10% service charge was warranted.
Lastly, the LA equally brushed aside the Union’s claim of ULP declaring that the PPHI was well within its legal and
contractual right to refuse payment of service charges for entries from which it did not collect any service charge
pursuant tothe provision of their CBA.

The NLRC’s ruling

In its decision16 of July 4, 2005, the NLRC reversed the LA’s decision and considered the specified
entries/transactions as "service chargeable." As the PPHI failed to prove that it paid or remitted the required service
charges, the NLRC held the PPHI liable to pay the Union ₱5,566,007.62 representing the claimed uncollected
service charges for the years 1997, 1998 and 1999 per the 3rd audit report.

The PHHI went to the CA on a petition for certiorari17 after the NLRC denied its motion for reconsideration.18

The CA’s ruling

The CA granted the PPHI’s petition in its January 31, 2007 decision.19 It affirmed the LA’s decision but ordered the
PPHI to pay the Union the amount of ₱80,063.88 as service charges that it found was due under the circumstances.
The CA declared that no service charges were due from the specified entries/transactions; either these constituted
"negotiated contracts" and "special rates" that Section 68 of the CBA explicitly excludes from the coverage of
service charges, or they were cited bases that the Union failed to sufficiently prove.

The CA pointed out that: one, the "Westin Gold Card Revenues" entry involved the sale, not of food, beverage,
transportation, laundry and rooms, but of a "contractual right" to be charged a lesser rate for the products and
services that the Hotel and the stores within it provide. At any rate, the PPHI charges, collects and distributes to the
covered employees the CBAagreed service charges whenever any Westin Gold Card member purchases food,
beverage, etc. Two, the "Maxi-Media F & B and Rooms and Barter" entry did not involve any sale transaction that
Section 68 contemplates. The CA pointed out that the arrangement20 between the PPHI and Maxi-Media
International, Inc. was not one of sale but an innominate contract of facio ut des, i.e., in exchange for the
professional entertainment services provided by Maxi-Media, the Hotel agreed to give the former ₱2,800,000.00
worth of products and services.The CA added that this agreement falls under "negotiated contracts" that Section 68
explicitly exempts. Three, the sale of "Gift Certificates" does not involve the CBA-contemplated "sale of food,
beverage, etc." Four, the Union failed to show the source of its computations for its "Guaranteed No Show" and "F &
B Revenue" claims. Five, the "Business Promotions" entry likewise did not involve any sale; these were part of the
PPHI’s business expenses in the form of either signing benefits for the PPHI’s executives or asmarketing tool used
by the PPHI’s marketing personnel to generate goodwill. And six, the Union’s claims for service charges that the
PPHI allegedly collected prior to May 3, 1998 or three years before the Union filed itscomplaint on May 3, 2001 had
already prescribed per Article 291 of the Labor Code.

The Union filed the present petition after the CA denied its motion for Reconsideration 21

in the CA’s April 20, 2007 resolution.22

The Petition

The Union argues that the CA clearly misapprehended and misappreciated, with grave abuse of discretion, the facts
and evidence on record. It maintains that the specified entries/transactions are revenue based transactions which,
per Section 68 and 69 of the CBA, clearly called for the collection and distribution of a 10% service charge in favor
of the covered employees. Particularly, the Union argues that: (1) the "Westin Gold Cards" serve not only as a
discount card but also as a "pre-paid" card that provide its purchasing members complimentary amenities for which
the Hotel employees rendered services and should, therefore, had been subjected to the 10% service charge; (2)
the PPHI failed to prove that it had paid and distributed to the covered employees the service charge due on the
actual discounted sales of food, beverage, etc., generated by the "Westin Gold Cards;" (3) the Hotel employees
likewise rendered services whenever the Maxi-Media International, Inc. consumed or availed part of the
2,800,000.00 worth of goods and services pursuant to its agreement with the PPHI; (4) the "Maxi-Media" discounts
should be charged to the PPHI as part of its expenses and not the Union’s share in the service charges; (5) the
PPHI has a separate budget for promotions, hence the "Business Promotions" entry should likewise had been
subjected to the 10% service charge; (6) the sale of "Gift Certificates," recorded in the PPHI’s "Journal Vouchers" as
"other revenue/income," constituted a revenue transaction for which service charges were due; (7) the PPHI
admitted that service charges from "Guaranteed No Show" were due; and (8) it properly identified through reference
numbers the uncollected service charges from "Food and Beverage Revenue."

The Union contends that inrefusing to collect and remit the CBA-mandated service charges that the PPHI insists
were non-revenue transactions falling under "Negotiated Contracts" and/or "Special Rates," the PPHI, in effect,
contravened the employees’ rights to service charges under the law and the CBA. The Union also contends that the
term "Negotiated Contracts" should be applied to "airline contracts" only that they (the Union and the PPHI) intended
when they executed the CBA. It points out that at the time the CBA was executed, the PPHI had an existing
agreement with Northwest Airlines to which the term "Negotiated Contracts" clearly referred to. Further, the Union
argues that its claim for unpaid services charges for the year 1997 and part of 1998 had not yet prescribed. Applying
Article 1155 of the Civil Code in relation toArticle 291 of the Labor Code, the Union points out that the running of the
prescriptive period for the filing of its claim was interrupted when it presented to the PPHI its 1st audit report during
the February 26, 1999 LMCMand when the PPHI admitted the service charges due to the Union inthe PPHI’s June
9, 1999 letter.

The Union additionally argues that the PPHI failed to conform to the generally accepted accounting standards when
it reclassified the revenue items as expense items.

Finally, the Union contends that the PPHI’s refusal, despite repeated demands, to distribute the unremitted service
charges and recognize its right to service charges on the specified entries; the PPHI’s deliberate failure to disclose
its financial transactions and audit reports; and the PPHI’s reclassification of the revenues into expense items
constitute gross violation of the CBA that amounts to whatthe law considers as ULP.

The Case for the Respondent

The PPHI primarily counters, in its comment,23 that the Union’s call for the Court to thoroughly re-examinethe
records violates the Rule 45 proscription against questions of facts.The PPHI points out that Rule 45 of the Rules of
Court under which the petition is filed requires that only questions of law be raised. In addition, the factual findings of
the LA that had been affirmed by the CA deserve not only respect but even finality.

On the petition’s merits, the PPHI argues that the specified entries/transactions for which the Union claims service
charges: (1) were not revenue generating transactions; (2) that did not involve a sale of food, beverage, rooms,
transportation or laundry; and/or (3) were in the nature of negotiated contracts and special rates that Section 68 of
the CBA specifically excepts from the collection of service charges. Correlatively, Article 96 of the Labor Code
requires the collection of service charges as a condition precedent to its distribution or payment. Thus, as no service
charges were collected on the specified entries/transactions that the CBA expressly excepts, the Union’s claim for
unpaid service charges clearly had no basis.

To be precise, the PPHI points out that, first, the sale per se of the "Westin Gold Cards" did not involve a sale of
food, beverage, etc. that Section 68 of the CBA contemplates. The discounted sales of food, beverage, etc. to
Westin Gold Card holders, on the other hand, had already been subjected to service charges inclusive of the
discount, i.e., computed on the gross sales of food, beverage, etc. to the card holders, and which service charges it
had already distributed to the covered employees. Second, its agreement with Maxi-Media involved an exchange or
barter transaction, i.e., its food and Hotel services in exchange for Maxi-Media’s entertainment services that did not
generate income. This agreement likewise falls under "Negotiated Contracts" that Section 68 clearly excepts. And,
in any case, it had already collected, and distributed to the covered employees, the service charges on the food,
beverage, etc. that Maxi-Media consumed based on the monthly average rate of the rooms and on the 50% rate of
the price of the consumed food and beverage. Third, the Union failed to prove its claims for uncollected service
charges from "Guaranteed No Show" and "Business Promotions." Fourth, the "Food and Beverage other Revenue"
entry refers to the PPHI’s transactions with external service providers the payment for whose services could not be
considered as the PPHI’s revenue. Fifth, the sale per se of the "Gift Certificates" also did not involve the Section 68-
contemplated sale of food, beverage, etc. and the Union failed to prove that the presented Gift Certificateshad
actually been consumed, i.e., used within the Hotel premises for food, beverage, etc. And sixth, it had never been its
practice to collect service charges on the specified entries/transactions that could have otherwise resulted in what
the Union considers as "partial abolition of service charges" when it refused to collect service charges from them.

The PPHI also disputes what it considers as the Union’s strained interpretation of the CBA exception of "Negotiated
Contracts" as applicable to airline contracts only. It points out that the clear wordings of Section 68 of the CBA
plainly show the intent to except, in a general and broad sense, "Negotiated Contracts" and "Special Rates" as to
include the "Westin Gold Cards" and "Maxi-Media" barter agreement. The PPHI additionally argues that the CBA’s
exception of "Negotiated Contracts" and "Special Rates" from the collection of service charges does not violate
Article 96 of the Labor Code. It points out that Article 96 merely provides for the minimum percentage distribution,
between it (the PPHI) as the employer and the Hotel’s covered employees, of the collected service charges which
their CBA more than satisfied. It also points out that Article 96 does not prohibit the exception of certain transactions
from the coverage and/or collection of service charges that it (as the employer) and the Union (in behalf of the
covered Hotel employees) had voluntarily and mutually agreed on in their CBA. And in fact, the Union’s refusal to
1âw phi 1

recognize these clear and express exceptions constituted a violation of their agreement.

Further, the PPHI maintains that the Union’s claim for the alleged uncollected service charges for the year 1997 and
the early months of 1998 had already prescribed per Article 291 of the Labor Code.

Finally, the PPHI points out that the issue in this case is not whether service charges had been paid. Rather, the
clear issue is whether or not service charges should have been collected (and distributed to the covered employees)
for the specified entries/transactions that the LA and the CA correctly addressed and which the NLRC clearly
missed as it rendered a decision without any factual or legal basis.

The Court's Ruling

We find the petition unmeritorious.

Preliminary considerations: jurisdictional limitations of the Court’s Rule 45 review of the CA’s Rule 65 decision in
labor cases; the Montoya ruling and factual-issue-bar-rule

In a petition for review on certiorari under Rule 45 of the Rules of Court, we review the legal errors that the CA may
have committed in the assailed decision, in contrastwith the review for jurisdictional errors that we undertake in an
original certiorari action. In reviewing the legal correctness of the CA decision in a labor case taken under Rule 65 of
the Rules of Court, we examine the CA decision in the context that it determined the presence or the absence of
grave abuse of discretion in the NLRC decision before it and not on the basis of whether the NLRC decision, on the
merits of the case, was correct. In other words, we proceed from the premise that the CA undertook a Rule 65
review, not a review on appeal, of the NLRC decision challenged before it. Within this limited scope of our Rule 45
review, the question that we ask is: Did the CA correctly determine whether the NLRC committed grave abuse of
discretion in ruling on the case?24

In addition, the Court’s jurisdiction in a Rule 45 petition for review on certiorari is limited to resolving only questions
of law. A question of law arises when the doubt or controversy exists as to what law pertains to a particular set of
facts; and a question of fact arises when the doubt or controversy pertains to the truth or falsity of the alleged facts.25

The present petition essentially raises the question – whether the Union may collect from the PPHI, under the terms
of the CBA, its share of the service charges. This is a clear question of law that falls well within the Court’s power in
a Rule 45 petition.

Resolution of this question of law, however, is inextricably linked with the largely factual issue of whether the
specified entries/transactions fall within the generally covered sale of food, beverage, transportation, etc. from which
service charges are due or within the CBA excepted "Negotiated Contracts" and "Special Rates." It also unavoidably
requires resolution of another factual issue, i.e., whether the Union’s claim for service charges collected for the year
1997 and the early months of 1998 had already prescribed. As questions of fact, they are proscribed by our Rule 45
jurisdiction; we generally cannot address these factual issues except to the extent necessary to determine whether
the CA correctly found the NLRC in grave abuse of discretion in granting the Union’s claim for service charges from
the specified entries/transactions.

The jurisdictional limitations of our Rule 45 review of the CA’s Rule 65 decision in labor cases constrain us to deny
the present petition for clear lack of legal error in the CA’s decision.Our consideration of the facts taken within this
limited scope of our factual review power, convinces us that grave abuse of discretion attended the NLRC’s
decision. At what point and to what extent the NLRC gravely abusedits discretion is the matter we shall discuss
below.
The NLRC’s patently erroneous appreciation of the real issue in the present controversy, along with the facts and
the evidence, amounted to grave abuse of discretion

In granting the Union’s claim, the NLRC simply declared that the PPHI "has not shown any proof that it paid or
remitted what is due to the Union and its members" and concluded that the specified entries/transactions were
"service chargeable." This NLRC conclusion plainly failed to appreciate that it involved only the alleged uncollected
service charges from the specified entries/transactions. The NLRC likewise, in the course of its ruling, did not point
to any evidence supporting its conclusion.

In deciding as it did, the NLRC patently proceeded from the wrong premise, i.e., that the PPHI did not at all
distribute to the Hotel’s covered employees their share in the collected service charges. It likewise erroneously
assumed that all the specified entries/transactions were subject to service charges and that the PPHI collected
service charges from them as its ruling was patently silent on this point. The NLRC also erroneously assumed that
each and every transaction that the PPHI entered into was subject to a service charge.

What the NLRC clearly and conveniently overlooked was the underlying issue of whether service charges are due
from the specified entries/transactions, i.e., whether the specified entries/transactions are covered by the CBA’s
general-rule provisions on the collection of service charges or whether they are excepted because they fall within
the excepted "Negotiated Contracts" and "Special Rates" or simply did not involve a "sale of food, beverage, etc."
from which service charges are due. This understanding of this case’s real issue is an indispensable requisite in the
proper resolution of the controversy and a task that the NLRC, as a tribunal exercising quasi-judicial power,
mustperform with circumspection and utmost diligence. The patent failure led to its manifestly flawed conclusions
that were belied by the underlying facts. By so doing, the NLRC acted outside the clear contemplation of the law.26

Accordingly, we affirm the CA’s decision to be legally correct as it correctly reversed the NLRC decision for grave
abuse of discretion.

Nature of a CBA; rules inthe interpretation of CBA provisions

A collective bargaining agreement, as used in Article 252 (now Article 262)27 of the Labor Code, is a contract
executed at the request of either the employer or the employees’ exclusive bargaining representative with respect to
wages, hours of work and all other terms and conditions of employment, including proposals for adjusting any
grievances or questions under such agreement.28 Jurisprudence settles that a CBA is the law between the
contracting parties who are obliged under the law to comply with its provisions.29

As a contract and the governing law between the parties, the general rules of statutory construction apply in the
interpretation of its provisions. Thus, if the terms of the CBA are plain, clear and leave no doubt on the intention of
the contracting parties, the literal meaning of its stipulations, as they appear on the face of the contract, shall
prevail.30 Only when the words used are ambiguous and doubtful or leading to several interpretations of the parties’
agreement that a resort to interpretation and construction is called for.31

No service charges were due from the specified entries/transactions; they either fall within the CBA-excepted
"Negotiated Contracts" and "Special Rates" or did not involve "a sale of food, beverage, etc."

The Union anchors its claim for services charges on Sections 68 and 69 of the CBA, in relation with Article96 of the
Labor Code. Section 68 states that the sale of food, beverage, transportation, laundry and rooms are subject to
service charge at the rate often percent (10%). Excepted from the coverage of the 10% service charge are the so-
called "negotiated contracts" and "special rates."

Following the wordings of Section 68 of the CBA, three requisites must be present for the provisions on service
charges to operate: (1) the transaction from which service charge is sought to be collected is a sale; (2) the sale
transaction covers food, beverage, transportation, laundry and rooms; and (3) the sale does not result from
negotiated contracts and/or at special rates.

In plain terms, all transactions involving a "sale of food, beverage, transportation, laundry and rooms" are generally
covered. Excepted from the coverage are, first, non-sale transactions or transactions that do not involve any sale
even though they involve "food, beverage, etc." Second, transactions that involve a sale but do not involve "food,
beverage, etc." And third, transactions involving "negotiated contracts" and "special rates" i.e., a "sale of food,
beverage, etc." resulting from "negotiated contracts" or at "special rates;" non-sale transactions involving "food,
beverage, etc." resulting from "negotiated contracts" and/or "special rates;" and sale transactions, but not involving
"food, beverage, etc.," resulting from "negotiated contracts" and "special rates." Notably, the CBA does not
specifically define the terms "negotiated contracts" and "special rates." Nonetheless, the CBA likewise does not
explicitly limit the use of these terms to specified transactions. With particular reference to "negotiated contracts,"
the CBA does not confine its application to "airline contracts" as argued by the Union. Thus, as correctly declared by
the CA, the term "negotiated contracts" should be read as applying to all types of negotiated contracts and not to
"airlines contracts" only. This is in line with the basic rule of construction that when the terms are clear and leave no
doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall prevail. A constricted
interpretation of this term, i.e., as applicable to "airlines contracts" only, must be positively shown either by the
wordings of the CBA or by sufficient evidence of the parties’ intention to limit its application. The Union completely
failed to provide support for its constricted reading of the term "negotiated contracts," either from the wordings of the
CBA or from the evidence.

In reversing the NLRC’s ruling and denying the Union’s claim, the CA found the specified entries/transactions as
either falling under the excepted negotiated contracts and/or special rates or not involving a sale of food, beverage,
etc. Specifically, it considered the entries "Westin Gold

Cards Revenue" and "Maxi Media Barter" to be negotiated contracts or contracts under special rates, and the
entries "Business Promotions" and "Gift Certificates" as contracts that did not involve a sale of food, beverage, etc.
The CA also found no factual and evidentiary basis to support the Union’s claim for service charges on the entries
"Guaranteed No show" and "F & B Revenue."

Our consideration of the records taken under our limited factual review power convinces us that these specified
entries/transactions are indeed not subject to a 10% service charge. We thus see no reason to disturb the CA’s
findings on these points.

The PPHI did not violate Article 96 of the Labor Code when they refused the Union’s claim for service charges on
the specified entries/transactions

Article 96 of the Labor Code provides for the minimum percentage distribution between the employer and the
employees of the collected service charges, and its integration inthe covered employees’ wages in the event the
employer terminates its policy of providing for its collection. It pertinently reads:

Art. 96. Service Charges.

x x x In case the service charge is abolished, the share of the covered employees shall be considered integrated in
their wages.

This last paragraph of Article 96 of the Labor Code presumes the practice of collecting service charges and the
employer’s termination of this practice. When this happens, Article 96 requires the employer to incorporate the
amount that the employees had been receiving as share of the collected service charges into their wages. Incases
where no service charges had previously been collected (as where the employer never had any policy providing for
collection of service charges or had never imposed the collection of service charges on certain specified
transactions), Article 96 will not operate.

In this case, the CA found that the PPHI had not in fact been collecting services charges on the specified
entries/transactions that we pointed out as either falling under "negotiated contracts" and/or "special rates" or did not
involve a "sale of food, beverage, etc." Accordingly, Article 96 of the Labor Code finds no application in this case;
the PPHI did not abolish or terminate the implementation of any company policy providing for the collection of
service charges on specified

entries/transactions that could have otherwise rendered it liable to pay an amount representing the covered
employees’ share in the alleged abolished service charges.
The Union’s claim for service charges for the year 1997 and the early months of 1998 could not have yet prescribed
at the time it filed its complaint on May 3, 2001; Article 1155 of the Civil Code applies suppletorily to Article 291 of
the Labor Code

Article 291 (now Article 305)32 of the Labor Code states that "all money claims arising from employer-employee
relations x x x shall be filed within three (3) years from the time the cause of action accrued; otherwise, they shall
forever be barred." [Emphasis supplied]

Like other causes of action, the prescriptive period for money claims under Article 291 of the Labor Code is subject
to interruption. And, in the absence of an equivalent Labor Codeprovision for determining whether Article 291’s
three-year prescriptive period may be interrupted, Article 1155 of the Civil Code33 may be applied. Thus, the period
of prescription of money claims under Article 291 is interrupted by: (1) the filing of an action; (2) a written
extrajudicial demand by the creditor; and (3) a written acknowledgment of the debt by the debtor.

In the present petition, the facts indisputably showed that as early as 1998, the Union demanded, via the 1st audit
report, from the PPHI the payment and/or distribution of the alleged uncollected service charges for the year 1997.
From thereon, the parties went through negotiations (LCMC) to settle and reconcile on their respective positions and
claims.

Under these facts – the Union’s written extrajudicial demand through its 1st audit report and the successive
negotiation meetings between the Union and the PPHI – the running of the three-year prescriptive period under
Article 291 of the Labor Code could have effectively been interrupted. Consequently, the Union’s claims for the
alleged uncollected service charges for the year 1997 could not have yet prescribed at the time it filed its complaint
on May 3, 2001.

This non-barring effect of prescription, notwithstanding (i.e., that the running of the three-year prescriptive period
had effectively been interrupted – by the Union's written extrajudicial demand on the PPHI), the CA, as it affirmed
the LA, still correctly denied the Union's claims for the alleged uncollected and/or undistributed service charges on
the specified entries/transactions for the year 1997 and the early part of 1998. As the CA found and discussed in its
decision, and with which we agree as amply supported by factual and legal bases, the nature of these specified
entries/transactions as either excepted from the collection of service charges or not constituting a "sale of food,
beverage, etc.," and the Union's failure to support its claims by sufficient evidence warranted, without doubt, the
denial of the Union's action.

In sum, we find the CA's denial of the Union's claim for service charges from the specified entries/transactions
legally correct and to be well supported by the facts and the law. The CA correctly reversed for grave abuse of
discretion the NLRC's decision.

WHEREFORE, in light of these considerations, we hereby DENY the petition. We AFFIRM the decision dated
January 31, 2007 and resolution dated April 20, 2007 of the Court of Appeals in CA-G.R. Sp No. 93698.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 175773 June 17, 2013

MITSUBISHI MOTORS PHILIPPINES SALARIED EMPLOYEES UNION (MMPSEU), Petitioner,

vs.
MITSUBISHI MOTORS PHILIPPINES CORPORATION, Respondent.

DECISION

DEL CASTILLO, J.:

The Collective Bargaining Agreement (CBA) of the parties in this case provides that the company shoulder the
hospitalization expenses of the dependents of covered employees subject to certain limitations and restrictions.
Accordingly, covered employees pay part of the hospitalization insurance premium through monthly salary
deduction while the company, upon hospitalization of the covered employees' dependents, shall pay the
hospitalization expenses incurred for the same. The conflict arose when a portion of the hospitalization expenses of
the covered employees' dependents were paid/shouldered by the dependent's own health insurance. While the
company refused to pay the portion of the hospital expenses already shouldered by the dependents' own health
insurance, the union insists that the covered employees are entitled to the whole and undiminished amount of said
hospital expenses.

By this Petition for Review on Certiorari,1 petitioner Mitsubishi Motors Philippines Salaried Employees Union
(MMPSEU) assails the March 31, 2006 Decision2 and December 5, 2006 Resolution3 of the Court of Appeals (CA) in
CA-G.R. SP No. 75630, which reversed and set aside the Voluntary Arbitrator’s December 3, 2002 Decision4 and
declared respondent Mitsubishi Motors Philippines Corporation (MMPC) to be under no legal obligation to pay its
covered employees’ dependents’ hospitalization expenses which were already shouldered by other health insurance
companies.

Factual Antecedents

The parties’ CBA5 covering the period August 1, 1996 to July 31, 1999 provides for the hospitalization insurance
benefits for the covered dependents, thus:

SECTION 4. DEPENDENTS’ GROUP HOSPITALIZATION INSURANCE – The COMPANY shall obtain group
hospitalization insurance coverage or assume under a self-insurance basis hospitalization for the dependents of
regular employees up to a maximum amount of forty thousand pesos (₱40,000.00) per confinement subject to the
following:

a. The room and board must not exceed three hundred pesos (₱300.00) per day up to a maximum of thirty-
one (31) days. Similarly, Doctor’s Call fees must not exceed three hundred pesos (₱300.00) per day for a
maximum of thirty-one (31) days. Any excess of this amount shall be borne by the employee.

b. Confinement must be in a hospital designated by the COMPANY. For this purpose, the COMPANY shall
designate hospitals in different convenient places to be availed of by the dependents of employees. In cases
of emergency where the dependent is confined without the recommendation of the company doctor or in a
hospital not designated by the COMPANY, the COMPANY shall look into the circumstances of such
confinement and arrange for the payment of the amount to the extent of the hospitalization benefit.

c. The limitations and restrictions listed in Annex "B" must be observed.

d. Payment shall be direct to the hospital and doctor and must be covered by actual billings.
Each employee shall pay one hundred pesos (₱100.00) per month through salary deduction as his share in the
payment of the insurance premium for the above coverage with the balance of the premium to be paid by the
COMPANY. If the COMPANY is self-insured the one hundred pesos (₱100.00) per employee monthly contribution
shall be given to the COMPANY which shall shoulder the expenses subject to the above level of benefits and
subject to the same limitations and restrictions provided for in Annex "B" hereof.

The hospitalization expenses must be covered by actual hospital and doctor’s bills and any amount in excess of the
above mentioned level of benefits will be for the account of the employee.

For purposes of this provision, eligible dependents are the covered employees’ natural parents, legal spouse and
legitimate or legally adopted or step children who are unmarried, unemployed who have not attained twenty-one
(21) years of age and wholly dependent upon the employee for support.

This provision applies only in cases of actual confinement in the hospital for at least six (6) hours.

Maternity cases are not covered by this section but will be under the next succeeding section on maternity benefits.6

When the CBA expired on July 31, 1999, the parties executed another CBA7 effective August 1, 1999 to July 31,
2002 incorporating the same provisions on dependents’ hospitalization insurance benefits but in the increased
amount of ₱50,000.00. The room and board expenses, as well as the doctor’s call fees, were also increased to
₱375.00.

On separate occasions, three members of MMPSEU, namely, Ernesto Calida (Calida), Hermie Juan Oabel (Oabel)
and Jocelyn Martin (Martin), filed claims for reimbursement of hospitalization expenses of their dependents.

MMPC paid only a portion of their hospitalization insurance claims, not the full amount. In the case of Calida, his
wife, Lanie, was confined at Sto. Tomas University Hospital from September 4 to 9, 1998 due to Thyroidectomy. The
medical expenses incurred totalled ₱29,967.10. Of this amount, ₱9,000.00 representing professional fees was paid
by MEDICard Philippines, Inc. (MEDICard) which provides health maintenance to Lanie.8 MMPC only paid
₱12,148.63.9 It did not pay the ₱9,000.00 already paid by MEDICard and the ₱6,278.47 not covered by official
receipts. It refused to give to Calida the difference between the amount of medical expenses of ₱27,427.1010 which
he claimed to be entitled to under the CBA and the ₱12,148.63 which MMPC directly paid to the hospital.

In the case of Martin, his father, Jose, was admitted at The Medical City from March 26 to 27, 2000 due to Acid
Peptic Disease and incurred medical expenses amounting to ₱9,101.30.14 MEDICard paid
₱8,496.00.15Consequently, MMPC only paid ₱288.40,16 after deducting from the total medical expenses the amount
paid by MEDICard and the ₱316.90 discount given by the hospital.

Claiming that under the CBA, they are entitled to hospital benefits amounting to ₱27,427.10, ₱6,769.35 and
₱8,123.80, respectively, which should not be reduced by the amounts paid by MEDICard and by Prosper, Calida,
Oabel and Martin asked for reimbursement from MMPC. However, MMPC denied the claims contending that double
insurance would result if the said employees would receive from the company the full amount of hospitalization
expenses despite having already received payment of portions thereof from other health insurance providers.

This prompted the MMPSEU President to write the MMPC President17 demanding full payment of the hospitalization
benefits. Alleging discrimination against MMPSEU union members, she pointed out that full reimbursement was
given in a similar claim filed by Luisito Cruz (Cruz), a member of the Hourly Union. In a letter-reply,18 MMPC,
through its Vice-President for Industrial Relations Division, clarified that the claims of the said MMPSEU members
have already been paid on the basis of official receipts submitted. It also denied the charge of discrimination and
explained that the case of Cruz involved an entirely different matter since it concerned the admissibility of certified
true copies of documents for reimbursement purposes, which case had been settled through voluntary arbitration.

On August 28, 2000, MMPSEU referred the dispute to the National Conciliation and Mediation Board and requested
for preventive mediation.19

Proceedings before the Voluntary Arbitrator

On October 3, 2000, the case was referred to Voluntary Arbitrator Rolando Capocyan for resolution of the issue
involving the interpretation of the subject CBA provision.20

MMPSEU alleged that there is nothing in the CBA which prohibits an employee from obtaining other insurance or
declares that medical expenses can be reimbursed only upon presentation of original official receipts. It stressed
that the hospitalization benefits should be computed based on the formula indicated in the CBA without deducting
the benefits derived from other insurance providers. Besides, if reduction is permitted, MMPC would be unjustly
benefited from the monthly premium contributed by the employees through salary deduction. MMPSEU added that
its members had legitimate claims under the CBA and that any doubt as to any of its provisions should be resolved
in favor of its members. Moreover, any ambiguity should be resolved in favor of labor.21

On the other hand, MMPC argued that the reimbursement of the entire amounts being claimed by the covered
employees, including those already paid by other insurance companies, would constitute double indemnity or double
insurance, which is circumscribed under the Insurance Code. Moreover, a contract of insurance is a contract of
indemnity and the employees cannot be allowed to profit from their dependents’ loss.22

Meanwhile, the parties separately sought for a legal opinion from the Insurance Commission relative to the issue at
hand. In its letter23 to the Insurance Commission, MMPC requested for confirmation of its position that the covered
employees cannot claim insurance benefits for a loss that had already been covered or paid by another insurance
company. However, the Office of the Insurance Commission opted not to render an opinion on the matter as the
same may become the subject of a formal complaint before it.24 On the other hand, when queried by MMPSEU,25the
Insurance Commission, through Atty. Richard David C. Funk II (Atty. Funk) of the Claims Adjudication Division,
rendered an opinion contained in a letter,26 viz:

Ms. Cecilia L. ParasPresident

Mitsubishi Motors Phils.

[Salaried] Employees Union

Ortigas Avenue Extension,
Cainta, Rizal

Madam:

We acknowledge receipt of your letter which, to our impression, basically poses the question of whether or not
recovery of medical expenses from a Health Maintenance Organization bars recovery of the same reimbursable
amount of medical expenses under a contract of health or medical insurance.

We wish to opine that in cases of claims for reimbursement of medical expenses where there are two contracts
providing benefits to that effect, recovery may be had on both simultaneously. In the absence of an Other Insurance
provision in these coverages, the courts have uniformly held that an insured is entitled to receive the insurance
benefits without regard to the amount of total benefits provided by other insurance. (INSURANCE LAW, A Guide to
Fundamental Principles, Legal Doctrines, and Commercial Practices; Robert E. Keeton, Alau I. Widiss, p. 261). The
result is consistent with the public policy underlying the collateral source rule – that is, x x x the courts have usually
concluded that the liability of a health or accident insurer is not reduced by other possible sources of indemnification
or compensation. (ibid).

Very truly yours,

RICHARD DAVID C. FUNK II

Officer-in-Charge
Claims Adjudication Division

(SGD.)
Attorney IV

On December 3, 2002, the Voluntary Arbitrator rendered a Decision27 finding MMPC liable to pay or reimburse the
amount of hospitalization expenses already paid by other health insurance companies. The Voluntary Arbitrator held
that the employees may demand simultaneous payment from both the CBA and their dependents’ separate health
insurance without resulting to double insurance, since separate premiums were paid for each contract. He also
noted that the CBA does not prohibit reimbursement in case there are other health insurers.

Proceedings before the Court of Appeals

MMPC filed a Petition for Review with Prayer for the Issuance of a Temporary Restraining Order and/or Writ of
Preliminary Injunction28 before the CA. It claimed that the Voluntary Arbitrator committed grave abuse of discretion in
not finding that recovery under both insurance policies constitutes double insurance as both had the same subject
matter, interest insured and risk or peril insured against; in relying solely on the unauthorized legal opinion of Atty.
Funk; and in not finding that the employees will be benefited twice for the same loss. In its Comment,29 MMPSEU
countered that MMPC will unjustly enrich itself and profit from the monthly premiums paid if full reimbursement is not
made.

On March 31, 2006, the CA found merit in MMPC’s Petition. It ruled that despite the lack of a provision which bars
recovery in case of payment by other insurers, the wordings of the subject provision of the CBA showed that the
parties intended to make MMPC liable only for expenses actually incurred by an employee’s qualified dependent. In
particular, the provision stipulates that payment should be made directly to the hospital and that the claim should be
supported by actual hospital and doctor’s bills. These mean that the employees shall only be paid amounts not
covered by other health insurance and is more in keeping with the principle of indemnity in insurance contracts.
Besides, a contrary interpretation would "allow unscrupulous employees to unduly profit from the x x x benefits" and
shall "open the floodgates to questionable claims x x x."30

The dispositive portion of the CA Decision31 reads:

WHEREFORE, the instant petition is GRANTED. The decision of the voluntary arbitrator dated December 3, 2002 is
REVERSED and SET ASIDE and judgment is rendered declaring that under Art. XI, Sec. 4 of the Collective
Bargaining Agreement between petitioner and respondent effective August 1, 1999 to July 31, 2002, the former’s
obligation to reimburse the Union members for the hospitalization expenses incurred by their dependents is
exclusive of those paid by the Union members to the hospital.

SO ORDERED.32

In its Motion for Reconsideration,33 MMPSEU pointed out that the alleged oppression that may be committed by
abusive employees is a mere possibility whereas the resulting losses to the employees are real. MMPSEU cited
Samsel v. Allstate Insurance Co.,34 wherein the Arizona Supreme Court explicitly ruled that an insured may recover
from separate health insurance providers, regardless of whether one of them has already paid the medical
expenses incurred. On the other hand, MMPC argued in its Comment35 that the cited foreign case involves a
different set of facts.

The CA, in its Resolution36 dated December 5, 2006, denied MMPSEU’s motion.

Hence, this Petition.

Issues

MMPSEU presented the following grounds in support of its Petition:

A.

THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT REVERSED THE DECISION DATED 03 [DECEMBER]
2002 OF THE VOLUNTARY ARBITRATOR BELOW WHEN THE SAME WAS SUPPORTED BY SUBSTANTIAL
EVIDENCE, INCLUDING THE OPINION OF THE INSURANCE COMMISSION THAT RECOVERY FROM BOTH
THE CBA AND SEPARATE HEALTH CARDS IS NOT PROHIBITED IN THE ABSENCE OF ANY SPECIFIC
PROVISION IN THE CBA.

B.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN OVERTURNING THE DECISION OF THE
VOLUNTARY ARBITRATOR WITHOUT EVEN GIVING ANY LEGAL OR JUSTIFIABLE BASIS FOR SUCH
REVERSAL.

C.

THE COURT OF APPEALS COMMITTED GRAVE ERROR IN REFUSING TO CONSIDER OR EVEN MENTION
ANYTHING ABOUT THE AMERICAN AUTHORITIES CITED IN THE RECORDS THAT DO NOT PROHIBIT, BUT
IN FACT ALLOW, RECOVERY FROM TWO SEPARATE HEALTH PLANS.

D.

THE COURT OF APPEALS GRAVELY ERRED IN GIVING MORE IMPORTANCE TO A POSSIBLE, HENCE
MERELY SPECULATIVE, ABUSE BY EMPLOYEES OF THE BENEFITS IF DOUBLE RECOVERY WERE
ALLOWED INSTEAD OF THE REAL INJURY TO THE EMPLOYEES WHO ARE PAYING FOR THE CBA
HOSPITALIZATION BENEFITS THROUGH MONTHLY SALARY DEDUCTIONS BUT WHO MAY NOT BE ABLE
TO AVAIL OF THE SAME IF THEY OR THEIR DEPENDENTS HAVE OTHER HEALTH INSURANCE.37

MMPSEU avers that the Decision of the Voluntary Arbitrator deserves utmost respect and finality because it is
supported by substantial evidence and is in accordance with the opinion rendered by the Insurance Commission, an
agency equipped with vast knowledge concerning insurance contracts. It maintains that under the CBA, member-
employees are entitled to full reimbursement of medical expenses incurred by their dependents regardless of any
amounts paid by the latter’s health insurance provider. Otherwise, non-recovery will constitute unjust enrichment on
the part of MMPC. It avers that recovery from both the CBA and other insurance companies is allowed under their
CBA and not prohibited by law nor by jurisprudence.

Our Ruling

The Petition has no merit.

Atty. Funk erred in applying the

collateral source rule.

The Voluntary Arbitrator based his ruling on the opinion of Atty. Funk that the employees may recover benefits from
different insurance providers without regard to the amount of benefits paid by each. According to him, this view is
consistent with the theory of the collateral source rule.

As part of American personal injury law, the collateral source rule was originally applied to tort cases wherein the
defendant is prevented from benefiting from the plaintiff’s receipt of money from other sources.38 Under this rule, if
an injured person receives compensation for his injuries from a source wholly independent of the tortfeasor, the
payment should not be deducted from the damages which he would otherwise collect from the tortfeasor.39 In a
recent Decision40 by the Illinois Supreme Court, the rule has been described as "an established exception to the
general rule that damages in negligence actions must be compensatory." The Court went on to explain that although
the rule appears to allow a double recovery, the collateral source will have a lien or subrogation right to prevent such
a double recovery.41 In Mitchell v. Haldar,42 the collateral source rule was rationalized by the Supreme Court of
Delaware:

The collateral source rule is ‘predicated on the theory that a tortfeasor has no interest in, and therefore no right to
benefit from monies received by the injured person from sources unconnected with the defendant’. According to the
collateral source rule, ‘a tortfeasor has no right to any mitigation of damages because of payments or compensation
received by the injured person from an independent source.’ The rationale for the collateral source rule is based
upon the quasi-punitive nature of tort law liability. It has been explained as follows:

The collateral source rule is designed to strike a balance between two competing principles of tort law: (1) a plaintiff
is entitled to compensation sufficient to make him whole, but no more; and (2) a defendant is liable for all damages
that proximately result from his wrong. A plaintiff who receives a double recovery for a single tort enjoys a windfall; a
defendant who escapes, in whole or in part, liability for his wrong enjoys a windfall. Because the law must sanction
one windfall and deny the other, it favors the victim of the wrong rather than the wrongdoer.

Thus, the tortfeasor is required to bear the cost for the full value of his or her negligent conduct even if it results in a
windfall for the innocent plaintiff. (Citations omitted)

As seen, the collateral source rule applies in order to place the responsibility for losses on the party causing
them.43Its application is justified so that "'the wrongdoer should not benefit from the expenditures made by the
injured party or take advantage of contracts or other relations that may exist between the injured party and third
persons."44Thus, it finds no application to cases involving no-fault insurances under which the insured is indemnified
for losses by insurance companies, regardless of who was at fault in the incident generating the losses.45 Here, it is
clear that MMPC is a no-fault insurer. Hence, it cannot be obliged to pay the hospitalization expenses of the
dependents of its employees which had already been paid by separate health insurance providers of said
dependents.

The Voluntary Arbitrator therefore erred in adopting Atty. Funk’s view that the covered employees are entitled to full
payment of the hospital expenses incurred by their dependents, including the amounts already paid by other health
insurance companies based on the theory of collateral source rule.

The conditions set forth in the CBA provision indicate an intention to limit MMPC’s liability only to actual expenses
incurred by the employees’ dependents, that is, excluding the amounts paid by dependents’ other health insurance
providers.

The Voluntary Arbitrator ruled that the CBA has no express provision barring claims for hospitalization expenses
already paid by other insurers. Hence, the covered employees can recover from both. The CA did not agree, saying
that the conditions set forth in the CBA implied an intention of the parties to limit MMPC’s liability only to the extent
of the expenses actually incurred by their dependents which excludes the amounts shouldered by other health
insurance companies.

We agree with the CA. The condition that payment should be direct to the hospital and doctor implies that MMPC is
only liable to pay medical expenses actually shouldered by the employees’ dependents. It follows that MMPC’s
liability is limited, that is, it does not include the amounts paid by other health insurance providers. This condition is
obviously intended to thwart not only fraudulent claims but also double claims for the same loss of the dependents
of covered employees.

It is well to note at this point that the CBA constitutes a contract between the parties and as such, it should be strictly
construed for the purpose of limiting the amount of the employer’s liability.46 The terms of the subject provision are
clear and provide no room for any other interpretation. As there is no ambiguity, the terms must be taken in their
plain, ordinary and popular sense.47 Consequently, MMPSEU cannot rely on the rule that a contract of insurance is
to be liberally construed in favor of the insured. Neither can it rely on the theory that any doubt must be resolved in
favor of labor.

Samsel v. Allstate Insurance Co. is not

on all fours with the case at bar.

MMPSEU cannot rely on Samsel v. Allstate Insurance Co. where the Supreme Court of Arizona allowed the insured
to enjoy medical benefits under an automobile policy insurance despite being able to also recover from a separate
health insurer. In that case, the Allstate automobile policy does not contain any clause restricting medical payment
coverage to expenses actually paid by the insured nor does it specifically provide for reduction of medical payments
benefits by a coordination of benefits.48 However, in the case before us, the dependents’ group hospitalization
insurance provision in the CBA specifically contains a condition which limits MMPC’s liability only up to the extent of
the expenses that should be paid by the covered employee’s dependent to the hospital and doctor. This is evident
from the portion which states that "payment by MMPC shall be direct to the hospital and doctor."49 In contrast, the
Allstate automobile policy expressly gives Allstate the authority to pay directly to the insured person or on the latter’s
behalf all reasonable expenses actually incurred. Therefore, reliance on Samsel is unavailing because the facts
therein are different and not decisive of the issues in the present case.
To allow reimbursement of amounts paid
under other insurance policies shall
constitute double recovery which is not
sanctioned by law.

MMPSEU insists that MMPC is also liable for the amounts covered under other insurance policies; otherwise,
MMPC will unjustly profit from the premiums the employees contribute through monthly salary deductions.

This contention is unmeritorious.

To constitute unjust enrichment, it must be shown that a party was unjustly enriched in the sense that the term
unjustly could mean illegally or unlawfully.50 A claim for unjust enrichment fails when the person who will benefit has
a valid claim to such benefit.51

The CBA has provided for MMPC’s limited liability which extends only up to the amount to be paid to the hospital
and doctor by the employees’ dependents, excluding those paid by other insurers. Consequently, the covered
employees will not receive more than what is due them; neither is MMPC under any obligation to give more than
what is due under the CBA.

Moreover, since the subject CBA provision is an insurance contract, the rights and obligations of the parties must be
determined in accordance with the general principles of insurance law.52 Being in the nature of a non-life insurance
contract and essentially a contract of indemnity, the CBA provision obligates MMPC to indemnify the covered
employees’ medical expenses incurred by their dependents but only up to the extent of the expenses actually
incurred.53 This is consistent with the principle of indemnity which proscribes the insured from recovering greater
than the loss.54 Indeed, to profit from a loss will lead to unjust enrichment and therefore should not be
countenanced. As aptly ruled by the CA, to grant the claims of MMPSEU will permit possible abuse by employees.

WHEREFORE, the Petition is DENIED. The Decision dated March 31, 2006 and Resolution dated December 5,
2006 of the Court of Appeals in CA-G.R. SP No. 75630, are AFFIRMED.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 191281 December 5, 2012

BEST WEAR GARMENTS and/or WARREN PARDILLA, Petitioners,

vs.
ADELAIDA B. DE LEMOS and CECILE M. OCUBILLO, Respondents.

DECISION

VILLARAMA, J.:

This is a petition for review on certiorari under Rule 45 assailing the Decision1 dated February 24, 2009 and
Resolution2 dated February 10, 2010 of the Court of Appeals (CA) in CA-G.R. SP No. 102002. TheCA reversed the
Decision3 dated August 28, 2007 of the National Labor Relations Commission (NLRC) and reinstated the September
5, 2005 Decision 4 of the Labor Arbiter.

Petitioner Best Wear Garments is a sole proprietorship represented by its General Manager Alex Sitosta.
Respondents Cecile M. Ocubillo and Adelaida B. De Lemos were hired as sewers on piece-rate basis by petitioners
on October 27, 1993 andJuly 12, 1994, respectively.

On May 20, 2004, De Lemos filed a complaint5 for illegal dismissal with prayer for backwages and other accrued
benefits, separation pay, service incentive leave pay and attorney’s fees. A similar complaint6 was filed by Ocubillo
on June 10, 2004. Both alleged in their position paper that in August 2003, Sitosta arbitrarily transferred them to
other areas of operation of petitioner’s garments company, which they said amounted to constructive dismissal as it
resulted in less earnings for them.

De Lemos claimed that after two months in her new assignment, she was able to adjust but Sitosta again
transferred her to a "different operation where she could not earn [as] much as before because by-products require
long period of time to finish." She averred that the reason for her transfer was her refusal "to render [overtime work]
up to 7:00 p.m." Her request to be returned to her previous assignment was rejected and she was "constrained not
to report for work as Sitosta had become indifferent to her since said transfer of operation." She further alleged that
her last salary was withheld by petitioner company.7

On her part, Ocubillo alleged that her transfer was precipitated by her having "incurred excessive absences since
2001." Her absences were due to the fact that her father became very sick since 2001 until his untimely demise on
November 9, 2003; aside from this, she herself became very sickly. She claimed that from September to October
2003, Sitosta assigned her to different machines "whichever is available" and that "there were times, she could not
earn for a day because there was no available machine to work for [sic]." Sitosta also allegedly required her to
render overtime work up to 7:00 p.m. which she refused "because she was only paid up to 6:25 p.m."8

Petitioners denied having terminated the employment of respondents who supposedly committed numerous
absences without leave (AWOL). They claimed that sometime in February 2004, De Lemos informed Sitosta that
due to personal problem, she intends to resign from the company. She then demanded the payment of separation
pay. In March 2004, Ocubillo likewise intimated her intention to resign and demanded separation pay. Sitosta
explained to both De Lemos and Ocubillo that the company had no existing policy on granting separation pay, and
hence he could not act on their request. De Lemos never reported back to work since March 2004, while Ocubillo
failed to report for work from October 2004 to the present.

As to the allegation of respondents that the reason for their transfer was their refusal to render overtime work until
7:00 p.m., petitioners asserted that respondents are piece-rate workers and hence they are not paid according to
the number of hours worked.
On September 5, 2005, Labor Arbiter Arden S. Anni rendered a Decision granting respondents’ claims, as follows:

WHEREFORE, ALL THE FOREGOING CONSIDERED, judgment is rendered, as follows:

1. Declaring that complainants were constructively, nay, illegally dismissed from employment;

2. Ordering respondents to pay each of the complainants SEPARATION PAY equivalent to one-month
salary for every year of service, a fraction of at least six (6) months being considered as one (1) whole year;

3. Ordering respondents to pay each of the complainants BACKWAGES computed from the time of their
dismissal up to the finality of this decision.

For this purpose, both parties are directed to submit their respective computations of the total amount awarded for
approval by this office.

All other claims are dismissed for lack of merit.

SO ORDERED.9

Labor Arbiter Anni ruled that since respondents neither resigned nor abandoned their jobs, the ambiguities in the
circumstances surrounding their dismissal are resolved in favor of the workers. It was emphasized that respondents
could no longer be deemed terminated for reason of AWOL because this prerogative should have been exercised
before the dismissals have been effected. Moreover, it would have been illogical for respondents to resign and then
file a complaint for illegal dismissal.

Petitioners appealed to the NLRC which reversed the Labor Arbiter’s decision and dismissed respondents’
complaints. The NLRC found no basis for the charge of constructive dismissal, thus:

Complainants’ alleged demotion is vague. They simply allege that by reason of their transfer in August 2003, they
did not earn as much as they earned in their previous assignments. They failed to state how much they earned
before and after their transfer, if only to determine whether or not there was indeed a diminution in their earnings.
Further, it is to be stressed that complainants were paid on a piece rate basis, which simply means that the more
output, they produced the more earnings they will have. In other words, the earning is dependent upon
complainants.

We find more credible respondents’ assertion that complainants’ transfer was a valid exercise of management
prerogative. Respondent company points out that it is engaged in the business of garments manufacturing as a
sub-contractor. That, the kind of work it performs is dependent into with its client which specifies the work it
has to perform. And, that corollary thereto, the work to be performed by its employees will depend on the
work specifications in the contract. Thus, if complainants have been assigned to different operations, it was
pursuant to the requirements of its contracts. x x x.

In furtherance of their defense that complainants were not dismissed, either actual or constructive in August 2003,
respondents allege that complainants continued to report for work until February 2004 for complainant De Lemos
and August 2004 for complainant Ocubillo. We lend credence to this allegation of respondents because it remains
unrebutted by complainants.

It is to be noted that it was only [on] May 20, 2004 and June 10, 2004 that the instant consolidated cases were
filed by complainant De Lemos and Ocubillo, respectively. It may not be amiss to state that the date of filing jibe
with respondents’ allegation that sometime in February and March 2004, complainants intimated their intention to
resign and demanded for payment of separation pay but was not favorably acted upon by management.

Be that as it may, considering that complainants were not dismissed by respondents, they should be ordered to
report back to work without backwages and for the respondents to accept them.

WHEREFORE, premises considered, the Decision dated September 5, 2005 is hereby SET ASIDE and a new one
entered dismissing complainants’ charge of illegal dismissal for lack of merit. However, there being no dismissal,
complainants Adelaida B. De Lemos and Cecile M. Ocubillo are hereby directed to report back to work without
backwages within ten (10) days from receipt of this Resolution and for the respondent Company to accept them
under the same terms and conditions at the time of their employment.

SO ORDERED.10 (Italics in the original; emphasis supplied)

Respondents filed a motion for reconsideration which the NLRC denied. Thus, they elevated the case to the CA
alleging grave abuse of discretion on the part of the NLRC.

By Decision dated February 24, 2009, the CA granted the petition for certiorari, reversed the ruling of the NLRC and
reinstated the Labor Arbiter’s decision with modification that the service incentive leave pay shall be excluded in the
computation of the monetary award. The CA found no valid and legitimate business reason for the transfer order
which entailed the reduction of respondents’ earnings. Because respondents’ plea to be returned to their former
posts was not heeded by petitioners, no other conclusion "is discernible from the attendant circumstances except
the fact that [respondents’] transfer was unreasonable, inconvenient and prejudicial to them which [is] tantamount to
a constructive dismissal."11 Moreover, the unauthorized absences of respondents did not warrant a finding of
abandonment in view of the length of their service with petitioner company and the difficulty in finding similar
employment. The CA further invoked the rule that an employee who forthwith takes steps to protest his layoff cannot
by any logic be said to have abandoned his work.

Petitioners filed a motion for partial reconsideration which was denied by the CA.

Hence, this petition alleging that the CA has glaringly overlooked and clearly erred in its findings of fact and in
applying the law on constructive dismissal.

At the outset, it must bestated that the main issue in this case involves a question of fact. It is an established rule
that the jurisdiction of the Supreme Court in cases brought before it from the CA via Rule 45 of the 1997 Rules of
Civil Procedure is generally limited to reviewing errors of law. This Court is not a trier of facts. In the exercise of its
power of review, the findings of fact of the CA are conclusive and binding and consequently, it is not our function to
analyze or weigh evidence all over again.12

There are, however, recognized exceptions13 to this rule such as when there is a divergence between the findings of
facts of the NLRC and that of the CA.14 In this case, the CA’s findings are contrary to those of the NLRC. There is,
therefore, a need to review the records to determine which of them should be preferred as more conformable to
evidentiary facts.15

The right of employees to security of tenure does not give them vested rights to their positions to the extent of
depriving management of its prerogative to change their assignments or to transfer them. Thus, an employer may
transfer or assign employees from one office or area of operation to another, provided there is no demotion in rank
or diminution of salary, benefits, and other privileges, and the action is not motivated by discrimination, made in bad
faith, or effected as a form of punishment or demotion without sufficient cause.16

In Blue Dairy Corporation v. NLRC,17 we held that:

x x x. The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion,
bearing in mind the basic elements of justice and fair play. Having the right should not be confused with the manner
in which that right is exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of an
undesirable worker. In particular, the employer must be able to show that the transfer is not unreasonable,
inconvenient or prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries,
privileges and other benefits. Should the employer fail to overcome this burden of proof, the employee’s transfer
shall be tantamount to constructive dismissal, which has been defined as a quitting because continued employment
is rendered impossible, unreasonable or unlikely; as an offer involving a demotion in rank and diminution in pay.
Likewise, constructive dismissal exists when an act of clear discrimination, insensibility or disdain by an employer
has become so unbearable to the employee leaving him with no option but to forego with his continued
employment.18
With the foregoing as guidepost, we hold that the CA erred in reversing the NLRC’s ruling that respondents were not
constructively dismissed.

Being piece-rate workers assigned to individual sewing machines, respondents’ earnings depended on the quality
and quantity of finished products. That their work output might have been affected by the change in their specific
work assignments does not necessarily implythat any resultingreduction in payis tantamount to constructive
dismissal. Workers under piece-rate employment have no fixed salaries and their compensation is computed on the
basis of accomplished tasks. As admitted by respondent De Lemos, some garments or by-products took a longer
time to finish so they could not earn as much as before. Also,the type of sewing jobs available would depend on the
specifications made by the clients of petitioner company. Under these circumstances, it cannot be said that the
transfer was unreasonable, inconvenient or prejudicial to the respondents. Such deployment of sewers to work on
different types of garments as dictated by present business necessity is within the ambit of management prerogative
which, in the absence of bad faith, ill motive or discrimination, should not be interfered with by the courts.

The records are bereft of any showing of clear discrimination, insensibility or disdain on the part of petitioners in
transferring respondents to perform a different type of sewing job.It is unfair to charge petitioners with constructive
dismissal simply because the respondents insist that their transfer to a new work assignment was against their will.
We have long stated that "the objection to the transfer being grounded on solely upon the personal inconvenience or
hardship that will be caused to the employee by reason of the transfer is not a valid reason to disobey an order of
transfer."19 That respondents eventually discontinued reporting for work after their plea to be returned to their former
work assignment was their personal decision, for which the petitioners should not be held liable particularly as the
latter did not, in fact, dismiss them.

Indeed, there was no evidence that respondents were dismissed from employment. In fact, petitioners expressed
1âw phi 1

willingness to accept them back to work. There being no termination of employment by the employer, the award of
backwages cannot be sustained. It is well settled that backwages may be granted only when there is a finding of
illegal dismissal.20 In cases where there is no evidence of dismissal, the remedy is reinstatement but without
backwages.21

The constitutional policy of providing full protection to labor is not intended to oppress or destroy
management.22While the Constitution is committed to the policy of social justice and the protection of the working
class, it should not be supposed that every labor dispute will be automatically decided in favor of labor. Management
also has its rights which are entitled to respect and enforcement in the interest of simple fair play.23 Thus, where
management prerogative to transfer employees is validly exercised, as in this case, courts will decline to interfere.

WHEREFORE, the petition for review on certiorari is GRANTED. The Decision dated February 24, 2009 and
Resolution dated February 10, 2010 of the Court of Appeals in CA-G.R. SP No. 102002 are SET ASIDE. The
Decision dated August 28, 2007 of the National Labor Relations Commission is hereby REINSTATED and
UPHELD.

No pronouncement as to costs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. Nos. 158786 & 158789 October 19, 2007

TOYOTA MOTOR PHILS. CORP. WORKERS ASSOCIATION (TMPCWA), ED CUBELO, EDWIN ALARANA,
ALEX ALEJO, ERWIN ALFONSO, MELVIN APOSTOL, DANIEL AROLLADO, DOMINADOR ARRIOLA, LESTER
ATUN, ROLANDO BALUYOT, RODERICK BAYANI, ABEL BERCES, BENNY BERING, MELCHOR BLANCO,
JERRY BOLOCON, ELMER BULAN, NELSON CABAHUG, JESSIE CABATAY, MARCELO CABEZAS, ROQUE
CANDELARIO, JR., LORENZO CARAQUEO, DENNIS CARINGAL, GIENELL CASABA, CHRISTOPHER
CATAPUSAN, RICO CATRAL, JULIUS COMETA, JAY ANTONIO CORAL, REYNALDO CUEVAS, BENIGNO
DAVID, JR., JOEY DE GUZMAN, LEONARDO DE LEON, ROGELIO DELOS SANTOS, JOSELITO DE OCAMPO,
FRANK MANUEL DIA, ANTONIO DIMAYUGA, ARMANDO ERCILLO, DELMAR ESPADILLA, DENNIS
ESPELOA, JASON FAJILAGUTAN, JOHN FAJURA, MELENCIO FRANCO, DEXTER FULGAR, EDUARDO
GADO, ERWIN GALANG, ROBIN GARCES, ARIEL GARCIA, RONALD GASPI, ANGELO GAVARRA,
REYNALDO GOJAR, EDGAR HILANGA, EUGENE JAY HONDRADA, ALEJANDRO IMPERIAL, FERDINAND
JAEN, JOEY JAVILLONAR, BASILIO LAQUI, ALBERTO LOMBOY, JUDE JONOBELL LOZADA, JOHNNY
LUCIDO, ROMMEL MACALINDONG, NIXON MADRAZO, ROGELIO MAGISTRADO, JR., PHILIP JOHN
MAGNAYE, ALLAN JOHN MALABANAN, ROLANDO MALALUAN, JR., PAULINO MALEON, MANUEL
MANALO, JR., JONAMAR MANAOG, JOVITO MANECLANG, BAYANI MANGUIL, JR., CARLITO MARASIGAN,
ROMMEL MARIANO, BOBIT MENDOZA, ERICSON MONTERO, MARLAW MONTERO, EDWIN NICANOR,
RODERICK NIERVES, LOLITO NUNEZ, FELIMON ORTIZ, EDWIN PECAYO, ERWIN PENA, JOWALD
PENAMANTE, JORGE POLUTAN, EDDIE RAMOS, ROLANDO REYES, PHILIP ROXAS, DAVID SALLAN, JR.,
BERNARDO SALVADOR, BALDWIN SAN PABLO, JEFFREY SANGALANG, BERNABE SAQUILABON, ALEX
SIERRA, ROMUALDO SIMBORIO, EDWIN TABLIZO, PETRONIO TACLAN, JR., RODEL TOLENTINO,
ROMMEL TOLENTINO, GRANT ROBERT TORAL, FEDERICO TORRES, JR., EMANNUEL TULIO, NESTOR
UMITEN, JR., APOLLO VIOLETA, SR., DOMINADOR ZAMORA, JR., ROMMEL ARCETA, ANTONIO
BORSIGUE, EMILIO COMPLETO, RANDY CONSIGNADO, BASILIO DELA CRUZ, ALEXANDER ESTEVA,
NIKKO FRANCO, RODEL GAMIT, ROBERTO GONZALES, PHILIP JALEA, JOEY LLANERA, GERONIMO
LOPEZ, RUEL MANEGO, EDWIN MANZANILLA, KENNETH NATIVIDAD, LARRY ORMILLA, CORNELIO
PLATON, PAUL ARTHUR SALES, ALEJANDRO SAMPANG, LAURO SULIT, ROLANDO TOMAS, JOSE
ROMMEL TRAZONA, MICHAEL TEDDY YANGYON, MAXIMINO CRUZ, VIRGILIO COLANDOG, ROMMEL
DIGMA, JOSELITO HUGO, and RICKY CHAVEZ, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, (NLRC-2ND DIVISION), HON. COMMISSIONERS: VICTORINO
CALAYCAY, ANGELITA GACUTAN, and RAUL AQUINO, TOYOTA MOTOR PHILIPPINES CORPORATION,
TAKESHI FUKUDA, and DAVID GO, Respondents,

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. Nos. 158798-99

TOYOTA MOTOR PHILIPPINES CORPORATION, Petitioner,

vs.
TOYOTA MOTOR PHILIPPINES CORP. WORKERS ASSOCIATION (TMPCWA), Respondent.

DECISION

VELASCO, JR., J.:

The Case

In the instant petition under Rule 45 subject of G.R. Nos. 158786 and 158789, Toyota Motor Philippines Corporation
Workers Association (Union) and its dismissed officers and members seek to set aside the February 27, 2003
Decision1 of the Court of Appeals (CA) in CA-G.R. SP Nos. 67100 and 67561, which affirmed the August 9, 2001
Decision2 and September 14, 2001 Resolution3 of the National Labor Relations Commission (NLRC), declaring
illegal the strikes staged by the Union and upholding the dismissal of the 227 Union officers and members.

On the other hand, in the related cases docketed as G.R. Nos. 158798-99, Toyota Motor Philippines Corporation
(Toyota) prays for the recall of the award of severance compensation to the 227 dismissed employees, which was
granted under the June 20, 2003 CA Resolution4 in CA-G.R. SP Nos. 67100 and 67561.

In view of the fact that the parties are petitioner/s and respondent/s and vice-versa in the four (4) interrelated cases,
they will be referred to as simply the Union and Toyota hereafter.

The Facts

The Union is a legitimate labor organization duly registered with the Department of Labor and Employment (DOLE)
and is the sole and exclusive bargaining agent of all Toyota rank and file employees.5

Toyota, on the other hand, is a domestic corporation engaged in the assembly and sale of vehicles and parts.6 It is a
Board of Investments (BOI) participant in the Car Development Program and the Commercial Vehicle Development
Program. It is likewise a BOI-preferred non-pioneer export trader of automotive parts and is under the "Special
Economic Zone Act of 1995." It is one of the largest motor vehicle manufacturers in the country employing around
1,400 workers for its plants in Bicutan and Sta. Rosa, Laguna. It is claimed that its assets amount to PhP 5.525
billion, with net sales of PhP 14.646 billion and provisions for income tax of PhP 120.9 million.

On February 14, 1999, the Union filed a petition for certification election among the Toyota rank and file employees
with the National Conciliation and Mediation Board (NCMB), which was docketed as Case No. NCR-OD-M-9902-
001. Med-Arbiter Ma. Zosima C. Lameyra denied the petition, but, on appeal, the DOLE Secretary granted the
Union’s prayer, and, through the June 25, 1999 Order, directed the immediate holding of the certification election.7

After Toyota’s plea for reconsideration was denied, the certification election was conducted. Med-Arbiter Lameyra’s
May 12, 2000 Order certified the Union as the sole and exclusive bargaining agent of all the Toyota rank and file
employees. Toyota challenged said Order via an appeal to the DOLE Secretary.8

In the meantime, the Union submitted its Collective Bargaining Agreement (CBA) proposals to Toyota, but the latter
refused to negotiate in view of its pending appeal. Consequently, the Union filed a notice of strike on January 16,
2001 with the NCMB, docketed as NCMB-NCR-NS-01-011-01, based on Toyota’s refusal to bargain. On February
5, 2001, the NCMB-NCR converted the notice of strike into a preventive mediation case on the ground that the issue
of whether or not the Union is the exclusive bargaining agent of all Toyota rank and file employees was still
unresolved by the DOLE Secretary.

In connection with Toyota’s appeal, Toyota and the Union were required to attend a hearing on February 21, 2001
before the Bureau of Labor Relations (BLR) in relation to the exclusion of the votes of alleged supervisory
employees from the votes cast during the certification election. The February 21, 2001 hearing was cancelled and
reset to February 22, 2001. On February 21, 2001, 135 Union officers and members failed to render the required
overtime work, and instead marched to and staged a picket in front of the BLR office in Intramuros, Manila.9 The
Union, in a letter of the same date, also requested that its members be allowed to be absent on February 22, 2001
to attend the hearing and instead work on their next scheduled rest day. This request however was denied by
Toyota.

Despite denial of the Union’s request, more than 200 employees staged mass actions on February 22 and 23, 2001
in front of the BLR and the DOLE offices, to protest the partisan and anti-union stance of Toyota. Due to the
deliberate absence of a considerable number of employees on February 22 to 23, 2001, Toyota experienced acute
lack of manpower in its manufacturing and production lines, and was unable to meet its production goals resulting in
huge losses of PhP 53,849,991.

Soon thereafter, on February 27, 2001, Toyota sent individual letters to some 360 employees requiring them to
explain within 24 hours why they should not be dismissed for their obstinate defiance of the company’s directive to
render overtime work on February 21, 2001, for their failure to report for work on February 22 and 23, 2001, and for
their participation in the concerted actions which severely disrupted and paralyzed the plant’s operations.10 These
letters specifically cited Section D, paragraph 6 of the Company’s Code of Conduct, to wit:

Inciting or participating in riots, disorders, alleged strikes, or concerted actions detrimental to [Toyota’s] interest.

1st offense – dismissal.11

Meanwhile, a February 27, 2001 Manifesto was circulated by the Union which urged its members to participate in a
strike/picket and to abandon their posts, the pertinent portion of which reads, as follows:

YANIG sa kanyang komportableng upuan ang management ng TOYOTA. And dating takot, kimi, at mahiyaing
manggagawa ay walang takot na nagmartsa at nagprotesta laban sa desperadong pagtatangkang baguhin ang
desisyon ng DOLE na pabor sa UNYON. Sa tatlong araw na protesta, mahigit sa tatlong daang manggagawa ang
lumahok.

xxxx

HANDA na tayong lumabas anumang oras kung patuloy na ipagkakait ng management ang CBA. Oo maari
tayong masaktan sa welga. Oo, maari tayong magutom sa piketlayn. Subalit may pagkakaiba ba ito sa unti-
unting pagpatay sa atin sa loob ng 12 taong makabaling likod ng pagtatrabaho? Ilang taon na lang ay
magkakabutas na ang ating mga baga sa mga alipato at usok ng welding. Ilang taon na lang ay marupok na ang
ating mga buto sa kabubuhat. Kung dumating na ang panahong ito at wala pa tayong CBA, paano na? Hahayaan
ba nating ang kumpanya lang ang makinabang sa yamang likha ng higit sa isang dekadang pagpapagal natin?

HUWAG BIBITIW SA NASIMULANG TAGUMPAY!

PAIGTINGIN ANG PAKIKIBAKA PARA SA ISANG MAKATARUNGANG CBA!

HIGIT PANG PATATAGIN ANG PAGKAKAISA NG MGA MANGGAGAWA SA TOYOTA! 12 (Emphasis

supplied.)

On the next day, the Union filed with the NCMB another notice of strike docketed as NCMB-NCR-NS-02-061-01 for
union busting amounting to unfair labor practice.

On March 1, 2001, the Union nonetheless submitted an explanation in compliance with the February 27, 2001
notices sent by Toyota to the erring employees. The Union members explained that their refusal to work on their
scheduled work time for two consecutive days was simply an exercise of their constitutional right to peaceably
assemble and to petition the government for redress of grievances. It further argued that the demonstrations staged
by the employees on February 22 and 23, 2001 could not be classified as an illegal strike or picket, and that Toyota
had already condoned the alleged acts when it accepted back the subject employees.13

Consequently, on March 2 and 5, 2001, Toyota issued two (2) memoranda to the concerned employees to clarify
whether or not they are adopting the March 1, 2001 Union’s explanation as their own. The employees were also
required to attend an investigative interview,14 but they refused to do so.

On March 16, 2001, Toyota terminated the employment of 227 employees15 for participation in concerted actions in
violation of its Code of Conduct and for misconduct under Article 282 of the Labor Code. The notice of termination
reads:

After a careful evaluation of the evidence on hand, and a thorough assessment of your explanation, TMP has
concluded that there are overwhelming reasons to terminate your services based on Article 282 of the Labor Code
and TMP’s Code of Conduct.

Your repeated absences without permission on February 22 to 23, 2001 to participate in a concerted action against
TMP constitute abandonment of work and/or very serious misconduct under Article 282 of the Labor Code.

The degree of your offense is aggravated by the following circumstances:

1. You expressed to management that you will adopt the union’s letter dated March 1, 2001, as your own
explanation to the charges contained in the Due Process Form dated February 27, 2001. It is evident from
such explanation that you did not come to work because you deliberately participated together with other
Team Members in a plan to engage in concerted actions detrimental to TMP’s interest. As a result of your
participation in the widespread abandonment of work by Team Members from February 22 to 23, 2001, TMP
suffered substantial damage.

It is significant that the absences you incurred in order to attend the clarificatory hearing conducted by the
Bureau of Labor Relations were unnecessary because the union was amply represented in the said
hearings by its counsel and certain members who sought and were granted leave for the purpose. Your
reason for being absent is, therefore, not acceptable; and

2. Your participation in the organized work boycott by Team Members on February 22 and 23 led to work
disruptions that prevented the Company from meeting its production targets, resulting [in] foregone sales of
more than eighty (80) vehicles, mostly new-model Revos, valued at more than Fifty Million Pesos
(50,000,000.00).

The foregoing is also a violation of TMP’s Code of Conduct (Section D, Paragraph 6) to wit:

"Inciting or participating in riots, disorders, illegal strikes or concerted actions detrimental to TMP’s
interest."

Based on the above, TMP Management is left with no other recourse but to terminate your
employment effective upon your receipt thereof.

[Sgd.]
JOSE MARIA ALIGADA

Deputy Division Manager16

In reaction to the dismissal of its union members and officers, the Union went on strike on March 17, 2001.
Subsequently, from March 28, 2001 to April 12, 2001, the Union intensified its strike by barricading the gates
of Toyota’s Bicutan and Sta. Rosa plants. The strikers prevented workers who reported for work from
entering the plants. In his Affidavit, Mr. Eduardo Nicolas III, Security Department Head, stated that:

3. On March 17, 2001, members of the Toyota Motor Philippines Corporation Workers Association
(TMPCWA), in response to the dismissal of some two hundred twenty seven (227) leaders and members of
TMPCWA and without observing the requirements mandated by the Labor Code, refused to report for work
and picketed TMPC premises from 8:00 a.m. to 5:00 p.m. The strikers badmouthed people coming in and
hurled invectives such as "bakeru" at Japanese officers of the company. The strikers likewise pounded the
officers’ vehicle as they tried to enter the premises of the company.

4. On March 28, 2001, the strikers intensified their picketing and barricaded the gates of TMPC’s Bicutan
and Sta. Rosa plants, thus, blocking the free ingress/egress to and from the premises. Shuttle buses and
cars containing TMPC employees, suppliers, dealers, customers and other people having business with the
company, were prevented by the strikers from entering the plants.

5. As a standard operating procedure, I instructed my men to take photographs and video footages of those
who participated in the strike. Seen on video footages taken on various dates actively participating in the
strike were union officers Emilio C. Completo, Alexander Esteva, Joey Javellonar and Lorenzo Caraqueo.

6. Based on the pictures, among those identified to have participated in the March 28, 2001 strike were
Grant Robert Toral, John Posadas, Alex Sierra, Allan John Malabanan, Abel Bersos, Ernesto Bonavente,
Ariel Garcia, Pablito Adaya, Feliciano Mercado, Charlie Oliveria, Philip Roxas, June Lamberte, Manjolito
Puno, Baldwin San Pablo, Joseph Naguit, Federico Torres, Larry Gerola, Roderick Bayani, Allan Oclarino,
Reynaldo Cuevas, Jorge Polutan, Arman Ercillo, Jimmy Hembra, Albert Mariquit, Ramil Gecale, Jimmy
Palisoc, Normandy Castalone, Joey Llanera, Greg Castro, Felicisimo Escrimadora, Rodolfo Bay, Ramon
 Clemente, Dante Baclino, Allan Palomares, Arturo Murillo and Robert Gonzales. Attached hereto as
Annexes "1" to "18" are the pictures taken on March 28, 2001 at the Bicutan and Sta. Rosa plants.

7. From March 29 to 31, 2001, the strikers continued to barricade the entrances to TMPC’s two (2) plants.
Once again, the strikers hurled nasty remarks and prevented employees aboard shuttle buses from entering
the plants. Among the strikers were Christopher Saldivar, Basilio Laqui, Sabas Bernabise, Federico Torres,
Freddie Olit, Josel Agosto, Arthur Parilla, Richard Calalang, Ariel Garcia, Edgar Hilaga, Charlie Oliveria,
Ferdinand Jaen, Wilfredo Tagle, Alejandro Imperial, Manjolito Puno, Delmar Espadilla, Domingo Javier,
Apollo Violeta and Elvis Tabinao.17

On March 29, 2001, Toyota filed a petition for injunction with a prayer for the issuance of a temporary restraining
order (TRO) with the NLRC, which was docketed as NLRC NCR Case No. INJ-0001054-01. It sought free ingress to
and egress from its Bicutan and Sta. Rosa manufacturing plants. Acting on said petition, the NLRC, on April 5, 2001,
issued a TRO against the Union, ordering its leaders and members as well as its sympathizers to remove their
barricades and all forms of obstruction to ensure free ingress to and egress from the company’s premises. In
addition, the NLRC rejected the Union’s motion to dismiss based on lack of jurisdiction.18

Meanwhile, Toyota filed a petition to declare the strike illegal with the NLRC arbitration branch, which was docketed
as NLRC NCR (South) Case No. 30-04-01775-01, and prayed that the erring Union officers, directors, and members
be dismissed.19

On April 10, 2001, the DOLE Secretary assumed jurisdiction over the labor dispute and issued an Order20 certifying
the labor dispute to the NLRC. In said Order, the DOLE Secretary directed all striking workers to return to work at
their regular shifts by April 16, 2001. On the other hand, it ordered Toyota to accept the returning employees under
the same terms and conditions obtaining prior to the strike or at its option, put them under payroll reinstatement. The
parties were also enjoined from committing acts that may worsen the situation. 1âwphi1

The Union ended the strike on April 12, 2001. The union members and officers tried to return to work on April 16,
2001 but were told that Toyota opted for payroll-reinstatement authorized by the Order of the DOLE Secretary.

In the meantime, the Union filed a motion for reconsideration of the DOLE Secretary’s April 10, 2001 certification
Order, which, however, was denied by the DOLE Secretary in her May 25, 2001 Resolution. Consequently, a
petition for certiorari was filed before the CA, which was docketed as CA-G.R. SP No. 64998.

In the intervening time, the NLRC, in compliance with the April 10, 2001 Order of the DOLE Secretary, docketed the
case as Certified Case No. 000203-01.

Meanwhile, on May 23, 2001, at around 12:00 nn., despite the issuance of the DOLE Secretary’s certification Order,
several payroll-reinstated members of the Union staged a protest rally in front of Toyota’s Bicutan Plant bearing
placards and streamers in defiance of the April 10, 2001 Order.

Then, on May 28, 2001, around forty-four (44) Union members staged another protest action in front of the Bicutan
Plant. At the same time, some twenty-nine (29) payroll-reinstated employees picketed in front of the Santa Rosa
Plant’s main entrance, and were later joined by other Union members.

On June 5, 2001, notwithstanding the certification Order, the Union filed another notice of strike, which was
docketed as NCMB-NCR-NS-06-150-01. On June 18, 2001, the DOLE Secretary directed the second notice of
strike to be subsumed in the April 10, 2001 certification Order.

In the meantime, the NLRC, in Certified Case No. 000203-01, ordered both parties to submit their respective
position papers on June 8, 2001. The union, however, requested for abeyance of the proceedings considering that
there is a pending petition for certiorari with the CA assailing the validity of the DOLE Secretary’s Assumption of
Jurisdiction Order.

Thereafter, on June 19, 2001, the NLRC issued an Order, reiterating its previous order for both parties to submit
their respective position papers on or before June 2, 2001. The same Order also denied the Union’s verbal motion
to defer hearing on the certified cases.
On June 27, 2001, the Union filed a Motion for Reconsideration of the NLRC’s June 19, 2001 Order, praying for the
deferment of the submission of position papers until its petition for certiorari is resolved by the CA.

On June 29, 2001, only Toyota submitted its position paper. On July 11, 2001, the NLRC again ordered the Union to
submit its position paper by July 19, 2001, with a warning that upon failure for it to do so, the case shall be
considered submitted for decision.

Meanwhile, on July 17, 2001, the CA dismissed the Union’s petition for certiorari in CA-G.R. SP No. 64998,
assailing the DOLE Secretary’s April 10, 2001 Order.

Notwithstanding repeated orders to file its position paper, the Union still failed to submit its position paper on July
19, 2001. Consequently, the NLRC issued an Order directing the Union to submit its position paper on the
scheduled August 3, 2001 hearing; otherwise, the case shall be deemed submitted for resolution based on the
evidence on record.

During the August 3, 2001 hearing, the Union, despite several accommodations, still failed to submit its position
paper. Later that day, the Union claimed it filed its position paper by registered mail.

Subsequently, the NLRC, in its August 9, 2001 Decision, declared the strikes staged by the Union on February 21 to
23, 2001 and May 23 and 28, 2001 as illegal. The decretal portion reads:

WHEREFORE, premises considered, it is hereby ordered:

(1) Declaring the strikes staged by the Union to be illegal.

(2) Declared [sic] that the dismissal of the 227 who participated in the illegal strike on February 21-23, 2001
is legal.

(3) However, the Company is ordered to pay the 227 Union members, who participated in the illegal strike
severance compensation in an amount equivalent to one month salary for every year of service, as an
alternative relief to continued employment.

(4) Declared [sic] that the following Union officers and directors to have forfeited their employment status for
having led the illegal strikes on February 21-23, 2001 and May 23 and 28, 2001: Ed Cubelo, Maximino Cruz,
Jr., Ricky Chavez, Joselito Hugo, Virgilio Colandog, Rommel Digma, Federico Torres, Emilio Completo,
Alexander Esteva, Joey Javellonar, Lorenzo Caraqueo, Roderick Nieres, Antonio Borsigue, Bayani Manguil,
Jr., and Mayo Mata.21

SO ORDERED.22

The NLRC considered the mass actions staged on February 21 to 23, 2001 illegal as the Union failed to comply with
the procedural requirements of a valid strike under Art. 263 of the Labor Code.

After the DOLE Secretary assumed jurisdiction over the Toyota dispute on April 10, 2001, the Union again staged
strikes on May 23 and 28, 2001. The NLRC found the strikes illegal as they violated Art. 264 of the Labor Code
which proscribes any strike or lockout after jurisdiction is assumed over the dispute by the President or the DOLE
Secretary.

The NLRC held that both parties must have maintained the status quo after the DOLE Secretary issued the
assumption/certification Order, and ruled that the Union did not respect the DOLE Secretary’s directive.

Accordingly, both Toyota and the Union filed Motions for Reconsideration, which the NLRC denied in its September
14, 2001 Resolution.23 Consequently, both parties questioned the August 9, 2001 Decision24 and September 14,
2001 Resolution of the NLRC in separate petitions for certiorari filed with the CA, which were docketed as CA-G.R.
SP Nos. 67100 and 67561, respectively. The CA then consolidated the petitions.
In its February 27, 2003 Decision,25 the CA ruled that the Union’s petition is defective in form for its failure to append
a proper verification and certificate of non-forum shopping, given that, out of the 227 petitioners, only 159 signed the
verification and certificate of non-forum shopping. Despite the flaw, the CA proceeded to resolve the petitions on the
merits and affirmed the assailed NLRC Decision and Resolution with a modification, however, of deleting the award
of severance compensation to the dismissed Union members.

In justifying the recall of the severance compensation, the CA

considered the participation in illegal strikes as serious misconduct. It defined serious misconduct as a transgression
of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies
wrongful intent and not mere error in judgment. It cited Panay Electric Company, Inc. v. NLRC,26 where we revoked
the grant of separation benefits to employees who lawfully participated in an illegal strike based on Art. 264 of the
Labor Code, which states that "any union officer who knowingly participates in an illegal strike and any worker or
union officer who knowingly participates in the commission of illegal acts during a strike may be declared to have
lost his employment status."27

However, in its June 20, 2003 Resolution,28 the CA modified its February 27, 2003 Decision by reinstating
severance compensation to the dismissed employees based on social justice.

The Issues

Petitioner Union now comes to this Court and raises the following issues for our consideration:

I. Whether the mere participation of ordinary employees in an illegal strike is enough reason to warrant their
dismissal.

II. Whether the Union officers and members’ act of holding the protest rallies in front of the BLR office and
the Office of the Secretary of Labor and Employment on February 22 and 23, 2001 should be held as illegal
strikes. In relation hereto, whether the protests committed on May 23 and 28, 2001, should be held as illegal
strikes. Lastly, whether the Union violated the Assumption of Jurisdiction Order issued by the Secretary of
Labor and Employment.

III. Whether the dismissal of 227 Union officers and members constitutes unfair labor practice.

IV. Whether the CA erred in affirming the Decision of the NLRC which excluded the Union’s Position Paper
which the Union filed by mail. In the same vein, whether the Union’s right to due process was violated when
the NLRC excluded their Position Paper.

V. Whether the CA erred in dismissing the Union’s Petition for Certiorari.

Toyota, on the other hand, presents this sole issue for our determination:

I. Whether the Court of Appeals erred in issuing its Resolution dated June 20, 2003, partially modifying its Decision
dated February 27, 2003, and awarding severance compensation to the dismissed Union members.

In sum, two main issues are brought to the fore:

(1) Whether the mass actions committed by the Union on different occasions are illegal strikes; and

(2) Whether separation pay should be awarded to the Union members who participated in the illegal strikes.

The Court’s Ruling

The Union contends that the NLRC violated its right to due process when it disregarded its position paper in
deciding Toyota’s petition to declare the strike illegal.
We rule otherwise.

It is entirely the Union’s fault that its position paper was not considered by the NLRC. Records readily reveal that the
NLRC was even too generous in affording due process to the Union. It issued no less than three (3) orders for the
parties to submit its position papers, which the Union ignored until the last minute. No sufficient justification was
offered why the Union belatedly filed its position paper. In Datu Eduardo Ampo v. The Hon. Court of Appeals, it was
explained that a party cannot complain of deprivation of due process if he was afforded an opportunity to participate
in the proceedings but failed to do so. If he does not avail himself of the chance to be heard, then it is deemed
waived or forfeited without violating the constitutional guarantee.29 Thus, there was no violation of the Union’s right
to due process on the part of the NLRC.

On a procedural aspect, the Union faults the CA for treating its petition as an unsigned pleading and posits that the
verification signed by 159 out of the 227 petitioners has already substantially complied with and satisfied the
requirements under Secs. 4 and 5 of Rule 7 of the Rules of Court.

The Union’s proposition is partly correct.

Sec. 4 of Rule 7 of the Rules of Court states:

Sec. 4. Verification.—Except when otherwise specifically required by law or rule, pleadings need not be under oath,
verified or accompanied by affidavit.

A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein are true
and correct of his personal knowledge or based on authentic records.

A pleading required to be verified which contains a verification based on "information and belief" or upon
"knowledge, information and belief," or lacks a proper verification, shall be treated as an unsigned pleading.

The verification requirement is significant, as it is intended to secure an assurance that the allegations in the
pleading are true and correct and not the product of the imagination or a matter of speculation.30 This requirement is
simply a condition affecting the form of pleadings, and noncompliance with the requirement does not necessarily
render it fatally defective. Indeed, verification is only a formal and not a jurisdictional requirement.31

In this case, the problem is not the absence but the adequacy of the Union’s verification, since only 159 out of the
227 petitioners executed the verification. Undeniably, the petition meets the requirement on the verification with
respect to the 159 petitioners who executed the verification, attesting that they have sufficient knowledge of the truth
and correctness of the allegations of the petition. However, their signatures cannot be considered as verification of
the petition by the other 68 named petitioners unless the latter gave written authorization to the 159 petitioners to
sign the verification on their behalf. Thus, in Loquias v. Office of the Ombudsman, we ruled that the petition satisfies
the formal requirements only with regard to the petitioner who signed the petition but not his co-petitioner who did
not sign nor authorize the other petitioner to sign it on his behalf.32 The proper ruling in this situation is to consider
the petition as compliant with the formal requirements with respect to the parties who signed it and, therefore, can
be given due course only with regard to them. The other petitioners who did not sign the verification and certificate
against forum shopping cannot be recognized as petitioners have no legal standing before the Court. The petition
should be dismissed outright with respect to the non-conforming petitioners.

In the case at bench, however, the CA, in the exercise of sound discretion, did not strictly apply the ruling
in Loquiasand instead proceeded to decide the case on the merits.

The alleged protest rallies in front of the offices of BLR and DOLE Secretary and at the Toyota plants
constituted illegal strikes

When is a strike illegal?

Noted authority on labor law, Ludwig Teller, lists six (6) categories of an illegal strike, viz:
 (1) [when it] is contrary to a specific prohibition of law, such as strike by employees performing governmental
functions; or

(2) [when it] violates a specific requirement of law[, such as Article 263 of the Labor Code on the requisites
of a valid strike]; or

(3) [when it] is declared for an unlawful purpose, such as inducing the employer to commit an unfair labor
practice against non-union employees; or

(4) [when it] employs unlawful means in the pursuit of its objective, such as a widespread terrorism of non-
strikers [for example, prohibited acts under Art. 264(e) of the Labor Code]; or

(5) [when it] is declared in violation of an existing injunction[, such as injunction, prohibition, or order issued
by the DOLE Secretary and the NLRC under Art. 263 of the Labor Code]; or

(6) [when it] is contrary to an existing agreement, such as a no-strike clause or conclusive arbitration
clause.33

Petitioner Union contends that the protests or rallies conducted on February 21 and 23, 2001 are not within the
ambit of strikes as defined in the Labor Code, since they were legitimate exercises of their right to peaceably
assemble and petition the government for redress of grievances. Mainly relying on the doctrine laid down in the case
of Philippine Blooming Mills Employees Organization v. Philippine Blooming Mills Co., Inc.,34 it argues that the
protest was not directed at Toyota but towards the Government (DOLE and BLR). It explains that the protest is not a
strike as contemplated in the Labor Code. The Union points out that in Philippine Blooming Mills Employees
Organization, the mass action staged in Malacañang to petition the Chief Executive against the abusive behavior of
some police officers was a proper exercise of the employees’ right to speak out and to peaceably gather and ask
government for redress of their grievances.

The Union’s position fails to convince us.

While the facts in Philippine Blooming Mills Employees Organization are similar in some respects to that of the
present case, the Union fails to realize one major difference: there was no labor dispute in Philippine Blooming Mills
Employees Organization. In the present case, there was an on-going labor dispute arising from Toyota’s refusal to
recognize and negotiate with the Union, which was the subject of the notice of strike filed by the Union on January
16, 2001. Thus, the Union’s reliance on Phililippine Blooming Mills Employees Organization is misplaced, as it
cannot be considered a precedent to the case at bar.

A strike means any temporary stoppage of work by the concerted action of employees as a result of an industrial or
labor dispute. A labor dispute, in turn, includes any controversy or matter concerning terms or conditions of
employment or the association or representation of persons in negotiating, fixing, maintaining, changing, or
arranging the terms and conditions of employment, regardless of whether the disputants stand in the proximate
relation of the employer and the employee.35

In Bangalisan v. Court of Appeals, it was explained that "[t]he fact that the conventional term ‘strike’ was not used by
the striking employees to describe their common course of action is inconsequential, since the substance of the
situation and not its appearance, will be deemed controlling."36 The term "strike" has been elucidated to encompass
not only concerted work stoppages, but also slowdowns, mass leaves, sit-downs, attempts to damage, destroy, or
sabotage plant equipment and facilities, and similar activities.37

Applying pertinent legal provisions and jurisprudence, we rule that the protest actions undertaken by the Union
officials and members on February 21 to 23, 2001 are not valid and proper exercises of their right to assemble and
ask government for redress of their complaints, but are illegal strikes in breach of the Labor Code. The Union’s
position is weakened by the lack of permit from the City of Manila to hold "rallies." Shrouded as demonstrations,
they were in reality temporary stoppages of work perpetrated through the concerted action of the employees who
deliberately failed to report for work on the convenient excuse that they will hold a rally at the BLR and DOLE offices
in Intramuros, Manila, on February 21 to 23, 2001. The purported reason for these protest actions was to safeguard
their rights against any abuse which the med-arbiter may commit against their cause. However, the Union failed to
advance convincing proof that the med-arbiter was biased against them. The acts of the med-arbiter in the
performance of his duties are presumed regular. Sans ample evidence to the contrary, the Union was unable to
justify the February 2001 mass actions. What comes to the fore is that the decision not to work for two days was
designed and calculated to cripple the manufacturing arm of Toyota. It becomes obvious that the real and ultimate
goal of the Union is to coerce Toyota to finally acknowledge the Union as the sole bargaining agent of the company.
This is not a legal and valid exercise of the right of assembly and to demand redress of grievance.

We sustain the CA’s affirmance of the NLRC’s finding that the protest rallies staged on February 21 to 23, 2001
were actually illegal strikes. The illegality of the Union’s mass actions was succinctly elaborated by the labor
tribunal, thus:

We have stated in our questioned decision that such mass actions staged before the Bureau of Labor Relations on
February 21-23, 2001 by the union officers and members fall squarely within the definition of a strike (Article 212 (o),
Labor Code). These concerted actions resulted in the temporary stoppage of work causing the latter substantial
losses. Thus, without the requirements for a valid strike having been complied with, we were constrained to consider
the strike staged on such dates as illegal and all employees who participated in the concerted actions to have
consequently lost their employment status.

If we are going to stamp a color of legality on the two (2) [day-] walk out/strike of respondents without filing a notice
of strike, in effect we are giving license to all the unions in the country to paralyze the operations of their
companies/employers every time they wish to hold a demonstration in front of any government agency. While we
recognize the right of every person or a group to peaceably assemble and petition the government for redress of
grievances, the exercise of such right is governed by existing laws, rules and regulations.

Although the respondent union admittedly made earnest representations with the company to hold a mass protest
before the BLR, together with their officers and members, the denial of the request by the management should have
been heeded and ended their insistence to hold the planned mass demonstration. Verily, the violation of the
company rule cannot be dismissed as mere absences of two days as being suggested by the union [are but]
concerted actions detrimental to Petitioner Toyota’s interest.38 (Emphasis supplied.)

It is obvious that the February 21 to 23, 2001 concerted actions were undertaken without satisfying the prerequisites
for a valid strike under Art. 263 of the Labor Code. The Union failed to comply with the following requirements: (1) a
notice of strike filed with the DOLE 30 days before the intended date of strike, or 15 days in case of unfair labor
practice;39 (2) strike vote approved by a majority of the total union membership in the bargaining unit concerned
obtained by secret ballot in a meeting called for that purpose; and (3) notice given to the DOLE of the results of the
voting at least seven days before the intended strike. These requirements are mandatory and the failure of a union
to comply with them renders the strike illegal.40 The evident intention of the law in requiring the strike notice and the
strike-vote report is to reasonably regulate the right to strike, which is essential to the attainment of legitimate policy
objectives embodied in the law.41 As they failed to conform to the law, the strikes on February 21, 22, and 23, 2001
were illegal.

Moreover, the aforementioned February 2001 strikes are in blatant violation of Sec. D, par. 6 of Toyota’s Code of
Conduct which prohibits "inciting or participating in riots, disorders, alleged strikes or concerted actions detrimental
to [Toyota’s] interest." The penalty for the offense is dismissal. The Union and its members are bound by the
company rules, and the February 2001 mass actions and deliberate refusal to render regular and overtime work on
said days violated these rules. In sum, the February 2001 strikes and walk-outs were illegal as these were in
violation of specific requirements of the Labor Code and a company rule against illegal strikes or concerted actions.

With respect to the strikes committed from March 17 to April 12, 2001, those were initially legal as the legal
requirements were met. However, on March 28 to April 12, 2001, the Union barricaded the gates of the Bicutan and
Sta. Rosa plants and blocked the free ingress to and egress from the company premises. Toyota employees,
customers, and other people having business with the company were intimidated and were refused entry to the
plants. As earlier explained, these strikes were illegal because unlawful means were employed. The acts of the
Union officers and members are in palpable violation of Art. 264(e), which proscribes acts of violence, coercion, or
intimidation, or which obstruct the free ingress to and egress from the company premises. Undeniably, the strikes
from March 28 to April 12, 2001 were illegal.
Petitioner Union also posits that strikes were not committed on May 23 and 28, 2001. The Union asserts that the
rallies held on May 23 and 28, 2001 could not be considered strikes, as the participants were the dismissed
employees who were on payroll reinstatement. It concludes that there was no work stoppage.

This contention has no basis.

It is clear that once the DOLE Secretary assumes jurisdiction over the labor dispute and certifies the case for
compulsory arbitration with the NLRC, the parties have to revert to the status quo ante (the state of things as it was
before). The intended normalcy of operations is apparent from the fallo of the April 10, 2001 Order of then DOLE
Secretary Patricia A. Sto. Tomas, which reads:

WHEREFORE, PREMISES CONSIDERED, this Office hereby CERTIFIES the labor dispute at Toyota Motors
Philippines Corporation to the [NLRC] pursuant to Article 263 (g) of the Labor Code, as amended. This Certification
covers the current labor cases filed in relation with the Toyota strike, particularly, the Petition for Injunction filed with
the National Labor Relations Commission entitled Toyota Motor Philippines Corporation vs. Toyota Motor
Philippines Corporation Workers Association (TMPCWA), Ed Cubelo, et al., NLRC Injunction Case No. 3401054-01;
Toyota Motor Philippines Corporation vs. Toyota Motor Philippines Corporation Workers Association, et al., NLRC
NCR Case No. 3004-01775-01, and such other labor cases that the parties may file relating to the strike and its
effects while this Certification is in effect.

As provided under Article 2634(g) of the Labor Code, all striking workers are directed to return to work at their
regular shifts by April 16, 2001; the Company is in turn directed to accept them back to work under the same terms
and conditions obtaining prior to the work stoppage, subject to the option of the company to merely reinstate a
worker or workers in the payroll in light of the negative emotions that the strike has generated and the need to
prevent the further deterioration of the relationship between the company and its workers.

Further, the parties are hereby ordered to cease and desist from committing any act that might lead to the
worsening of an already deteriorated situation.42 (Emphasis supplied.)

It is explicit from this directive that the Union and its members shall refrain from engaging in any activity that might
exacerbate the tense labor situation in Toyota, which certainly includes concerted actions.

This was not heeded by the Union and the individual respondents who staged illegal concerted actions on May 23
and 28, 2001 in contravention of the Order of the DOLE Secretary that no acts should be undertaken by them to
aggravate the "already deteriorated situation."

While it may be conceded that there was no work disruption in the two Toyota plants, the fact still remains that the
Union and its members picketed and performed concerted actions in front of the Company premises. This is a
patent violation of the assumption of jurisdiction and certification Order of the DOLE Secretary, which ordered the
parties "to cease and desist from committing any act that might lead to the worsening of an already deteriorated
situation." While there are no work stoppages, the pickets and concerted actions outside the plants have a
demoralizing and even chilling effect on the workers inside the plants and can be considered as veiled threats of
possible trouble to the workers when they go out of the company premises after work and of impending disruption of
operations to company officials and even to customers in the days to come. The pictures presented by Toyota
undoubtedly show that the company officials and employees are being intimidated and threatened by the strikers. In
short, the Union, by its mass actions, has inflamed an already volatile situation, which was explicitly proscribed by
the DOLE Secretary’s Order. We do not find any compelling reason to reverse the NLRC findings that the pickets on
May 23 and 28, 2001 were unlawful strikes.

From the foregoing discussion, we rule that the February 21 to 23, 2001 concerted actions, the March 17 to April 12,
2001 strikes, and the May 23 and 28, 2001 mass actions were illegal strikes.

Union officers are liable for unlawful strikes or illegal acts during a strike

Art. 264 (a) of the Labor Code provides:

ART. 264. PROHIBITED ACTIVITIES

(a) x x x

Any worker whose employment has been terminated as a consequence of an unlawful lockout shall be entitled to
reinstatement with full backwages. Any union officer who knowingly participates in an illegal strike and any worker or
union officer who knowingly participates in the commission of illegal acts during a strike may be declared to have
lost his employment status: Provided, That mere participation of a worker in a lawful strike shall not constitute
sufficient ground for termination of his employment, even if a replacement had been hired by the employer during
such lawful strike.

Art. 264(a) sanctions the dismissal of a union officer who knowingly participates in an illegal strike or who knowingly
participates in the commission of illegal acts during a lawful strike.

It is clear that the responsibility of union officials is greater than that of the members. They are tasked with the duty
to lead and guide the membership in decision making on union activities in accordance with the law, government
rules and regulations, and established labor practices. The leaders are expected to recommend actions that are
arrived at with circumspection and contemplation, and always keep paramount the best interests of the members
and union within the bounds of law. If the implementation of an illegal strike is recommended, then they would
mislead and deceive the membership and the supreme penalty of dismissal is appropriate. On the other hand, if the
strike is legal at the beginning and the officials commit illegal acts during the duration of the strike, then they cannot
evade personal and individual liability for said acts.

The Union officials were in clear breach of Art. 264(a) when they knowingly participated in the illegal strikes held
from February 21 to 23, 2001, from March 17 to April 12, 2001, and on May 23 and 28, 2001. We uphold the
findings of fact of the NLRC on the involvement of said union officials in the unlawful concerted actions as affirmed
by the CA, thus:

As regards to the Union officers and directors, there is overwhelming justification to declare their termination from
service. Having instigated the Union members to stage and carry out all illegal strikes from February 21-23, 2001,
and May 23 and 28, 2001, the following Union officers are hereby terminated for cause pursuant to Article 264(a) of
the Labor Code: Ed Cubelo, Maximino Cruz, Jr., Ricky Chavez, Joselito Hugo, Virgilio Colandog, Rommel Digma,
Federico Torres, Emilio Completo, Alexander Esteva, Joey Javellonar, Lorenzo Caraqueo, Roderick Nieres, Antonio
Borsigue, Bayani Manguil, Jr., and Mayo Mata.43

The rule is well entrenched in this jurisdiction that factual findings of the labor tribunal, when affirmed by the
appellate court, are generally accorded great respect, even finality.44

Likewise, we are not duty-bound to delve into the accuracy of the factual findings of the NLRC in the absence of
clear showing that these were arbitrary and bereft of any rational basis.45 In the case at bench, the Union failed to
convince us that the NLRC findings that the Union officials instigated, led, and knowingly participated in the series of
illegal strikes are not reinforced by substantial evidence. Verily, said findings have to be maintained and upheld. We
reiterate, as a reminder to labor leaders, the rule that "[u]nion officers are duty bound to guide their members to
respect the law."46 Contrarily, if the "officers urge the members to violate the law and defy the duly constituted
authorities, their dismissal from the service is a just penalty or sanction for their unlawful acts."47

Member’s liability depends on participation in illegal acts

Art. 264(a) of the Labor Code provides that a member is liable when he knowingly participates in an illegal act
"during a strike." While the provision is silent on whether the strike is legal or illegal, we find that the same is
irrelevant. As long as the members commit illegal acts, in a legal or illegal strike, then they can be
terminated.48However, when union members merely participate in an illegal strike without committing any illegal act,
are they liable?

This was squarely answered in Gold City Integrated Port Service, Inc. v. NLRC,49 where it was held that an ordinary
striking worker cannot be terminated for mere participation in an illegal strike. This was an affirmation of the rulings
in Bacus v. Ople50 and Progressive Workers Union v. Aguas,51 where it was held that though the strike is illegal, the
ordinary member who merely participates in the strike should not be meted loss of employment on the
considerations of compassion and good faith and in view of the security of tenure provisions under the Constitution.
In Esso Philippines, Inc. v. Malayang Manggagawa sa Esso (MME), it was explained that a member is not
responsible for the union’s illegal strike even if he voted for the holding of a strike which became illegal.52

Noted labor law expert, Professor Cesario A. Azucena, Jr., traced the history relating to the liability of a union
member in an illegal strike, starting with the "rule of vicarious liability," thus:

Under [the rule of vicarious liability], mere membership in a labor union serves as basis of liability for acts of
individuals, or for a labor activity, done on behalf of the union. The union member is made liable on the theory that
all the members are engaged in a general conspiracy, and the unlawful acts of the particular members are viewed
as necessary incidents of the conspiracy. It has been said that in the absence of statute providing otherwise, the
rule of vicarious liability applies.

Even the Industrial Peace Act, however, which was in effect from 1953 to 1974, did not adopt the vicarious liability
concept. It expressly provided that:

No officer or member of any association or organization, and no association or organization participating or

interested in a labor dispute shall be held responsible or liable for the unlawful acts of individual officers, members,
or agents, except upon proof of actual participation in, or actual authorization of, such acts or of ratifying of such
acts after actual knowledge thereof.

Replacing the Industrial Peace Act, the Labor Code has not adopted the vicarious liability rule.53

Thus, the rule on vicarious liability of a union member was abandoned and it is only when a striking worker
"knowingly participates in the commission of illegal acts during a strike" that he will be penalized with dismissal.

Now, what are considered "illegal acts" under Art. 264(a)?

No precise meaning was given to the phrase "illegal acts." It may encompass a number of acts that violate existing
labor or criminal laws, such as the following:

(1) Violation of Art. 264(e) of the Labor Code which provides that "[n]o person engaged in picketing shall
commit any act of violence, coercion or intimidation or obstruct the free ingress to or egress from the
employer’s premises for lawful purposes, or obstruct public thoroughfares";

(2) Commission of crimes and other unlawful acts in carrying out the strike;54 and

(3) Violation of any order, prohibition, or injunction issued by the DOLE Secretary or NLRC in connection
with the assumption of jurisdiction/certification Order under Art. 263(g) of the Labor Code.

As earlier explained, this enumeration is not exclusive and it may cover other breaches of existing laws.

In the cases at bench, the individual respondents participated in several mass actions, viz:

(1) The rallies held at the DOLE and BLR offices on February 21, 22, and 23, 2001;

(2) The strikes held on March 17 to April 12, 2001; and

(3) The rallies and picketing on May 23 and 28, 2001 in front of the Toyota Bicutan and Sta. Rosa plants.

Did they commit illegal acts during the illegal strikes on February 21 to 23, 2001, from March 17 to April 12, 2001,
and on May 23 and 28, 2001?

The answer is in the affirmative.

As we have ruled that the strikes by the Union on the three different occasions were illegal, we now proceed to
determine the individual liabilities of the affected union members for acts committed during these forbidden
concerted actions.

Our ruling in Association of Independent Unions in the Philippines v. NLRC lays down the rule on the liability of the
union members:

Decisive on the matter is the pertinent provisions of Article 264 (a) of the Labor Code that: "[x x x] any worker [x x x]
who knowingly participates in the commission of illegal acts during a strike may be declared to have lost his
employment status. [x x x]" It can be gleaned unerringly from the aforecited provision of law in point, however, that
an ordinary striking employee can not be terminated for mere participation in an illegal strike. There must be proof
that he committed illegal acts during the strike and the striker who participated in the commission of illegal
act[s] must be identified. But proof beyond reasonable doubt is not required. Substantial evidence available
under the circumstances, which may justify the imposition of the penalty of dismissal, may suffice.

In the landmark case of Ang Tibay vs. CIR, the court ruled "Not only must there be some evidence to support a
finding or conclusion, but the evidence must be ‘substantial.’ Substantial evidence is more than a mere scintilla.
It means such relevant evidence that a reasonable mind might accept as sufficient to support a
conclusion."55 (Emphasis supplied.)

Thus, it is necessary for the company to adduce proof on the participation of the striking employee in the
commission of illegal acts during the strikes.

After a scrutiny of the records, we find that the 227 employees indeed joined the February 21, 22, and 23, 2001
rallies and refused to render overtime work or report for work. These rallies, as we earlier ruled, are in reality illegal
strikes, as the procedural requirements for strikes under Art. 263 were not complied with. Worse, said strikes were
in violation of the company rule prohibiting acts "in citing or participating in riots, disorders, alleged strikes or
concerted action detrimental to Toyota’s interest."

With respect to the February 21, 22, and 23, 2001 concerted actions, Toyota submitted the list of employees who
did not render overtime work on February 21, 2001 and who did not report for work on February 22 and 23, 2001 as
shown by Annex "I" of Toyota’s Position Paper in NLRC Certified Case No. 000203-01 entitled In Re: Labor Dispute
at Toyota Motor Philippines Corp. The employees who participated in the illegal concerted actions were as follows:

1. Aclan, Eugenio; 2. Agosto, Joel; 3. Agot, Rodelio; 4. Alarana, Edwin; 5. Alejo, Alex; 6. Alfonso, Erwin; 7.
Apolinario, Dennis; 8. Apostol, Melvin; 9. Arceta, Romel; 10. Arellano, Ruel; 11. Ariate, Abraham; 12. Arollado,
Daniel; 13. Arriola, Dominador; 14. Atun, Lester; 15. Bala, Rizalino; 16. Baluyut, Rolando; 17. Banzuela, Tirso Jr.;
18. Bayani, Roderick; 19. Benabise, Sabas Jr.; 20. Berces, Abel; 21. Bering, Benny; 22. Birondo, Alberto; 23.
Blanco, Melchor; 24. Bolanos, Dexter; 25. Bolocon, Jerry; 26. Borebor, Rurel; 27. Borromeo, Jubert; 28. Borsigue,
Antonio; 29. Bulan, Elmer; 30. Busano, Freddie; 31. Bustillo, Ernesto Jr.; 32. Caalim, Alexander; 33. Cabahug,
Nelson; 34. Cabatay, Jessie; 35. Cabezas, Marcelo; 36. Calalang, Richard; 37. Candelario, Roque Jr.; 38. Capate,
Leo Nelson; 39. Carandang, Resty; 40. Caraqueo, Lorenzo; 41. Caringal, Dennis; 42. Casaba, Gienell; 43.
Catapusan, Christopher; 44. Catral, Rico; 45. Cecilio, Felipe; 46. Cinense, Joey; 47. Cometa, Julius; 48. Completo,
Emilio; 49. Consignado, Randy; 50. Coral, Jay Antonio; 51. Correa, Claudio Jr.; 52. Cuevas, Reynaldo; 53.
Dacalcap, Albert; 54. Dakay, Ryan; 55. Dalanon, Herbert; 56. Dalisay, Rene; 57. David, Benigno Jr.; 58. De
Guzman, Joey; 59. Dela Cruz, Basilio; 60. Dela Cruz, Ferdinand; 61. Dela Torre, Heremo; 62. De Leon, Leonardo;
63. Delos Santos, Rogelio; 64. De Ocampo, Joselito; 65. De Silva, Leodegario; 66. Del Mundo, Alex; 67. Del Rio,
Rey; 68. Dela Ysla, Alex; 69. Dia, Frank Manuel; 70. Dimayuga, Antonio; 71. Dingcong, Jessiah; 72. Dumalag,
Jasper; 73. Duyag, Aldrin; 74. Ercillo, Armando; 75. Espadilla, Delmar; 76. Espejo, Lionel; 77. Espeloa, Dennis; 78.
Esteva, Alexander; 79. Estole, Francisco; 80. Fajardo, George; 81. Fajilagutan, Jason; 82. Fajura, John; 83. Franco,
Melencio; 84. Franco, Nikko; 85. Fulgar, Dexter; 86. Fulo, Dante; 87. Gado, Eduardo; 88. Galang, Erwin; 89. Gamit,
Rodel; 90. Garces, Robin; 91. Garcia, Ariel; 92. Gaspi, Ronald; 93. Gavarra, Angelo; 94. Gerola, Genaro Jr.; 95.
Gerola, Larry; 96. Gohilde, Michael; 97. Gojar, Regino; 98. Gojar, Reynaldo; 99. Gonzales, Roberto; 100. Gutierrez,
Bernabe; 101. Hilaga, Edgar; 102. Hilanga, Melchor; 103. Hondrada, Eugene Jay; 104. Imperial, Alejandro; 105.
Jaen, Ferdinand; 106. Jalea, Philip; 107. Javillonar, Joey; 108. Julve, Frederick; 109. Lalisan, Victorio; 110.
Landicho, Danny; 111. Laqui, Basilio; 112. Lavide, Edgar; 113. Lazaro, Orlando; 114. Legaspi, Noel; 115. Lising,
Reynaldo Jr.; 116. Llanera, Joey; 117. Lomboy, Alberto; 118. Lopez, Geronimo; 119. Lozada, Jude Jonobell; 120.
Lucido, Johny; 121. Macalindong, Rommel; 122. Madrazo, Nixon; 123. Magbalita, Valentin; 124. Magistrado,
Rogelio Jr.; 125. Magnaye, Philip John; 126. Malabanan, Allan John; 127. Malabrigo, Angelito; 128. Malaluan,
Rolando Jr.; 129. Malate, Leoncio Jr.; 130. Maleon, Paulino; 131. Manaig, Roger; 132. Manalang, Joseph Patrick;
133. Manalo, Manuel Jr.; 134. Manaog, Jonamar; 135. Manaog, Melchor; 136. Mandolado, Melvin; 137. Maneclang,
Jovito; 138. Manego, Ruel; 139. Manguil, Bayani Jr.; 140. Manigbas, June; 141. Manjares, Alfred; 142. Manzanilla,
Edwin; 143. Marasigan, Carlito; 144. Marcial, Nilo; 145. Mariano, Rommel; 146. Mata, Mayo; 147. Mendoza, Bobit;
148. Mendoza, Roberto; 149. Milan, Joseph; 150. Miranda, Eduardo; 151. Miranda, Luis; 152. Montero, Ericson;
153. Montero, Marlaw; 154. Montes, Ruel; 155. Morales, Dennis; 156. Natividad, Kenneth; 157. Nava, Ronaldo;
158. Nevalga, Alexander; 159. Nicanor, Edwin; 160. Nierves, Roderick; 161. Nunez, Alex; 162. Nunez, Lolito; 163.
Obe, Victor; 164. Oclarino, Alfonso; 165. Ojenal, Leo; 166. Olit, Freddie; 167. Oliver, Rex; 168. Oliveria, Charlie;
169. Operana, Danny; 170. Oriana, Allan; 171. Ormilla, Larry; 172. Ortiz, Felimon; 173. Paniterce, Alvin; 174.
Parallag, Gerald; 175. Pecayo, Edwin; 176. Pena, Erwin; 177. Penamante, Jowald; 178. Piamonte, Melvin; 179.
Piamonte, Rogelio; 180. Platon, Cornelio; 181. Polutan, Jorge; 182. Posada, John; 183. Puno, Manjolito; 184.
Ramos, Eddie; 185. Reyes, Rolando; 186. Roxas, Philip; 187. Sales, Paul Arthur; 188. Sallan, David Jr.; 189.
Salvador, Bernardo; 190. Sampang, Alejandro; 191. San Pablo, Baldwin; 192. Sangalang, Jeffrey; 193. Santiago,
Eric; 194. Santos, Raymond; 195. Sapin, Al Jose; 196. Saquilabon, Bernabe; 197. Serrano, Ariel; 198. Sierra, Alex;
199. Simborio, Romualdo; 200. Sulit, Lauro; 201. Tabirao, Elvisanto; 202. Tablizo, Edwin; 203. Taclan, Petronio;
204. Tagala, Rommel; 205. Tagle, Wilfredo Jr.; 206. Tecson Alexander; 207. Templo, Christopher; 208. Tenorio,
Roderick; 209. Tolentino, Rodel; 210. Tolentino, Rommel; 211. Tolentino, Romulo Jr.; 212. Tomas, Rolando; 213.
Topaz, Arturo Sr.; 214. Toral, Grant Robert; 215. Torres, Dennis; 216. Torres, Federico; 217. Trazona, Jose
Rommel; 218. Tulio, Emmanuel; 219. Umiten, Nestor Jr.; 220. Vargas, Joseph; 221. Vergara, Allan; 222. Vergara,
Esdwin; 223. Violeta, Apollo Sr.; 224. Vistal, Alex; 225. Yangyon, Michael Teddy; 226. Zaldevar, Christopher; and
227. Zamora, Dominador Jr.

Toyota’s Position Paper containing the list of striking workers was attested to as true and correct under oath by Mr.
Jose Ma. Aligada, First Vice President of the Group Administration Division of Toyota. Mr. Emerito Dumaraos,
Assistant Department Manager of the Production Department of Toyota, likewise submitted a June 29, 2001
Affidavit56 confirming the low attendance of employees on February 21, 22, and 23, 2001, which resulted from the
intentional absences of the aforelisted striking workers. The Union, on the other hand, did not refute Toyota’s
categorical assertions on the participation of said workers in the mass actions and their deliberate refusal to perform
their assigned work on February 21, 22, and 23, 2001. More importantly, it did not deny the fact of absence of the
employees on those days from the Toyota manufacturing plants and their deliberate refusal to render work. Their
admission that they participated in the February 21 to 23, 2001 mass actions necessarily means they were absent
from their work on those days.

Anent the March 28 to April 12, 2001 strikes, evidence is ample to show commission of illegal acts like acts of
coercion or intimidation and obstructing free ingress to or egress from the company premises. Mr. Eduardo Nicolas
III, Toyota’s Security Chief, attested in his affidavit that the strikers "badmouthed people coming in and shouted
invectives such as bakeru at Japanese officers of the company." The strikers even pounded the vehicles of Toyota
officials. More importantly, they prevented the ingress of Toyota employees, customers, suppliers, and other
persons who wanted to transact business with the company. These were patent violations of Art. 264(e) of the Labor
Code, and may even constitute crimes under the Revised Penal Code such as threats or coercion among others.

On March 28, 2001, the following have committed illegal acts––blocking the ingress to or egress from the two (2)
Toyota plants and preventing the ingress of Toyota employees on board the company shuttle–– at the Bicutan and
Sta. Rosa Plants, viz:

1. Grant Robert Toral; 2. John Posadas; 3. Alex Sierra; 4. Allan John Malabanan; 5. Abel Berces; 6. Ariel Garcia; 7.
Charlie Oliveria; 8. Manjolito Puno; 9. Baldwin San Pablo; 10. Federico Torres; 11. Larry Gerola; 12. Roderick
Bayani; 13. Allan Oclarino; 14. Reynaldo Cuevas; 15. George Polutan; 16. Arman Ercillo; 17. Joey Llanera; and 18.
Roberto Gonzales

Photographs were submitted by Toyota marked as Annexes "1" through "18" of its Position Paper, vividly showing
the participation of the aforelisted employees in illegal acts.57

To further aggravate the situation, a number of union members committed illegal acts (blocking the ingress to and
egress from the plant) during the strike staged on March 29, 2001 at the Toyota plant in Bicutan, to wit:

1. Basilio Laqui; 2. Sabas Benabise; 3. Federico Torres; 4. Freddie Olit; and 5. Joel Agosto
Pictures marked as Annexes "21" to "22" of Toyota’s Position Paper reveal the illegal acts committed by the
aforelisted workers.58

On the next day, March 30, 2001, several employees again committed illegal acts (blocking ingress to and egress
from the plant) during the strike at the Bicutan plant, to wit:

1. Ariel Garcia; 2. Edgar Hilaga; 3. Charlie Oliveria; 4. Ferdinand Jaen; 5. Wilfredo Tagle; 6. Alejandro Imperial; 7.
Manjolito Puno; 8. Delmar Espadilla; 9. Apollo Violeta; and 10. Elvis Tabirao

Pictures marked as Annexes "25" to "26" and "28" of Toyota’s Position Paper show the participation of these
workers in unlawful acts.59

On April 5, 2001, seven (7) Toyota employees were identified to have committed illegal acts (blocking ingress to and
egress from the plant) during the strike held at the Bicutan plant, to wit:

1. Raymund Santos; 2. Elvis Tabirao; 3. Joseph Vargas; 4. Bernardo Salvador; 5. Antonio Dimayuga; 6. Rurel
Borebor; and 7. Alberto Lomboy

The participations of the strikers in illegal acts are manifest in the pictures marked as Annexes "32" and "33" of
Toyota’s Position Paper.60

On April 6, 2001, only Rogelio Piamonte was identified to have committed illegal acts (blocking ingress to and
egress from the Toyota plant) during the strike at the Toyota Santa Rosa plant.61 Then, on April 9, 2001, Alvin
Paniterce, Dennis Apolinario, and Eduardo Miranda62 were identified to have committed illegal acts (blocking ingress
to and egress from the Toyota plant) during the strike at the Toyota Santa Rosa plant and were validly dismissed by
Toyota.

Lastly, the strikers, though on payroll reinstatement, staged protest rallies on May 23, 2001 and May 28, 2001 in
front of the Bicutan and Sta. Rosa plants. These workers’ acts in joining and participating in the May 23 and 28,
2001 rallies or pickets were patent violations of the April 10, 2001 assumption of jurisdiction/certification Order
issued by the DOLE Secretary, which proscribed the commission of acts that might lead to the "worsening of an
already deteriorated situation." Art. 263(g) is clear that strikers who violate the assumption/certification Order may
suffer dismissal from work. This was the situation in the May 23 and 28, 2001 pickets and concerted actions, with
the following employees who committed illegal acts:

a. Strikers who joined the illegal pickets on May 23, 2001 were (1) Dennis Apolinario; (2) Abel Berces; (3) Benny
Bering; (4) Dexter Bolaños; (5) Freddie Busano; (6) Ernesto Bustillo, Jr.; (7) Randy Consignado; (8) Herbert
Dalanon; (9) Leodegario De Silva; (10) Alexander Esteva; (11) Jason Fajilagutan; (12) Nikko Franco; (13) Genaro
Gerola, Jr.; (14) Michael Gohilde; (15) Rogelio Magistrado; (16) Rolando Malaluan, Jr.; (17) Leoncio Malate, Jr.; (18)
Edwin Manzanilla; (19) Nila Marcial; (20) Roderick Nierves; (21) Larry Ormilla; (22) Filemon Ortiz; (23) Cornelio
Platon; (24) Alejandro Sampang; (25) Eric Santiago; (26) Romualdo Simborio; (27) Lauro Sulit; and (28) Rommel
Tagala.

Pictures show the illegal acts (participation in pickets/strikes despite the issuance of a return-to-work order)
committed by the aforelisted strikers.63

b. Strikers who participated in the May 28, 2001 were (1) Joel Agosto; (2) Alex Alejo; (3) Erwin Alfonso; (4) Dennis
Apolinario; (5) Melvin Apostol; (6) Rommel Arceta; (7) Lester Atun; (8) Abel Berces; (9) Benny Bering; (10) Dexter
Bolanos; (11) Marcelo Cabezas; (12) Nelson Leo Capate; (13) Lorenzo Caraqueo; (14) Christopher Catapusan; (15)
Ricky Chavez; (16) Virgilio Colandog; (17) Claudio Correa; (18) Ed Cubelo; (19) Reynaldo Cuevas; (20) Rene
Dalisay; (21) Benigno David, Jr.; (22) Alex Del Mundo; (23) Basilio Dela Cruz; (24) Roel Digma; (25) Aldrin Duyag;
(26) Armando Ercillo; (27) Delmar Espadilla; (28) Alexander Esteva; (29) Nikko Franco; (30) Dexter Fulgar; (31)
Dante Fulo; (32) Eduardo Gado; (33) Michael Gohilde; (34) Eugene Jay Hondrada II; (35) Joey Javillonar; (36)
Basilio Laqui; (37) Alberto Lomboy; (38) Geronimo Lopez; (39) Rommel Macalindog; (40) Nixon Madrazo; (41)
Valentin Magbalita; (42) Allan Jon Malabanan; (43) Jonamar Manaog; (44) Bayani Manguil; (45) June Manigbas;
(46) Alfred Manjares; (47) Edwin Manzanilla; (48) Mayo Mata; (49) Leo Ojenal; (50) Allan Oriana; (51) Rogelio
Piamonte; (52) George Polutan; (53) Eric Santiago; (54) Bernabe Saquilabon; (55) Alex Sierra; (56) Romualdo
Simborio; (57) Lauro Sulit; (58) Elvisanto Tabirao; (59) Edwin Tablizo; (60) Emmanuel Tulio; (61) Nestor Umiten;
(62) Joseph Vargas; (63) Edwin Vergara; and (64) Michael Teddy Yangyon.

Toyota presented photographs which show said employees conducting mass pickets and concerted actions.64

Anent the grant of severance compensation to legally dismissed union members, Toyota assails the turn-around by
the CA in granting separation pay in its June 20, 2003 Resolution after initially denying it in its February 27, 2003
Decision. The company asseverates that based on the CA finding that the illegal acts of said union members
constitute gross misconduct, not to mention the huge losses it suffered, then the grant of separation pay was not
proper.

The general rule is that when just causes for terminating the services of an employee under Art. 282 of the Labor
Code exist, the employee is not entitled to separation pay. The apparent reason behind the forfeiture of the right to
termination pay is that lawbreakers should not benefit from their illegal acts. The dismissed employee, however, is
entitled to "whatever rights, benefits and privileges [s/he] may have under the applicable individual or collective
bargaining agreement with the employer or voluntary employer policy or practice"65 or under the Labor Code and
other existing laws. This means that the employee, despite the dismissal for a valid cause, retains the right to
receive from the employer benefits provided by law, like accrued service incentive leaves. With respect to benefits
granted by the CBA provisions and voluntary management policy or practice, the entitlement of the dismissed
employees to the benefits depends on the stipulations of the CBA or the company rules and policies.

As in any rule, there are exceptions. One exception where separation pay is given even though an employee is
validly dismissed is when the court finds justification in applying the principle of social justice well entrenched in the
1987 Constitution. In Phil. Long Distance Telephone Co. (PLDT) v. NLRC, the Court elucidated why social justice
can validate the grant of separation pay, thus:

The reason is that our Constitution is replete with positive commands for the promotion of social justice, and
particularly the protection of the rights of the workers. The enhancement of their welfare is one of the primary
concerns of the present charter. In fact, instead of confining itself to the general commitment to the cause of labor in
Article II on the Declaration of Principles of State Policies, the new Constitution contains a separate article devoted
to the promotion of social justice and human rights with a separate sub-topic for labor. Article XIII expressly
recognizes the vital role of labor, hand in hand with management, in the advancement of the national economy and
the welfare of the people in general. The categorical mandates in the Constitution for the improvement of the lot of
the workers are more than sufficient basis to justify the award of separation pay in proper cases even if the
dismissal be for cause.66

In the same case, the Court laid down the rule that severance compensation shall be allowed only when the cause
of the dismissal is other than serious misconduct or that which reflects adversely on the employee’s moral character.
The Court succinctly discussed the propriety of the grant of separation pay in this wise:

We hold that henceforth separation pay shall be allowed as a measure of social justice only in those instances
where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral
character. Where the reason for the valid dismissal is, for example, habitual intoxication or an offense involving
moral turpitude, like theft or illicit sexual relations with a fellow worker, the employer may not be required to give the
dismissed employee separation pay, or financial assistance, or whatever other name it is called, on the ground of
social justice.

A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather than punishing the
erring employee for his offense. And we do not agree that the punishment is his dismissal only and that the
separation pay has nothing to do with the wrong he has committed. Of course it has. Indeed, if the employee who
steals from the company is granted separation pay even as he is validly dismissed, it is not unlikely that he will
commit a similar offense in his next employment because he thinks he can expect a like leniency if he is again found
out. This kind of misplaced compassion is not going to do labor in general any good as it will encourage the
infiltration of its ranks by those who do not deserve the protection and concern of the Constitution.

The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the
underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense. Compassion for the
poor is an imperative of every humane society but only when the recipient is not a rascal claiming an undeserved
privilege. Social justice cannot be permitted to be refuge of scoundrels any more than can equity be an impediment
to the punishment of the guilty. Those who invoke social justice may do so only if their hands are clean and their
motives blameless and not simply because they happen to be poor. This great policy of our Constitution is not
meant for the protection of those who have proved they are not worthy of it, like the workers who have tainted the
cause of labor with the blemishes of their own character.67

Explicit in PLDT are two exceptions when the NLRC or the courts should not grant separation pay based on social
justice¾serious misconduct (which is the first ground for dismissal under Art. 282) or acts that reflect on the moral
character of the employee. What is unclear is whether the ruling likewise precludes the grant of separation pay
when the employee is validly terminated from work on grounds laid down in Art. 282 of the Labor Code other than
serious misconduct.

A recall of recent cases decided bearing on the issue reveals that when the termination is legally justified on any of
the grounds under Art. 282, separation pay was not allowed. In Ha Yuan Restaurant v. NLRC,68 we deleted the
award of separation pay to an employee who, while unprovoked, hit her co-worker’s face, causing injuries, which
then resulted in a series of fights and scuffles between them. We viewed her act as serious misconduct which did
not warrant the award of separation pay. In House of Sara Lee v. Rey,69 this Court deleted the award of separation
pay to a branch supervisor who regularly, without authorization, extended the payment deadlines of the company’s
sales agents. Since the cause for the supervisor’s dismissal involved her integrity (which can be considered as
breach of trust), she was not worthy of compassion as to deserve separation pay based on her length of service.
In Gustilo v. Wyeth Phils., Inc.,70 this Court found no exceptional circumstance to warrant the grant of financial
assistance to an employee who repeatedly violated the company’s disciplinary rules and regulations and whose
employment was thus terminated for gross and habitual neglect of his duties. In the doctrinal case of San Miguel v.
Lao,71 this Court reversed and set aside the ruling of the CA granting retirement benefits or separation pay to an
employee who was dismissed for willful breach of trust and confidence by causing the delivery of raw materials,
which are needed for its glass production plant, to its competitor. While a review of the case reports does not reveal
a case involving a termination by reason of the commission of a crime against the employer or his/her family which
dealt with the issue of separation pay, it would be adding insult to injury if the employer would still be compelled to
shell out money to the offender after the harm done.

In all of the foregoing situations, the Court declined to grant termination pay because the causes for dismissal
recognized under Art. 282 of the Labor Code were serious or grave in nature and attended by willful or wrongful
intent or they reflected adversely on the moral character of the employees. We therefore find that in addition to
serious misconduct, in dismissals based on other grounds under Art. 282 like willful disobedience, gross and
habitual neglect of duty, fraud or willful breach of trust, and commission of a crime against the employer or his
family, separation pay should not be conceded to the dismissed employee.

In analogous causes for termination like inefficiency, drug use, and others, the NLRC or the courts may opt to grant
separation pay anchored on social justice in consideration of the length of service of the employee, the amount
involved, whether the act is the first offense, the performance of the employee and the like, using the guideposts
enunciated in PLDT on the propriety of the award of separation pay.

In the case at bench, are the 227 striking employees entitled to separation pay?

In the instant case, the CA concluded that the illegal strikes committed by the Union members constituted serious
misconduct.72

The CA ratiocinated in this manner:

Neither can social justice justify the award to them of severance compensation or any other form of financial
assistance. x x x

xxxx

Considering that the dismissal of the employees was due to their participation in the illegal strikes as well as
violation of the Code of Conduct of the company, the same constitutes serious misconduct. A serious misconduct is
a transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in
character, and implies wrongful intent and not mere error in judgment. In fact, in Panay Electric Company, Inc. v.
NLRC, the Supreme Court nullified the grant of separation benefits to employees who unlawfully participated in an
illegal strike in light of Article 264, Title VIII, Book V of the Labor Code, that, "any union officer who knowingly
participates in an illegal strike and any worker or union officer who knowingly participates in the commission of
illegal acts during a strike may be declared to have lost his employment status."

The constitutional guarantee on social justice is not intended only for the poor but for the rich as well. It is a policy of
fairness to both labor and management.73 (Emphasis supplied.)

In disposing of the Union’s plea for reconsideration of its February 27, 2003 Decision, the CA however performed a
volte-face by reinstating the award of separation pay.

The CA’s grant of separation pay is an erroneous departure from our ruling in Phil. Long Distance Telephone Co. v.
NLRC that serious misconduct forecloses the award of separation pay. Secondly, the advertence to the alleged
honest belief on the part of the 227 employees that Toyota committed a breach of the duty to bargain collectively
and an abuse of valid exercise of management prerogative has not been substantiated by the evidence extant on
record. There can be no good faith in intentionally incurring absences in a collective fashion from work on February
22 and 23, 2001 just to attend the DOLE hearings. The Union’s strategy was plainly to cripple the operations and
bring Toyota to its knees by inflicting substantial financial damage to the latter to compel union recognition. The
Union officials and members are supposed to know through common sense that huge losses would befall the
company by the abandonment of their regular work. It was not disputed that Toyota lost more than PhP 50 million
because of the willful desertion of company operations in February 2001 by the dismissed union members. In
addition, further damage was experienced by Toyota when the Union again resorted to illegal strikes from March 28
to April 12, 2001, when the gates of Toyota were blocked and barricaded, and the company officials, employees,
and customers were intimidated and harassed. Moreover, they were fully aware of the company rule on prohibition
against concerted action inimical to the interests of the company and hence, their resort to mass actions on several
occasions in clear violation of the company regulation cannot be excused nor justified. Lastly, they blatantly violated
the assumption/certification Order of the DOLE Secretary, exhibiting their lack of obeisance to the rule of law. These
acts indeed constituted serious misconduct.

A painstaking review of case law renders obtuse the Union’s claim for separation pay. In a slew of cases, this Court
refrained from awarding separation pay or financial assistance to union officers and members who were separated
from service due to their participation in or commission of illegal acts during strikes. In the recent case of Pilipino
Telephone Corporation v. Pilipino Telephone Employees Association (PILTEA),74 this Court upheld the dismissal of
union officers who participated and openly defied the return-to-work order issued by the DOLE Secretary. No
separation pay or financial assistance was granted. In Sukhothai Cuisine and Restaurant v. Court of Appeals,75 this
Court declared that the union officers who participated in and the union members who committed illegal acts during
the illegal strike have lost their employment status. In this case, the strike was held illegal because it violated
agreements providing for arbitration. Again, there was no award of separation pay nor financial assistance.
In Philippine Diamond Hotel and Resort, Inc. v. Manila Diamond Hotel Employees Union,76 the strike was declared
illegal because the means employed was illegal. We upheld the validity of dismissing union members who
committed illegal acts during the strike, but again, without awarding separation pay or financial assistance to the
erring employees. In Samahang Manggagawa sa Sulpicio Lines, Inc. v. Sulpicio Lines,77 this Court upheld the
dismissal of union officers who participated in an illegal strike sans any award of separation pay. Earlier, in Grand
Boulevard Hotel v. Genuine Labor Organization of Workers in Hotel, Restaurant and Allied Industries,78 we affirmed
the dismissal of the Union’s officers who participated in an illegal strike without awarding separation pay, despite the
NLRC’s declaration urging the company to give financial assistance to the dismissed employees.79 In Interphil
Laboratories Union-FFW, et al. v. Interphil Laboratories, Inc.,80 this Court affirmed the dismissal of the union officers
who led the concerted action in refusing to render overtime work and causing "work slowdowns." However, no
separation pay or financial assistance was allowed. In CCBPI Postmix Workers Union v. NLRC,81 this Court affirmed
the dismissal of union officers who participated in the strike and the union members who committed illegal acts while
on strike, without awarding them separation pay or financial assistance. In 1996, in Allied Banking Corporation v.
NLRC,82 this Court affirmed the dismissal of Union officers and members, who staged a strike despite the DOLE
Secretary’s issuance of a return to work order but did not award separation pay. In the earlier but more relevant
case of Chua v. NLRC,83 this Court deleted the NLRC’s award of separation benefits to an employee who
participated in an unlawful and violent strike, which strike resulted in multiple deaths and extensive property
damage. In Chua, we viewed the infractions committed by the union officers and members as a serious misconduct
which resulted in the deletion of the award of separation pay in conformance to the ruling in PLDT. Based on
existing jurisprudence, the award of separation pay to the Union officials and members in the instant petitions
cannot be sustained.

One last point to consider—it is high time that employer and employee cease to view each other as adversaries and
instead recognize that theirs is a symbiotic relationship, wherein they must rely on each other to ensure the success
of the business. When they consider only their own self-interests, and when they act only with their own benefit in
mind, both parties suffer from short-sightedness, failing to realize that they both have a stake in the business. The
employer wants the business to succeed, considering the investment that has been made. The employee in turn,
also wants the business to succeed, as continued employment means a living, and the chance to better one’s lot in
life. It is clear then that they both have the same goal, even if the benefit that results may be greater for one party
than the other. If this becomes a source of conflict, there are various, more amicable means of settling disputes and
of balancing interests that do not add fuel to the fire, and instead open avenues for understanding and cooperation
between the employer and the employee. Even though strikes and lockouts have been recognized as effective
bargaining tools, it is an antiquated notion that they are truly beneficial, as they only provide short-term solutions by
forcing concessions from one party; but staging such strikes would damage the working relationship between
employers and employees, thus endangering the business that they both want to succeed. The more progressive
and truly effective means of dispute resolution lies in mediation, conciliation, and arbitration, which do not increase
tension but instead provide relief from them. In the end, an atmosphere of trust and understanding has much more
to offer a business relationship than the traditional enmity that has long divided the employer and the employee.

WHEREFORE, the petitions in G.R. Nos. 158786 and 158789 are DENIED while those in G.R. Nos. 158798-99 are
GRANTED.

The June 20, 2003 CA Resolution in CA-G.R. SP Nos. 67100 and 67561 restoring the grant of severance
compensation is ANNULLED and SET ASIDE.

The February 27, 2003 CA Decision in CA-G.R. SP Nos. 67100 and 67561, which affirmed the August 9, 2001
Decision of the NLRC but deleted the grant of severance compensation, is REINSTATED and AFFIRMED.

No costs.

SO ORDERED.
G.R. No. 169712 January 20, 2009

MA. WENELITA S. TIRAZONA, Petitioner,

vs.
PHILIPPINE EDS TECHNO- SERVICE INC. (PET INC.) AND/OR KEN KUBOTA, MAMORU ONO and JUNICHI
HIROSE, Respondents.

RESOLUTION

CHICO-NAZARIO, J.:

Before Us is a Motion for Leave to File [a] Second Motion for Reconsideration,1 with the Second Motion for
Reconsideration incorporated therein, where petitioner Ma. Wenelita Tirazona (Tirazona) seeks the reconsideration
of the Resolution2 of this Court dated 23 June 2008. Said Resolution denied for lack of merit petitioner’s previous
Motion for Reconsideration,3 which sought the reversal of our Decision4 dated 14 March 2008 or, in the alternative,
modification thereof by awarding her separation pay and retirement benefits under existing laws.

In our 14 March 2008 Decision, we subscribed to the factual findings of the National Labor Relations Commission
(NLRC) and the Court of Appeals that Tirazona, being the Administrative Manager of Philippine EDS Techno-
Service, Inc. (PET), was a managerial employee who held a position of trust and confidence; that after PET
officers/directors called her attention to her improper handling of a situation involving a rank-and-file employee, she
claimed that she was denied due process for which she demanded ₱2,000,000.00 indemnity from PET and its
officers/directors; that she admitted to reading a confidential letter addressed to PET officers/directors containing the
legal opinion of the counsel of PET regarding her case; and that she was validly terminated from her employment on
the ground that she willfully breached the trust and confidence reposed in her by her employer. In the end, we
concluded that:

Tirazona, in this case, has given PET more than enough reasons to distrust her. The arrogance and hostility she
has shown towards the company and her stubborn, uncompromising stance in almost all instances justify the
company’s termination of her employment. Moreover, Tirazona’s reading of what was supposed to be a confidential
letter between the counsel and directors of the PET, even if it concerns her, only further supports her employer’s
view that she cannot be trusted. In fine, the Court cannot fault the actions of PET in dismissing petitioner.5

Hence, the fallo of our 14 March 2008 Decision reads:

WHEREFORE, premises considered, the instant petition is hereby DENIED for lack of merit and the Decision of the
Court of Appeals dated 24 May 2005 is hereby AFFIRMED. Costs against the petitioner.6

On 29 April 2008, Tirazona moved for reconsideration7 of our afore-mentioned Decision. She argued therein that the
Court failed to consider the length of her service to PET in affirming her termination from employment. She prayed
that her dismissal be declared illegal. Alternatively, should the Court uphold the legality of her dismissal, Tirazona
pleaded that she be awarded separation pay and retirement benefits, out of humanitarian considerations.

In our Resolution8 dated 23 June 2008, we denied Tirazona’s Motion for Reconsideration, as the same did not
present any substantial arguments that would warrant a modification of our previous ruling. We thus decreed:

ACCORDINGLY, the Court resolves to DENY the motion for reconsideration with FINALITY for lack of merit.

On 21 August 2008, Tirazona filed the instant Motion for Leave to File [a] Second Motion for Reconsideration, with
the Second Motion for Reconsideration incorporated therein, raising essentially the same arguments and prayers
contained in her first Motion for Reconsideration.

The Court thereafter required PET to comment on the above motion. On 19 November 2008, PET filed its
Comment/Opposition,9 to which Tirazona filed her Reply10 on 8 December 2008.

After thoroughly scrutinizing the averments of the present Motion, the Court unhesitatingly declares the same to be
completely unmeritorious.
Section 2, Rule 52 of the Rules of Court explicitly decrees that no second motion for reconsideration of a judgment
or final resolution by the same party shall be entertained. Accordingly, a second motion for reconsideration is a
prohibited pleading,http://www.supremecourt.gov.ph/resolutions/2006/july/122472.htm - _ftn6 which shall not be
allowed, except for extraordinarily persuasive reasons and only after an express leave shall have first been
obtained.11 In this case, we fail to find any such extraordinarily persuasive reason to allow Tirazona’s Second Motion
for Reconsideration.

As a general rule, an employee who has been dismissed for any of the just causes enumerated under Article 28212of
the Labor Code is not entitled to separation pay.13 In Sy v. Metropolitan Bank & Trust Company,14 we declared that
only unjustly dismissed employees are entitled to retirement benefits and other privileges including reinstatement
and backwages.

Although by way of exception, the grant of separation pay or some other financial assistance may be allowed to an
employee dismissed for just causes on the basis of equity,15 in Philippine Long Distance Telephone Company v.
National Labor Relations Commission,16 we set the limits for such a grant and gave the following ratio for the same:

[S]eparation pay shall be allowed as a measure of social justice only in those instances where the employee
is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. x x
x.

A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather than punishing the
erring employee for his offense. And we do not agree that the punishment is his dismissal only and that the
separation pay has nothing to do with the wrong he has committed. Of course it has. Indeed, if the employee who
steals from the company is granted separation pay even as he is validly dismissed, it is not unlikely that he will
commit a similar offense in his next employment because he thinks he can expect a like leniency if he is again found
out. This kind of misplaced compassion is not going to do labor in general any good as it will encourage the
infiltration of its ranks by those who do not deserve the protection and concern of the Constitution.

The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the
underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense. Compassion for the
poor is an imperative of every humane society but only when the recipient is not a rascal claiming an undeserved
privilege. Social justice cannot be permitted to be [a] refuge of scoundrels any more than can equity be an
impediment to the punishment of the guilty. Those who invoke social justice may do so only if their hands are clean
and their motives blameless and not simply because they happen to be poor. This great policy of our Constitution is
not meant for the protection of those who have proved they are not worthy of it, like the workers who have tainted
the cause of labor with the blemishes of their own character. (Emphasis ours.)

In accordance with the above pronouncements, Tirazona is not entitled to the award of separation pay.

Contrary to her exaggerated claims, Tirazona was not just "gracelessly expelled" or "simply terminated" from the
company on 22 April 2002. She was found to have violated the trust and confidence reposed in her by her employer
when she arrogantly and unreasonably demanded from PET and its officers/directors the exorbitant amount of
₱2,000,000.00 in damages, coupled with a threat of a lawsuit if the same was not promptly paid within five days.
This unwarranted imposition on PET and its officers/directors was made after the company sent Tirazona a letter,
finding her handling of the situation involving a rank-and-file employee to be less than ideal, and merely reminding
her to be more circumspect when dealing with the more delicate concerns of their employees. To aggravate the
situation, Tirazona adamantly and continually refused to cooperate with PET’s investigation of her case and to
provide an adequate explanation for her actions.

Verily, the actions of Tirazona reflected an obdurate character that is arrogant, uncompromising, and hostile. By
immediately and unreasonably adopting an adverse stance against PET, she sought to impose her will on the
company and placed her own interests above those of her employer. Her motive for her actions was rendered even
more questionable by her exorbitant and arbitrary demand for ₱2,000,000.00 payable within five days from demand.
Her attitude towards her employer was clearly inconsistent with her position of trust and confidence. Her poor
character became even more evident when she read what was supposed to be a confidential letter of the legal
counsel of PET to PET officers/directors expressing his legal opinion on Tirazona’s administrative case. PET was,
therefore, fully justified in terminating Tirazona’s employment for loss of trust and confidence.
Tirazona also failed to persuade us to consider in her favor her length of service to PET.

In the Motion for Reconsideration filed on 29 April 2008 and in the instant motion, Tirazona prays for this Court to
grant her separation and other retirement benefits, should we uphold the legality of her dismissal. She anchors her
claim on the fact that she had allegedly been in the employ of PET for twenty-six (26) years and that the Court must
give due consideration to the length of her service to the company.17 However, in her Reply to the
Comment/Opposition to the instant motion filed by PET, Tirazona retracted the above allegation and stated that the
claim of twenty-six (26) years of employment with PET was an error committed through inadvertence. She then
averred that the length of her employment with PET should indeed be counted from July 1999, which up to the
present time will result in a period of eight (8) years, more or less.

We find that the above statement is still inaccurate. As this Court ruled in our Decision dated 14 March 2008,
Tirazona was validly terminated from her employment on 22 April 2002. Therefore, counting from the time when
Tirazona was employed by PET on 19 July 1999 up to the time when she was dismissed, she had only rendered a
little more than two (2) years and nine (9) months of service to PET.

Finally, the cases cited by Tirazona hardly support her cause.

In Soco v. Mercantile Corporation of Davao18 and Firestone Tire and Rubber Company of the Philippines v.
Lariosa,19 separation pay was granted to the dismissed employees, as they were mere rank-and-file employees who
did not have any previous derogatory record with their companies and in equitable regard for their long years of
service spanning more than ten (10) years.

In Farrol v. Court of Appeals,20 separation pay was awarded because the penalty of dismissal was held to be harsh
and disproportionate to the offense committed and the dismissed employee had been at the service of the company
for twenty four (24) years.

In Negros Navigation Co. Inc. v. National Labor Relations Commission,21 separation pay was awarded to the
employee dismissed, as it was the employer itself that prayed for the award of the same, in lieu of the employee’s
reinstatement.

Lastly, in Philippine Commercial International Bank v. Abad,22 separation pay was ordered granted to a dismissed
managerial employee because there was an express finding that the violation of the bank policies was not
perpetrated for the employee’s self-interest, nor did the employee exhibit any lack of moral depravity. The employee
had also been in the service of the company for twenty-five (25) years.

Obviously, Tirazona’s reliance upon the above-cited cases is misleading, as the circumstances therein are markedly
different from those in the case at bar.

In sum, we hold that the award of separation pay or any other kind of financial assistance to Tirazona, under the
guise of compassionate justice, is not warranted in this case. To hold otherwise would only cause a disturbance of
the sound jurisprudence on the matter and a perversion of the noble dictates of social justice.

While the Court commiserates with the plight of Tirazona, who has recently manifested23 that she has since been
suffering from her poor health condition, the Court cannot grant her plea for the award of financial benefits based
solely on this unfortunate circumstance. For all its conceded merit, equity is available only in the absence of law and
not as its replacement. Equity as an exceptional extenuating circumstance does not favor, nor may it be used to
reward, the indolent24 or the wrongdoer, for that matter. This Court will not allow a party, in the guise of equity, to
benefit from its own fault.25

WHEREFORE, the Motion for Leave to File [a] Second Motion for Reconsideration is hereby DENIED for lack of
merit and the Second Motion for Reconsideration incorporated therein is NOTED WITHOUT ACTION in view of the
denial of the former.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 184011 September 18, 2013

REYNALDO HAYAN MOYA, Petitioner,

vs.
FIRST SOLID RUBBER INDUSTRIES, INC., Respondent.

DECISION

PEREZ, J.:

Before the Court is a Petition for Review on Certiorari1 from the Decision2 of the Special Third Division of the Court
of Appeals in CA-G.R. SP No. 99500 dated 30 April 2008, modifying the Decision of the National Labor Relations
Commission (NLRC) by deleting the award of separation pay in favor of Reynaldo Hayan Moya (Moya). The
dispositive portion of the assailed decision reads:

WHEREFORE, premises considered, the petition is hereby GRANTED. The Resolutions dated January 31, 2007
and April 24, 2007 of the National Labor Relations Commission in NLRC NCR CA No. 048653-06 (NLRC NCR Case
No. 00-11-12626 2004) affirming the Decision dated February 28, 2006 of the Labor Arbiter Pablo C. Espiritu, Jr. is
MODIFIED by deleting the award for separation pay in favor of private respondent Reynaldo Hayan Moya.3

The facts as gathered by this Court follow:

On 25 January 2005, Moya filed before the NLRC-National Capital Region a complaint for illegal dismissal against
First Solid Rubber Industries, Inc. (First Solid) and its President Edward Lee Sumulong. In his complaint-
affidavit,4Moya alleged that:

1. Sometime in May 1993, he was hired by the company First Solid, a business engaged in manufacturing of
tires and rubbers, as a machine operator;

2. Through years of dedication to his job, he was promoted as head of the Tire Curing Department of the
company;

3. On October 15, 2004, he reported an incident about an under curing of tires within his department which
led to the damage of five tires;

4. The company conducted an investigation of the incident and he was later required to explain;

5. In his explanation, he stated that the damage was caused by machine failure and the incident was without
any fault of the operator;

6. Despite his explanation of what transpired, he was terminated by the company through a letter dated
November 9, 2004.

From the foregoing, he prayed that payment of backwages, separation pay, moral damages and exemplary
damages be adjudged in his favor due to the illegal dismissal he suffered from the company.

Moya, through his Reply,5 added that his termination fell short of any of the just causes of serious misconduct, gross
and habitual neglect of duties and willful breach of trust. He pointed out that the company failed to prove that his act
fell within the purview of improper or wrong misconduct, and that a single act of negligence as compared to eleven
(11) years of service of good record with the company will not justify his dismissal.
First Solid, in its Position Paper,6 Reply7 and Memorandum,8 admitted that Moya was a former employee of the
company and was holding the position of Officer-in-Charge of the Tire Curing Department until his valid dismissal.
However, it denied that it illegally dismissed Moya and maintained that his severance from the company was due to
a valid exercise of management prerogative.9 The company insisted on its right to validly dismiss an employee in
good faith if it has a reasonable ground to believe that its employee is responsible of misconduct, and the nature of
his participation therein renders him absolutely unworthy of the trust and confidence demanded by his position.10

Opposing the story of Moya, the company countered that Moya, who was exercising supervision and control over
the employees as a department head, failed to exercise the diligence required of him to see to it that the machine
operator, Melandro Autor, properly operated the machine. This act is considered as a gross and habitual neglect of
duty which caused actual losses to the company.11

During the initial investigation, Moya, in his Explanation Letter12 dated 15 October 2004, insisted that the cause of
the damage of five (5) tires was due to premature hauling of the tires below curing time. Unsatisfied with the
explanation, the company sent Moya a Letter13 dated 26 October 2004 stating that he failed to explain what really
transpired in the under curing of tires. The company informed Moya that the damage was caused by the operator’s
unlawful setting of the timer from manual to automatic without Moya’s permission. To make the matter worse, Moya
failed to disclose the real situation that the operator was at fault.

Moya was given twenty-four (24) hours to defend himself and explain the matter. In response, Moya admitted in a
letter dated 29 October 2004 his mistake of not disclosing the true incident and explained that he found it more
considerate to just let the operator be suspended and be fined for the damage committed. He denied any willful
intention to conceal the truth or cover up the mistake of his employee. Finally, he asked for the company’s
forgiveness for the fault he had committed.14 In a letter dated 3 November 2004, Moya reiterated his plea for
forgiveness and asked for another chance to continue his employment with the company.15

Procedural due process, through issuance of twin notices, was also complied with by the company. Moya was
informed of the charges against him through a memorandum16 indicating his violation and was given an opportunity
to answer or rebut the charges. After giving his explanation through several letters to the company, a notice was
sent informing him of the management’s decision of his dismissal and termination from services on9 November
2004 based on serious misconduct, gross and habitual neglect of duty and willful breach of trust reposed upon him
by the company.17

On 28 February 2006, Labor Arbiter Pablo C. Espiritu, Jr. rendered a judgment18 finding sufficient and valid grounds
to dismiss Moya for concealing and lying to First Solid about the factual circumstances leading to the damage of five
(5) tires on 15 October 2004. However, it ruled that the dismissal from service of the complainant was too harsh as a
penalty since it was a first offense and there was no willful and malicious intention on his part to cause damage. The
dispositive portion reads:

WHEREFORE, judgment is hereby rendered ordering Respondents First Solid Rubber Industrial, Inc. and Edward
Lee Sumulong to jointly and severally pay complainant separation pay in lieu of reinstatement the amount of ₱63,
654.00.

All other claims whether monetary or otherwise are hereby DISMISSED for lack of merit.19

In justifying his decision, the Labor Arbiter explained that the length of time during which the complainant was
deprived of employment was sufficient penalty for the act he had committed against the company. As a result, his
reinstatement without backwages to his former position was in order. However, since the employment was already
strained and Moya was no longer seeking to be reinstated, he decided that it was for the best interest of both parties
to award instead a separation pay of one (1) month salary for every year of credited service less the total of cash
advances of the complainant amounting to ₱19,000.00.20

Not in total accord with the outcome of the decision, First Solid filed its partial appeal before the NLRC on 13 April
2006. The company assailed as error on the part of the Labor Arbiter the grant of separation pay in favor of Moya
despite the finding that there was a just cause for the employee’s dismissal from service. It was submitted that the
complainant’s length of service to the company cannot be invoked to justify the award. It was argued that Moya was
dismissed for just causes; hence, to award separation pay would be tantamount to giving a prize for disloyalty and
breach of trust.21
On 31 January 2007, the NLRC affirmed the Decision of the Labor Arbiter in its entirety.22

The NLRC affirmed the finding of the Labor Arbiter that a separation pay should be given to Moya in lieu of
reinstatement citing primarily his length of service and years of contribution to the profitable business operation of
the company. It also noted that this transgression was the first mistake of Moya in the performance of his functions.
Finally, it cited as justification the Court’s ruling in St. Michael’s Institute v. Santos,23 wherein the Court held that
"even when an employee is found to have transgressed the employer’s rules, in the actual imposition of penalties
upon the erring employee, due consideration must still be given to his length of service and the number of violations
committed during his employment."24

In its Motion for Reconsideration,25 First Solid insisted that length of service cannot mitigate breach of trust which is
penalized with dismissal.

On 24 April 2007, the NLRC denied the motion of First Solid as it found no compelling justification to overturn its
findings.26

In its Petition for Certiorari before the Court of Appeals, the company reiterated its previous arguments that
separation pay cannot be awarded to validly dismissed employees and that length of service was not a ground to
reduce the penalty of dismissal due to breach of trust.27

In his Comment28 and Memorandum,29 Moya capitalized on the pronouncement of the Labor Arbiter that his alleged
infraction does not merit a penalty of dismissal from service given his length of service to the company as well as
the failure of the company to prove that he acted maliciously and with the intention to cause damage.

First Solid, in its Reply30 and Memorandum,31 argued that Moya, being a supervisor, the company reposed on him its
trust and confidence. He was expected to remain loyal and trustworthy and promote the best interest of the
company. His act of concealing, by making a fraudulent report to the company regarding the transgression of the
machine operator under him, is a valid basis for dismissal based on breach of trust and confidence. The company
further contended that the award of separation pay made by the labor tribunals was contrary to law and
jurisprudence.

In its Decision,32 the Court of Appeals ruled in favor of the company and reversed the decisions of the labor
tribunals. The dispositive portions reads:

WHEREFORE, premises considered, the petition is GRANTED. The Resolutions dated January 31, 2007 and April
24, 2007 of the National Labor Relations Commission in NLRC NCR CA No. 048653-06(NLRC NCR Case No. 00-
11-12626-2004) affirming the Decision dated February 28, 2006 of the Labor Arbiter Pablo C. Espiritu, Jr. is
MODIFIED by deleting the award for separation pay in favor of private respondent Reynaldo Hayan Moya.33

The appellate court ruled that an employee found to be guilty of serious misconduct or other acts reflecting his moral
character is not entitled to separation pay. Moya who held a supervisory position as the Head of the Curing
Department breached the trust reposed upon him when he did not disclose what was actually done by the machine
operator which eventually caused the damage. It was only when the company discovered that the report was not in
accordance with what really transpired that Moya admitted its mistake. In sum, the appellate court agreed that First
Solid presented substantial proof to consider Moya as dishonest and disloyal to the company.

It took the position that instead of being a basis for the award of separation pay, Moya’s length of service should
have been taken against him. The reason for his dismissal was his lack of integrity and loyalty to the company
reflecting upon his moral character.

The appellate court emphasized that while the law is considerate to the welfare of the employees whenever there is
a labor conflict, it also protects the right of an employer to exercise its management prerogative in good faith.

The Court’s Ruling

That there is a valid ground for the dismissal of Moya based on breach and loss of trust and confidence is no longer
at issue. The Labor Arbiter, NLRC and the appellate court were unanimous in their rulings on this matter. The
remaining question is whether or not petitioner employee is entitled to separation pay based on his length of service.

Petitioner is not entitled to separation pay. Payment of separation pay cannot be justified by his length of service.

It must be stressed that Moya was not an ordinary rank-and-file employee. He was holding a supervisory rank being
an Officer-in-Charge of the Tire Curing Department. The position, naturally one of trust, required of him abiding
honesty as compared to ordinary rank-and-file employees. When he made a false report attributing the damage of
five tires to machine failure, he breached the trust and confidence reposed upon him by the company.

In a number of cases,34 this Court put emphasis on the right of an employer to exercise its management prerogative
in dealing with its company’s affairs including its right to dismiss its erring employees. We recognized the right of the
employer to regulate all aspects of employment, such as the freedom to prescribe work assignments, working
methods, processes to be followed, regulation regarding transfer of employees, supervision of their work, lay-off and
discipline, and dismissal and recall of workers.35 It is a general principle of labor law to discourage interference with
an employer’s judgment in the conduct of his business. As already noted, even as the law is solicitous of the welfare
of the employees, it also recognizes employer’s exercise of management prerogatives. As long as the company’s
exercise of judgment is in good faith to advance its interest and not for the purpose of defeating or circumventing the
rights of employees under the laws or valid agreements, such exercise will be upheld.36

Following the ruling in The Coca-Cola Export Corporation v. Gacayan,37 the employers have a right to impose a
penalty of dismissal on employees by reason of loss of trust and confidence. More so, in the case of supervisors or
personnel occupying positions of responsibility, does loss of trust justify termination. Loss of confidence as a just
cause for termination of employment is premised on the fact that an employee concerned holds a position of trust
and confidence. This situation holds where a person is entrusted with confidence on delicate matters, such as the
custody, handling, or care and protection of the employer’s property. But, in order to constitute a just cause for
dismissal, the act complained of must be "work-related" such as would show the employee concerned to be unfit to
continue working for the employer.38

The foregoing as viewpoint, the right of First Solid to handle its own affairs in managing its business must be
respected. The clear consequence is the denial of the grant of separation pay in favor of Moya.

As pronounced in the recent case of Unilever Philippines, Inc., v. Rivera,39 an employee who has been dismissed for
any of the just causes enumerated under Article 28240 of the Labor Code, including breach of trust, is not entitled to
separation pay.41 This is further bolstered by Section 7,Rule I, Book VI of the Omnibus Rules Implementing the
Labor Code which provides that:

Sec. 7. Termination of employment by employer. — The just causes for terminating the services of an employee
shall be those provided in Article 282 of the Code. The separation from work of an employee for a just cause does
not entitle him to the termination pay provided in the Code, without prejudice, however, to whatever rights, benefits
and privileges he may have under the applicable individual or collective agreement with the employer or voluntary
employer policy or practice.1âw phi1

However, this Court also provides exceptions to the rule based on "social justice" or on "equitable grounds"
following the ruling in Philippine Long Distance Telephone Co. v. NLRC,42 stating that separation pay shall be
allowed as a measure of social justice only in those instances where the employee is validly dismissed for causes
other than serious misconduct or those reflecting on his moral character. Where the reason for the valid dismissal is,
for example, habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a
fellow worker, the employer may not be required to give the dismissed employee separation pay, or financial
assistance, or whatever other name it is called, on the ground of social justice.43

The PLDT case further elucidates why an erring employee could not benefit under the cloak of social justice in the
award of separation pay, we quote:

The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the
underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense. Compassion for the
poor is an imperative of every humane society but only when the recipient is not a rascal claiming an undeserved
privilege. Social justice cannot be permitted to be refuge of scoundrels any more than can equity be an impediment
to the punishment of the guilty. Those who invoke social justice may do so only if their hands are clean and their
motives blameless and not simply because they happen to be poor. This great policy of our Constitution is not
meant for the protection of those who have proved they are not worthy of it, like the workers who have tainted the
cause of labor with the blemishes of their own character.44

Moya’s dismissal is based on one of the grounds under Art. 282 of the Labor Code which is willful breach by the
employee of the trust reposed in him by his employer. Also, he is outside the protective mantle of the principle of
social justice as his act of concealing the truth from the company is clear disloyalty to the company which has long
employed him. 1âwphi1

Indeed, as found below, Moya’s length of service should be taken against him. The pronouncement in Reno Foods,
Inc. v. Nagkakaisang Lakas ng Manggagawa (NLM) Katipunan45 is instructive on the matter:

x x x Length of service is not a bargaining chip that can simply be stacked against the employer. After all, an
employer-employee relationship is symbiotic where both parties benefit from mutual loyalty and dedicated service. If
an employer had treated his employee well, has accorded him fairness and adequate compensation as determined
by law, it is only fair to expect a long-time employee to return such fairness with at least some respect and honesty.
Thus, it may be said that betrayal by a long-time employee is more insulting and odious for a fair
employer.46(Emphasis supplied).

WHEREFORE, we DENY the petition for review on certiorari. The Decision dated 30 April 2008 and Resolution
dated 1 August 2008 of the Special Third Division of the Court of Appeals in CA-G.R. SP No. 99500 are hereby
AFFIRMED.

JOSE PORTUGAL PEREZ

Associate Justice

WE CONCUR:
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 172101 November 23, 2007

REPUBLIC OF THE PHILIPPINES, represented by the SOCIAL SECURITY COMMISSION and SOCIAL
SECURITY SYSTEM, Petitioners,
vs.
ASIAPRO COOPERATIVE, Respondent.

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure
seeking to annul and set aside the Decision1 and Resolution2 of the Court of Appeals in CA-G.R. SP No. 87236,
dated 5 January 2006 and 20 March 2006, respectively, which annulled and set aside the Orders of the Social
Security Commission (SSC) in SSC Case No. 6-15507-03, dated 17 February 20043 and 16 September
2004,4respectively, thereby dismissing the petition-complaint dated 12 June 2003 filed by herein petitioner Social
Security System (SSS) against herein respondent.

Herein petitioner Republic of the Philippines is represented by the SSC, a quasi-judicial body authorized by law to
resolve disputes arising under Republic Act No. 1161, as amended by Republic Act No. 8282.5 Petitioner SSS is a
government corporation created by virtue of Republic Act No. 1161, as amended. On the other hand, herein
respondent Asiapro Cooperative (Asiapro) is a multi-purpose cooperative created pursuant to Republic Act No.
69386 and duly registered with the Cooperative Development Authority (CDA) on 23 November 1999 with
Registration Certificate No. 0-623-2460.7

The antecedents of this case are as follows:

Respondent Asiapro, as a cooperative, is composed of owners-members. Under its by-laws, owners-members are
of two categories, to wit: (1) regular member, who is entitled to all the rights and privileges of membership; and (2)
associate member, who has no right to vote and be voted upon and shall be entitled only to such rights and
privileges provided in its by-laws.8 Its primary objectives are to provide savings and credit facilities and to develop
other livelihood services for its owners-members. In the discharge of the aforesaid primary objectives, respondent
cooperative entered into several Service Contracts9 with Stanfilco - a division of DOLE Philippines, Inc. and a
company based in Bukidnon. The owners-members do not receive compensation or wages from the respondent
cooperative. Instead, they receive a share in the service surplus10 which the respondent cooperative earns from
different areas of trade it engages in, such as the income derived from the said Service Contracts with Stanfilco. The
owners-members get their income from the service surplus generated by the quality and amount of services they
rendered, which is determined by the Board of Directors of the respondent cooperative.

In order to enjoy the benefits under the Social Security Law of 1997, the owners-members of the respondent
cooperative, who were assigned to Stanfilco requested the services of the latter to register them with petitioner SSS
as self-employed and to remit their contributions as such. Also, to comply with Section 19-A of Republic Act No.
1161, as amended by Republic Act No. 8282, the SSS contributions of the said owners-members were equal to the
share of both the employer and the employee.

On 26 September 2002, however, petitioner SSS through its Vice-President for Mindanao Division, Atty. Eddie A.
Jara, sent a letter11 to the respondent cooperative, addressed to its Chief Executive Officer (CEO) and General
Manager Leo G. Parma, informing the latter that based on the Service Contracts it executed with Stanfilco,
respondent cooperative is actually a manpower contractor supplying employees to Stanfilco and for that reason, it is
an employer of its owners-members working with Stanfilco. Thus, respondent cooperative should register itself with
petitioner SSS as an employer and make the corresponding report and remittance of premium contributions in
accordance with the Social Security Law of 1997. On 9 October 2002,12 respondent cooperative, through its
counsel, sent a reply to petitioner SSS’s letter asserting that it is not an employer because its owners-members are
the cooperative itself; hence, it cannot be its own employer. Again, on 21 October 2002,13 petitioner SSS sent a
letter to respondent cooperative ordering the latter to register as an employer and report its owners-members as
employees for compulsory coverage with the petitioner SSS. Respondent cooperative continuously ignored the
demand of petitioner SSS.

Accordingly, petitioner SSS, on 12 June 2003, filed a Petition14 before petitioner SSC against the respondent
cooperative and Stanfilco praying that the respondent cooperative or, in the alternative, Stanfilco be directed to
register as an employer and to report respondent cooperative’s owners-members as covered employees under the
compulsory coverage of SSS and to remit the necessary contributions in accordance with the Social Security Law of
1997. The same was docketed as SSC Case No. 6-15507-03. Respondent cooperative filed its Answer with Motion
to Dismiss alleging that no employer-employee relationship exists between it and its owners-members, thus,
petitioner SSC has no jurisdiction over the respondent cooperative. Stanfilco, on the other hand, filed an Answer
with Cross-claim against the respondent cooperative.

On 17 February 2004, petitioner SSC issued an Order denying the Motion to Dismiss filed by the respondent
cooperative. The respondent cooperative moved for the reconsideration of the said Order, but it was likewise denied
in another Order issued by the SSC dated 16 September 2004.

Intending to appeal the above Orders, respondent cooperative filed a Motion for Extension of Time to File a Petition
for Review before the Court of Appeals. Subsequently, respondent cooperative filed a Manifestation stating that it
was no longer filing a Petition for Review. In its place, respondent cooperative filed a Petition for Certiorari before
the Court of Appeals, docketed as CA-G.R. SP No. 87236, with the following assignment of errors:

I. The Orders dated 17 February 2004 and 16 September 2004 of [herein petitioner] SSC were issued with grave
abuse of discretion amounting to a (sic) lack or excess of jurisdiction in that:

A. [Petitioner] SSC arbitrarily proceeded with the case as if it has jurisdiction over the petition a quo,
considering that it failed to first resolve the issue of the existence of an employer-employee
relationship between [respondent] cooperative and its owners-members.

B. While indeed, the [petitioner] SSC has jurisdiction over all disputes arising under the SSS Law
with respect to coverage, benefits, contributions, and related matters, it is respectfully submitted that
[petitioner] SSC may only assume jurisdiction in cases where there is no dispute as to the existence
of an employer-employee relationship.

C. Contrary to the holding of the [petitioner] SSC, the legal issue of employer-employee relationship
raised in [respondent’s] Motion to Dismiss can be preliminarily resolved through summary hearings
prior to the hearing on the merits. However, any inquiry beyond a preliminary determination, as what
[petitioner SSC] wants to accomplish, would be to encroach on the jurisdiction of the National Labor
Relations Commission [NLRC], which is the more competent body clothed with power to resolve
issues relating to the existence of an employment relationship.

II. At any rate, the [petitioner] SSC has no jurisdiction to take cognizance of the petition a quo.

A. [Respondent] is not an employer within the contemplation of the Labor Law but is a multi-purpose
cooperative created pursuant to Republic Act No. 6938 and composed of owners-members, not
employees.

B. The rights and obligations of the owners-members of [respondent] cooperative are derived from
their Membership Agreements, the Cooperatives By-Laws, and Republic Act No. 6938, and not from
any contract of employment or from the Labor Laws. Moreover, said owners-members enjoy rights
that are not consistent with being mere employees of a company, such as the right to participate and
vote in decision-making for the cooperative.
 C. As found by the Bureau of Internal Revenue [BIR], the owners-members of [respondent]
cooperative are not paid any compensation income.15 (Emphasis supplied.)

On 5 January 2006, the Court of Appeals rendered a Decision granting the petition filed by the respondent
cooperative. The decretal portion of the Decision reads:

WHEREFORE, the petition is GRANTED. The assailed Orders dated [17 February 2004] and [16 September 2004],
are ANNULLED and SET ASIDE and a new one is entered DISMISSING the petition-complaint dated [12 June
2003] of [herein petitioner] Social Security System.16

Aggrieved by the aforesaid Decision, petitioner SSS moved for a reconsideration, but it was denied by the appellate
court in its Resolution dated 20 March 2006.

Hence, this Petition.

In its Memorandum, petitioners raise the issue of whether or not the Court of Appeals erred in not finding that the
SSC has jurisdiction over the subject matter and it has a valid basis in denying respondent’s Motion to Dismiss. The
said issue is supported by the following arguments:

I. The [petitioner SSC] has jurisdiction over the petition-complaint filed before it by the [petitioner SSS] under
R.A. No. 8282.

II. Respondent [cooperative] is estopped from questioning the jurisdiction of petitioner SSC after invoking its
jurisdiction by filing an [A]nswer with [M]otion to [D]ismiss before it.

III. The [petitioner SSC] did not act with grave abuse of discretion in denying respondent [cooperative’s]
[M]otion to [D]ismiss.

IV. The existence of an employer-employee relationship is a question of fact where presentation of evidence
is necessary.

V. There is an employer-employee relationship between [respondent cooperative] and its [owners-

members].

Petitioners claim that SSC has jurisdiction over the petition-complaint filed before it by petitioner SSS as it involved
an issue of whether or not a worker is entitled to compulsory coverage under the SSS Law. Petitioners avow that
Section 5 of Republic Act No. 1161, as amended by Republic Act No. 8282, expressly confers upon petitioner SSC
the power to settle disputes on compulsory coverage, benefits, contributions and penalties thereon or any other
matter related thereto. Likewise, Section 9 of the same law clearly provides that SSS coverage is compulsory upon
all employees. Thus, when petitioner SSS filed a petition-complaint against the respondent cooperative and
Stanfilco before the petitioner SSC for the compulsory coverage of respondent cooperative’s owners-members as
well as for collection of unpaid SSS contributions, it was very obvious that the subject matter of the aforesaid
petition-complaint was within the expertise and jurisdiction of the SSC.

Petitioners similarly assert that granting arguendo that there is a prior need to determine the existence of an
employer-employee relationship between the respondent cooperative and its owners-members, said issue does not
preclude petitioner SSC from taking cognizance of the aforesaid petition-complaint. Considering that the principal
relief sought in the said petition-complaint has to be resolved by reference to the Social Security Law and not to the
Labor Code or other labor relations statutes, therefore, jurisdiction over the same solely belongs to petitioner SSC.

Petitioners further claim that the denial of the respondent cooperative’s Motion to Dismiss grounded on the alleged
lack of employer-employee relationship does not constitute grave abuse of discretion on the part of petitioner SSC
because the latter has the authority and power to deny the same. Moreover, the existence of an employer-employee
relationship is a question of fact where presentation of evidence is necessary. Petitioners also maintain that the
respondent cooperative is already estopped from assailing the jurisdiction of the petitioner SSC because it has
already filed its Answer before it, thus, respondent cooperative has already submitted itself to the jurisdiction of the
petitioner SSC.
Finally, petitioners contend that there is an employer-employee relationship between the respondent cooperative
and its owners-members. The respondent cooperative is the employer of its owners-members considering that it
undertook to provide services to Stanfilco, the performance of which is under the full and sole control of the
respondent cooperative.

On the other hand, respondent cooperative alleges that its owners-members own the cooperative, thus, no
employer-employee relationship can arise between them. The persons of the employer and the employee are
merged in the owners-members themselves. Likewise, respondent cooperative’s owners-members even requested
the respondent cooperative to register them with the petitioner SSS as self-employed individuals. Hence, petitioner
SSC has no jurisdiction over the petition-complaint filed before it by petitioner SSS.

Respondent cooperative further avers that the Court of Appeals correctly ruled that petitioner SSC acted with grave
abuse of discretion when it assumed jurisdiction over the petition-complaint without determining first if there was an
employer-employee relationship between the respondent cooperative and its owners-members. Respondent
cooperative claims that the question of whether an employer-employee relationship exists between it and its
owners-members is a legal and not a factual issue as the facts are undisputed and need only to be interpreted by
the applicable law and jurisprudence.

Lastly, respondent cooperative asserts that it cannot be considered estopped from assailing the jurisdiction of
petitioner SSC simply because it filed an Answer with Motion to Dismiss, especially where the issue of jurisdiction is
raised at the very first instance and where the only relief being sought is the dismissal of the petition-complaint for
lack of jurisdiction.

From the foregoing arguments of the parties, the issues may be summarized into:

I. Whether the petitioner SSC has jurisdiction over the petition-complaint filed before it by petitioner SSS
against the respondent cooperative.

II. Whether the respondent cooperative is estopped from assailing the jurisdiction of petitioner SSC since it
had already filed an Answer with Motion to Dismiss before the said body.

Petitioner SSC’s jurisdiction is clearly stated in Section 5 of Republic Act No. 8282 as well as in Section 1, Rule III of
the 1997 SSS Revised Rules of Procedure.

Section 5 of Republic Act No. 8282 provides:

SEC. 5. Settlement of Disputes. – (a) Any dispute arising under this Act with respect to coverage, benefits,
contributions and penalties thereon or any other matter related thereto, shall be cognizable by the Commission, x x
x. (Emphasis supplied.)

Similarly, Section 1, Rule III of the 1997 SSS Revised Rules of Procedure states:

Section 1. Jurisdiction. – Any dispute arising under the Social Security Act with respect to coverage, entitlement of
benefits, collection and settlement of contributions and penalties thereon, or any other matter related thereto, shall
be cognizable by the Commission after the SSS through its President, Manager or Officer-in-charge of the
Department/Branch/Representative Office concerned had first taken action thereon in writing. (Emphasis supplied.)

It is clear then from the aforesaid provisions that any issue regarding the compulsory coverage of the SSS is well
within the exclusive domain of the petitioner SSC. It is important to note, though, that the mandatory coverage under
the SSS Law is premised on the existence of an employer-employee relationship17 except in cases of compulsory
coverage of the self-employed.

It is axiomatic that the allegations in the complaint, not the defenses set up in the Answer or in the Motion to
Dismiss, determine which court has jurisdiction over an action; otherwise, the question of jurisdiction would depend
almost entirely upon the defendant.18 Moreover, it is well-settled that once jurisdiction is acquired by the court, it
remains with it until the full termination of the case.19 The said principle may be applied even to quasi-judicial bodies.
In this case, the petition-complaint filed by the petitioner SSS before the petitioner SSC against the respondent
cooperative and Stanfilco alleges that the owners-members of the respondent cooperative are subject to the
compulsory coverage of the SSS because they are employees of the respondent cooperative. Consequently, the
respondent cooperative being the employer of its owners-members must register as employer and report its owners-
members as covered members of the SSS and remit the necessary premium contributions in accordance with the
Social Security Law of 1997. Accordingly, based on the aforesaid allegations in the petition-complaint filed before
the petitioner SSC, the case clearly falls within its jurisdiction. Although the Answer with Motion to Dismiss filed by
the respondent cooperative challenged the jurisdiction of the petitioner SSC on the alleged lack of employer-
employee relationship between itself and its owners-members, the same is not enough to deprive the petitioner SSC
of its jurisdiction over the petition-complaint filed before it. Thus, the petitioner SSC cannot be faulted for initially
assuming jurisdiction over the petition-complaint of the petitioner SSS.

Nonetheless, since the existence of an employer-employee relationship between the respondent cooperative and its
owners-members was put in issue and considering that the compulsory coverage of the SSS Law is predicated on
the existence of such relationship, it behooves the petitioner SSC to determine if there is really an employer-
employee relationship that exists between the respondent cooperative and its owners-members.

The question on the existence of an employer-employee relationship is not within the exclusive jurisdiction of the
National Labor Relations Commission (NLRC). Article 217 of the Labor Code enumerating the jurisdiction of the
Labor Arbiters and the NLRC provides that:

ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. - (a) x x x.

xxxx

6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims,
arising from employer-employee relations, including those of persons in domestic or household service, involving an
amount exceeding five thousand pesos (₱5,000.00) regardless of whether accompanied with a claim for
reinstatement.20

Although the aforesaid provision speaks merely of claims for Social Security, it would necessarily include issues on
the coverage thereof, because claims are undeniably rooted in the coverage by the system. Hence, the question on
the existence of an employer-employee relationship for the purpose of determining the coverage of the Social
Security System is explicitly excluded from the jurisdiction of the NLRC and falls within the jurisdiction of the SSC
which is primarily charged with the duty of settling disputes arising under the Social Security Law of 1997.

On the basis thereof, considering that the petition-complaint of the petitioner SSS involved the issue of compulsory
coverage of the owners-members of the respondent cooperative, this Court agrees with the petitioner SSC when it
declared in its Order dated 17 February 2004 that as an incident to the issue of compulsory coverage, it may inquire
into the presence or absence of an employer-employee relationship without need of waiting for a prior
pronouncement or submitting the issue to the NLRC for prior determination. Since both the petitioner SSC and the
NLRC are independent bodies and their jurisdiction are well-defined by the separate statutes creating them,
petitioner SSC has the authority to inquire into the relationship existing between the worker and the person or entity
to whom he renders service to determine if the employment, indeed, is one that is excepted by the Social Security
Law of 1997 from compulsory coverage.21

Even before the petitioner SSC could make a determination of the existence of an employer-employee relationship,
however, the respondent cooperative already elevated the Order of the petitioner SSC, denying its Motion to
Dismiss, to the Court of Appeals by filing a Petition for Certiorari. As a consequence thereof, the petitioner SSC
became a party to the said Petition for Certiorari pursuant to Section 5(b)22 of Republic Act No. 8282. The appellate
court ruled in favor of the respondent cooperative by declaring that the petitioner SSC has no jurisdiction over the
petition-complaint filed before it because there was no employer-employee relationship between the respondent
cooperative and its owners-members. Resultantly, the petitioners SSS and SSC, representing the Republic of the
Philippines, filed a Petition for Review before this Court.

Although as a rule, in the exercise of the Supreme Court’s power of review, the Court is not a trier of facts and the
findings of fact of the Court of Appeals are conclusive and binding on the Court,23 said rule is not without exceptions.
There are several recognized exceptions24 in which factual issues may be resolved by this Court. One of these
exceptions finds application in this present case which is, when the findings of fact are conflicting. There are,
indeed, conflicting findings espoused by the petitioner SSC and the appellate court relative to the existence of
employer-employee relationship between the respondent cooperative and its owners-members, which necessitates
a departure from the oft-repeated rule that factual issues may not be the subject of appeals to this Court.

In determining the existence of an employer-employee relationship, the following elements are considered: (1) the
selection and engagement of the workers; (2) the payment of wages by whatever means; (3) the power of dismissal;
and (4) the power to control the worker’s conduct, with the latter assuming primacy in the overall consideration.25The
most important element is the employer’s control of the employee’s conduct, not only as to the result of the work to
be done, but also as to the means and methods to accomplish.26 The power of control refers to the existence of the
power and not necessarily to the actual exercise thereof. It is not essential for the employer to actually supervise the
performance of duties of the employee; it is enough that the employer has the right to wield that power.27 All the
aforesaid elements are present in this case.

First. It is expressly provided in the Service Contracts that it is the respondent cooperative which has the exclusive
discretion in the selection and engagement of the owners-members as well as its team leaders who will be assigned
at Stanfilco.28 Second. Wages are defined as "remuneration or earnings, however designated, capable of being
expressed in terms of money, whether fixed or ascertained, on a time, task, piece or commission basis, or other
method of calculating the same, which is payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for service rendered or to be rendered."29 In this case, the
weekly stipends or the so-called shares in the service surplus given by the respondent cooperative to its owners-
members were in reality wages, as the same were equivalent to an amount not lower than that prescribed by
existing labor laws, rules and regulations, including the wage order applicable to the area and industry; or the same
shall not be lower than the prevailing rates of wages.30 It cannot be doubted then that those stipends or shares in the
service surplus are indeed wages, because these are given to the owners-members as compensation in rendering
services to respondent cooperative’s client, Stanfilco. Third. It is also stated in the above-mentioned Service
Contracts that it is the respondent cooperative which has the power to investigate, discipline and remove the
owners-members and its team leaders who were rendering services at Stanfilco.31 Fourth. As earlier opined, of the
four elements of the employer-employee relationship, the "control test" is the most important. In the case at bar, it is
the respondent cooperative which has the sole control over the manner and means of performing the services under
the Service Contracts with Stanfilco as well as the means and methods of work.32 Also, the respondent cooperative
is solely and entirely responsible for its owners-members, team leaders and other representatives at Stanfilco.33 All
these clearly prove that, indeed, there is an employer-employee relationship between the respondent cooperative
and its owners-members.

It is true that the Service Contracts executed between the respondent cooperative and Stanfilco expressly provide
that there shall be no employer-employee relationship between the respondent cooperative and its owners-
members.34 This Court, however, cannot give the said provision force and effect.

As previously pointed out by this Court, an employee-employer relationship actually exists between the respondent
cooperative and its owners-members. The four elements in the four-fold test for the existence of an employment
relationship have been complied with. The respondent cooperative must not be allowed to deny its employment
relationship with its owners-members by invoking the questionable Service Contracts provision, when in actuality, it
does exist. The existence of an employer-employee relationship cannot be negated by expressly repudiating it in a
contract, when the terms and surrounding circumstances show otherwise. The employment status of a person is
defined and prescribed by law and not by what the parties say it should be.35

It is settled that the contracting parties may establish such stipulations, clauses, terms and conditions as they want,
and their agreement would have the force of law between them. However, the agreed terms and conditions must
not be contrary to law, morals, customs, public policy or public order.36 The Service Contract provision in question
must be struck down for being contrary to law and public policy since it is apparently being used by the respondent
cooperative merely to circumvent the compulsory coverage of its employees, who are also its owners-members, by
the Social Security Law.

This Court is not unmindful of the pronouncement it made in Cooperative Rural Bank of Davao City, Inc. v. Ferrer-
Calleja37 wherein it held that:
A cooperative, therefore, is by its nature different from an ordinary business concern, being run either by persons,
partnerships, or corporations. Its owners and/or members are the ones who run and operate the business while the
others are its employees x x x.

An employee therefore of such a cooperative who is a member and co-owner thereof cannot invoke the right to
collective bargaining for certainly an owner cannot bargain with himself or his co-owners. In the opinion of August
14, 1981 of the Solicitor General he correctly opined that employees of cooperatives who are themselves members
of the cooperative have no right to form or join labor organizations for purposes of collective bargaining for being
themselves co-owners of the cooperative. 1awp++i 1

However, in so far as it involves cooperatives with employees who are not members or co-owners thereof, certainly
such employees are entitled to exercise the rights of all workers to organization, collective bargaining, negotiations
and others as are enshrined in the Constitution and existing laws of the country.

The situation in the aforesaid case is very much different from the present case. The declaration made by the Court
in the aforesaid case was made in the context of whether an employee who is also an owner-member of a
cooperative can exercise the right to bargain collectively with the employer who is the cooperative wherein he is an
owner-member. Obviously, an owner-member cannot bargain collectively with the cooperative of which he is also
the owner because an owner cannot bargain with himself. In the instant case, there is no issue regarding an owner-
member’s right to bargain collectively with the cooperative. The question involved here is whether an employer-
employee relationship can exist between the cooperative and an owner-member. In fact, a closer look at
Cooperative Rural Bank of Davao City, Inc. will show that it actually recognized that an owner-member of a
cooperative can be its own employee.

It bears stressing, too, that a cooperative acquires juridical personality upon its registration with the Cooperative
Development Authority.38 It has its Board of Directors, which directs and supervises its business; meaning, its Board
of Directors is the one in charge in the conduct and management of its affairs.39 With that, a cooperative can be
likened to a corporation with a personality separate and distinct from its owners-members. Consequently, an owner-
member of a cooperative can be an employee of the latter and an employer-employee relationship can exist
between them.

In the present case, it is not disputed that the respondent cooperative had registered itself with the Cooperative
Development Authority, as evidenced by its Certificate of Registration No. 0-623-2460.40 In its by-laws,41 its Board of
Directors directs, controls, and supervises the business and manages the property of the respondent cooperative.
Clearly then, the management of the affairs of the respondent cooperative is vested in its Board of Directors and not
in its owners-members as a whole. Therefore, it is completely logical that the respondent cooperative, as a juridical
person represented by its Board of Directors, can enter into an employment with its owners-members.

In sum, having declared that there is an employer-employee relationship between the respondent cooperative and
its owners-member, we conclude that the petitioner SSC has jurisdiction over the petition-complaint filed before it by
the petitioner SSS. This being our conclusion, it is no longer necessary to discuss the issue of whether the
respondent cooperative was estopped from assailing the jurisdiction of the petitioner SSC when it filed its Answer
with Motion to Dismiss.

WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The Decision and the Resolution of
the Court of Appeals in CA-G.R. SP No. 87236, dated 5 January 2006 and 20 March 2006, respectively, are hereby
REVERSED and SET ASIDE. The Orders of the petitioner SSC dated 17 February 2004 and 16 September 2004
are hereby REINSTATED. The petitioner SSC is hereby DIRECTED to continue hearing the petition-complaint filed
before it by the petitioner SSS as regards the compulsory coverage of the respondent cooperative and its owners-
members. No costs.

SO ORDERED.

MINITA V. CHICO-NAZARIO
Associate Justice

WE CONCUR:
G.R. No. 153511 July 18, 2012

LEGEND HOTEL (MANILA), owned by TITANIUM CORPORATION, and/or, NELSON NAPUD, in his capacity
as the President of Petitioner Corporation, Petitioner,
vs.
HERNANI S. REALUYO, also known as JOEY ROA, Respondent.

DECISION

BERSAMIN, J.:

This labor case for illegal dismissal involves a pianist employed to perform in the restaurant of a hotel. On August 9,
1999, respondent, whose stage name was Joey R. Roa, filed a complaint for alleged unfair labor practice,
constructive illegal dismissal, and the underpayment/nonpayment of his premium pay for holidays, separation pay,
service incentive leave pay, and 13111 month pay. He prayed for attorney's fees, moral damages off P100,000.00
and exemplary damages for P100,000.00.1

Respondent averred that he had worked as a pianist at the Legend Hotel’s Tanglaw Restaurant from September
1992 with an initial rate of P400.00/night that was given to him after each night’s performance; that his rate had
increased to P750.00/night; and that during his employment, he could not choose the time of performance, which
had been fixed from 7:00 pm to 10:00 pm for three to six times/week. He added that the Legend Hotel’s restaurant
manager had required him to conform with the venue’s motif; that he had been subjected to the rules on employees’
representation checks and chits, a privilege granted to other employees; that on July 9, 1999, the management had
notified him that as a cost-cutting measure his services as a pianist would no longer be required effective July 30,
1999; that he disputed the excuse, insisting that Legend Hotel had been lucratively operating as of the filing of his
complaint; and that the loss of his employment made him bring his complaint.2

In its defense, petitioner denied the existence of an employer-employee relationship with respondent, insisting that
he had been only a talent engaged to provide live music at Legend Hotel’s Madison Coffee Shop for three hours/day
on two days each week; and stated that the economic crisis that had hit the country constrained management to
dispense with his services.

On December 29, 1999, the Labor Arbiter (LA) dismissed the complaint for lack of merit upon finding that the parties
had no employer-employee relationship.3 The LA explained thusly:

xxx

On the pivotal issue of whether or not there existed an employer-employee relationship between the parties, our
finding is in the negative. The finding finds support in the service contract dated September 1, 1992 xxx.

xxx

Even if we grant the initial non-existence of the service contract, as complainant suggests in his reply (third
paragraph, page 4), the picture would not change because of the admission by complainant in his letter dated
October 8, 1996 (Annex "C") that what he was receiving was talent fee and not salary.

This is reinforced by the undisputed fact that complainant received his talent fee nightly, unlike the regular
employees of the hotel who are paid by monthly xxx.

xxx

And thus, absent the power to control with respect to the means and methods by which his work was to be
accomplished, there is no employer-employee relationship between the parties xxx.

xxx

WHEREFORE, this case must be, as it is hereby, DISMISSED for lack of merit.
SO ORDERED.4

Respondent appealed, but the National Labor Relations Commission (NLRC) affirmed the LA on May 31, 2001.5

Respondent assailed the decision of the NLRC in the Court of Appeals (CA) on certiorari.

On February 11, 2002, the CA set aside the decision of the NLRC,6 holding:

xxx

Applying the above-enumerated elements of the employee-employer relationship in this case, the question to be
asked is, are those elements present in this case?

The answer to this question is in the affirmative.

xxx

Well settled is the rule that of the four (4) elements of employer-employee relationship, it is the power of control that
is more decisive.

In this regard, public respondent failed to take into consideration that in petitioner’s line of work, he was supervised
and controlled by respondent’s restaurant manager who at certain times would require him to perform only tagalog
songs or music, or wear barong tagalog to conform with Filipiniana motif of the place and the time of his
performance is fixed by the respondents from 7:00 pm to 10:00 pm, three to six times a week. Petitioner could not
choose the time of his performance. xxx.

As to the status of petitioner, he is considered a regular employee of private respondents since the job of the
petitioner was in furtherance of the restaurant business of respondent hotel. Granting that petitioner was initially a
contractual employee, by the sheer length of service he had rendered for private respondents, he had been
converted into a regular employee xxx.

xxx

xxx In other words, the dismissal was due to retrenchment in order to avoid or minimize business losses, which is
recognized by law under Article 283 of the Labor Code, xxx.

xxx

WHEREFORE, foregoing premises considered, this petition is GRANTED. xxx.7

Issues

In this appeal, petitioner contends that the CA erred:

I. XXX WHEN IT RULED THAT THERE IS THE EXISTENCE OF EMPLOYER-EMPLOYEE RELATIONSHIP

BETWEEN THE PETITIONER HOTEL AND RESPONDENT ROA.

II. XXX IN FINDING THAT ROA IS A REGULAR EMPLOYEE AND THAT THE TERMINATION OF HIS
SERVICES WAS ILLEGAL. THE CA LIKEWISE ERRED WHEN IT DECLARED THE REINSTATEMENT OF
ROA TO HIS FORMER POSITION OR BE GIVEN A SEPARATION PAY EQUIVALENT TO ONE MONTH
FOR EVERY YEAR OF SERVICE FROM SEPTEMBER 1999 UNTIL JULY 30, 1999 CONSIDERING THE
ABSENCE OF AN EMPLOYMENT RELATIONSHIP BETWEEN THE PARTIES.

III. XXX WHEN IT DECLARED THAT ROA IS ENTITLED TO BACKWAGES, SERVICE INCENTIVE LEAVE
AND OTHER BENEFITS CONSIDERING THAT THERE IS NO EMPLOYER EMPLOYEE RELATIONSHIP
BETWEEN THE PARTIES.
 IV. XXX WHEN IT NULLIFIED THE DECISION DATED MAY 31, 2001 IN NLRC NCR CA NO. 023404-2000
OF THE NLRC AS WELL AS ITS RESOLUTION DATED JUNE 29, 2001 IN FAVOR OF HEREIN
PETITIONER HOTEL WHEN HEREIN RESPONDENT ROA FAILED TO SHOW PROOF THAT THE NLRC
AND THE LABOR ARBITER HAVE COMMITTED GRAVE ABUSE OF DISCRETION OR LACK OF
JURISDICTION IN THEIR RESPECTIVE DECISIONS.

V. XXX WHEN IT OVERLOOKED THE FACT THAT THE PETITION WHICH ROA FILED IS IMPROPER
SINCE IT RAISED QUESTIONS OF FACT.

VI. XXX WHEN IT GAVE DUE COURSE TO THE PETITION FILED BY ROA WHEN IT IS CLEARLY
IMPROPER AND SHOULD HAVE BEEN DISMISSED OUTRIGHT CONSIDERING THAT A PETITION FOR
CERTIORARI UNDER RULE 65 IS LIMITED ONLY TO QUESTIONS OR ISSUES OF GRAVE ABUSE OF
DISCRETION OR LACK OF JURISDICTION COMMITTED BY THE NLRC OR THE LABOR ARBITER,
WHICH ISSUES ARE NOT PRESENT IN THE CASE AT BAR.

The assigned errors are divided into the procedural issue of whether or not the petition for certiorari filed in the CA
was the proper recourse; and into two substantive issues, namely: (a) whether or not respondent was an employee
of petitioner; and (b) if respondent was petitioner’s employee, whether he was validly terminated.

Ruling

The appeal fails.

Procedural Issue:

Certiorari was a proper recourse

Petitioner contends that respondent’s petition for certiorari was improper as a remedy against the NLRC due to its
raising mainly questions of fact and because it did not demonstrate that the NLRC was guilty of grave abuse of
discretion.

The contention is unwarranted. There is no longer any doubt that a petition for certiorari brought to assail the
decision of the NLRC may raise factual issues, and the CA may then review the decision of the NLRC and pass
upon such factual issues in the process.8 The power of the CA to review factual issues in the exercise of its original
jurisdiction to issue writs of certiorari is based on Section 9 of Batas Pambansa Blg. 129, which pertinently provides
that the CA "shall have the power to try cases and conduct hearings, receive evidence and perform any and all acts
necessary to resolve factual issues raised in cases falling within its original and appellate jurisdiction, including the
power to grant and conduct new trials or further proceedings."

Substantive Issue No. 1:

Employer-employee relationship existed between the parties

We next ascertain if the CA correctly found that an employer-employee relationship existed between the parties.

The issue of whether or not an employer-employee relationship existed between petitioner and respondent is
essentially a question of fact.9 The factors that determine the issue include who has the power to select the
employee, who pays the employee’s wages, who has the power to dismiss the employee, and who exercises control
of the methods and results by which the work of the employee is accomplished.10 Although no particular form of
evidence is required to prove the existence of the relationship, and any competent and relevant evidence to prove
the relationship may be admitted,11 a finding that the relationship exists must nonetheless rest on substantial
evidence, which is that amount of relevant evidence that a reasonable mind might accept as adequate to justify a
conclusion.12

Generally, the Court does not review factual questions, primarily because the Court is not a trier of facts. However,
where, like here, there is a conflict between the factual findings of the Labor Arbiter and the NLRC, on the one hand,
and those of the CA, on the other hand, it becomes proper for the Court, in the exercise of its equity jurisdiction, to
review and re-evaluate the factual issues and to look into the records of the case and re-examine the questioned
findings.13

A review of the circumstances reveals that respondent was, indeed, petitioner’s employee. He was undeniably
employed as a pianist in petitioner’s Madison Coffee Shop/Tanglaw Restaurant from September 1992 until his
services were terminated on July 9, 1999.

First of all, petitioner actually wielded the power of selection at the time it entered into the service contract dated
September 1, 1992 with respondent. This is true, notwithstanding petitioner’s insistence that respondent had only
offered his services to provide live music at petitioner’s Tanglaw Restaurant, and despite petitioner’s position that
what had really transpired was a negotiation of his rate and time of availability. The power of selection was firmly
evidenced by, among others, the express written recommendation dated January 12, 1998 by Christine Velazco,
petitioner’s restaurant manager, for the increase of his remuneration.14

Petitioner could not seek refuge behind the service contract entered into with respondent. It is the law that defines
and governs an employment relationship, whose terms are not restricted to those fixed in the written contract, for
other factors, like the nature of the work the employee has been called upon to perform, are also considered. The
law affords protection to an employee, and does not countenance any attempt to subvert its spirit and intent. Any
stipulation in writing can be ignored when the employer utilizes the stipulation to deprive the employee of his
security of tenure. The inequality that characterizes employer-employee relations generally tips the scales in favor of
the employer, such that the employee is often scarcely provided real and better options.15

Secondly, petitioner argues that whatever remuneration was given to respondent were only his talent fees that were
not included in the definition of wage under the Labor Code; and that such talent fees were but the consideration for
the service contract entered into between them.

The argument is baseless.

Respondent was paid P400.00 per three hours of performance from 7:00 pm to 10:00 pm, three to six nights a
week. Such rate of remuneration was later increased to P750.00 upon restaurant manager Velazco’s
recommendation. There is no denying that the remuneration denominated as talent fees was fixed on the basis of
his talent and skill and the quality of the music he played during the hours of performance each night, taking into
account the prevailing rate for similar talents in the entertainment industry.16

Respondent’s remuneration, albeit denominated as talent fees, was still considered as included in the term wage in
the sense and context of the Labor Code, regardless of how petitioner chose to designate the remuneration. Anent
this, Article 97(f) of the Labor Code clearly states:

xxx wage paid to any employee shall mean the remuneration or earnings, however designated, capable of being
expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other
method of calculating the same, which is payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for services rendered or to be rendered, and includes the
fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily
furnished by the employer to the employee.

Clearly, respondent received compensation for the services he rendered as a pianist in petitioner’s hotel. Petitioner
cannot use the service contract to rid itself of the consequences of its employment of respondent. There is no
denying that whatever amounts he received for his performance, howsoever designated by petitioner, were his
wages.

It is notable that under the Rules Implementing the Labor Code and as held in Tan v. Lagrama,17 every employer is
required to pay his employees by means of a payroll, which should show in each case, among others, the
employee’s rate of pay, deductions made from such pay, and the amounts actually paid to the employee. Yet,
petitioner did not present the payroll of its employees to bolster its insistence of respondent not being its employee.

That respondent worked for less than eight hours/day was of no consequence and did not detract from the CA’s
finding on the existence of the employer-employee relationship. In providing that the " normal hours of work of any
employee shall not exceed eight (8) hours a day," Article 83 of the Labor Code only set a maximum of number of
hours as "normal hours of work" but did not prohibit work of less than eight hours.

Thirdly, the power of the employer to control the work of the employee is considered the most significant
determinant of the existence of an employer-employee relationship.18 This is the so-called control test, and is
premised on whether the person for whom the services are performed reserves the right to control both the end
achieved and the manner and means used to achieve that end.19

Petitioner submits that it did not exercise the power of control over respondent and cites the following to buttress its
submission, namely: (a) respondent could beg off from his nightly performances in the restaurant for other
engagements; (b) he had the sole prerogative to play and perform any musical arrangements that he wished; (c)
although petitioner, through its manager, required him to play at certain times a particular music or song, the music,
songs, or arrangements, including the beat or tempo, were under his discretion, control and direction; (d) the
requirement for him to wear barong Tagalog to conform with the Filipiniana motif of the venue whenever he
performed was by no means evidence of control; (e) petitioner could not require him to do any other work in the
restaurant or to play the piano in any other places, areas, or establishments, whether or not owned or operated by
petitioner, during the three hour period from 7:00 pm to 10:00 pm, three to six times a week; and (f) respondent
could not be required to sing, dance or play another musical instrument.

A review of the records shows, however, that respondent performed his work as a pianist under petitioner’s
supervision and control. Specifically, petitioner’s control of both the end achieved and the manner and means used
to achieve that end was demonstrated by the following, to wit:

a. He could not choose the time of his performance, which petitioners had fixed from 7:00 pm to 10:00 pm,
three to six times a week;

b. He could not choose the place of his performance;

c. The restaurant’s manager required him at certain times to perform only Tagalog songs or music, or to
wear barong Tagalog to conform to the Filipiniana motif; and

d. He was subjected to the rules on employees’ representation check and chits, a privilege granted to other
employees.

Relevantly, it is worth remembering that the employer need not actually supervise the performance of duties by the
employee, for it sufficed that the employer has the right to wield that power.

Lastly, petitioner claims that it had no power to dismiss respondent due to his not being even subject to its Code of
Discipline, and that the power to terminate the working relationship was mutually vested in the parties, in that either
party might terminate at will, with or without cause.

The claim is contrary to the records. Indeed, the memorandum informing respondent of the discontinuance of his
service because of the present business or financial condition of petitioner20 showed that the latter had the power to
dismiss him from employment.21

Substantive Issue No. 2:

Validity of the Termination

Having established that respondent was an employee whom petitioner terminated to prevent losses, the conclusion
that his termination was by reason of retrenchment due to an authorized cause under the Labor Code is inevitable.

Retrenchment is one of the authorized causes for the dismissal of employees recognized by the Labor Code. It is a
management prerogative resorted to by employers to avoid or to minimize business losses. On this matter, Article
283 of the Labor Code states:
Article 283. Closure of establishment and reduction of personnel. – The employer may also terminate the
employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent
losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the
purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of
Labor and Employment at least one (1) month before the intended date thereof. xxx. In case of retrenchment to
prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to
serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least
one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year.

The Court has laid down the following standards that an employer should meet to justify retrenchment and to foil
abuse, namely:

(a) The expected losses should be substantial and not merely de minimis in extent;

(b) The substantial losses apprehended must be reasonably imminent;

(c) The retrenchment must be reasonably necessary and likely to effectively prevent the expected losses;
and

(d) The alleged losses, if already incurred, and the expected imminent losses sought to be forestalled must
be proved by sufficient and convincing evidence.22

Anent the last standard of sufficient and convincing evidence, it ought to be pointed out that a less exacting standard
of proof would render too easy the abuse of retrenchment as a ground for termination of services of employees.23

Was the retrenchment of respondent valid?

In termination cases, the burden of proving that the dismissal was for a valid or authorized cause rests upon the
employer. Here, petitioner did not submit evidence of the losses to its business operations and the economic havoc
it would thereby imminently sustain. It only claimed that respondent’s termination was due to its "present
business/financial condition." This bare statement fell short of the norm to show a valid retrenchment. Hence, we
hold that there was no valid cause for the retrenchment of respondent.

Indeed, not every loss incurred or expected to be incurred by an employer can justify retrenchment. The employer
1âw phi 1

must prove, among others, that the losses are substantial and that the retrenchment is reasonably necessary to
avert such losses. Thus, by its failure to present sufficient and convincing evidence to prove that retrenchment was
necessary, respondent’s termination due to retrenchment is not allowed.

The Court realizes that the lapse of time since the retrenchment might have rendered respondent's reinstatement to
his former job no longer feasible. If that should be true, then petitioner should instead pay to him separation pay at
the rate of one. month pay for every year of service computed from September 1992 (when he commenced to work
for the petitioners) until the finality of this decision, and full backwages from the time his compensation was withheld
until the finality of this decision.

WHEREFORE, we DENY the petition for review on certiorari, and AFFIRM the decision of the Court of Appeals
promulgated on February 11, 2002, subject to the modification that should reinstatement be no longer feasible,
petitioner shall pay to respondent separation pay of one month for every year of service computed from September
1992 until the finality of this decision, and full backwages from the time his compensation was withheld until the
finality of this decision.

Costs of suit to be paid by the petitioners.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 179654 September 22, 2014

HACIENDA LEDDY/RICARDO GAMBOA, JR., Petitioner,

vs.
PAQUITA VILLEGAS, Respondent.

DECISION

PERALTA, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal of the
Decision1dated May 25, 2007 and Resolution2 dated August 10, 2007 of the Court of Appeals in CA-G.R. SP No.
01923,3which granted the Petition for Certiorari under Rule 65 of the 1997 Rules of Civil Procedure filed by Villegas,
and reversed the January 26, 2006 and March 31, 2006 Orders of the National Labor Relations Commission
(NLRC). These two Orders issued by the NLRC reversed the December 3, 2003 Decision of Executive Labor Arbiter
Danilo Acosta.

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

Villegas is an employee at the Hacienda Leddy as early as 1960, when it was still named Hacienda Teresa. Later on
named Hacienda Leddy owned by Ricardo Gamboa Sr., the same was succeeded by his son Ricardo Gamboa, Jr.
During his employment up to the time of his dismissal, Villegas performed sugar farming job 8 hours a day, 6 days a
week work, continuously for not less than 302 days a year, and for which services he was paid ₱45.00 per day. He
likewise worked in petitioner's coconut lumber business where he was paid ₱34.00 a day for 8 hours work.

On June 9, 1993, Gamboa went toVillegas' house and told him that his services were no longer needed without prior
notice or valid reason. Hence, Villegas filed the instant complaint for illegal dismissal.

Gamboa, on the other hand, denied having dismissed Villegas but admitted in his earlier position paper thatVillegas
indeed worked with the said farm owned by his father, doing casual and odd jobs until the latter's death in 1993.4 He
was even given the benefit of occupying a small portion of the land where his house was erected. He, however,
maintained that Villegas ceased working at the farm as early as 1992, contrary to his allegation that he was
dismissed.5

However, later, Gamboaapparently retracted and instead insisted that the farm records reveal that the only time
Villegas rendered service for the hacienda was only in the year 1993,specifically February 9, 1993 and February 11,
1993 when he was contracted by the farm to cut coconut lumber which were given to regular workers for the repairs
of their houses.6 Gamboa added that they informed Villegas that they need the property, hence, they requested that
he vacateit, but he refused. Thus, Gamboa surmised that Villegas filed the instant complaint to gain leverage so he
would not be evicted from the land he is occupying. He further argued that during his employment, Villegas was paid
in accordance with the rate mandated by law and that his claim for illegal dismissal was merely a fabrication as he
was the one who opted not to work. The Labor Arbiter found thatthere was illegal dismissal.7 The dispositive portion
of the decision reads:

WHEREFORE, in view of all the foregoing, respondent Ricardo Gamboa, Jr., is hereby ordered to pay complainant
Paquito Villegas the amount of One Hundred Forty Thousand Three Hundred Eight Pesos and Eighty-Four/00
(₱140,308.84), representing his wage differential, backwages and separation pay, the award to be deposited with
this office within ten (10) days from receipt of this decision.

SO ORDERED.8
On appeal, on January 26, 2006, the NLRC set aside and vacated the Labor Arbiter's decision.9 Complainant moved
for reconsideration, but was denied.10

Thus, viapetition for certiorariunder Rule 65 of the Rules of Court, raising grave abuse of discretion as ground,
Villegas appealed before the Court of Appeals and sought the annulment of the Resolutions of the NLRC.

In the disputed Decision11 dated May 25, 2007, the Court of Appeals granted the petition and annulled and set aside
the NLRC Decision dated January 26, 2006 and Resolution dated March 31, 2006. It further reinstated the Labor
Arbiter's Decision dated December 3, 2003.

Hence, this appeal anchored on the following grounds:

WHETHER THE COURT OFAPPEALS COMMITTED REVERSIBLE ERROR, BASED ON SUBSTANTIAL

QUESTIONS OF LAW, IN REVERSING THE DECISION OF THE NLRC AND AFFIRMING THE DECISION OF the
EXECUTIVE LABOR ARBITER DECLARING THAT RESPONDENT IS A REGULAR WORKER, THE FINDINGS
NOT BEING IN ACCORD WITH LAW;

II

WHETHER THE COURT OFAPPEALS COMMITTED REVERSIBLE ERROR, BASED ON SUBSTANTIAL

QUESTIONS OF LAW, IN REVERSING THE DECISION OF THE NLRC AND AFFIRMING THE DECISION OF
THE EXECUTIVE LABOR ARBITER AND FAILED TO CONSIDER THE MOTIVE OF THE RESPONDENT IN
FILING THE CASE AND THE CREDIBILITY OF HIS WITNESS;

III

THAT ASSUMING WITHOUT ADMITTING THAT RESPONDENT IS A REGULAR WORKER, THE HONORABLE
COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON SUBSTANTIAL QUESTIONS OF LAW,
IN REVERSING THE DECISION OF THE NLRC AND AFFIRMING THE DECISION OF THE EXECUTIVE LABOR
ARBITER IN DIRECTING A STRAIGHT COMPUTATION FOR WAGE DIFFERENTIALS, BACKWAGES AND
SEPARATION PAY, THE FINDINGS NOT BEING INACCORD WITH LAW.

Petitioner disputed that there exists an employer-employee relationship between him and Villegas. He claimed that
respondent was paid on a piece-rate basis without supervision.12 Petitioner added that since his job was not
necessary or desirable in the usual business or trade of the hacienda, he cannot be considered as a regular
employee. Petitioner insisted that it was Villegas who has stopped working in the hacienda and that he was not
dismissed.

We deny the petition.

The issue of Villegas' alleged illegal dismissal is anchored on the existence of an employer-employee relationship
between him and Gamboa; thus, essentially a question of fact. Generally, the Court does not review errors that raise
factual questions. However, when there is conflict among the factual findings of the antecedent deciding bodies like
the LA, the NLRC and the CA, "it is proper, in the exercise of Our equity jurisdiction, to review and re-evaluate the
factual issues and to look into the records of the case and re-examine the questioned findings."13

A perusal of the records would show that respondent, having been employed in the subject Hacienda while the
same was still being managed by petitioner's father until the latter's death in 1993, is undisputed as the same was
even admitted by Gamboa in his earlier pleadings.14 While refuting that Villegas was a regular employee, petitioner
however failed to categorically deny that Villegas was indeed employed in their hacienda albeit he insisted that
Villegas was merely a casual employee doing odd jobs.

The rule is long and well settled that, in illegal dismissal cases like the one at bench, the burden of proof is upon the
employer to show that the employee’s termination from service is for a just and valid cause. The employer’s case
succeeds or fails on the strength of its evidence and not the weakness of that adduced by the employee, in keeping
with the principle that the scales of justice should be tilted in favor of the latter in case of doubt in the evidence
presented by them. Often described as more than a mere scintilla, the quantum of proof is substantial evidence
which is understood as such relevant evidence as a reasonable mind might accept as adequate to support a
conclusion, even if other equally reasonable minds might conceivably opine otherwise.15

In the instant case, if we are to follow the length of time that Villegas had worked with the Gamboas, it should be
more than 20 years of service. Even Gamboa admitted that by act of generosity and compassion, Villegas was
given a privilege of erecting his house inside the hacienda during his employment.16 While it may indeed be an act of
good will on the part of the Gamboas, still, such act is usually done by the employer either out of gratitude for the
employee’s service orfor the employer's convenience as the nature of the work calls for it. Indeed, petitioner's length
of service is an indication of the regularity of his employment. Even assuming that he was doing odd jobs around the
farm, such long period of doing said odd jobs is indicative that the same was either necessary or desirable to
petitioner's trade or business. Owing to the length ofservice alone, he became a regular employee, by operation of
law, one year after he was employed.

Article 280 of the Labor Code, describes a regular employee as one who is either (1) engaged to perform activities
which are necessary or desirable in the usual business or trade of the employer; and (2) those casual employees
who have rendered at least one year of service, whether continuous or broken, with respect to the activity in which
he is employed.

In Integrated Contractor and Plumbing Works, Inc. v. National Labor Relations Commission,17 we held that the testto
determine whether employment is regular or not is the reasonable connection between the particular activity
performed by the employee in relation to the usual business or trade of the employer. If the employee has been
performing the job for at least one year, even if the performance is not continuous or merely intermittent, the law
deems the repeated and continuing need for its performance as sufficient evidence of the necessity, if not
indispensability of that activity to the business. Clearly,with more than 20 years of service, Villegas, without doubt,
passed this test to attain employment regularity.

While length of time may not be the controlling test to determine if Villegas is indeed a regular employee, it is vital in
establishing if he was hired to perform tasks which are necessary and indispensable to the usual business or trade
of the employer. If it was true that Villegas worked in the hacienda only in the year 1993, specifically February
9,1993 and February 11, 1993, why would then hebe given the benefit toconstruct his house in the hacienda? More
significantly, petitioner admitted that Villegas had worked in the hacienda until his father'sdemise. Clearly, even
assuming that Villegas' employment was only for a specific duration, the fact that he was repeatedly re-hired over a
long periodof time shows that his job is necessary and indispensable to the usual business or trade of the employer.

Gamboa likewise argued that Villegas was paid on a piece-rate basis.18 However, payment on a piece-ratebasis
does not negate regular employment. "The term ‘wage’ is broadly defined in Article 97 of the Labor Code as
remuneration or earnings, capable of being expressed in terms of money whether fixed or ascertained on a time,
task, piece or commission basis. Payment by the piece is just a method of compensation and does not define the
essence of the relations."19

We are likewise unconvinced thatit was Villegas who suddenly stopped working. Considering that hewas employed
with the Gamboas for more than 20 years and was even given a place to call his home, it does not make sense why
Villegas would suddenly stop working therein for no apparent reason. To justify a finding of abandonment of work,
there must be proof of a deliberate and unjustified refusal on the part of an employee to resume his employment.
The burden of proof is on the employer to show an unequivocal intent on the part of the employee to discontinue
employment. Mere absence is not sufficient. It must be accompanied by manifest acts unerringly pointing to the fact
that the employee simply does not want to work anymore.20

Petitioner failed to discharge this burden. Other than the self-serving declarations in the affidavit of his employee,
petitioner did not adduce proof of overt acts of Villegas showing his intention to abandon his work. Abandonment is
a matter of intention;it cannot be inferred or presumed from equivocal acts. On the contrary, the filing of the instant
illegal dismissal complaint negates any intention on his part to sever their employment relationship. The delay of
morethan 1 year infiling the instant illegal dismissal case likewise is non-issue considering that the complaint was
filed within a reasonable period during the three-year period provided under Article 291 of the Labor Code.21 As aptly
observed by the appellate court, Villegas appeared tobe without educational attainment. He could not have known
that he has rights as a regular employee that is protected by law.
The Labor Code draws a fine line between regular and casual employees to protect the interests of labor. We ruled
in Baguio Country Club Corporation v. NLRC22 that "its language evidently manifests the intent to safeguard the
tenurial interest of the worker who may be denied the rights and benefits due a regular employee by virtue of
lopsided agreements with the economically powerful employer who can maneuver to keep an employee on a casual
status for as long as convenient." Thus, notwithstanding any agreements to the contrary, what determines whether a
certain employment is regular or casual is not the will and word of the employer, to which the desperate worker often
accedes, much less the procedure of hiring the employee or the manner of paying his salary. It is the nature of the
activities performed in relation to the particular business or trades considering all circumstances, and in some cases
the length of time of its performance and itscontinued existence.23

All these having discussed, as a regular worker, Villegas is entitled to security of tenure under Article 279 ofthe
Labor Code and can only be removed for cause. We found no valid cause attending to his dismissal and found also
that his dismissal was without due process.

Article 277(b) of the Labor Code provides that:

x x x Subject to the constitutional right of workers to security of tenure and their right to be protected against
dismissal except for a just and authorized cause and without prejudice to the requirement of notice under Article 283
of this Code, the employer shall furnish the worker whose employment is sought to be terminated a written notice
containing a statement of the causes for termination and shall afford the latter ample opportunity to be heard and to
defend himself with the assistance of his representative if he so desires in accordance with company rules and
regulations promulgated pursuant to guidelines set by the Department of Labor and Employment. x x x

The failure of the petitioner to comply with these procedural guidelines renders its dismissal of Villegas illegal. An
1âw phi 1

illegally dismissed employee should be entitled to either reinstatement - if viable, or separation pay if reinstatement
is no longer viable, plus backwages in either instance.24 Considering that reinstatement is no longer feasible
because of strained relations between the employee and the employer, separation pay should be granted. The basis
for computing separation pay is usually the length of the employee's past service, while that for backwages is the
actual period when the employee was unlawfully prevented from working.25 It should be emphasized, however, that
the finality of the illegal dismissal decision becomes the reckoning point. In allowing separation pay, the final
decision effectively declares that the employment relationship ended so that separation pay and backwages are to
be computed up to that point. The decision also becomes a judgment for money from which another consequence
flows - the payment of interest in case of delay.26

WHEREFORE, premises considered, the Decision dated May 25, 2007 and Resolution dated August 10, 2007 of
the Court of Appeals are hereby AFFIRMED. The Decision dated December 3, 2003 of the Labor Arbiter in RAB
Case No. 06-08-10480-94 is hereby REINSTATED. This case is hereby REMANDED to the Labor Arbiter for the
recomputation of respondent's separation pay and backwages with legal interest.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 179652 May 8, 2009

PEOPLE'S BROADCASTING (BOMBO RADYO PHILS., INC.), Petitioner,

vs.
THE SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT, THE REGIONAL DIRECTOR,
DOLE REGION VII, and JANDELEON JUEZAN, Respondents.

DECISION

TINGA, J.:

The present controversy concerns a matter of first impression, requiring as it does the determination of the
demarcation line between the prerogative of the Department of Labor and Employment (DOLE) Secretary and his
duly authorized representatives, on the one hand, and the jurisdiction of the National Labor Relations Commission,
on the other, under Article 128 (b) of the Labor Code in an instance where the employer has challenged the
jurisdiction of the DOLE at the very first level on the ground that no employer-employee relationship ever existed
between the parties.

I.

The instant petition for certiorari under Rule 65 assails the decision and the resolution of the Court of Appeals dated
26 October 2006 and 26 June 2007, respectively, in C.A. G.R. CEB-SP No. 00855.1

The petition traces its origins to a complaint filed by Jandeleon Juezan (respondent) against People’s Broadcasting
Service, Inc. (Bombo Radyo Phils., Inc) (petitioner) for illegal deduction, non-payment of service incentive leave,
13th month pay, premium pay for holiday and rest day and illegal diminution of benefits, delayed payment of wages
and non-coverage of SSS, PAG-IBIG and Philhealth before the Department of Labor and Employment (DOLE)
Regional Office No. VII, Cebu City.2 On the basis of the complaint, the DOLE conducted a plant level inspection on
23 September 2003. In the Inspection Report Form,3 the Labor Inspector wrote under the heading
"Findings/Recommendations" "non-diminution of benefits" and "Note: Respondent deny employer-employee
relationship with the complainant- see Notice of Inspection results." In the Notice of Inspection Results4 also bearing
the date 23 September 2003, the Labor Inspector made the following notations:

Management representative informed that complainant is a drama talent hired on a per drama " participation basis"
hence no employer-employeeship [sic] existed between them. As proof of this, management presented photocopies
of cash vouchers, billing statement, employments of specific undertaking (a contract between the talent director &
the complainant), summary of billing of drama production etc. They (mgt.) has [sic] not control of the talent if he
ventures into another contract w/ other broadcasting industries.

On the other hand, complainant Juezan’s alleged violation of non-diminution of benefits is computed as follows:

@ P 2,000/15 days + 1.5 mos = ₱ 6,000

(August 1/03 to Sept 15/03)

Note: Recommend for summary investigation or whatever action deem proper.5

Petitioner was required to rectify/restitute the violations within five (5) days from receipt. No rectification was effected
by petitioner; thus, summary investigations were conducted, with the parties eventually ordered to submit their
respective position papers.6
In his Order dated 27 February 2004,7 DOLE Regional Director Atty. Rodolfo M. Sabulao (Regional Director) ruled
that respondent is an employee of petitioner, and that the former is entitled to his money claims amounting to
₱203,726.30. Petitioner sought reconsideration of the Order, claiming that the Regional Director gave credence to
the documents offered by respondent without examining the originals, but at the same time he missed or failed to
consider petitioner’s evidence. Petitioner’s motion for reconsideration was denied.8 On appeal to the DOLE
Secretary, petitioner denied once more the existence of employer-employee relationship. In its Order dated 27
January 2005, the Acting DOLE Secretary dismissed the appeal on the ground that petitioner did not post a cash or
surety bond and instead submitted a Deed of Assignment of Bank Deposit.9

Petitioner elevated the case to the Court of Appeals, claiming that it was denied due process when the DOLE
Secretary disregarded the evidence it presented and failed to give it the opportunity to refute the claims of
respondent. Petitioner maintained that there is no employer-employee relationship had ever existed between it and
respondent because it was the drama directors and producers who paid, supervised and disciplined respondent. It
also added that the case was beyond the jurisdiction of the DOLE and should have been considered by the labor
arbiter because respondent’s claim exceeded ₱5,000.00.

The Court of Appeals held that petitioner was not deprived of due process as the essence thereof is only an
opportunity to be heard, which petitioner had when it filed a motion for reconsideration with the DOLE Secretary. It
further ruled that the latter had the power to order and enforce compliance with labor standard laws irrespective of
the amount of individual claims because the limitation imposed by Article 29 of the Labor Code had been repealed
by Republic Act No. 7730.10 Petitioner sought reconsideration of the decision but its motion was denied.11

Before this Court, petitioner argues that the National Labor Relations Commission (NLRC), and not the DOLE
Secretary, has jurisdiction over respondent’s claim, in view of Articles 217 and 128 of the Labor Code.12 It adds that
the Court of Appeals committed grave abuse of discretion when it dismissed petitioner’s appeal without delving on
the issues raised therein, particularly the claim that no employer-employee relationship had ever existed between
petitioner and respondent. Finally, petitioner avers that there is no appeal, or any plain, speedy and adequate
remedy in the ordinary course of law available to it.

On the other hand, respondent posits that the Court of Appeals did not abuse its discretion. He invokes Republic Act
No. 7730, which "removes the jurisdiction of the Secretary of Labor and Employment or his duly authorized
representatives, from the effects of the restrictive provisions of Article 129 and 217 of the Labor Code, regarding the
confinement of jurisdiction based on the amount of claims."13 Respondent also claims that petitioner was not denied
due process since even when the case was with the Regional Director, a hearing was conducted and pieces of
evidence were presented. Respondent stands by the propriety of the Court of Appeals’ ruling that there exists an
employer-employee relationship between him and petitioner. Finally, respondent argues that the instant petition for
certiorari is a wrong mode of appeal considering that petitioner had earlier filed a Petition for Certiorari, Mandamus
and Prohibition with the Court of Appeals; petitioner, instead, should have filed a Petition for Review.14

II.

The significance of this case may be reduced to one simple question—does the Secretary of Labor have the power
to determine the existence of an employer-employee relationship?

To resolve this pivotal issue, one must look into the extent of the visitorial and enforcement power of the DOLE
found in Article 128 (b) of the Labor Code, as amended by Republic Act 7730. It reads:

Article 128 (b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases
where the relationship of employer-employee still exists, the Secretary of Labor and Employment or his duly
authorized representatives shall have the power to issue compliance orders to give effect to the labor standards
provisions of this Code and other labor legislation based on the findings of labor employment and enforcement
officers or industrial safety engineers made in the course of inspection. The Secretary or his duly authorized
representative shall issue writs of execution to the appropriate authority for the enforcement of their orders, except
in cases where the employer contests the findings of the labor employment and enforcement officer and raises
issues supported by documentary proofs which were not considered in the course of inspection. (emphasis
supplied)

xxx
The provision is quite explicit that the visitorial and enforcement power of the DOLE comes into play only "in cases
when the relationship of employer-employee still exists." It also underscores the avowed objective underlying the
grant of power to the DOLE which is "to give effect to the labor standard provision of this Code and other labor
legislation." Of course, a person’s entitlement to labor standard benefits under the labor laws presupposes the
existence of employer-employee relationship in the first place.

The clause "in cases where the relationship of employer-employee still exists" signifies that the employer-employee
relationship must have existed even before the emergence of the controversy. Necessarily, the DOLE’s power does
not apply in two instances, namely: (a) where the employer-employee relationship has ceased; and (b) where no
such relationship has ever existed.

The first situation is categorically covered by Sec. 3, Rule 11 of the Rules on the Disposition of Labor Standards
Cases15 issued by the DOLE Secretary. It reads:

Rule II MONEY CLAIMS ARISING FROM COMPLAINT/ROUTINE INSPECTION

Sec. 3. Complaints where no employer-employee relationship actually exists. Where employer-employee

relationship no longer exists by reason of the fact that it has already been severed, claims for payment of monetary
benefits fall within the exclusive and original jurisdiction of the labor arbiters. Accordingly, if on the face of the
complaint, it can be ascertained that employer-employee relationship no longer exists, the case, whether
accompanied by an allegation of illegal dismissal, shall immediately be endorsed by the Regional Director to the
appropriate branch of the National Labor Relations Commission (NLRC).

In the recent case of Bay Haven, Inc. v. Abuan,16 this Court recognized the first situation and accordingly ruled that a
complainant’s allegation of his illegal dismissal had deprived the DOLE of jurisdiction as per Article 217 of the Labor
Code.17

In the first situation, the claim has to be referred to the NLRC because it is the NLRC which has jurisdiction in view
of the termination of the employer-employee relationship. The same procedure has to be followed in the second
situation since it is the NLRC that has jurisdiction in view of the absence of employer-employee relationship between
the evidentiary parties from the start.

Clearly the law accords a prerogative to the NLRC over the claim when the employer-employee relationship has
terminated or such relationship has not arisen at all. The reason is obvious. In the second situation especially, the
existence of an employer-employee relationship is a matter which is not easily determinable from an ordinary
inspection, necessarily so, because the elements of such a relationship are not verifiable from a mere ocular
examination. The intricacies and implications of an employer-employee relationship demand that the level of
scrutiny should be far above the cursory and the mechanical. While documents, particularly documents found in the
employer’s

office are the primary source materials, what may prove decisive are factors related to the history of the employer’s
business operations, its current state as well as accepted contemporary practices in the industry. More often than
not, the question of employer-employee relationship becomes a battle of evidence, the determination of which
should be comprehensive and intensive and therefore best left to the specialized quasi-judicial body that is the
NLRC.

It can be assumed that the DOLE in the exercise of its visitorial and enforcement power somehow has to make a
determination of the existence of an employer-employee relationship. Such prerogatival determination, however,
cannot be coextensive with the visitorial and enforcement power itself. Indeed, such determination is merely
preliminary, incidental and collateral to the DOLE’s primary function of enforcing labor standards provisions. The
determination of the existence of employer-employee relationship is still primarily lodged with the NLRC. This is the
meaning of the clause "in cases where the relationship of employer-employee still exists" in Art. 128 (b).

Thus, before the DOLE may exercise its powers under Article 128, two important questions must be resolved: (1)
Does the employer-employee relationship still exist, or alternatively, was there ever an employer-employee
relationship to speak of; and (2) Are there violations of the Labor Code or of any labor law?
The existence of an employer-employee relationship is a statutory prerequisite to and a limitation on the power of
the Secretary of Labor, one which the legislative branch is entitled to impose. The rationale underlying this limitation
is to eliminate the prospect of competing conclusions of the Secretary of Labor and the NLRC, on a matter fraught
with questions of fact and law, which is best resolved by the quasi-judicial body, which is the NRLC, rather than an
administrative official of the executive branch of the government. If the Secretary of Labor proceeds to exercise his
visitorial and enforcement powers absent the first requisite, as the dissent proposes, his office confers jurisdiction on
itself which it cannot otherwise acquire.

The approach suggested by the dissent is frowned upon by common law. To wit:

[I]t is a general rule, that no court of limited jurisdiction can give itself jurisdiction by a wrong decision on a point
collateral to the merits of the case upon which the limit to its jurisdiction depends; and however its decision may be
final on all particulars, making up together that subject matter which, if true, is within its jurisdiction, and however
necessary in many cases it may be for it to make a preliminary inquiry, whether some collateral matter be or be not
within the limits, yet, upon this preliminary question, its decision must always be open to inquiry in the superior
court.18

A more liberal interpretative mode, "pragmatic or functional analysis," has also emerged in ascertaining the
jurisdictional boundaries of administrative agencies whose jurisdiction is established by statute. Under this
approach, the Court examines the intended function of the tribunal and decides whether a particular provision falls
within or outside that function, rather than making the provision itself the determining centerpiece of the
analysis.19Yet even under this more expansive approach, the dissent fails.

A reading of Art. 128 of the Labor Code reveals that the Secretary of Labor or his authorized representatives was
granted visitorial and enforcement powers for the purpose of determining violations of, and enforcing, the Labor
Code and any labor law, wage order, or rules and regulations issued pursuant thereto. Necessarily, the actual
existence of an employer-employee relationship affects the complexion of the putative findings that the Secretary of
Labor may determine, since employees are entitled to a different set of rights under the Labor Code from the
employer as opposed to non-employees. Among these differentiated rights are those accorded by the "labor
standards" provisions of the Labor Code, which the Secretary of Labor is mandated to enforce. If there is no
employer-employee relationship in the first place, the duty of the employer to adhere to those labor standards with
respect to the non-employees is questionable.

This decision should not be considered as placing an undue burden on the Secretary of Labor in the exercise of
visitorial and enforcement powers, nor seen as an unprecedented diminution of the same, but rather a recognition of
the statutory limitations thereon. A mere assertion of absence of employer-employee relationship does not deprive
the DOLE of jurisdiction over the claim under Article 128 of the Labor Code. At least a prima facie showing of such
absence of relationship, as in this case, is needed to preclude the DOLE from the exercise of its power. The
Secretary of Labor would not have been precluded from exercising the powers under Article 128 (b) over petitioner if
another person with better-grounded claim of employment than that which respondent had. Respondent, especially
if he were an employee, could have very well enjoined other employees to complain with the DOLE, and, at the
same time, petitioner could ill-afford to disclaim an employment relationship with all of the people under its aegis.

Without a doubt, petitioner, since the inception of this case had been consistent in maintaining that respondent is not
its employee. Certainly, a preliminary determination, based on the evidence offered, and noted by the Labor
Inspector during the inspection as well as submitted during the proceedings before the Regional Director puts in
genuine doubt the existence of employer-employee relationship. From that point on, the prudent recourse on the
part of the DOLE should have been to refer respondent to the NLRC for the proper dispensation of his claims.
Furthermore, as discussed earlier, even the evidence relied on by the Regional Director in his order are mere self-
serving declarations of respondent, and hence cannot be relied upon as proof of employer-employee relationship.

III.

Aside from lack of jurisdiction, there is another cogent reason to to set aside the Regional Director’s 27 February
2004 Order. A careful study of the case reveals that the said Order, which found respondent as an employee of
petitioner and directed the payment of respondent’s money claims, is not supported by substantial evidence, and
was even made in disregard of the evidence on record.
It is not enough that the evidence be simply considered. The standard is substantial evidence as in all other quasi-
judicial agencies. The standard employed in the last sentence of Article 128(b) of the Labor Code that the
documentary proofs be "considered in the course of inspection" does not apply. It applies only to issues other than
the fundamental issue of existence of employer-employee relationship. A contrary rule would lead to controversies
on the part of labor officials in resolving the issue of employer-employee relationship. The onset of arbitrariness is
the advent of denial of substantive due process.

As a general rule, the Supreme Court is not a trier of facts. This applies with greater force in cases before quasi-
judicial agencies whose findings of fact are accorded great respect and even finality. To be sure, the same findings
should be supported by substantial evidence from which the said tribunals can make its own independent evaluation
of the facts. Likewise, it must not be rendered with grave abuse of discretion; otherwise, this Court will not uphold
the tribunals’ conclusion.20 In the same manner, this Court will not hesitate to set aside the labor tribunal’s findings of
fact when it is clearly shown that they were arrived at arbitrarily or in disregard of the evidence on record or when
there is showing of fraud or error of law.21

At the onset, it is the Court’s considered view that the existence of employer- employee relationship could have
been easily resolved, or at least prima facie determined by the labor inspector, during the inspection by looking at
the records of petitioner which can be found in the work premises. Nevertheless, even if the labor inspector had
noted petitioner’s manifestation and documents in the Notice of Inspection Results, it is clear that he did not give
much credence to said evidence, as he did not find the need to investigate the matter further. Considering that the
documents shown by petitioner, namely: cash vouchers, checks and statements of account, summary billings
evidencing payment to the alleged real employer of respondent, letter-contracts denominated as "Employment for a
Specific Undertaking," prima facie negate the existence of employer-employee relationship, the labor inspector
could have exerted a bit more effort and looked into petitioner’s payroll, for example, or its roll of employees, or
interviewed other employees in the premises. After all, the labor inspector, as a labor regulation officer is given
"access to employer’s records and premises at any time of day or night whenever work is being undertaken therein,
and the right to copy therefrom, to question any employee and investigate any fact, condition or matter