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Table of
Contents
Module 2. Basic Principles 5
Lirio vs Genovia G.R. No. 169757 6
The New Philippine Skylanders Inc vs Dakila G.R. No. 19954757 8
Francisco vs NLRC 500 RA 690 10
Coca-Cola Bottlers Philippines vs Dr. Dean Climaco G.R. No. 146881 12
Bernarte vs Philippine Basketball Association G.R. No. 192084 14
Escasinas vs Shangri-La’s Mactan Island Resort G.R. No. 178827 16
Dr. Loreche-Amit vs Cagayan de Oro Medical Center G.R. No. 216635 18

Module 3. Hiring of Employee 20

Duncan Associaton vs Glaxo Wellcome Philippines G.R. No. 162994 21
Del Monte Philippines vs Velasco G.R. 153477 23
Star Paper Corporation vs Simbol G.R. No. 164774 25

Module 4. Wages and Wage Fixing 27

Module 4.A. Violation of Wage Order 28
S.I.P. Food House et al., vs Batolina G.R. No. 192473 29
Royal Plant Workers Union vs Coca-Cola Bottlers Philippines G.R. No. 198783 31
Milan et al., vs NLRC G.R. No. 202961 34
SLL International Cables Specialist vs NLRC G.R. No. 172161 36

Module 5. Wage Enforcement and Recovery 38

People’s Broadcasting vs Secretary of DOLE G.R. No. 179652 39
Superior Packaging Corporation vs Balagsay et al G.R. No. 178909 40
DOLE vs Kentex Manufacturing Corporation G.R. No.253781 43

Module 6. Wage Protection Provisions and Prohibitions Regarding Wages 45

Bluer Than Blue Joint Ventures Co vs Esteban G.R. No.192582 46
T&H Shopfitters vs T&H Shopfitters Corporation Union G.R. No.191714 48
Wesleyan University vs Wesleyan Faculty and Staff G.R. No.181806 50
Galang et al vs Boie Takeda Chemicals Inc. et al G.R. No.183932 52
PLDT vs Estranero G.R. No.202961 55

Module 7. Payment of Wages 58

Congson vs NLRC 243 SCRA 260 59
House of Sara Lee vs Rey G.R. No.149013 61

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Module 8. Conditions of Employment 63
Linton Commercial Corporation vs Hellera et al G.R. No.163147 64
Nate Casket Maker vs Arango et al G.R. No. 192282 66
San Juan De Dios Hospital vs NLRC 282 SCRA 315 68
Philippine Airlines vs NLRC 302 SCRA 582 70

Module 9. Minimum Labor Standard Benefits 72

Robina Farms Cebu vs Villa G.R. No. 175869 73
Bahia Shipping Services vs Chua G.R. No. 162195 75
Leyte IV Electric Cooperative Inc vs LEYECO IV Employees Union G.R. 1577745 77
Tan vs Lagrama G.R. No. 151228 79

Module 10. Other Special Benefits 81

Banco de Oro Unibank vs Sagaysay G.R. No. 214961 82
Maria De Leon Transportation Inc vs Macuray G.R. No. 214940 84
Philippine Airlines Vs Hassaram G.R. No. 217730 86
Arco Metal Products vs Samahan ng Manggagawa sa Arco G.R. No. 170734 87

Module 11. Jurisdiction of the Labor Arbiter 88

Module 12. 2011 NLRC Rules of Procedure, as amended 89

McBurnie vs Ganzon G.R. No. 178034/1718117 90
Indophil Textile Mills Inc vs Engr. Adviento G.R. No. 171212 93
Lockheed Detective & Watchman Agency G.R. No. 185918 95
Quantum Foods vs Esloyo G.R. No. 213696 97

Module 13. Other Important Labor Provisions 101

Aliviado et al vs Procter & Gamble G.R. No. 160506 102
Atty. Ortiz vs San Miguel Corporation G.R. No. 151983-84 104
Kaisahan at Kapatiran ng Mga Manggagawa vs MWC G.R. No. 174179 107
Philippine Airlines vs Zamora G.R. No. 166996 110
Polyfoam-RGC International Corp vs Concepcion G.R. No. 172349 113
Goya Inc. vs Goya Inc. Employees Union G.R. No. 170054 116

Module 14. Miscellaneous Provisions 119

University of the East vs Pepanio G.R. No. 193897 120
Provincial Bus Operators Association of the Phils vs DOLE G.R. No. 202275 122
Bernardo et al vs NLRC G.R. No. 122917 125

Module 15. Medical, Dental and Occupational Safety 127

Ocean Builders Construction vs Spouses Cubacub G.R. No. 150898 128
U-BIX Corporation vs Bandiola G.R. No. 157168 131

Module 16. Migrant Worker’s Act and Overseas Filipino Act of 1995 and Recruitment
and Placement 134
Pentagon International Shipping Services vs CA G.R. No. 169158 135
Aldovino vs Gold & Green Manpower Management G.R. No. 200811 138
ACTI Overseas Corporation vs Echin G.R. No. 178551 141

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 1. LIRIO VS GENOVIA
G.R. No. 169757, November 23, 2011

Wilmer D. Genovia filed a complaint against Cesar Lirio for illegal dismissal, non-
payment of commission and award of moral and exemplary damages. He was hired as studio
manager by Lirio and received a monthly salary of ₱7,000.00. He was made to report for
work from Monday to Friday from 9:00 a.m. to 6 p.m. On Saturdays, he was required to work
half-day only. Lirio approached him and told him about his project to produce an
album. Lirio asked Genovia to compose and arrange songs for such album. As agreed upon
by both of them, the additional services that Genovia would render included the composing
and arranging of the musical scores only. The technical aspect in producing the album would
be performed by Genovia in his capacity as studio manager for which he was paid on a
monthly basis. After the completion of the album, Lirio informed Genovia that he was
entitled only to 20% of the net profit, and not of the gross sales of the album, and that the
salaries he received and would continue to receive as studio manager would be deducted from
the said 20% net profit share. Lirio then verbally terminated Genovia’s services, and he was
instructed not to report for work.

Lirio claims that Genovia was not hired as studio manager, composer, technician or as
an employee in any other capacity by Celkor. According to Lirio, Genovia verbally agreed to
co-produce the album based on the terms and conditions that Lirio was entitled to 60% of the

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net profit, while Genovia is entitled to 20% of the net profit; and Genovia shall be entitled to
draw advances of ₱7,000.00 a month, which shall be deductible from his share of the net
profits and only until such time that the album has been produced. Lirio contends that from
the aforesaid terms and conditions, his relationship with Genovia is one of an informal
partnership under Article 1767 of the New Civil Code. Lirio had no control over the time and
manner by which Genovia composed or arranged the songs, except on the result thereof.
Hence, no employer-employee relationship existed between him and the Genovia, and there
was no illegal dismissal to speak of.

The Labor Arbiter found that an employer-employee relationship existed between

Lirio and Genovia. Lirio’s denial of the employment relationship cannot overcome Genovia’s
positive assertion and documentary evidence proving that Lirio hired Genovia as his
employee. The National Labor Relations Commission (NLRC) reversed and set aside the
decision of the Labor Arbiter as Genovia failed to proved with substantial evidence that he
was selected and engaged by Lirio, that Lirio had the power to dismiss him, and that they had
the power to control him not only as to the result of his work, but also as to the means and
methods of accomplishing his work. The Court of Appealas (CA) reversed and set aside the
resolution of the NLRC, and reinstated the decision of the Labor Arbiter.

ISSUE:
Whether or not an employer-employee relationship existed between Lirio and
Genovia

SC RULING:
The elements to determine the existence of an employment relationship are:
1. the selection and engagement of the employee;
2. the payment of wages;
3. the power of dismissal; and
4. the employer’s power to control the employee’s conduct.

It is settled that 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.  In this case, the documentary evidence presented by Genovia
to prove that he was an employee of Lirio are as follows: (a) a document denominated as
"payroll" certified correct by Lirio, which showed that Genovia received a monthly salary of
₱7,000.00 with the corresponding deductions due to absences incurred by Genovia; and (2)
copies of petty cash vouchers, showing the amounts he received and signed for in the
payrolls. The said documents showed that Lirio hired Genovia as an employee and he was
paid monthly wages of ₱7,000.00. Lirio wielded the power to dismiss as Genovia stated that
he was verbally dismissed by Lirio, and Genovia, thereafter, filed an action for illegal
dismissal against Lirio.

The power of control refers merely to the existence of the power. It is not essential for
the employer to actually supervise the performance of duties of the employee, as it is
sufficient that the former has a right to wield the power. Lirio stated that it was agreed that he
would help and teach Genovia how to use the studio equipment. In such case, Lirio certainly
had the power to check on the progress and work of Genovia.

In Nicario v. National Labor Relations Commission, the Court held that if doubts

exist between the evidence presented by the employer and the employee, the scales of justice

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must be tilted in favor of the latter. It is a time-honored rule that in controversies between a
laborer and his master, doubts reasonably arising from the evidence, or in the interpretation of
agreements and writing should be resolved in the former’s favor. The policy is to extend the
doctrine to a greater number of employees who can avail of the benefits under the law, which
is in consonance with the avowed policy of the State to give maximum aid and protection of
labor. 

The Courts agrees with CA that the evidence presented by the parties showed that an
employer-employee relationship existed between Lirio and Genovia.

2. THE NEW PHILIPPINE SKYLANDERS INC VS DAKILA

G.R. No. 199547, September 24, 2012

Dakila was employed by New Philippine Skylanders as early as 1987 and terminated
for cause in April 1997 when the corporation was sold. In May 1997, he was rehired as
consultant by the NPS under a Contract for Consultancy Services. In a letter dated April 19,
2007, Dakila informed NPS of his compulsory retirement effective May 2, 2007 and sought
for the payment of his retirement benefits pursuant to the Collective Bargaining Agreement.
His request, however, was not acted upon. Instead, he was terminated from service effective
May 1, 2007. Dakila then filed a complaint for constructive illegal dismissal, non-payment of
retirement benefits, under/non-payment of wages and other benefits of a regular employee,
and damages before the NLRC. He averred that the consultancy contract was a scheme to
deprive him of the benefits of regularization, claiming to have assumed tasks necessary and
desirable in the trade or business of NPSs and under their direct control and supervision. In
support of his claim, he submitted, among others, copies of his time cards, Official Business
Itinerary Slips, Daily Attendance Sheets and other documents prescribing the manner in
which his tasks were to be accomplished under the control of the NPSs and acknowledging
his status as a regular employee of the corporation.

The New Philippine Skylanders Inc asserted that Dakila was a consultant and not their
regular employee. The latter was not included in NPS' payroll and paid a fixed amount under
the consultancy contract. He was not required to observe regular working hours and was free
to adopt means and methods to accomplish his task except as to the results of the work
required of him. Hence, no employer-employee relationship existed between them. Moreover,
Dakila terminated his contract in a letter dated April 19, 2007, thus, negating his dismissal.

The Labor Arbiter declared Dakila to be a regular employee on the basis of the
unrebutted documentary evidence showing that he was under the NPS’ direct control and
supervision and performed tasks that were either incidental or usually desirable and necessary
in the trade or business of NPS corporation for a period of ten years. The National Labor
Relations Commission sustained the Labor Arbiter's finding that Dakila was a regular
employee and that his dismissal was illegal. The Court of Appeals found factual findings of
the LA and the NLRC to be supported by substantial evidence and thus, should be accorded
respect and finality.

ISSUE:
Whether or not an employer-employee relationship existed between the parties
Whether or not Dakila is entitled to reinstatement

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SC RULING:
The issue of illegal dismissal is premised on the existence of an employer-employee
relationship between the parties herein. The records reveal that both the LA and the NLRC,
as affirmed by the CA, have found substantial evidence to show that Dakila was a regular
employee who was dismissed without cause.

Following Article 279 of the Labor Code, an employee who is unjustly dismissed
from work is entitled to reinstatement without loss of seniority rights and other privileges and
to his full backwages computed from the time he was illegally dismissed.  However,
considering that Dakila was terminated on May 1, 2007, or one (1) day prior to his
compulsory retirement on May 2, 2007, his reinstatement is no longer feasible. Accordingly,
the NLRC correctly held him entitled to the payment of his retirement benefits pursuant to
the CBA. On the other hand, his backwages should be computed only for days prior to his
compulsory retirement which in this case is only a day. consequently, the award of
reinstatement wages pending appeal must be deleted for lack of basis.

3. FRANCISCO VS NLRC
500 RA 690, 2006

In 1995, Francisco was hired by Kasei Corporation during its incorporation stage. She
was designated as Accountant and Corporate Secretary and was assigned to handle all the
accounting needs of the company. In 1996, she was designated Acting Manager. The

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corporation also hired Gerry Nino as accountant in lieu of petitioner. As Acting Manager,
Francisco was assigned to handle recruitment of all employees and perform management
administration functions; represent the company in all dealings with government agencies;
and to administer all other matters pertaining to the operation of Kasei Restaurant which is
owned and operated by Kasei Corporation.  For five years, Francisco performed the duties of
Acting Manager.

In January 2001, Francisco was replaced by Liza R. Fuentes as Manager. Francisco

alleged that she was required to sign a prepared resolution for her replacement but she was
assured that she would still be connected with Kasei Corporation. Timoteo Acedo, the
designated Treasurer, convened a meeting of all employees of Kasei Corporation and
announced that nothing had changed and that Francisco was still connected with Kasei
Corporation. Thereafter, Kasei Corporation reduced her salary from January 2001 to
September 2001, and did not pay her mid-year bonus allegedly because the company was not
earning well. On October 2001, Francisco did not receive her salary from the company. She
made repeated follow-ups with the company cashier but she was advised that the company
was not earning well. On October 15, 2001, Francisco asked for her salary from Acedo and
the rest of the officers but she was informed that she is no longer connected with the
company. Since she was no longer paid her salary, she did not report for work and filed an
action for constructive dismissal before the labor arbiter.

ISSUE:
Whether there was an employer-employee relationship between Francisco and Kasei
Corporation

SC RULING:
The better approach to determining the existence of an employer-employee relation
would be to adopt a two- tiered test involving: (1) the putative employer’s power to control
the employee with respect to the means and methods by which the work is to be
accomplished; and (2) the underlying economic realities of the activity or relationship.

Thus, the determination of the relationship between employer and employee depends
upon the circumstances of the whole economic activity, such as: 
500 the extent to which the services performed are an integral part of the
employer’s business; 
501 the extent of the worker’s investment in equipment and facilities; 
502 the nature and degree of control exercised by the employer; 
503 the worker’s opportunity for profit and loss; 
504 the amount of initiative, skill, judgment or foresight required for the success of
the claimed independent enterprise; 
505 the permanency and duration of the relationship between the worker and the
employer; and 
506 the degree of dependency of the worker upon the employer for his continued
employment in that line of business. 

When Francisco was designated General Manager, Kasei Corporation made a report
to the SSS signed by Irene Ballesteros. Petitioner’s membership in the SSS as manifested by
a copy of the SSS specimen signature card which was signed by the President of Kasei
Corporation and the inclusion of her name in the on-line inquiry system of the SSS evidences
the existence of an employer-employee relationship between Francisco and Kasei

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Corporation. It is therefore apparent that Francisco is economically dependent on Kasei
Corporation for her continued employment in the latter’s line of business. 

4. COCA-COLA BOTTLERS PHILIPPINES VS DR. DEAN CLIMACO

G.R. No. 146881, February 15, 2007

Dr. Dean Climaco is a medical doctor hired by Coca-Cola Bottlers Phils by virtue of a
Retainer Agreement which stated that such agreement shall only be for a period of 1 year
beginning January 1, 1988 up to December 31, 1988. That the compensation to be paid by the
company for the services of the doctor is fixed at ₱3,800.00 per month. That the doctor shall
observe clinic hours at the company’s premises from Monday to Saturday of a minimum of 2
hours each day or a maximum of 2 hours each day or treatment from 7:30 a.m. to 8:30 a.m.
and 3:00 p.m. to 4:00 p.m. The Retainer Agreement was renewed annually. The last one
expired on Dec 31, 1993. Despite the non-renewal, Dr. Climaco continued to perform his
functions as Coca-Cola’s doctor until he received a letter (March 9, 1995) from the company
concluding their retainership agreement effective 30 days from receipt 

Dr. Climaco inquired to the DOLE regarding the letter he received. Director Ancheta,
DOLE Legal Service, stated that there was an employer-employee relationship between
Coca-Cola and Dr. Climaco based on the Retainer Agreement and Comprehensive Medical
Plan and the application of the four-fold test. However, Dir Ancheta advised him to file a
case with the NLRC since termination disputes and money claims arising from employer-
employee relationships is a question of fact. SSS also stated that Dr. Climaco’s services
partake the nature of work of a regular company doctor and thus, he was subject to social
security coverage. However, Coca-Cola’s management refused to recognize him as a regular
employee. Coca-Cola refused.

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 The National Labor Relations Commission ruled in favour of Coca-Cola, stating that
no employer-employee relationship existed since Coca-Cola lacked the power of control over
Dr. Climaco’s performance of duties. The Court of Appeals reversed NLRC’s decision since
there is a relationship, based on the Retainer Agreement and services rendered, after applying
the four-fold test. 

ISSUE:
Whether or not there exists an employer-employee relationship between the parties 

SC RULING: 
In determining the existence of the employer-employee relationship, the Supreme
Court adhered to the four-fold test: 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 (control test) which is considered to be the most important element.

The Court agrees with the NLRC’s findings that no employer-employee relationship
existed as Coca-Cola lacked the power of control over Dr. Climaco’s performance of his
duties. In Neri v NLRC, it held that “the guidelines were laid down merely to ensure that the
desired end result was achieved. It did not, however, tell Neri how the radio/telex machine
should be operated”. In this case, the Comprehensive Medical Plan provided guidelines
merely to ensure that the end result was achieved, but it did not control the means and
methods by which Dr. Climaco performed his assigned tasks. It didn’t tell him “how to
conduct his physical examination, how to immunize, or how to diagnose and treat his patients
in each case”. It is precisely because of this lack of control that the contract provides that Dr.
Climaco shall be directly responsible to the employee concerned and their dependents for any
injury, harm or damage caused through professional negligence, incompetence or other valid
causes of action. 

Dr. Climaco’s work schedule and on-call requirement also doesn’t amount to such
control but are only necessary incidents to the Retainership Agreement. Coca-Cola also
didn’t wield the sole power of dismissal or termination. The Agreement granted to both
parties the power to terminate relationship upon giving a 30-day notice. 

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 5. BERNARTE VS PHILIPPINE BASKETBALL ASSOCIATION ET AL.,
G.R. No. 192084, September 14, 2011

Complainants Bernarte and Guevarra aver that they were invited to join the Philippine
Basketball Association as referees. They were made to sign contracts on a year-to-year basis.
During the term of Commissioner Eala, however, changes were made on the terms of their
employment. Bernarte received a letter from the Office of the Commissioner advising him
that his contract would not be renewed citing his unsatisfactory performance on and off the
court. Guevarra signed a contract as trainee on March 2001. On the next year, he signed a
yearly contract as Regular Class C referee. On May 2003, respondent Martinez issued a
memorandum to Guevarra expressing dissatisfaction over his questioning on the assignment
of referees officiating out-of-town games. Beginning February 2004, he was no longer made
to sign a contract.

Respondents aver that the complainants entered into two contracts of retainer with the
PBA in 2003. After the lapse of the 2 nd contract of retainer, the PBA decided not to renew
their contracts. They argued that Complainants were not illegally dismissed because they
were not employees of the PBA. Their respective contracts of retainer were simply not
renewed.

The Labor Arbiter declared petitioner an employee whose dismissal by respondent

was illegal, which was affirmed by the National Labor Relations Commission. The Court of
Appeals overturned the decision as the petitioner was considered by the CA as an
independent contractor and not an employee.

ISSUE:
Whether or not the petitioner is an employee or independent contractor

SC RULING:
The existence of an employer-employee relationship is ultimately a question of fact.
To determine the existence of an employer-employee relationship, case law has consistently
applied the four-fold test, to wit: (a) the selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d) the employer’s power to control the
employee on the means and methods by which the work is accomplished. 

PBA admits repeatedly engaging petitioner’s services, as shown in the retainer

contracts. PBA paid petitioner a retainer fee, exclusive of per diem or allowances as
stipulated in the contract. PBA can terminate the retainer contract for petitioner’s violation of
its terms and conditions. However, once in the playing court, the referees exercise their own
independent judgment, based on the rules of the game, as to when and how a call or decision
is to be made. The referees decide whether an infraction was committed, and the PBA cannot
overrule them once the decision is made on the playing court. The referees are the only,
absolute, and final authority on the playing court. The very nature of petitioner’s job of

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officiating a professional basketball game undoubtedly calls for freedom of control by
respondents.
The fact that PBA repeatedly hired petitioner does not by itself prove that petitioner is
an employee of the former.  For a hired party to be considered an employee, the hiring party
must have control over the means and methods by which the hired party is to perform his
work, which is absent in this case. The continuous rehiring by PBA of petitioner simply
signifies the renewal of the contract between PBA and petitioner, and highlights the
satisfactory services rendered by petitioner warranting such contract renewal. Conversely, if
PBA decides to discontinue petitioner’s services at the end of the term fixed in the contract,
whether for unsatisfactory services, or violation of the terms and conditions of the contract, or
for whatever other reason, the same merely results in the non-renewal of the contract, as in
the present case. The non-renewal of the contract between the parties does not constitute
illegal dismissal of petitioner by respondents.

6. ESCASINAS VS SHANGRI-LA'S MACTAN ISLAND RESORT

G.R No. 178827
Escasinas and Singco were registered nurses, engaged by respondent Dr. Jessica
Pepito to work in her clinic at respondent Shangri-La’s Mactan Island Resort. Escasinas and
Singco filed with the National Labor Relations Commission (NLRC) a complaint for
regularization, underpayment of wages, non-payment of holiday pay, night shift differential
and 13th month pay against Shangrila et al., claiming that they are regular employees of
Shangri-La. 

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 Shangri-la claimed that Escasinas and Singco were not its employees but of Dr.
Pepito, whom it retained via Memorandum of Agreement (MOA) pursuant to Article 157 of
the Labor Code. Dr. Pepito for her part claimed that Escasinas and Singco were already
working for the previous retained physicians of Shangri-la before she was retained. Escasinas
and Singco, however, insist that under Article 157 of the Labor Code, Shangri-la is required
to hire full-time registered nurse, hence their engagement should be deemed as regular
employment. They maintain that Dr. Pepito is a labor-only contractor for she has no license
or business permit and no business name registration as mandated by Sec. 19 and 20 of the
Implementing Rules and Regulations of the Labor Code. 
The Labor Arbiter declared Escasinas and Singco to be regular employees of Shangri-
la. The National Labor Relations Commission, on the other hand, granted Shangri-la’s and
Dr. Pepito’s appeal and dismissed Escasinas and Singco complaint for lack of merit, finding
that no employer-employee relationship exists between Shangri-la and petitioners. 

ISSUES:
Whether or not Escasinas and Singco are regular employees of Shangri-la and Dr.
Pepito.

SC RULING:
The requirements for the existence of an employer-employee relationship are different
from the requisites for the existence of an independent and permissible contractor
relationship. 

The existence of an independent and permissible contractor relationship is generally

established by considering the following determinants: whether the contractor is carrying on
an independent business; the nature and extent of the work; the skill required; the term and
duration of the relationship; the right to assign the performance of a specified piece of work;
the control and supervision of the work to another; the employer's power with respect to the
hiring, firing and payment of the contractor's workers; the control of the premises; the duty to
supply the premises, tools, appliances, materials and labor; and the mode, manner and terms
of payment. 

On the other hand, the existence of an employer- employee relationship is established

by the presence of the following determinants: (1) the selection and engagement of the
workers; (2) the power of dismissal; (3) the payment of wages by whatever means; and (4)
the power to control the worker's conduct, with the latter assuming primacy in the overall
consideration. 

The Court holds that Dr. Pepito is a legitimate independent contractor. That Shangri-
la provides the clinic premises and medical supplies for use of its employees and guests do
not necessarily prove that respondent doctor lacks substantial capital and investment.
Besides, the maintenance of a clinic and provision of medical services to its employees is
required under Art. 157, which are not directly related to Shangri-la’s principal business –
operation of hotels and restaurants. 

As to payment of wages, Dr. Pepito is the one who underwrites the following:
salaries, SSS contributions and other benefits of the staff; group life, group personal accident
insurance and life/death insurance for the staff with minimum benefit payable at 12 times the
employee’s last drawn salary, as well as value added taxes and withholding taxes, sourced
from her P60,000.00 monthly retainer fee and 70% share of the service charges from Shangri-

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la’s guests who avail of the clinic services. It is unlikely that Dr. Pepito would report
Escasinas and Singco as workers, pay their SSS premium as well as their wages if they were
not indeed her employees. 

With respect to the supervision and control of the nurses and clinic staff, it is not
disputed that a document, ―Clinic Policies and Employee Manual claimed to have been
prepared by Dr. Pepito exists, to which Escasinas and Singco gave their conformity and in
which they acknowledged their coterminous employment status. It is thus presumed that said
document, and not the employee manual being followed by Shangri-la’s regular workers,
governs how they perform their respective tasks and responsibilities.

Contrary to Escasinas and Singco contention, the various office directives issued by
Shangri-la’s officers do not imply that it is Shangri-la’s management and not Dr. Pepito who
exercises control over them or that Shangri-la has control over how the doctor and the nurses
perform their work. 

7. DR. LORECHE-AMIT VS CAGAYAN DE ORO MEDICAL CENTER

G.R. 216635, June 3, 2019

Dr. Mary Jean P. Loreche-Amit started working with Cagayan De Oro Medical
Center, Inc. sometime in May 1996, when she was engaged by the late Dr. Jose Gaerlan as
Associate Pathologist in the Department of Laboratories. Upon the demise of Dr. Gaerlan,
Cagayan de Oro Medical Center's Board of Directors formally appointed Dr. Loreche-Amit
as Chief Pathologist for five years or until May 15, 2011. 

On June 13, 2007, the Board of Directors passed a resolution, recalling Dr. Loreche-
Amit’s appointment as Chief Pathologist. This prompted her to file a complaint for illegal
dismissal, contending that she was dismissed by CDMC from her work without just cause
and due process.  She claims that Dr. Hernando Emano asked her to help his daughter Dr.
Helga Emano-Bleza to qualify as a pathologist considering that Dr. Loreche-Amit is one of
the six members of the Board of Governors accredited by the Professional Regulation
Commission. However, she refused to assist Dr. Emano-Bleza because the latter failed to
qualify in the clinical pathology examination. Such refusal, according to her, started the
subtle attempt of Dr. Emano to oust her from her job.

Soon thereafter, Dr. Francisco Oh issued an Inter-Office Memorandum addressed to

all laboratory personnel stating that working in and out of the building without proper
permission is to be treated as absence without official leave and payment for printing of
duplicate copies not endorsed to the hospital is a form of stealing. As she slammed the
Memorandum against the wall and tagged the name of Dr. Oh as an irrational man, she
received an Inter-Office Memorandum from Dr. Oh for alleged conduct

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unbecoming/insubordination, and to explain why her appointment should not be revoked
due to such behavior. Finally, a Memorandum recalling her appointment was issued.

ISSUES:
Whether or not there existed an employer-employee relationship between Dr. Loreche
Amit and Cagayan de Oro Medical Center

SC RULING:
The four-fold test, to wit: 1) the selection and engagement of the employees; 2) the
payment of wages; 3) the power of dismissal; and 4) the power to control the employee's
conduct, must be applied to determine the existence of an employer-employee relationship.

In this case, it is apparent that CDMC, through the Board of Directors, exercised the
power to select and supervise petitioner as the Pathologist. It must be emphasized that
petitioner was appointed as Pathologist with a term of five years from May 2006 to May
2011. She was likewise paid compensation which is at 4% of the gross receipts of the
Clinical Section of the laboratory. However, based on the records, CDMC does not exercise
the power of control over petitioner. 

The power to control the work of the employee is considered the most significant
determinant of the existence of an employer-employee relationship. This test 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.  

As the Labor Arbiter, NLRC, and the CA aptly observed, Dr. Loreche-Amit was
working for two other hospitals aside from CDMC, not to mention those other hospitals
which she caters to when her services are needed. Such fact evinces that she controls her
working hours. On this note, relevant is the economic reality test which this Court has
adopted in determining the existence of employer-employee relationship. Under this test,
the economic realities prevailing within the activity or between the parties are examined,
taking into consideration the totality of circumstances surrounding the true nature of the
relationship between the parties, to wit:

In our jurisdiction, the benchmark of economic reality in analyzing possible

employment relationships for purposes of applying the Labor Code ought to be the
economic dependence of the worker on his employer. Thus, the fact that petitioner
continued to work for other hospitals strengthens the proposition that petitioner was not
wholly dependent on CDMC. Petitioner likewise admitted that she receives in full her 4%
share in the Clinical Section of the hospital regardless of the number of hours she worked
therein. Alternatively put, petitioner manages her method and hours of work. The rule is
that where a person who works for another performs his job more or less at his own
pleasure, in the manner he sees fit, not subject to definite hours or conditions of work, and
is compensated according to the result of his efforts and not the amount thereof, no
employer-employee relationship exists.  

Moreover, the Memorandum, pertaining to petitioner's behavior, issued by Dr. Oh

does not sufficiently establish the element of control. The Memorandum merely states that
intolerable behavior in the hospital cannot be countenanced. It is administrative in character
which does not, in any way, pertains to the manner and method of petitioner's work. 

16 | P a g e
8. DUNCAN ASSOCIATION OF DETAILMAN-PTGWO VS GLAXO WELLCOME
PHILIPPINES
G.R. No. 162994, September 17, 2004

17 | P a g e
 Pedro Tecson was hired by Glaxo Wellcome Philippines Inc. as their Medical
Representative on 1995. He signed a contract of employment which states that he is to
disclose any existing or future relationship with co-employers or employees of competing
drug companies and should management find such relationship pose a possible conflict of
interest, the management may compel the employee to, either be reassigned to another
department or resign from the company.

Tecson entered into a relationship with Bettsy, an employee of Astra Pharmaceuticals,

a competitor of Glaxo. They then got married in 1998. Glaxo, even prior to such marriage,
informed Tecson of the possible conflict of interest. After such marriage, the superiors of
Tecson reminded him that he should abide by the stipulations of the contract and that they
should decide which one of them would have to resign form their job. Tecson requested for
reassignment but was not able to due to Glaxo’s “Least-Movement Policy”. He was
transferred to a different area and was further prohibited from being issued samples of
products and was not included in product conferences, yet receiving his pay. Eventually the
parties were not able to come to terms and Tecson was offered his separation pay of half of a
month’s pay for every year of service to which he declined.

The National Conciliation and Mediation Board (NCMB) affirmed Glaxo’s policy as
valid. The Court of Appeals ruled Glaxo’s policy is a valid exercise of its management
prerogatives.

Tecson contends that Glaxo’s policy is violative of the Equal Protection Clause in the
Constitution. While Glaxo argues that such company policy is a valid exercise of its
management prerogatives. They also maintain the position that Glaxo has a genuine interest
in ensuring that its employees avoid any activity that may conflict their responsibilities with
the company. Further, Glaxo points out that Tecson could no longer question the assailed
policy because he was fully aware of the provision when he signed his contract of
employment.

ISSUE:
Whether or not Glaxo’s policy is a valid exercise of management prerogative

SC RULING:
Glaxo has a right to guard its trade secrets and other confidential programs. The
assailed prohibition is a reasonable exercise of management prerogative as Glaxo possesses
the right to protect its economic interests and the right to adopt and enforce policy to protect
its functions. It is clear that Glaxo does not prohibit relationships between their employees
and those of a competitor company, it only seeks to avoid conflict of interests.  Indeed, while
the laws endeavor to give life to social justice and the protection of labor, it does not mean
that every dispute will be decided in favor of the workers. 

The Court also finds no merit that Tecson was constructively dismissed when he was
reassigned and was excluded from company seminars. Constructive Dismissal is defined as
quitting, an involuntary resignation resorted to when continued employment becomes
unreasonable; when there is a demotion, diminution in pay or discrimination. Here, none of
those conditions were present. Glaxo even showed its desire to retain Tecson as its employee
and was given chances to eliminate the conflict. Clearly the foregoing dispels any suspicion
of unfairness and bad faith on the part of Glaxo.

18 | P a g e
 9. DEL MONTE PHILIPPINES INC. VS LOLITA VELASCO
G.R. No. 153477, March 6, 2007

Lolita Velasco is a Field Worker who is also a regularized employee with Del Monte
Philippines. She was issued a warning in the years 1987 and 1991 for her absences. In 1994,
she was subjected to a hearing to explain her excessive Absence without Official Leave.
Having failed to appear in the numerous hearings to explain her absences, her services were
officially terminated in January 1995. Velasco filed a case for Illegal Dismissal as the reason
for her absences was that she suffered a urinary tract infection due to her pregnancy and that
she sent the application for leave to her supervisor. She went to the company hospital for
check-up and was advised to have rest in quarters for a total of 11 days. She alleges that she
did not file the adequate leave of absence because based on policy, a medical certificate is
already sufficient and that she only failed to report on September 10, 1994 as her actual
application for leave of absence was denied.

The Labor Arbiter dismissed the complaint for Lack of Merit holding that Velasco is
an incorrigible absentee and that her absences were without permission. Even if she was
pregnant, it did not justify her failure to appear during the hearings or explain her absences.
The National Labor Relations Commission held that her dismissal was illegal in consonance
with the provision stated in Article 279 of the Labor Code. Furthermore, she was able to

19 | P a g e
justify the fact that her absences were due to her pregnancy, hence negating Del Monte’s
contention that she gave no valid explanation. In addition, she averred that the sheer distance
between the home and workplace made it difficult to send a formal notice and that she even
sent her child to inform the supervisor but said child was unable to as the child was ashamed
to approach the officer. The Court of Appeals affirmed the decision of the NLRC.

ISSUE:
Whether or not the employment of Velasco has been validly terminated on the ground
of excessive absences without permission, on account of her pregnancy.

SC RULING:
Paragraph 2 of Article 137 of the labor Code provides, that it shall be unlawful for
any employer to discharge such woman on account of her pregnancy, while on leave or in
confinement due to her pregnancy.

Del Monte’s contention that the cause of the dismissal was gross and habitual neglect
unrelated to her state of pregnancy is unpersuasive. The records show and even Del Monte
acknowledges that the absences complained of were due to her pregnancy. Although it can be
submitted that Velasco has incurred a string of absences in the totality of her employment
tenure, it must be stressed the reason for her consecutive absences, which is the primary
matter complained of by Del Monte, was caused by her pregnancy. The state of Velasco was
properly documented by the Hospital records and certificates issued by the company hospital.
Medical health reports also establish that during the first trimester of pregnancy, the mother
may be plagued with various illnesses and discomforts due to such. 

Del Monte contends that many women go through pregnancy and yet are able to
submit notices. The Court emphasized that under the company’s own policy, subsequent
justification may be admitted. Del Monte’s contention that the jurisprudential rule that the
totality of the infractions of an employee may be considered to justify a dismissal, is tenuous.
Del Monte cannot lay down a pattern of absenteeism and habitual disregard of company rules
to justify such dismissal. The undeniable fact is that during the absences in 1994, such was
caused by her pregnancy which is covered in the prohibition under the labor Code. Since the
last string of absences is justifiable, there is no legal basis in considering these absences
together with prior infractions

20 | P a g e
 10. STAR PAPER CORPORATION VS SIMBOL
G.R. No. 164774, April 12, 2006

Star Paper Corporation is a corporation engaged in trading – principally of paper

products. Josephine Ongsitco is its Manager of the Personnel and Administration Department
while Sebastian Chua is its Managing Director. Star Paper Corporation had a policy wherein
couples within the company got married, one of them should resign.

Respondents Simbol, Comia and Estrella were all regular employees of the company.
They got married with Dayrit, Ongsitco, and Zuñiga, respectively. After their marriages, they
were then reminded by Ongsitco regarding the policy and Simbol, Comia, and Estralla
respectively resigned their positions.

Respondents later filed a complaint for unfair labor practice, constructive dismissal,
separation pay and attorney’s fees. They averred that the aforementioned company policy is
illegal and contravenes Article 136 of the Labor Code. They also contended that they were
dismissed due to their union membership.

The Labor Arbiter dismissed the complaint for lack of merit, which the National
Labor Relations Commission affirmed. Upon appeal with the Court of Appeals, the Court of
Appeals reversed the NLRC decision.

ISSUE:
Whether or not of banning spouses working in the same company is valid exercise of
management prerogative

SC RULING:
Article 136 of the Labor Code states that it shall be unlawful for an employer to
require as a condition of employment or continuation of employment that a woman employee
shall not get married, or to stipulate expressly or tacitly that upon getting married a woman
employee shall be deemed resigned or separated, or to actually dismiss, discharge,
discriminate or otherwise prejudice a woman employee merely by reason of her marriage.

Petitioners allege that its policy "may appear to be contrary to Article 136 of the
Labor Code" but it assumes a new meaning if read together with the first paragraph of the
rule. The rule does not require the woman employee to resign. The employee spouses have
the right to choose who between them should resign. Further, they are free to marry persons
other than co-employees. Hence, it is not the marital status of the employee, per se, that is

21 | P a g e
being discriminated. It is only intended to carry out its no-employment-for-relatives-within-
the-third-degree-policy which is within the ambit of the prerogatives of management.

It is true that the policy of petitioners prohibiting close relatives from working in the
same company takes the nature of an anti-nepotism employment policy. However, in the
cases of Duncan and PT&T, it instructs us that the requirement of reasonableness must be
clearly established to uphold the questioned employment policy. The employer has the
burden to prove the existence of a reasonable business necessity. It is significant to note that
in the case at bar, respondents were hired after they were found fit for the job, but were asked
to resign when they married a co-employee.  Petitioners failed to show how the marriage of
Simbol, then a Sheeting Machine Operator, to Alma Dayrit, then an employee of the
Repacking Section, could be detrimental to its business operations. Neither did petitioners
explain how this detriment will happen in the case of Wilfreda Comia, then a Production
Helper in the Selecting Department, who married Howard Comia, then a helper in the cutter-
machine. 

The failure of petitioners to prove a legitimate business concern in imposing the

questioned policy cannot prejudice the employee’s right to be free from arbitrary
discrimination based upon stereotypes of married persons working together in one company.

22 | P a g e
23 | P a g e
 11. S.I.P. FOOD HOUSE ET AL., VS BATOLINA
G.R. No. 192473, October 11, 2010

The GSIS Multi-Purpose Cooperative (GMPC) is an entity organized by the

employees of the Government Service Insurance System (GSIS). Incidental to its purpose,
GMPC wanted to operate a canteen in the new GSIS Building, but had no capability and
expertise in this area. Thus, it engaged the services of S.I.P. Food House (SIP), owned by the
spouses Alejandro and Esther Pablo, as concessionaire. 

Restituto Batolina and nine others (the respondents) worked as waiters and waitresses
in the canteen. In February 2004, GMPC terminated SIP’s "contract as GMPC
concessionaire" because of GMPCs decision "to take direct investment in and management of
the GMPC canteen"; SIP’s continued refusal to heed GMPCs directives for service
improvement; and the alleged interference of Pablo’s two sons with the operation of the
canteen. The termination of the concession contract caused the termination of the
respondents’ employment, prompting them to file a complaint for illegal dismissal, with
money claims, against SIP and the spouses Pablo.

The respondents alleged before the Labor Arbiter that they were SIP employees who
were illegally dismissed. To avoid liability, SIP argued that it operated the canteen in behalf
of GMPC since it had no authority by itself to do so. The respondents were not its employees,

24 | P a g e
but GMPCs, as shown by their identification cards. The Labor Arbiter ruled that respondents
were GMPCs employees and not SIPs. It, however, opined that even if respondents were
considered as SIP’s employees, their dismissal would still not be illegal because the
termination of its contract to operate the canteen came as a surprise and was against its will,
rendering the canteens closure involuntary.

The National Labor Relations Commission found that SIP was the respondent's
employer, but it sustained the Labor Arbiter’s ruling that the employees were not illegally
dismissed as the termination of SIPs concession to operate the canteen constituted an
authorized cause for the severance of employer-employee relations. As the Labor Arbiter did,
the NLRC regarded the closure of SIPs canteen operations involuntary, thus, negating the
employee's entitlement to separation pay. The Court of Appeals, finding substantial evidence
in the records supporting the NLRC conclusions, brushed aside SIPs argument that it could
not have been the employer of the respondents because it was a mere labor-only contractor of
GMPC. It sustained the NLRC's findings that SIP was the respondent's employer.

ISSUE:
Whether or not SIP was the employer of respondents

SC RULING:
SIP and its proprietors could not be considered as mere agents of GMPC because they
exercised the essential elements of an employment relationship with the respondents such as
hiring, payment of wages and the power of control, not to mention that SIP operated the
canteen on its own account as it paid a fee for the use of the building and for the privilege of
running the canteen. 

The fact that the respondents applied with GMPC in February 2004 when it
terminated its contract with SIP, is another clear indication that the two entities were separate
and distinct from each other. That complainants were employees of respondents is further
bolstered by the fact that respondents do not deny that they were the ones who paid
complainant's salary. When complainants charged them of underpayment, respondents even
interposed the defense of file board and lodging given to complainants. Clearly, no less than
respondents, thru their counsel, admitted that complainants herein were their employees.

25 | P a g e
 12. ROYAL PLANT WORKERS UNION VS COCA-COLA BOTTLERS
PHILIPPINES INCORPORATED
G.R. No. 198783, April 15, 2013

In Coca-Cola Bottlers Philippines, Inc. (CCBPI) plant in Cebu City, there are 20
bottling operators who work for its Bottling Line 1 while there are 12-14 bottling operators
who man its Bottling Line 2. All of them are male and they are members of herein respondent
Royal Plant Workers Union.

In 1974, the bottling operators of then Bottling Line 2 were provided with chairs upon
their request. In 1988, the bottling operators of then Bottling Line 1 followed suit and asked
to be provided also with chairs. Their request was likewise granted. Sometime in September
2008, the chairs provided for the operators were removed pursuant to a national directive of
petitioner. This directive is in line with the "I Operate, I Maintain, I Clean" program. The
program reinforces the task of bottling operators to constantly move about in the performance
of their duties and responsibilities. The bottling operators took issue with the removal of the
chairs.

Through the representation of herein respondent, they initiated the grievance

machinery of the Collective Bargaining Agreement (CBA). However, even after exhausting
the remedies provide by the grievance machinery, there was no progress. Hence, respondents
sent a Notice to Arbitrate to petitioners.

Before submitting to arbitration the issue, both parties availed of the

conciliation/mediation proceedings before the National Conciliation and Mediation Board
(NCMB) Regional Branch No. VII. They failed to arrive at an amicable settlement. The sole
issue for arbitration is whether the removal of chairs of the operators assigned at the
production/manufacturing line while performing their duties and responsibilities is valid or
not. The Arbitration Committee rendered in favor to petitioners. The Court of Appeals
rendered in favor of respondent, annulling the decision of the Arbitration Committee on the
ground that the removal of the chairs is within management prerogatives and that it was
employer’s discretion to develop measures to ensure efficiency and safety as respondent
reasoned that the workers would fall asleep.

ISSUE:
Whether or not an appeal to the CA via Rule 43 is the proper remedy to question the
decision of the Arbitration Committee

26 | P a g e
 Whether or not the removal of the bottling operators’ chairs is a valid exercise of
management prerogative

SC RULING:
Anent to the First Issue
The CCBPI is correct. This procedural issue being debated upon is not novel. The
Court has already ruled in a number of cases that a decision or award of a voluntary arbitrator
is appealable to the CA via a petition for review under Rule 43.

In the case of Samahan ng mga Manggagawa sa Hyatt-NUWHRAIN-APL v.

Bacungan, we repeated the well-settled rule that a decision or award of a voluntary arbitrator
is appealable to the CA via petition for review under Rule 43. We held that:
"The question on the proper recourse to assail a decision of a voluntary
arbitrator has already been settled in Luzon Development Bank v. Association of
Luzon Development Bank Employees, where the Court held that the decision or
award of the voluntary arbitrator or panel of arbitrators should likewise be appealable
to the Court of Appeals, in line with the procedure outlined in Revised Administrative
Circular No. 1-95 (now embodied in Rule 43 of the 1997 Rules of Civil Procedure),
just like those of the quasi-judicial agencies, boards and commissions enumerated
therein, and consistent with the original purpose to provide a uniform procedure for
the appellate review of adjudications of all quasi-judicial entities.

Anent to the Second Issue

Management is free to regulate, according to its own discretion and judgment, all
aspects of employment. The exercise of management prerogative, however, is not absolute as
it must be exercised in good faith and with due regard to the rights of labor. It cannot be
denied that CCBPI removed the operators’ chairs pursuant to a national directive and in line
with its program, launched to enable the Union to perform their duties and responsibilities
more efficiently. The chairs were not removed indiscriminately. They were carefully studied
with due regard to the welfare of the members of the Union. The removal of the chairs was
also compensated by a reduction of the operating hours of the bottling operators, and an
increase of the break period from 15 to 30 minutes between rotations. The removal of the
chairs was designed to increase work efficiency. Hence, CCBPI’s exercise of its management
prerogative was made in good faith without doing any harm to the workers’ rights.

There is no law that requires employers to provide chairs for bottling operators. The
CA correctly ruled that the Labor Code, specifically Article 132 thereof, only requires
employers to provide seats for women. It must be stressed that all concerned bottling
operators in this case are men. There was no violation either of the Health, Safety and Social
Welfare Benefit provisions under Book IV of the Labor Code of the Philippines. The
directive did not expose the bottling operators to safety and health hazards.

Furthermore, the CBA between the Union and CCBPI contains no provision

whatsoever requiring the management to provide chairs for the operators in the
production/manufacturing line while performing their duties and responsibilities. It expressly
provides that benefits and/or privileges, not expressly given therein but which are presently
being granted by the company and enjoyed by the employees, shall be considered as purely

27 | P a g e
voluntary acts by the management and that the continuance of such benefits and/or privileges,
no matter how long or how often, shall not be understood as establishing an obligation on the
company’s part. Since the matter of the chairs is not expressly stated in the CBA, it is
understood that it was a purely voluntary act on the part of CCBPI and the long practice did
not convert it into an obligation or a vested right in favor of the Union.

13. MILAN ET AL., VS NLRC, SOLID MILLS, INC & PHILIP ANG
G.R. No. 202961, February 4, 2015

As Solid Mills’ employees, petitioners and their families were allowed to occupy SMI
Village, a property owned by Solid Mills.  According to Solid Mills, this was “out of
liberality and for the convenience of its employees and on the condition that the employees
would vacate the premises anytime the Company deems fit.” In September 2003, the
petitioners were informed that effective October 2003, Solid Mills would cease its operations
due to business losses.

NAFLU recognized Solid Mills’ closure due to serious business losses in the
memorandum of agreement. The MOA granted separation pay less accountabilities, accrued
sick leave benefits, vacation leave benefits, & 13th month pay to the employees.

28 | P a g e
 Later, Solid Mills sent individual notices to petitioners to vacate SMI Village.
Petitioners were no longer allowed to report to work by October 10, 2003 and they were
required to sign a MOA with release and quitclaim before their vacation and sick leave
benefits, 13th month pay, and separation pay would be released.  Employees who signed the
memorandum of agreement were considered to have agreed to vacate SMI Village, and to the
demolition of the constructed houses inside as condition for the release of their termination
benefits and separation pay.

Petitioners refused to sign the documents and demanded to be paid their benefits and
separation pay. They filed complaints before the Labor Arbiter for alleged non-payment of
separation pay, accrued sick and vacation leaves, and 13th month pay. 

ISSUE:
Whether or not payment of monetary claims of petitioners should be held in abeyance
pending compliance of their accountabilities to Solid Mills

RULING:
Requiring clearance before the release of last payments to the employee is a standard
procedure among employers, whether public or private. As a general rule, employers are
prohibited from withholding wages from employees.  The Labor Code provides:
Art. 116. Withholding of wages and kickbacks prohibited. It shall be unlawful
for any person, directly or indirectly, to withhold any amount from the wages of a
worker or induce him to give up any part of his wages by force, stealth, intimidation,
threat or by any other means whatsoever without the worker’s consent.

The Labor Code also prohibits the elimination or diminution of benefits.

Art. 100. Prohibition against elimination or diminution of benefits. Nothing in
this Book shall be construed to eliminate or in any way diminish supplements, or
other employee benefits being enjoyed at the time of promulgation of this Code.

However, our law supports the employers’ institution of clearance procedures before
the release of wages.   As an exception to the general rule that wages may not be withheld
and benefits may not be diminished, the Labor Code provides:
Art. 113. Wage deduction. No employer, in his own behalf or in behalf of any
person, shall make any deduction from the wages of his employees, except:
1. In cases where the worker is insured with his consent by the
employer, and the deduction is to recompense the employer for the
amount paid by him as premium on the insurance;
2. For union dues, in cases where the right of the worker or his union
to check-off has been recognized by the employer or authorized in
writing by the individual worker concerned; and
3. In cases where the employer is authorized by law or regulations
issued by the Secretary of Labor and Employment.

The Civil Code provides that the employer is authorized to withhold wages for debts
due:
Article 1706. Withholding of the wages, except for a debt due, shall not be
made by the employer.

29 | P a g e
 As long as the debt or obligation was incurred by virtue of the employer-employee
relationship, generally, it shall be included in the employee’s accountabilities that are subject
to clearance procedures. Withholding of payment by the employer does not mean that the
employer may renege on its obligation to pay employees their wages, termination payments,
and due benefits.  The employees’ benefits are also not being reduced.  It is only subjected to
the condition that the employees return properties properly belonging to the employer.  This
is only consistent with the equitable principle that “no one shall be unjustly enriched or
benefited at the expense of another.”

14. SLL INTERNATIONAL CABLES SPECIALIST VS NLRC

G.R. No. 17216, March 2, 2011

Respondents Lopez, Canete and Zuniga were hired by petitioner Lagon as apprentice
or trainee cable/lineman. They were paid the full minimum wage and other benefits but since
they were only trainees, they did not report for work regularly but came in as substitutes to
the regular workers or in undertakings that needed extra workers to expedite completion of
work. Their employment is terminated upon completion of each project.

For 4 separate projects from May 1997-December 1999, they received the wage of
P145.00, the minimum prescribed daily wage for Region VII when they first started work in
March 1997. In July 1997, the amount of P145 was increased to P150.00 by the Regional
Wage Board (RWB) and in October of the same year, the latter was increased to P155.00. In
1999, the minimum prescribed rate for Manila was P198.00.

In January to February 2000, the 3 received the wage of P165.00. The existing rate at
that time was P213.00. In March 2000, private respondents filed a complaint for illegal
dismissal, non-payment of wages, holiday pay, 13th month pay for 1997 and 1998 and SIL
pay as well as damages and AF.

In their answers, petitioners alleged that the food allowance of P63.00 per day as well
as private respondents allowance for lodging house, transportation, electricity, water and
snacks allowance should be added to their basic pay. With these, petitioners claimed that
private respondents received higher wage rate than that prescribed in Rizal and Manila. They
argued that the rulings in Agabon v. NLRC and Glaxo Wellcome Philippines, Inc. v.
Nagkakaisang Empleyado Ng Wellcome-DFA should be applied by analogy, in the sense that
the lack of written acceptance of the employees of the facilities enjoyed by them should not
mean that the value of the facilities could not be included in the computation of the private
respondents’ “wages.”

ISSUE:
Should the value of the facilities be included in the computation of the “wages”
received by private respondents.

30 | P a g e
SC RULING:
On whether the value of the facilities should be included in the computation of the
“wages” received by private respondents, Section 1 of DOLE Memorandum Circular No. 2
provides that an employer may provide subsidized meals and snacks to his employees
provided that the subsidy shall not be less that 30% of the fair and reasonable value of such
facilities. In such cases, the employer may deduct from the wages of the employees not more
than 70% of the value of the meals and snacks enjoyed by the latter, provided that such
deduction is with the written authorization of the employees concerned.

Moreover, before the value of facilities can be deducted from the employees’ wages,
the following requisites must all be attendant:  proof must be shown that such facilities are
customarily furnished by the trade; the provision of deductible facilities must be voluntarily
accepted in writing by the employee; and facilities must be charged at reasonable value. Mere
availment is not sufficient to allow deductions from employees’ wages.

These requirements, however, have not been met in this case. SLL failed to present
any company policy or guideline showing that provisions for meals and lodging were part of
the employee’s salaries. It also failed to provide proof of the employees’ written
authorization, much less show how they arrived at their valuations. At any rate, it is not even
clear whether private respondents actually enjoyed said facilities.

The Court makes a distinction between “facilities” and “supplements.” It is of the

view that the food and lodging, or the electricity and water allegedly consumed by private
respondents in this case were not facilities but supplements. In the case of Atok-Big Wedge
Assn. v. Atok-Big Wedge Co., the two terms were distinguished from one another in this
wise:
“Supplements,” therefore, constitute extra remuneration or special privileges
or benefits given to or received by the laborers over and above their ordinary earnings
or wages. “Facilities,” on the other hand, are items of expense necessary for the
laborer’s and his family’s existence and subsistence so that by express provision of
law (Sec. 2[g]), they form part of the wage and when furnished by the employer are
deductible therefrom, since if they are not so furnished, the laborer would spend and
pay for them just the same.

In short, the benefit or privilege given to the employee which constitutes an extra
remuneration above and over his basic or ordinary earning or wage is supplement; and when
said benefit or privilege is part of the laborers’ basic wages, it is a facility. The distinction lies
not so much in the kind of benefit or item (food, lodging, bonus or sick leave) given, but in
the purpose for which it is given. In the case at bench, the items provided were given freely
by SLL for the purpose of maintaining the efficiency and health of its workers while they
were working at their respective projects.

For said reason, the cases of Agabon and Glaxo are inapplicable in this case. At any
rate, these were cases of dismissal with just and authorized causes. The present case involves
the matter of the failure of the petitioners to comply with the payment of the prescribed
minimum wage.

31 | P a g e
 15. PEOPLE’S BROADCASTING VS SECRETARY OF DOLE
G.R. No. 179652, March 6, 2012

Jandeleon Juezan, an employee of Bombo Radyo Phils Inc., filed a complaint with the
Department of Labor and Employment for Illegal Deduction, non-payment of S.I.L., 13th
month, premium pay and illegal diminution of benefits and noncoverage. The DOLE
Secretary dismissed the petitioner’s appeal on grounds that the petitioner submitted a Deed of
Assignment instead of posting a surety bond and that the petitioner was not afforded due
process. The Court of Appeals ruled that it was given due process and that the DOLE

32 | P a g e
Secretary has jurisdiction over the matter, as imposed in Article 129 of the Labor Code. The
Court of Appeals further dismissed the case saying that there was no employer-employee
relationship between the parties and that the DOLE may make a determination of the
existence of such relationship. The National Labor Relations Commission was then held to be
the primary agency in determining such existence.

ISSUE:
Whether or not DOLE has the power to determine the presence of an Employer-
Employee Relationship

SC RULING:
DOLE may determine the existence of such relationship which would be subject to
judicial review, but not by the NLRC. Thus, if a complaint is brought before the DOLE and
that it determines such presence, the DOLE exercises jurisdiction to the exclusion of the
NLRC. On the other hand, if DOLE sees none, jurisdiction lies with the NLRC.

It must be stressed that the DOLE is subject to the guidelines for the determination of
such relationship which is the 1.) selection and engagement of the employee, 2.) payment of
wages, 3.) power of dismissal, 4.) employer’s control of the employee’s conduct. Further,
Article 129 of the Labor Code should still be given effect. In summary, the threshold amount
set by the Labor Code so that the jurisdiction falls with the DOLE is P5,000. Above that, it
falls under the jurisdiction of the Labor Arbiter. 

The court also stressed out that the DOLE would have visitorial and enforcement
rights only if there is a finding of an existence of an employer-employee relationship. In the
present case, there was no such relationship. Thus, dismissal of the complaint is proper.

16. SUPERIOR PACKAGING CORPORATION VS BALAGSAY ET AL

G.R. No. 178909, October 10, 2012

The petitioner engaged the services of Lancer to provide reliever services to its
business, which involves the manufacture and sale of commercial and industrial corrugated
boxes. The respondents were engaged for four (4) months — from February to June 1998 —
and their tasks included loading, unloading and segregation of corrugated boxes.

Pursuant to a complaint filed by the respondents against the petitioner and its
President, Cesar Luz, for underpayment of wages, non-payment of premium pay for worked
rest, overtime pay and non-payment of salary, the Department of Labor and Employment
conducted an inspection of the petitioner's premises and found several violations, to wit: 
non-presentation of payrolls and daily time records; non-submission of annual report of
safety organization; medical and accident/illness reports; non-registration of establishment
under Rule 1020 of Occupational and Health Standards; and  no trained first aide.

Due to the petitioner's failure to appear in the summary investigations conducted by

the DOLE, an Order was issued on June 18, 2003 finding in favor of the respondents and

33 | P a g e
adopting the computation of the claims submitted. Petitioner and Luz were ordered, among
others, to pay respondents their total claims in the amount of P840,463.38. They filed a
motion for reconsideration on the ground that respondents are not its employees but of Lancer
and that they pay Lancer in lump sum for the services rendered.

DOLE denied its motion in its Resolution 4 dated February 16, 2004, ruling that the
petitioner failed to support its claim that the respondents are not its employees, and even
assuming that they were employed by Lancer, the petitioner still cannot escape liability as
Section 13 of the Department Order No. 10, Series of 1997, makes a principal jointly and
severally liable with the contractor to contractual employees to the extent of the work
performed when the contractor fails to pay its employees' wages.

The Court of Appeals affirmed the Secretary of DOLE's orders, with the modification
in that Luz was absolved of any personal liability under the award.

Petitioner argues that DOLE erred in doubling respondents' underpayment of wages

and regular holiday pay under Republic Act No. 6727 (Wage Rationalization Act) inasmuch
as the solidary liability of a principal does not extend to a punitive award against a contractor.
Petitioner also contends that there is no evidence showing that the respondents rendered
overtime work and that they actually worked on their rest days for them to be entitled to such
pay. Petitioner objects to the finding that it is engaged in labor-only contracting and is
consequently an indirect employer, considering that it is beyond the visitorial and
enforcement power of the DOLE to make such conclusion. According to the petitioner, such
conclusion may be made only upon consideration of evidentiary matters and cannot be
determined solely through a labor inspection. 

ISSUE:
Whether or not the DOLE had the authority to determine the existence of an
employer-employee relationship.
Whether or not petitioner may be held solidarily liable with Lancer for respondent’s
unpaid money claims.

RULING:
The DOLE clearly acted within its authority when it determined the existence of an
employer-employee relationship between the petitioner and respondents as it falls within the
purview of its visitorial and enforcement power under Article 128(b) of the Labor Code.

In People’s Broadcasting v. Secretary of the Department of Labor and Employment

the Court stated that 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 determination, however, is merely preliminary, incidental and
collateral to the DOLE’s primary function of enforcing labor standards provisions. Also, the
existence of an employer-employee relationship is ultimately a question of fact.  The
determination made in this case by the DOLE, albeit provisional, and as affirmed by the
Secretary of DOLE and the CA is beyond the ambit of a petition for review on certiorari.

It was the consistent conclusion of the DOLE and the CA that Lancer was not an
independent contractor but was engaged in “labor-only contracting”; hence, the petitioner
was considered an indirect employer of respondents and liable to the latter for their unpaid
money claims.

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 At the time of the respondents' employment in 1998, the applicable regulation was
DOLE Department Order No. 10, Series of 1997. Under said Department Order, labor-only
contracting was defined as follows:
Sec. 9. Labor-only contracting. — (a) Any person who undertakes to supply
workers to an employer shall be deemed to be engaged in labor-only contracting
where such person:
1. Does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises and other materials; and 
2. The workers recruited and placed by such persons are performing activities
which are directly related to the principal business or operations of the
employer in which workers are habitually employed.

The ratio of Lancer's authorized capital stock of P400,000.00 as against its subscribed
and paid-up capital stock of P25,000.00 shows the inadequacy of its capital investment
necessary to maintain its day-to-day operations. And while the Court does not set an absolute
figure for what it considers substantial capital for an independent job contractor, it measures
the same against the type of work which the contractor is obligated to perform for the
principal.  Moreover, the nature of respondents' work was directly related to the petitioner's
business.

The marked disparity between the petitioner's actual capitalization (P25,000.00) and
the resources needed to maintain its business, i.e., "to establish, operate and manage a
personnel service company which will conduct and undertake services for the use of offices,
stores, commercial and industrial services of all kinds," supports the finding that Lancer was,
indeed, a labor-only contractor. Aside from these is the undisputed fact that the petitioner
failed to produce any written service contract that might serve as proof of its alleged
agreement with Lancer.

Finally, a finding that a contractor is a "labor-only" contractor is equivalent to

declaring that there is an employer-employee relationship between the principal and the
employees of the supposed contractor, and the "labor-only" contractor is considered as a mere
agent of the principal, the real employer. The former becomes solidarily liable for all the
rightful claims of the employees. The petitioner therefore, being the principal employer and
Lancer, being the labor-only contractor, are solidarily liable for respondents' unpaid money
claims.

35 | P a g e
 17. DOLE VS KENTEX MANUFACTURING CORPORATION and ONG KING
GUAN
G.R. No. 233781

On May 13, 2015, a fire broke out in the factory located in Valenzuela City owned by
Kentex. The fire claimed 72 lives and injured a number of workers. As part of its standard
procedures, personnel of the DOLE Caloocan, Malabon, Navotas and Valenzuela (DOLE-
CAMANAVA) Field Office went to Kentex's premises.  For its part, the DOLE-NCR also
assessed Kentex's compliance with the occupational health and safety standards.

In the course of the investigation, it was discovered that Kentex had contracted with
CJC Manpower Services (CJC) for the deployment of workers. The DOLE-NCR directed
Kentex and CJC to attend the mandatory conference set on May 18 and 20, 2015 at the
DOLE-NCR Office in Malate, Manila. Notably, Kentex, its Chairman and Chief Executive
Officer Beato Ang, and the corporation's Chief Finance Officer Ong, were made parties to
this case before the DOLE-NCR.

In the meantime, on May 15, 2015, the DOLE Regional Office No. III (DOLE-RO
III) conducted its own Joint Assessment of CJC. The DOLE-RO III discovered that CJC,
which deployed workers to Kentex, was an unregistered private recruitment and placement
agency. Moreover, it noted that CJC was non-compliant with the occupational health and
safety standards as well as with labor standards, such as underpayment of wages and
nonpayment of statutory benefits.  As a result of these findings, the DOLE-RO III issued a
June 8, 2015 Compliance Order which effectively declared CJC as a labor-only contractor
with Kentex as its principal.
 
Meanwhile, during the mandatory conference set by the DOLE-NCR, CJC's
representatives admitted that there was no service contract between CJC and Kentex; that
CJC had deployed 99 workers at the Kentex factory on the day of the unfortunate incident;
that there were no employment contracts between CJC and the workers; that a CJC
representative was sent once a week to Kentex only to check on the workers' daily time
records; that Kentex remitted to CJC the wage of Php230.00/day for each of the deployed
workers from which amount CJC deducted administrative costs and other statutory
contributions, leaving each worker a mere wage of Php202.50 a day.

The Court of Appeals took the view that, as a company officer, he could not be
personally held liable for the debts of Kentex without a showing of bad faith or wrongdoing
on his part for the corporation's unlawful act.  The CA opined that nothing from the DOLE-
NCR's June 26, 2015 Order discussed any act of Ong that showed his involvement in the
wrongdoing of Kentex.

ISSUE:
Whether or not Ong is solidarily liable to pay the monetary awards to the employees.

SC RULING:
CA committed serious error when it ordered the discharge or release of Ong from the
obligations of Kentex. The reason is elemental in its simplicity: contrary to settled,

36 | P a g e
unrelenting jurisprudence, it unconsciously and egregiously sought to alter and modify, as
indeed it altered and modified, an already final and executory verdict.

The June 26, 2015 Order had already become final and executory in view of the
failure of respondents Kentex and Ong to appeal therefrom to the Secretary of Labor. Notice
ought to be taken of the fact that, at the time the DOLE-NCR rendered its ruling, Department
Order No. 131-13 Series of 2013 was the applicable rule of procedure. The pertinent
provision states:
Rule 11, Section 1. Appeal. — The Compliance Order may be appealed to the
Office of the Secretary of Labor and Employment by filing a Memorandum of
Appeal, furnishing the other party with a copy of the same, within ten (10) days
from receipt thereof. No further motion for extension of time shall be entertained.
A mere notice of appeal shall not stop the running of the period within which
to file an appeal.

Here, instead of filing an appeal with the DOLE Secretary, Ong moved for a
reconsideration of the subject Order; needless to say, this did not halt or stop the running of
the period to elevate the matter to the DOLE Secretary. Indeed, the DOLE-NCR took no
action at all on Ong's motion for reconsideration; in fact, it categorically informed Ong that
his resort to the filing of a motion for reconsideration was procedurally infirm. The June 26,
2015 Order having become final, it could no longer be altered or modified by discharging or
releasing Ong from his accountability. Respondent Ong King Guan solidarily liable to pay
the employees.

37 | P a g e
 18. BLUER THAN BLUE JOINT VENTURES CO., VS ESTEBAN
G.R. No. 192582, April 7, 2014

The respondent was employed as a sales clerk and assigned at the petitioner’s
boutique. Her primary tasks were attending to all customer needs, ensuring efficient
inventory, coordinating orders from clients, cashiering and reporting to the accounting
department.  Petitioner learned that some of their employees had access to their POS system
with the use of a universal password given to them by a certain Elmer Flores, who in turn
learned of the password from the respondent. 

Petitioner then conducted an investigation and asked respondent to explain why she
should not be disciplinarily dealt with. During the investigation the respondent was placed
under preventive suspension. After investigation, petitioner terminated respondent on the
grounds of loss of trust or confidence.

Respondent was given her final wage and benefits less the inventory variance incurred
by the store. This urged the respondent to file a complaint for illegal dismissal, illegal
suspension, holiday pay, rest day and separation pay.

The Labor Arbiter ruled in her favor awarding her backwages. Petitioner appealed the
decision in the National Labor Relations Commission and the decision was reversed.

38 | P a g e
However, upon the respondent’s petition for certiorari in the Court of Appeals the decision
was reinstated.

ISSUE:
Whether or not the negative sales variance could be validly deducted from the
respondent’s wage

SC RULING:
No, it cannot be deducted in this case. Article 113 of the Labor Code provides that no
employer, in his own behalf or in behalf of any person, shall make any deduction from the
wages of his employees, except in cases where the employer is authorized by law or
regulations issued by the Secretary of Labor and Employment, among others.

The Omnibus Rules Implementing the Labor Code, meanwhile, provides:

Section 14. Deduction for loss or damage. — Where the employer is engaged
in a trade, occupation or business where the practice of making deductions or
requiring deposits is recognized to answer for the reimbursement of loss or damage to
tools, materials, or equipment supplied by the employer to the employee, the
employer may make wage deductions or require the employees to make deposits from
which deductions shall be made, subject to the following conditions:
a. That the employee concerned is clearly shown to be
responsible for the loss or damage;
b. That the employee is given reasonable opportunity to show
cause why deduction should not be made;
c. That the amount of such deduction is fair and reasonable
and shall not exceed the actual loss or damage; and
d. That the deduction from the wages of the employee does not
exceed 20 percent of the employee's wages in a week.

In this case, petitioner failed to sufficiently establish that Esteban was responsible for
the negative variance it had in its sales for the year 2005 to 2006 and that Esteban was given
the opportunity to show cause the deduction from her last salary should not be made.
Furthermore, the court ruled, in Nina Jewelry Marketing of Metal Arts, Inc. v. Montecillo,
that:
[T]he petitioners should first establish that the making of deductions from the
salaries is authorized by law, or regulations issued by the Secretary of Labor. Further,
the posting of cash bonds should be proven as a recognized practice in the jewelry
manufacturing business, or alternatively, the petitioners should seek for the
determination by the Secretary of Labor through the issuance of appropriate rules and
regulations that the policy the former seeks to implement is necessary or desirable in
the conduct of business. The petitioners failed in this respect. It bears stressing that
without proofs that requiring deposits and effecting deductions are recognized
practices, or without securing the Secretary of Labor's determination of the necessity
or desirability of the same, the imposition of new policies relative to deductions and
deposits can be made subject to abuse by the employers. This is not what the law
intends.

39 | P a g e
 19. T&H SHOPFITTERS CORPORATION ET AL., VS T&H SHOPFITTERS
CORPORATION UNION
G.R. No. 191714, February 26, 2014

Respondents are employees of petitioners. In their desire to improve working

conditions, they decided to conduct a meeting for them to create a workers’ union.
Subsequently, some of them were barred from entering the premises of the petitioners’
factory. 

Some members were then transferred to another place where the petitioners’
warehouse was located. Some reported that they were sent to another place only to perform
work as grasscutters. Subsequently, the union was awarded by the Regional Office of the
Department of Labor and Employment a certificate of registration.

Prior to the Certification Election, some employees of the petitioner corporation were
sent on a field trip. However, respondents’ members were excluded from the field trip. The
employees then who were included in the field trip were then forced by the petitioner to vote
“no” in the upcoming election and because of that, the votes for “no union” prevailed. This
prompted the respondents a complaint for Unfair Labor Practice with moral and exemplary
damages as well as attorney’s fees.

ISSUES: 
Whether or not petitioner commit ted acts constitutive of ULP 
Whether or not the award for attorney’s fees was proper in the case at bar

SC RULING:  
Anent to the First Issue
Yes, in essence, ULP relates to the commission of acts that transgress the workers'
right to organize. In the case of Insular Life Assurance Co., Ltd. Employees Association —
NATU v.Insular Life Assurance Co. Ltd., the Court laid down the test of whether an
employer has interfered with and coerced employees in the exercise of their right to self-
organization, that is, whether the employer has engaged in conduct which, it may reasonably
be said, tends to interfere with the free exercise of employees' rights; and that it is not
necessary that there be direct evidence that any employee was in fact intimidated or coerced
by statements of threats of the employer if there is a reasonable inference that anti-union
conduct of the employer does have an adverse effect on self-organization and collective
bargaining.

The questioned acts of petitioners are: (1) Sponsoring a field trip to Zambales for its
employees, to the exclusion of union members, before the scheduled certification election; (2)
the active campaign by the sales officer of petitioners against the union prevailing as a

40 | P a g e
bargaining agent during the field trip; and (3) escorting its employees after the field trip to the
polling center. 

Indubitably, the various acts of petitioners, taken together, reasonably support an

inference that, indeed, such were all orchestrated to restrict respondents’ free exercise of their
right to self-organization.

Anent to the Second Issue

No, the applicable law concerning the grant thereof in labor cases is Article 111 of the
Labor Code. Pursuant thereto, the award of 10% attorney's fees is limited to cases of unlawful
withholding of wages.

In the case at bar, however, the Court cannot find any claim or proof that petitioners
unlawfully withheld the wages of respondents. Consequently, the grant of 10% attorney's fees
in favor of respondents is not justified under the circumstances. Accordingly, the Court
deemed it proper to delete the same.

20. WESLEYAN UNIVERSITY VS WESLEYAN UNIVERISTY FACULTY AND

STAFF ASSOCIATION
G.R. No. 181806, March 12, 2014

In December 2003, petitioner and respondent signed a 5-year CBA effective June 1,

2003 until May 31, 2008. On August 16, 2005, WesU, through its President, Atty. Maglaya,

41 | P a g e
issued a Memorandum providing guidelines on the implementation of vacation and sick leave
credits as well as vacation leave commutation. 

WesF&S’s President wrote a letter to Atty. Maglaya informing him that WesF&S is
not amenable to the unilateral changes made by WesU. Pres. questioned the guidelines for
being violative of existing practices and the CBA, specifically Sections 1 and 2, Article XII
of the CBA.

A Labor Management Committee (LMC) Meeting was held during which WesU
advised WesF&S to file a grievance complaint on the implementation of the vacation and
sick leave policy.  In the same meeting, WesU announced its plan of implementing a one-
retirement policy, which was unacceptable to WesF&S.

The Voluntary Arbitrator declared the one-retirement policy and the Memorandum
dated August 16, 2005 contrary to law. The Court of Appeals affirmed the rulings of the
Voluntary Arbitrator as supported by substantial evidence.  It also affirmed the nullification
of the one-retirement policy and the Memorandum dated August 16, 2005 on the ground that
these unilaterally amended the CBA without the consent of WesF&S.

WesU argues that there is only one retirement plan as the CBA Retirement Plan and
the PERAA Plan are one and the same. It maintains that there is no established company
practice or policy of giving two retirement benefits to its employees. WesU insists that these
were done by mere oversight or mistake as there is no Board Resolution authorizing their
release. And since these benefits are unauthorized and irregular, these cannot ripen into a
company practice or policy. WesU claims that the Memorandum dated August 16, 2005,
which provides for the guidelines on the implementation of vacation and sick leave credits as
well as vacation leave commutation, is valid because it is in full accord with existing policy. 

WesF&S’s asserts that there are two retirement plans as the PERAA Retirement Plan,
which has been implemented for more than 30 years, is different from the CBA Retirement
Plan.  WesF&S further avers that it has always been a practice of WesU to give two
retirement benefits and that this practice was established by substantial evidence as found by
both the Voluntary Arbitrator and the CA. As to the Memorandum dated August 16, 2005,
WesF&S asserts that it is arbitrary and contrary to the CBA and existing practices as it added
qualifications or limitations which were not agreed upon by the parties.

ISSUE:
Whether or not unilateral changes or suspensions in the implementation of the
provisions of the CBA valid

SC RULING:
The Non-Diminution Rule found in Article 100 of the Labor Code explicitly prohibits
employers from eliminating or reducing the benefits received by their employees. This rule
applies only if the benefit is based on an express policy, a written contract, or has ripened into
a practice. To be considered a practice, it must be consistently and deliberately made by the
employer over a long period of time. An exception to the rule is when “the practice is due to
error in the construction or application of a doubtful or difficult question of law.” The error,
however, must be corrected immediately after its discovery; otherwise, the rule on Non-
Diminution of Benefits would still apply.

42 | P a g e
 The practice of giving two retirement benefits to WesU’s employees is supported by
substantial evidence. WesF&S was able to present substantial evidence in the form of
affidavits to support its claim that there are two retirement plans.  WesU has been giving two
retirement benefits as early as 1997.  WesU, on the other hand, failed to present any evidence
to refute the veracity of these affidavits. 

WesU’s assertion that there is only one retirement plan as the CBA Retirement Plan
and the PERAA Plan are one and the same is not supported by any evidence. There is nothing
in Article XVI of the CBA to indicate or even suggest that the “Plan” referred to in the CBA
is the PERAA Plan. These circumstances bolster the finding that the two-retirement policy is
a practice.  Thus, WesU cannot, without the consent of WesF&S, eliminate the two-
retirement policy and implement a one-retirement policy as this would violate the rule on
non-diminution of benefits.

There is substantial evidence to prove that there is an existing practice of giving two
retirement benefits. The Memorandum is contrary to the existing CBA. Sections 1 and 2 of
Article XII of the CBA provide that all covered employees are entitled to 15 days sick leave
and 15 days vacation leave with pay every year and that after the second year of service, all
unused vacation leave shall be converted to cash and paid to the employee at the end of each
school year, not later than August 30 of each year. The Memorandum, however, states that
vacation and sick leave credits are not automatic as leave credits would be earned on a
month-to-month basis.  This limits the available leave credits of an employee at the start of
the school year. Considering that the Memorandum dated August 16, 2005 imposes a
limitation not agreed upon by the parties nor stated in the CBA, we agree with the CA that it
must be struck down.
21. GALANG ET AL., VS BOIE TAKEDA CHEMICALS INC. ET AL
G.R. No. 183932, July 20, 2016

Boie Takeda Chemicals Inc (BTCI) hired petitioners Ernesto Galang and Ma. Olga
Jasmin Chan on Aug 28, 1975 and July 20, 1983 respectively. As Regional Sales Managers,
they belong to BTCI’s sales department. They mainly managed the regional sales budget and
target and were responsible for market share and company growth within their respective
regions. They reported to the National Sales Director. When this position became vacant,
both Galang and Chan shared the functions and responsibilities of this position and responded
to the Gen Manager.

Kazuhiko Nomura, the new Gen Manager, asked them to apply for the position of
National Sales Director. Nomura also asked Edwin Villanueva and Mimi Escarte, both Group
Product Managers, to apply for Marketing Director  In the end, Nomura hired someone from
Novartis as Marketing Director while the National Sales Director position remained vacant.
However, Galang and Chan learned that Villanueva was promoted as National Sales Director
effective May 1, 2004. BTCI explained that the appointment was in pursuance to its
management prerogative.

This promotion caused ill-feelings on the part of Galang and Chan since they believed
that Villanueva didn’t apply for the position; only has a 3-year experience and he was
reportedly responsible for losses int eh marketing department. They also heard that he was
only promoted since Villanueva threatened to leave along with the company’s top cardio-
medical doctors.

43 | P a g e
 Petitioners claim that Nomura threatened to dismiss them if they failed to perform
well under Villanueva’s supervision. Because of this, petitioners inquired if they could avail
of the retirement package of 150% plus 120% of monthly salary for every year of service tax
free, and full ownership of service vehicle tax free. They later submitted a joint letter of
resignation.

Petitioners received their retirement package and monetary pay from BCTI. Chan
received 2 checks, amounting to P2,187,236.64 while Galang received P3,754,306.56. When
they retired, the position of Regional Sales Manager was abolished and replaced with the
position of Operations Manager.

The Labor Arbiter ruled in their favour, declaring that they were illegally
dismissed. However, the National Labor Relations Commission reversed the decision and
dismissed complaint. The Court of Appeals affirmed the decision.

ISSUE: 
Whether or not petitioners were constructively dismissed
Whether or not they are entitled to a higher retirement package 
SC RULING:
Anent to the First Issue
No, they voluntarily retired. Constructive dismissal is defined as a “dismissal in
disguise” or an act amounting to dismissal but made to appear as if it were not. It happens
where there is cessation of work since continued employment is rendered impossible,
unreasonable or unlikely, as an offer involving a demotion in rank and diminution in pay. In
some cases where there is no demotion in rank or diminution in pay, this still exists when the
employment has become so unbearable due to acts of clear discrimination, insensibility or
disdain by the employer that the employee has no choice to resign. Under these definitions,
what is lacking is employee’s voluntariness in separation from employment.

In this case, petitioners were neither demoted nor their pay and benefits diminished.
They also failed to show that their employment is rendered impossible, unreasonable or
unlikely. As to the allegations regarding Villanueva, our labor laws respect the employer’s
inherent right to control and manage effectively its enterprise and don’t normally allow
interference with the employer’s judgment in the conduct of his business.

Management has exclusive prerogatives to determine the qualifications and fitness of

the workers they are hiring, firing, promoting or reassigning. This prerogative can ONLY be
reviewed in instances of unlawful discrimination, law limitations and CBA provisions. The
law’s reluctance to interfere applies even more considering the National Sales Director is a
managerial position which is a position held by persons who have the trust of the company.
As such, the promotion to this position rests upon management’s discretion 

The employer’s exercise of management prerogatives, with or without reason, doesn’t

per se constitute unjust discrimination, unless there is showing of grave abuse of discretion.
In this case, there is none. Petitioners didn’t present any evidence showing BTCI’s rules
regarding the promotion of an employee to the position.  In fact, Villanueva’s resume show
that he has experience in sales and marketing. BTCI even hired a consulting agency to
determine who to appoint in the position. Nomura’s threats cannot be considered malicious. It
was only a warning for them to cooperate with the new National Sales Director. Such
warning is even expected of management as part of its supervision and disciplining power.

44 | P a g e
 In constructive dismissal cases, the employer has the burden of proving that his
conduct and action or the transfer of the employee are valid and based on legitimate grounds.
Likewise, the employee also has the burden to prove first the fact of dismissal by substantial
evidence. Only when dismissal is established will the burden shift to the employer to prove
the validity of the dismissal 

Anent to the Second Issue

Entitlement of employees to retirement benefits must be specifically granted under
existing laws, CBA, employment contract or an established employer policy. In this case,
petitioners weren’t covered by any agreement. It is also true that they received more than
what is mandated by Art 287 of LC.

In Vergara vs Coca-Cola Bottlers Phils Inc, SC ruled that the employee has the
burden to prove that the benefit has ripened into company practice (giving the benefit is done
over a long period of time and that it has been made consistently and deliberately). In this
case, petitioners enumerated other employees receiving large retirement benefits. However,
they cannot be used to prove the company’s practice since these employees weren’t the same
in terms of rank.

The affidavit of Ducacy affirms BTCI’s position that in practice, CBA provisions
govern employees’ retirement pay. While this may support the notion that in some cases, the
company provides higher retirement packages, the affidavit also states that the retirement
packages given to the mentioned employees were not in accordance with standard of merit or
company practice. As such, they failed to prove that this concession was standard company
practice. Hence, the petitioners have already received their complete retirement package and
other monetary claims as specified in the CBA between BTCI and BTCI Supervisory Union 

22. PLDT VS ESTRANERO

45 | P a g e
 G.R. No. 202961

PLDT employed the Estranero as an Auto-Mechanic/Electrician Helper. PLDT

adopted a company-wide Manpower Reduction Program, aimed at reducing its work
force.PLDT offered the affected employees an attractive redundancy pay consisting of 100%
of their basic monthly salary for every year of service, in addition to their retirement benefits,
if entitled. For those who were not qualified to the retirement benefits, they were offered
separation or redundancy package of 200% of their basic monthly salary for every year of
service.

By virtue of the MRP, a number of positions were declared redundant. Among those
gravely affected was Estranero. Estranero expressed his conformity to his inclusion in the
MRP. Estranero's name was included in the list of redundant employees for that period and a
Notice of Separation Due to Redundancy was submitted to DOLE. He was then made to sign
a deed denominated as a Receipt, Release and Quitclaim for his severance from employment.

Since his length of service was 7 years, 11 months and 15 days, which was rounded to
8 years, Estranero was not qualified for retirement pay which required an employee to have
worked for at least 15 years. He was nonetheless entitled to 200% of his basic monthly salary
for every year of service by way of redundancy pay or equivalent to P240,000.00. In addition,
he was also entitled to other benefits he has earned for the years prior to, and during the year
of his actual separation, all in the sum of P27,028.37. Thus, his aggregate redundancy pay
plus other earned benefits amounted to P267,028.37.

However, he had outstanding liabilities arising from various loans he obtained from
different entities which summed to P267,028.37. Thus, PLDT deducted the said amount from
the payment that the Estranero was supposed to receive as his redundancy pay. As a result,
his take home pay was in the amount of "zero pesos." This prompted the Estranero to retract
his availment of the separation pay package. Despite said retraction, Estranero was no longer
allowed to report for work.

The Labor Abriter ruled in favor of the Estranero, ordering PLDT to pay Estranero his
separation pay in the amount of P267,038.37. It sustained the validity of PLDT's redundancy
program. However, the Labor Arbiter ruled that the office lacks jurisdiction to pass upon the
issue of PLDT's act in deducting the total outstanding loans which the Estranero obtained
from different entities since the same does not involve an employer-employee relationship,
and may only be enforced by PLDT through a separate civil action in the regular courts.

The National Labor Relations Commission affirmed the decision. Estranero should be
paid his separation pay on account of redundancy. As to the setting-off of the Estranero's
outstanding loans, it agreed with the LA that the same is not a labor dispute but one arising
from a debtor-creditor relation where PLDT stands as a collecting agent over which the labor
tribunals has no jurisdiction.

The Court of Appeals affirmed the NLRC decision. PLDTfailed to present convincing
evidence that Estranero has knowledge and consented to these deductions. Estranero
maintains that PLDT unilaterally made the application of deductions without his knowledge,
much less consent. Thus, it is the burden of PLDT to present proof of the validity of the
deductions. However, aside from their bare allegations, they did not offer any concrete and

46 | P a g e
tangible evidence proving their authority to deduct the outstanding loans from his redundancy
pay.

ISSUE:
Whether or not the PLDT can validly deduct the Estranero's outstanding loan
obligation from his redundancy pay.

RULING:
There is no question about the validity of the MRP implemented by PLDT in 1995,
since redundancy is one of the authorized causes for termination of employment. It is clear in
Article 113 of the Labor Code that no employer, in his own behalf or in behalf of any person,
shall make any deduction from the wages of his employees, except in cases where the
employer is authorized by law or regulations issued by the Secretary of Labor and
Employment, among others.

The Omnibus Rules Implementing the Labor Code provides that deductions from the
wages of the employees may be made by the employer when such deductions are authorized
by law, or when the deductions are with the written authorization of the employees for
payment to a third person. Thus, any withholding of an employee's wages by an employer
may only be allowed in the form of wage deductions under the circumstances provided in
Article 113 of the Labor Code, as well as the Omnibus Rules implementing it.

Article 116 of the Labor Code clearly provides that it is unlawful for any person,
directly or indirectly, to withhold any amount from the wages of a worker without the
worker's consent. In this case, the deductions made to Estranero's redundancy pay do not fall
under any of the circumstances provided under Article 113, nor was it established with
certainty that Estranero has consented to the said deductions or that the PLDT had authority
to make such deductions.

PLDT may not offset the outstanding loans of Estranero against the latter's monetary
benefits. The records expressly revealed that Estranero has obtained various loans from
different entities and not with PLDT. Accordingly, set-off or legal compensation cannot take
place between PLDT and Estranero because they are not mutually creditor and debtor of each
other. Thus, there can be no valid set-off because Estranero's creditor is not PLDT.

The Court further agrees with the labor tribunals that PLDT cannot offset the
outstanding balance of Estranero's loan obligation with his redundancy pay because the
balance on the loan does not come within the scope of jurisdiction of the LA. The demand for
payment of the said loans is not a labor, but a civil dispute. It involves debtor-creditor
relations, rather than employee-employer relations. Evidently, the Estranero's unpaid balance
on his loans cannot be offset against the redundancy pay due to him.

In fine, the Court rules that PLDT has no legal right to withhold the Estranero's
redundancy pay and other benefits to recompense for his outstanding loan obligations to
different entities. The Estranero's entitlement to his redundancy pay is mandated by law
which the petitioners cannot unjustly deny.

47 | P a g e
48 | P a g e
 23. CONGSON VS NLRC
243 RA 260, 1995

Congson is the registered owner of Southern Fishing Industry. PR were hired on

various dates by Congson as regular piece-rate workers. They were uniformly paid at a rate of
P1.00 per tuna weighing 30-80kg per movement. They did the work of unloading tuna from
fishing boats to truck haulers; unloading them again at Congson's cold storage plant for filing,
storing, cleaning, and maintenance; and finally loading the processed tuna for shipment. They
worked 7 days a week.

Congson notified his workers of his proposal to reduce the rate-per-tuna movement
due to the scarcity of tuna. PR resisted Congson's proposed rate reduction. When they
reported for work the next day, they were informed that they had been replaced by a new set
of workers. When they requested for a dialogue with the management, they were instructed to
wait for further notice. They waited for the notice of dialogue for a full week but in vain.

PR filed a case against Congson before for underpayment of wages and non-payment
of overtime pay, 13th month pay, holiday pay, rest day pay, and 5-day service incentive leave
pay; and for constructive dismissal. They filed another case containing an additional claim for
separation pay should their complaint for constructive dismissal be upheld.

Congson claimed that the only issue for resolution was PR' monetary claims, and that
there was no constructive dismissal. He further argued that PR were not dismissed but rather,
they abandoned their work after learning of his proposal to reduce tuna movement rates. It
took PR 1 month to return to work, but they could no longer be accommodated as Congson
had already hired their replacements after they failed to heed petitioner's repeated demands
for them to return to work.

The Labor Arbiter found that the complainants were (constructively) dismissed from
employment without just or unauthorized cause hence illegal. The National Labor Relations
Commission found him guilty of illegal dismissal holding that Congson failed to substantiate
his contention that PR abandoned their work. The NLRC ruled that Congson replaced PR
with a new set of workers without just cause and the required notice and hearing.

49 | P a g e
 Petitioner argues that there are three (3) movements from the time the tuna is
unloaded from the fishing boat to the fish car then to the cold storage; and, finally from the
cold storage to the vessel. In addition to the amount of P1.00 per 'bariles' per movement, PR
gets the intestines and liver of the tuna as part of their salary. That for every tuna delivered,
herein complainants extract at least three (3) kilos of intestines and liver. That the minimum
prevailing price of tuna intestine and liver in 1986 to 1990 range from P15.00 to P20.00/kilo.
The value of the tuna intestine and liver should be computed in arriving at the daily wage of
complainants because the very essence of the agreement between complainants and
respondent is: complainants shall be paid only P1.00 per tuna per movement BUT the
intestines and liver of the tuna delivered shall go to complainants.

Congson admits that the P1.00-per-tuna movement is the actual wage rate applied to
PR as expressly agreed upon by both parties. Congson further admits that respondents, per
their request, were entitled to retrieve the tuna intestines and liver as part of their
compensation. Finally, Congson does not refute LA when the latter fixed PR' individual
monthly wage at P2,670 computed at the mandatory daily wage of P89.00.

Notwithstanding the fact that PR' actual cash wage fell below the minimum wage
fixed by law, NLRC should have considered as forming a substantial part of PR' total wages
the cash value of the tuna liver and intestines PR were entitled to retrieve. Congson therefore
argues that the combined value of PR' cash wage and the monetary value of the tuna liver and
intestines clearly exceeded the minimum wage fixed by law. 

RULING:
The Labor Code expressly provides:
Article 102. Forms of Payment. No employer shall pay the wages of an
employee by means of, promissory notes, vouchers, coupons, tokens tickets, chits, or
any object other than legal tender, even when expressly requested by the employee.
Payment of wages by check or money order shall be allowed when such
manner of payment is customary on the date of effectivity of this Code, or is
necessary as specified in appropriate regulations to be issued by the Secretary of
Labor or as stipulated in a collective bargaining agreement.

Congson's practice of paying the PR the minimum wage by means of legal tender
combined with tuna liver and intestines runs counter to the above cited provision of the Labor
Code. The fact that said method of paying the minimum wage was not only agreed upon by
both parties in the employment agreement but even expressly requested by PR, does not
shield petitioner.

Article 102 of the Labor Code is clear. Wages shall be paid only by means of legal
tender. The only instance when an employer is permitted to pay wages informs other than
legal tender, that is, by checks or money order, is when the circumstances prescribed in the
second paragraph of Article 102 are present.

We therefore find no grave abuse of discretion on the part of respondent NLRC in

upholding Labor Arbiter Aponesto's award of salary differentials.
24. HOUSE OF SARA LEE VS REY
G.R. No. 149013, August 31, 2006

50 | P a g e
 The House of Sara Lee (HSL) is a direct selling company of a variety of product lines
for both men and women. Its business operation deals with contracting dealers which are
known either as Independent Business Managers or Independent Group Supervisors. They
would obtain discounts and have a credit line then sell them at fixed price. Dealers are also
given service fees and sales commission based on volume. They would then remit such to the
company. Company Policy dictates that proceeds should be remitted within 38 days for IGSs
and 52 days for IBMs. Default in these terms would prevent the member from further
purchase.

Cynthia Rey is a Credit Administration Supervisor assigned to monitor each of the

deadlines and transactions of the dealers. In 1995, she was caught in a controversy. She
allegedly told one of the Accounts Clerk to change the credit term of one IBM from 52 days
to 60 days. The Account Clerk reported the unauthorized act to the Branch Operations
Manager. Upon the BOM’s investigation, he noticed that there were multiple accounts
extended from their stipulated term. Rey asked to explain, admitted such. The BOM informed
the higher-ups resulting to Rey’s Indefinite Suspension for the discrepancies. An audit was
undertaken which further proved the allegations against Rey, while she was on Maternity
Leave. Pending such investigation, she filled in the spot of Branch Operations Manager for a
period of 3 months.

As the investigation pursued, finding that 15 selected IBMs showed that from the 52
days it became 90 days and that such infractions were directly caused by the insistence of
Rey. On such basis, Rey was dismissed for breach of trust and confidence.

Rey then filed for Illegal Dismissal, nonpayment of backwages with the Labor
Arbiter, who sided with Rey ordering them to pay backwages and other fees. The Arbiter
held that the HSL failed to discharge its burden of proof showing that the dismissal was just
and did not consider the grounds of loss of trust and confidence. The National Labor
Relations Commission affirmed the decision of the Labor Arbiter and withheld a 14 th and 15th
month pay benefit.  The Court of Appeals dismissed the petition on the ground that factual
issues are not proper subjects for a special civil action.

ISSUE:
Whether or not Rey was Illegally dismissed
Whether or not the CA, Labor Arbiter, NLRC made an error in judgement

SC RULING:
NLRC and CA consistently ignored the fact that there were admittances by Rey, that
as a Credit Administration Supervisor, she knew the appropriate credit terms, she knew the
implications of extending such terms, that in several instances she acted on her own accord
without authority and other pertinent facts. Thus, contrary to the ruling of the NLRC and the
CA, Rey was dismissed for a just cause.

Loss of confidence related to work, as a just cause, is premised on the fact that an
employee concerned, holds a position of such trust and confidence. Here the court further
differentiated the Rank-and-File employees and those of supervisors regarding the
appreciation of loss of trust in confidence. For rank-and-file employees, proof of involvement
in the alleged events are necessary and that uncorroborated assertions will not be sufficient.
However, for a managerial employee, the mere existence of a basis for believing such has
breached the trust of his employer will suffice.

51 | P a g e
 In the case at bar, Rey is not an ordinary Rank and file employee. Her being a Credit
Administration Supervisor occupies a highly sensitive and critical position which may be
subjected to the aforementioned circumstance.

Rey’s contention that such breach was negated by the fact that she was hired as a
BOM for 3 months does not hold water. It must be noted that although the HSL
acknowledged her skill, it cannot be said that she was actually promoted as she was only in
the position in acting capacity.

In rem her benefits the court ruled that she is not entitled to 13 th month pay as she is
not a rank-and-file employee. Further, she is not also entitled to the 14th and 15th month pay as
she has not acquired and not presented any proof that she has the vested to right to claim
such. Lastly, the court is constrained to delete the award of separation pay. It is a well-settled
rule that separation pay shall be allowed only when the employee is validly dismissed for
causes other than serious misconduct.

52 | P a g e
 25. LINTON COMMERCIAL CORPORATION VS HELLERA ET AL
G.R. No. 163147, October 10, 2007

Linton is a domestic corporation engaged in the business of importation, wholesale,

retail and fabrication of steel and its by-products, where Desiree Ong is Linton's Vice
President. On December 1997, Linton issued a memorandum which was addressed to its
employees informing them of the company's decision to suspend its operations from 18
December 1997 to 5 January 1998 due to the currency crisis that affected its business
operations. Linton submitted an establishment termination report to the Department of Labor
and Employment (DOLE) regarding the temporary closure of the establishment covering the
said period. The company's operation was to resume on 6 January 1998.

On January 7, Linton informed the employees of the implementation of a new

compressed workweek of three days on rotation basis. In other words, each worker would be
working on a rotation basis for three working days only instead for six days a week. On the
same day, Linton submitted an establishment termination report concerning the rotation of its
workers. Linton proceeded with the implementation of the new policy without waiting for its
approval by DOLE. 

68 aggrieved workers filed a complaint for Illegal Reduction of Workdays to the

Labor Arbiter. The workers pointed out that Linton implemented the reduction of work hours
without observing Article 283 of the Labor Code, which required submission of notice
thereof to DOLE one month prior to the implementation of reduction of personnel, since
Linton filed only the establishment termination report enacting the compressed workweek on
the very date of its implementation. While petitioners contended that the devaluation of the

53 | P a g e
peso created a negative impact in international trade and affected their business because a
majority of their raw materials were imported. Where their business suffered a huge net loss,
leading to the decision of reducing workweek.

Pending the decision of the Labor Arbiter, 21 workers signed individual release and
quitclaim documents stating that they have voluntarily tendered their designation and had
been fully paid monetary compensation due. 

The Labor Arbiter rendered a decision finding the petitioners guilty of illegal
reduction. Of work hours and directed to pay compensation. The petitioners appealed to the
NLRC and reversed the decision. NLRC held that an employer has the prerogative to control
all aspects of employment in its business organization, including the supervision of workers,
work regulation, lay-off of workers, dismissal and recall of workers, and take judicial notice
of the Asian Currency Crisis. Also, Article 283 of the Labor Code, which requires an
employer to submit a written notice to DOLE one (1) month prior to the closure or reduction
of personnel, is not applicable to the instant case because no closure was undertaken and no
reduction of employees was implemented by Linton. The workers appealed to the CA. 

ISSUE:
Whether there was an illegal reduction of work hours.

SC RULING:
Yes, the compressed workweek arrangement was unjustified and illegal.

In Philippine Graphic Arts, Inc. v. NLRC, the Court upheld for the validity of the
reduction of working hours, taking into consideration the following: the arrangement was
temporary, it was a more humane solution instead of a retrenchment of personnel, there was
notice and consultations with the workers and supervisors, a consensus were reached on how
to deal with deteriorating economic conditions and it was sufficiently proven that the
company was suffering from losses. 

The Bureau of Working Conditions of the DOLE, moreover, released a bulletin

providing for in determining when an employer can validly reduce the regular number of
working days. The said bulletin states that a reduction of the number of regular working days
is valid where the arrangement is resorted to by the employer to prevent serious losses due to
causes beyond his control, such as when there is a substantial slump in the demand for his
goods or services or when there is lack of raw materials.  

A close examination of petitioners’ financial reports for 1997-1998 shows that, while
the company suffered a huge loss in 1997, it retained a considerable amount of earnings and
operating income. Clearly then, while Linton suffered from losses for that year, there
remained enough earnings to sufficiently sustain its operations. In business, sustained
operations in the black is the ideal but being in the red is a cruel reality. However, a year of
financial losses would not warrant the immolation of the welfare of the employees, which in
this case was done through a reduced workweek that resulted in an unsettling diminution of
the periodic pay for a protracted period. Permitting reduction of work and pay at the slightest
indication of losses would be contrary to the State’s policy to afford protection to labor and
provide full employment.

54 | P a g e
 26. NATE CASKET MAKETER VS ARANGO ET AL
G.R. No. 192282, October 5, 2016
Petitioners Armando and Anely Nate are the owners/proprietors of A. Nate Casket
Maker. They employed respondents on various dates as carpenters, mascilladors and painters
in their casket-making business from 1998 until their alleged termination in March 2007. 

Petitioners alleged in their Position Paper that respondents are pakyaw workers who
are paid per job order. Respondents are "stay-in" workers with free board and lodging, but
they would "always" drink, quarrel with each other on petty things such that they could not
accomplish the job orders on time. Hence, petitioners would then be compelled to "contract
out" to other workers for the job to be finished.

On February 3, 2007, petitioners met with respondents to present a proposed

employment agreement which would change the existing pakyaw system to "contractual
basis" and would provide for vacation leave and sick leave pay and other benefits given to
regular employees.

ISSUE:
Whether or not the respondents are entitled to security of tenure
Whether or not there was illegal dismissal

SC RULING:
Anent on the First Issue
There is no dispute that the tasks performed by respondents as carpenters, painters,
and mascilladors were necessary and desirable in the usual business of petitioners who are
engaged in the manufacture and selling of caskets.

The control test merely calls for the existence of the right to control, and not
necessarily the exercise thereof. It is not essential that the employer actually supervises the
performance of duties by the employee. It is enough that the former has a right to wield the
power.

Hence, pakyaw workers are considered regular employees for as long as their
employers exercise control over them. Thus, while respondents' mode of compensation was
on a per-piece basis, the status and nature of their employment was that of regular employees.

In addition, the power of control of petitioners over respondents is clearly present in

this case. As the former wielded control over the respondents in the discharge of their work.
The Court also considered the length of time that respondents worked for petitioners,
commencing on various dates from 1998 to 2007.

Anent on the Second Issue

55 | P a g e
 Petitioners violated respondents' rights to security of tenure and constitutional right to
due process in not even serving them with a written notice of termination which would recite
any valid or just cause for their dismissal. Respondents were merely told that their services
are terminated.

Petitioners violated respondents' rights to security of tenure and constitutional right to due
process in not even serving them with a written notice of termination which would recite any
valid or just cause for their dismissal. Respondents were merely told that their services are
terminated.

27. SAN JUAN DE DIOS HOSPITAL VS NLRC

282 RA 316, 1997

Petitioners, the rank-and-file employee-union officers and members of San Juan De

Dios Hospital Employees Association sent a letter, requesting for the expeditious
implementation by the hospital of the 40-hours/5-day workweek with compensable weekly 2
days off provided by RA 5901 and enforced by Sec of Labor’s Policy Instructions No. 54.
The hospital failed to respond, so the petitioners filed a complaint.

56 | P a g e
 The Labor Arbiter dismissed their complaint. The National Labor Relations
Commission affirmed their decision. 

ISSUE:
Whether or not policy Instructions No. 54 issued by then Labor Secretary Drilon is
valid

SC RULING: 
Policy Instruction No. 54 relies and purports to implement RA 5901 (An Act
Prescribing 40 hours/week of labor for government and private hospitals or clinic personnel)
enacted on June 21, 1969. The reliance on such statute since RA 5901 was repealed by the
LC on May 1, 1974.

Article 302 of LC provides that: “all labor laws not adopted as part of this Code either
directly or by reference are hereby repealed. All provisions of existing laws, orders, decree,
rules and regulations inconsistent herewith are likewise repealed”. Only Art 83 of LC which
appears to have incorporated or reproduced RA 5901’s provisions may support Policy
Instructions No. 54.
 
Article 83 provides: 
Normal Hours of Work. — The normal hours of work of any employee shall
not exceed 8 hours a day.

Health personnel in cities and municipalities with a population of at least 1,000,000 or

in hospitals and clinics with a bed capacity of at least 100 shall hold regular office hours for 8
hours a day, for 5 days a week, exclusive of time for meals, except where the exigencies of
the service require that such personnel work for 6 days or 48 hours, in which case they shall
be entitled to an additional compensation of at least 30% of their regular wage for work on
the sixth day. For purposes of this Article, "health personnel" shall include: resident
physicians, nurses, nutritionists, dietitians, pharmacists, social workers, laboratory
technicians, paramedical technicians, psychologists, midwives, attendants and all other
hospital or clinic personnel.

What Article 83 merely provides are:

1. regular office hour of 8 hours/ day, 5 days/week for health personnel 
2. where the exigencies of service require that health personnel work for 6 days
or 48 hours, then such health personnel shall be entitled to an additional
compensation of at 30% of their regular wage for work on the 6th day

There is nothing in the law that supports PI 54’s assertion that “personnel in subject
hospitals and clinics are entitled to a full weekly wage for 7 days if they have completed the
40-hour/5-day workweek in any given workweek”. It’s clear that the Sec of Labor exceeded
his authority by including 2 days off with pay in contravention of the clear mandate of the
statute. Even if RA 5901 was valid, PI 54 remains invalid.

RA 5901 didn’t give 2 days off with pay for health personnel who complete a 40-hour or
5-day workweek. RA 5901’s sole purpose was to shorten health personnel’s working hours,
not to dole out 2 days off with pay. The very IRR of RA 5901 also doesn’t support their
position. Sec 15 of the IRR already provided for additional pay.

57 | P a g e
 If they were entitled to 2 days off with pay, then Sec 15 is senseless as it grants additional
compensation equivalent to the regular rate plus 25% for work performed on Sunday, or an
additional straight-time pay which is equivalent to the regular rate for work performed in the
excess of 40 hours/ week. Hence, PI 54 unduly extended the statute and being inconsistent,
should be declared void. 

28. PHILIPPINE AIRLINES VS NLRC

302 SCRA 582, 1999

In 1985, Philippine Airlines Inc. (PAL) revised its Code of Discipline. Such was
circulated among the employees and was immediately implemented. Philippine Airlines
Employees Association (PALEA) filed a complaint to the National Labor Relations
Commission (NLRC) for Unfair Labor Practice saying that PAL implemented the said
revisions without notice and prior management with its union, further stating, that the
distribution was irregular, that PAL should discuss the substance of the code with the
PALEA, that the employees dismissed under the revised code should be reinstated and their
cases be subject to hearing and praying that PAL be declared guilty for unfair labor practices.
PAL filed a motion to dismiss asserting that such act was an exercise of its management
prerogative as employer to prescribe rules and regulations regarding employee conduct. They
also posit that they have not violated the Collective Bargaining Agreement (CBA).

Labor Arbiter Origuerra called the parties for a conference but both failed to appear at
the scheduled date. Interpreting such as a waiver to present evidence, such was submitted for
decision. The decision rendered, shows no bad faith on the part of PAL for adopting such
Code. However, PAL is not entirely fault free. PAL failed to meet the test of reasonableness,
propriety and fairness. Further, PAL failed to prove that the new code was amply circulated.
Thus, PAL was ordered to furnish all employees of the code, reconsider the cases of the
employees affected by the revision and to discuss with PALEA the objectionable provisions.

58 | P a g e
 PAL appealed to the NLRC, which concurred with the decision of the Labor Arbiter,
finding no evidence of unfair labor practice and affirmed the decision. The NLRC made the
following pertinent observations. “There is no dispute that the adoption of the rules of
conduct is a prerogative of management…there is a need for a cooperative, supportive and
smooth relationship between labor and management.” “In a sense, participation by the union
in the adoption of the code could have accelerated and enhanced their feeling of belonging
and would have resulted in cooperation rather than resistance” Thus, the NLRC modified the
decision adding that the assailed Code should be reviewed and discussed by the Union.

ISSUE:
Whether or not management may be compelled to share with the union its prerogative
of formulating a code of discipline.

SC RULING:
The courts never considered the exercise of management prerogatives, boundless. It
must be done so to ensure the participation of workers in decision and policy-making
processes affecting the rights, duties and welfare. As laid out in San Miguel Brewery Sales
Force Union V Ople: As long as the company’s management prerogatives are exercised in
good faith for the advancement of the employer’s interest and NOT for the purpose of
defeating or circumventing the rights of the employees under special laws, this court will
uphold them.

A close scrutiny of the objectionable provisions show that the matter is not purely
business oriented nor do they concern the management aspects of the business. The
implementation of the provisions may result in the deprivation of the employee’s means of
livelihood which take the form of a property right. The courts reminded PAL that reliance in
their CBA regarding the exclusive right to make and enforce company rules and regulations
is not a cession of the employee’s. right to participate in the deliberation of matters which
affect their rights and the formulation of policies.

59 | P a g e
60 | P a g e
 29. ROBINA FARMS CEBU VS ELIZABETH VILLA
G.R. No 175869, April 18, 2016

Petitioner Rolando Tan is the president of Supreme Theater Corporation and the
general manager of Crown and Empire Theaters. Respondent Leovigildo Lagrama is a
painter, making ad billboards and murals for the motion pictures shown at the Empress,
Supreme, and Crown Theaters for more than 10 years.

Respondent was summoned by Tan, admonishing him for urinating in the work area.
When respondent asked what Tan was saying, Tan replied that he does not want respondent
to draw anymore and to get out of the premises. Lagrama denied the charge against him. He
claimed that he was not the only one who entered the drawing area and that, even if the
charge was true, it was a minor infraction to warrant his dismissal. However, every time he
spoke, Tan shouted to get out.

Respondent filed a complaint against the petitioner for illegal dismissal and sought
reinvestigation and payment of 13th month pay, SIL pay, salary differential and damages.
Petitioner denies that respondent is his employee. He avers that respondent is an independent
contractor who works according to his own methods while petitioner is only interested in the
result thereof. Petitioner further avers that respondent was paid for every painting turned out
as ad billboard or mural for the pictures shown in the three theaters, on the basis of a "no
mural/billboard drawn, no pay" policy. He submitted the affidavits of other cinema owners,
an amusement park owner, and those supervising the construction of a church to prove that
the services of Lagrama were contracted by them. He denied having dismissed Lagrama and
alleged that it was the latter who refused to paint for him after he was scolded for his habits.

ISSUE:
Whether or not there is an employer-employee relationship between petitioner and
respondent
Whether petitioner is guilty for the illegal dismissal of respondent

SC RULING:
The Implementing Rules of the Labor Code provide that no worker shall be dismissed
except for a just or authorized cause provided by law and after due process.  This provision
has two aspects: 
1. the legality of the act of dismissal, that is, dismissal under the grounds
provided for under Article 282 of the Labor Code and 
2. the legality in the manner of dismissal. 

The illegality of the act of dismissal constitutes discharge without just cause, while
illegality in the manner of dismissal is dismissal without due process. In this case, by his
refusal to give Lagrama work to do and ordering Lagrama to get out of his sight as the latter
tried to explain his side, petitioner made it plain that Lagrama was dismissed. Urinating in a
work place other than the one designated for the purpose by the employer constitutes
violation of reasonable regulations intended to promote a healthy environment under Art.
282(1) of the Labor Code for purposes of terminating employment, but the same must be
shown by evidence. Here there is no evidence that Lagrama did urinate in a place other than a
rest room in the premises of his work.

61 | P a g e
 Instead of ordering his reinstatement as provided in Art. 279 of the Labor Code, the
Labor Arbiter found that the relationship between the employer and the employee has been so
strained that the latter's reinstatement would no longer serve any purpose. The parties do not
dispute this finding. Hence, the grant of separation pay in lieu of reinstatement is appropriate.

The Bureau of Working Conditions classifies workers paid by results into two groups,
namely: (1) those whose time and performance is supervised by the employer, and (2) those
whose time and performance is unsupervised by the employer. The first involves an element
of control and supervision over the manner the work is to be performed, while the second
does not. If a piece worker is supervised, there is an employer-employee relationship, as in
this case. However, such an employee is not entitled to service incentive leave pay since he is
paid a fixed amount for work done, regardless of the time he spent in accomplishing such
work.

30. BAHIA SHIPPING SERVICES VS CHUA

G.R. No 162195, April 8, 2008

Petitioner Bahia Shipping Services Inc hired respondent Reynaldo Chua as a

restaurant waiter on board the luxury cruise ship liner M/S Black Watch pursuant to a POEA-
approved employment contract for 9 months (from Oct 18, 1996- July 17, 1997). On Oct 18,
1996, Chua left Manila for Heathrow, England to board the cruise ship.

Chua reported for work on Feb 15, 1997 and was 1.5 hours late. The master of the
ship gave him an official warning-termination form on Feb 17. On March 8, ship capt. Thor
Fleten conducted an inquisitorial hearing to investigate the incident. Chua as then dismissed
from service on March 9 based on the unsigned and undated notice of dismissal. A record of
the said investigation was attached to the dismissal notice. On March 24, Chua filed a
complaint for illegal dismissal and other monetary claims with the LA. 

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 Chua alleged that: He was paid old USD 300/ month as monthly salary for 5 months
instead of USD 410 as in the employment contract. As such, he was underpaid in USD
110. He was further deducted by USD 20 per month by the shipping line for alleged union
dues. He asserts that it was his first offense committed on the vessel. Moreover, there is no
proof that he was a member of AMOSUP or ITF to deduct union dues from his monthly
salary 

Bahia Shipping Services replied, stating that: It allegedly received an addendum to the
CBA from their principal, Blackfriars Shipping Company. As such, Bahia requested rom the
POEA to amend Chua’s salary scale to USD 300 per month. It can deduct union dues from
Chua’s salary since there is a CBA between the Norwegian Seaman’s Union (NSU) and
Blackfriar’s Shipping Co. LTd. Chua violated the contract’s T&C as he always came in late
for duty even prior to the Feb 17 incident.

The Labor Arbiter held Bahia liable for illegal dismissal and unauthorized deductions.
NLRC affirmed LA’s ruling with modifications on the award. CA affirmed with
modifications on the award. 

ISSUE:
Whether or not Chua is entitled to overtime pay which was incorporated in his award
for the unexpired portion of the contract despite the fact that he did not render overtime work 

SC RULING: 
Chua’s dismissal was illegal considering that Bahia failed to provide evidence to
prove Chua’s habitual tardiness. Since dismissal was illegal, it follows that Chua is entitled to
payment of his salary for the unexpired portion of his contract pursuant to RA 8042
considering that his employment was pre-terminated before its expiration on July 17.
However, LA limited the award equivalent to Chua’s salary for 3 months. NLRC affirmed
but deducted one day as penalty for tardiness. CA affirmed the one-day salary deduction but
removed the 3-month salary cap of the LA. In the end, the monetary award is computed based
on the Chua’s salary from March 9-July 17 less his salary for 1 day.
As a general rule, the party who has failed to appeal from a judgement is deemed to
have acquiesced to it and thus, can no longer obtain another affirmative relief. However,
there is an exception when this strict adherence to the rule will impair a substantive right. 

In this case, SC relaxed the rules. While Chua failed to appeal, SC relaxed the rules to
protect the right of an illegally dismissed employed to monetary compensation. Pursuant to
Sec 10 of RA 8042, an overseas worker who has been illegally dismissed is entitled to “his
salaries for the unexpired portion of the employment contract or for 3 months for every year
of the unexpired term, whichever is less”.

The Court of Appeals was correct since 3-month salary cap applies only when the
term of the overseas contract is one year or longer. Otherwise, the first option applies wherein
the worker is entitled only to the payment of his salaries for the unexpired portion of the
contract.
 
As to the overtime pay, it should not be included. As in Cagampan v NLRC, SC held
that while an overseas employment contract may guarantee right to overtime pay, entitlement
to such must be first established.  As such, since there was no evidence of such, the overtime
pay should not be included in the computation 

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 31. LEYTE IV ELECTRIC COOPERATIVE INC VS
LEYECO IV EMPLOYEES UNION-ALU
G.R. No 1577745, October 19, 2007

On April 6, 1998, petitioner Leyte IV Electric Cooperative Inc and respondent Leyeco
IV Employees Union-ALU entered in a CBA which covers the company’s rank-and-file
employees for 5 years (effective Jan 1, 1998). Leyeco VP Vicente Casilansent a letter to the
company, demanding their holiday day as stipulated in the CBA. However, company replied
stating that it already paid all their employees with the holiday pays.
 
After exhausting the grievance machineries in the CBA, both parties agreed to submit
the issues to the National Conciliation and Mediation Board (NCMB) for arbitration. In its
position paper, respondent admitted that employees were paid all the days of the month even
if there was no work. However, this does not prevent them from making separate demands
for the payment of regular holidays. As such, they are now demanding P1,054, 393.07 for the
unpaid legal holidays and several pay slips

Petitioner, on the other hand, stated that the holiday pay was already paid. Pursuant to
the CBA, this payment was already presumed since the formula used to determine the daily
rate is the Basic Monthly Salary divided by 30 days (or Basic Monthly Salary x 12 / 360
days). With this formula, employees were already paid both their regular and special days,
days when their work is done, 51 unworked Sundays and Saturdays. 

Voluntary Arbitrator Lopez decided in favor of respondent. He reasoned that

petitioner failed to prove that t complied with the CBA stipulations as the payroll slips didn’t
reflect payment of the paid holidays. The case was elevated to the Court of Appeals, but CA
dismissed it since it was the wrong mode for appeal. Instead, it should be petition for review
under Rule 43 of the 1997 Rules of Civil Procedure, not Rule 65. 

ISSUE:
Whether or not the company is liable for holiday pay 

SC RULING:

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 VA gravely erred in the interpretation of the CBA as its interpretation disregards the
respondent’s admission that the employees were paid all the days of the month even if not
worked. As such, the 360 divisor in the formula is significant.

In other cases, the SC ruled that the divisor is significant in determining whether or
not holiday pay is already included in the monthly paid employee’s salary and in the
computation of his daily rate. 

In Producer’s Bank, the SC said that the employer in that case used the 314 as the
divisor. This number was arrived at by subtracting the Sundays and Saturdays from the total
number of calendar days. Using such divisor leads to the conclusion that the legal holidays
are already included therein. In Odango v NLRC, SC also ruled that the usage of a divisor that
is less than 365 does not make the employer automatically liable for underpayment of holiday
pay. In fact, the minimum allowable divisor is 287 days which is 365 days minus 52 Sundays
and 26 Saturdays. Anything under 287 meant that the employees are already deprived of
some of their holiday pay.

In this case, employees were only required to work from Mon-Fri. Thus, the minimum
allowable divisor is 263, which is the result of deducting 51 unworked Sundays and 51
unworked Saturdays from 265 days. Since the company used the 360-day divisor, this was
clearly above minimum and thus, it clearly indicates that the company has paid their
employees with holiday pay. Following the VA’s interpretation would result into a “double
burden” as the company would have to pay twice for the holiday pay. 

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 32. TAN VS LAGRAMA
G.R. No. 151228, August 15, 2002

Petitioner Rolando Tan is the president of Supreme Theater Corporation and the
general manager of Crown and Empire Theaters. Respondent Leovigildo Lagrama is a
painter, making ad billboards and murals for the motion pictures shown at the Empress,
Supreme, and Crown Theaters for more than 10 years.

Respondent was summoned by Tan, admonishing him for urinating in the work area.
When respondent asked what Tan was saying, Tan replied that he does not want respondent
to draw anymore and to get out of the premises. Lagrama denied the charge against him. He
claimed that he was not the only one who entered the drawing area and that, even if the
charge was true, it was a minor infraction to warrant his dismissal. However, every time he
spoke, Tan shouted to get out.

Respondent filed a complaint against the petitioner for illegal dismissal and sought
reinvestigation and payment of 13th month pay, SIL pay, salary differential and damages.
Petitioner denies that respondent is his employee. He avers that respondent is an independent
contractor who works according to his own methods while petitioner is only interested in the
result thereof.

Petitioner further avers that respondent was paid for every painting turned out as ad
billboard or mural for the pictures shown in the three theaters, on the basis of a "no
mural/billboard drawn, no pay" policy. He submitted the affidavits of other cinema owners,
an amusement park owner, and those supervising the construction of a church to prove that
the services of Lagrama were contracted by them. He denied having dismissed Lagrama and
alleged that it was the latter who refused to paint for him after he was scolded for his habits.

ISSUE:
Whether or not there is an employer-employee relationship between petitioner and
respondent
Whether petitioner is guilty for the illegal dismissal of respondent

SC RULING:
The Implementing Rules of the Labor Code provide that no worker shall be dismissed
except for a just or authorized cause provided by law and after due process. 
This provision has two aspects: 
1. the legality of the act of dismissal, that is, dismissal under the grounds
provided for under Article 282 of the Labor Code and
2. the legality in the manner of dismissal. 

The illegality of the act of dismissal constitutes discharge without just cause, while
illegality in the manner of dismissal is dismissal without due process.

In this case, by his refusal to give Lagrama work to do and ordering Lagrama to get
out of his sight as the latter tried to explain his side, petitioner made it plain that Lagrama was
dismissed. Urinating in a work place other than the one designated for the purpose by the
employer constitutes violation of reasonable regulations intended to promote a healthy
environment under Art. 282(1) of the Labor Code for purposes of terminating employment,

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but the same must be shown by evidence. Here there is no evidence that Lagrama did urinate
in a place other than a rest room in the premises of his work.

Instead of ordering his reinstatement as provided in Art. 279 of the Labor Code, the
Labor Arbiter found that the relationship between the employer and the employee has been so
strained that the latter's reinstatement would no longer serve any purpose. The parties do not
dispute this finding. Hence, the grant of separation pay in lieu of reinstatement is appropriate.

The Bureau of Working Conditions classifies workers paid by results into two groups,
namely; (1) those whose time and performance is supervised by the employer, and (2) those
whose time and performance is unsupervised by the employer. The first involves an element
of control and supervision over the manner the work is to be performed, while the second
does not. If a piece worker is supervised, there is an employer-employee relationship, as in
this case. However, such an employee is not entitled to service incentive leave pay since he is
paid a fixed amount for work done, regardless of the time he spent in accomplishing such
work.

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 33. BANCO DE ORO UNIBANK VS SAGAYSAY
G.R. No. 214961, September 16, 2015

In 2006, Guillermo Sagaysay, a veteran banker, was hired by BDO as a Senior

Accounting Assistant. He was hired from a merger between United Overseas Bank and BDO,
with BDO as the surviving bank.  In 2010, BDO informed Sagaysay that, pursuant to the
bank’s retirement policy established in 1994, he is to retire a few days after he turns 60 within
the same year. He prayed to BDO that his services be extended as he has outstanding loan
obligations, and that he is still able to effectively perform his duties. BDO denied such
request. In another prayer, he appealed that BDO extend his service for 8.5 months so that he
could render 5 years of business which would entitle him to basic retirement pay. In which
BDO again denied. BDO drafted a Release, Waiver and Quitclaim to release BDO from any
action in consideration of P98,376.14, to which he signed.

Aggrieved, Sagaysay filed a complaint for Illegal Dismissal with prayer for
reinstatement, backwages and damages. He contends that he suffered damages of P2,225,403
which he would have received if he was made to retire at 65. The L.A. ruled that sagaysay
was illegally dismissed because he was forced to avail of an optional retirement and was
contrary to the provisions of Art 287 of the Labor Code. Further stating that Sagaysay was
subjected to a retirement plan he did not freely assent to. He was ordered reinstated. In
BDO’s appeal to the NLRC, the commission ruled that Sagaysay assented to its retirement
plan. The NLRC found it difficult to believe that Sagaysay started his employment without
familiarizing the bank’s retirement policy. Further, his execution of the Quitclaim constitutes
proof that he accepted the retirement plan. In the Court of Appeals, the court ruled that the

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Retirement Plan was not a result of a mutual agreement of the parties, that he was forced to
take part of the plan due to the merger, and that the quitclaim cannot be given credence as his
filing of a complaint manifested that he had no intention to relinquish his employment.

ISSUE:
Whether or not the retirement plan is valid and effective
Whether or not th the execution of the quitclaim is valid

SC RULING:
Retirement is the result of a bilateral act of the parties indicating a voluntary
agreement. The lower court’s reliance on Art 287 is mistaken. It is clear in the provision that
287 is applicable only in the absence of a retirement plan with the mandatory retirement at
65. Thus, retirement age is primarily determined by the existing employment contract. The
facts also show that the retirement plan of BDO was in effect way before the hiring of
Sagaysay. The court also refutes Sagaysay’s claim that he was not informed. It is settled that
by accepting the terms of employment one is deemed to have assented to all existing rules
and regulations of one’s employer, including its retirement plan. Further, Sagaysay had every
opportunity to question such plan within his 4 years of employment.

The court rules that the quitclaim was validly executed. Although, quitclaims are
frowned upon, one with clear and unambiguous contents executed by the parties voluntarily
signing the same with full understanding, cannot be later invalidated because of claims that
one was pressured due to financial needs. He is also not entitled to retirement pay as he did
not qualify for the 5-year service stated in Article 287 of the Labor Code.

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 34. MARIA DE LEON TRANSPORTATION INC VS MACURAY
G.R. No 214940, June 6, 2018

Daniel M. Macuray filed a Complaint for illegal dismissal against petitioner Maria De
Leon Transportation, Inc. before RAB San Fernando, La Union. Macuray was employed as a
bus driver plying the Laoag-Manila-Laoag route receiving a monthly pay/commission of
P20,000.00. Maria’s dispatcher did not assign a bus to him and informed him that he was
already considered AWOL, without giving any reason therefor. He was not given any notice
or explanation regarding his employment status. He has served the company for 18 years and
considers himself illegally dismissed. During this time, he was already 62 years old, but he
received no benefits for his service. Furthermore, Maria owed him three months' salary for
2009.

Macuray prayed that he be awarded backwages, separation pay, retirement pay, 13th
month pay, damages, attorney's fees, and costs of suit.

Maria claimed that Macuray was hired on commission basis, on a "no work, no pay" and
"per travel, per trip" basis; he was paid P10,000.00 commission per month without salary.
That Macuray permanently abandoned his employment effective March 31, 2009, after he
failed to report for work; Maria information later on that Macuray was already engaged in
driving his family truck and that his claim of illegal dismissal was not true, as there was no
dismissal or termination of his services. His claim to have been illegally dismissed in
January, 2009, was contrary to the documentary evidence which showed that he continued to
work until March, 2009, after which he completely abandoned his employment. Maria
averred that it was common practice for bus drivers of Maria to simply stop reporting for
work for short periods of time, or even years, after which they would return and ask to be
allowed to drive buses once more, which management allowed after the absentee drivers gave
satisfactory and reasonable explanations for their absences

The Labor Arbiter dismissed the case for lack of merit. The dismissal is not illegal.
Hence, claims for separation pay, backwages and damages are denied. The National Labor
Relations commission ruled that mere absence or failure to report for work is not tantamount
to abandonment of work. Macuray is already 62 years old and he may not be apt for the job
as bus driver. Hence, his reinstatement may no longer be possible. Separation pay cannot also
be awarded to him because he was not dismissed by Maria. In cases where there was no
dismissal at all, separation pay should not be awarded.

The Court of Appeals ruled that the facts bear the marks of constructive dismissal. As
a regular employee who has been constructively dismissed, Macuray is entitled to separation
pay equivalent to 1 month salary for every year of service. Reinstatement being no longer
possible and Macuray being 62 years old, he is entitled to retirement pay. Macuray is entitled
to ½ of his monthly commission for every year of service. Thus, for having been illegally

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dismissed, he was entitled not only to separation pay and full backwages, but additionally, to
his retirement benefits pursuant to any collective bargaining agreement in the workplace or,
in the absence thereof.

ISSUE:
Whether or not he was constructively or illegally dismissed
Whether or not Macuray is entitled to separation pay, backwages, retirement pay,
service incentive leave pay, moral damages, exemplary damages, nominal damages and
attorney's fees.

SC RULING:
Macuray availed of the company practice and unwritten policy – of allowing its bus
drivers to take needed breaks or sabbaticals to enable them to recover from the monotony of
driving the same route for long periods. Since Macuray was not dismissed from work, Maria
may not be held liable for his monetary claims, except those that were actually owing to him
by way of unpaid salary/commission, and retirement benefits, which are due to him for the
reason that he reached the age of retirement while under Maria's employ.

As to unpaid salaries/commissions, Maria failed to pay three months' worth, January

to March, 2009 – which, at P10,000.00 per month – amounts to P30,000.00. As for retirement
benefits, Macuray is entitled to them considering that he was never dismissed from work,
either for cause or by resignation or abandonment. As far as Maria is concerned, he merely
went on a company-sanctioned sabbatical. It just so happened that during this sabbatical, he
reached the retirement age of 60; by this time, he is already 67 years old. By filing the labor
case, he may have pre-empted the payment of his retirement benefits; but it is a clear demand
for retirement benefits nonetheless.

In the absence of a retirement plan or agreement in Maria De Leon Transportation,

Inc., SC declares that Macuray is entitled to one month's salary for every year of service, that
is: P10,000.00 x 18 years = P180,000.00

35. PHILIPPINE AIRLINES VS HASSARAM

G.R. No 217730, June 5, 2017

Arjan T. Hassaram (Hassaram) filed a complaint against Philippine Airlines Inc.

(PAL), for illegal dismissal and non-payment of retirement benefits. He claimed that he was a
pilot for 24 years and his application for retirement benefits filed in 2000 was denied He
further claims that he is entitled to P4,456,817.75 under the PAL Retirement Benefit Plan.
PAL informed him that he lost his employment in 1998 due to his failure to comply with the
Return to Work Order by the Secretary of Labor against the Airline Pilots Association of the
Philippines (ALPAP). Before the L.A., Hassaram argued that he was not covered by the

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Order, thus PAL has no grounds for dismissal. In its Position Paper, PAL posits that the
Labor Arbiter has no jurisdiction to hear the case as jurisdiction lies with the Secretary of
Labor and that if anything, he should only be entitled to P5,000 for every year of service as
stated in their CBA.

The Labor Arbiter ruled that he is entitled to computation of benefits pursuant to the
system stated in Article 287 (now Art 302) of the Labor Code, stating the ½ moth salary for
every year of service.  PAL contended that he was not entitled to retirement benefits because
he had been terminated from employment for defiance of the Order. However, he was entitled
to such retirement benefits under Article 287. The NLRC affined the decision of the L.A. and
PAL’s retirement plan. This was later reversed by PAL’s MR on the grounds that Hassaram
received the retirement benefit of PAL. The CA ruled that despite him receiving
P4,456,817.75 under the Plan, this does not preclude him from claiming retirement benefits.
(4M + Retirement Benfits) In PAL’s comment, it said that the retirement fund is part of his
retirement pay.

ISSUE:
Whether or not the Retirement Plan made by PAL could be considered as part of
retirement pay stated in the Labor Code.

SC RULING:
The amount received by Hassaram under the PAL Pilot’s Retirement Benefit Plan
must be considered part of his retirement pay. However, it is not yet full. The PALPRBP is
only a component of his benefits. He is still entitled to the retirement benefit stated in the
CBA between PAL and ALPAP. CA erroneously relied on the provision of Article 287. It
must be emphasized that said article is only applicable when there is no CBA or the CBA of
such is lower than the one prescribed by law. Here, it can be clearly deduced that in the CBA
between PAL and ALPAP a provision regarding the retirement benefit is present. Which
when computed, is higher than the supposed benefits he would receive in Art. 287. Thus,
Hassaram is entitled to the PAL Pilot’s Retirement Benefit Plan AND the retirement benefit
stated in the CBA between PAL and ALPAP.
(Equation: 24 years x P5,000= P120,000 for CBA. ||. P4,456,817.75 Retirement
Benefit Plan)
36. ARCO METAL PRODUCTS CO., INC., ET AL., VS. SAMAHAN NG MGA
MANGGAGAWA SA ARCO METAL-NAFLU
G.R. No. 170734, May 14, 2008

Petitioner is a company engaged in the manufacture of metal products, whereas

respondent is the labor union of petitioner's rank and file employees. Sometime in 2003,
petitioner paid the 13th month pay, bonus, and leave encashment of three union members in
amounts proportional to the service they actually rendered in a year, which is less than a full
twelve (12) months.

Respondent protested the prorated scheme, claiming that on several occassions

petitioner did not prorate the payment of the same benefits to seven (7) employees who had
not served for the full 12 months.

According to respondent, the prorated payment violates the rule against diminution of
benefits under Article 100 of the Labor Code.

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ISSUE:
Whether or not the payment of 13 th month pay, bonus, and leave encashment violates
the rule against diminution of benefits

SC RULING:
There is no doubt that in order to be entitled to the full monetization of sixteen (16)
days of vacation and sick leave, one must have rendered at least one year of service. The
clear wording of the provisions does not allow any other interpretation. Anent the 13th month
pay and bonus, we agree with the findings of Mangabat that the CBA provisions did not give
any meaning different from that given by the law, thus it should be computed at 1/12 of the
total compensation whint to the amount of the 13th month pay given, or in proportion to the
actual service rendered by an employee within the year.

However, in the years 1992, 1993, 1994, 1999, 2002 and 2003, petitioner had adopted
a policy of freely, voluntarily and consistently granting full benefits to its employees
regardless of the length of service rendered. True, there were only a total of seven employees
who benefited from such a practice, but it was an established practice
nonetheless. Jurisprudence has not laid down any rule specifying a minimum number of years
within which a company practice must be exercised in order to constitute voluntary company
practice. Thus, it can be six years, three years, or even as short as two (2) years.ch an
employee receives for the whole calendar year. The bonus is also equivale

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 37. MCBURNIE VS. GANZON
G.R. No. 178034/1718117, October 17, 2013

McBurnie, an Australian national, instituted a complaint for illegal dismissal and

other monetary claims against the respondents. McBurnie claimed that he signed a five-year
employment agreement with the company EGI as an Executive Vice-President who shall
oversee the management of the company's hotels and resorts within the Philippines. He
performed work for the company until he figured in an accident that compelled him to go
back to Australia while recuperating from his injuries. 

While in Australia, he was informed by respondent Ganzon that his services were no
longer needed because their intended project would no longer push through.

The respondents opposed the complaint, contending that: (1) their agreement with
McBurnie was to jointly invest in and establish a company for the management of hotels; (2)
they did not intend to create an employer-employee relationship, and the execution of the
employment contract that was being invoked by McBurnie was solely for the purpose of
allowing McBurnie to obtain an alien work permit in the Philippines; and (3) at the time
McBurnie left for Australia for his medical treatment, he had not yet obtained a work permit.

The Labor Arbiter rendered a decision in favor of petitioner. Aggrieved, respondent

appealed to the NLRC and also made a motion to reduce bond. The respondents contended in
their Motion to Reduce Bond, inter alia, that the monetary awards of the LA were null and
excessive, allegedly with the intention of rendering them incapable of posting the necessary
appeal bond. They claimed that:
a. An award of "more than P60 Million Pesos to a single foreigner who had no
work permit and who left the country for good one month after the purported
commencement of his employment" was a patent nullity. 
b. Furthermore, they claimed that because of their business losses that may be
attributed to an economic crisis, they lacked the capacity to pay the bond of
almost P60 Million, or even the millions of pesos in premium required for
such bond.

The NLRC denied the motion explaining to the respondent that an employer seeking
to appeal the [LA's] decision to the Commission is unconditionally required by Art. 223,
Labor Code to post bond in the amount equivalent to the monetary award

In view for the failure to post the required additional bond, NLRC dismissed the
appeal. This prompted the respondents to file with the CA which it affirmed the NLRC. The
case eventually reached the Supreme Court, which was decided by the Third Division. The

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SC granted the motion to reduce the bond and to give due course to the appeal of the
respondent.
Petitioner filed the first motion of reconsideration which was denied by the SC. The
2 motion for reconsideration likewise met the same fate. On the 3 rd motion of
nd

reconsideration, the Supreme Court tried to decide the case en banc, accepting the case from
the Third Division.

ISSUE:
Whether or not the appeal bond amount can be reduced

SC RULING:
The Court emphasizes that second and subsequent motions for reconsideration are, as
a general rule, prohibited.  The general rule, however, against second and subsequent motions
for reconsideration admits of settled exceptions.

The Court has then entertained and granted second motions for reconsideration "in the
higher interest of substantial justice," as allowed under the Internal Rules when the assailed
decision is "legally erroneous," "patently unjust" and "potentially capable of causing
unwarranted and irremediable injury or damage to the parties."

A second motion for reconsideration may be allowed in instances of "extraordinarily

persuasive reasons and only after an express leave shall have been obtained. The instant case
also qualifies as an exception to, first, the proscription against second and subsequent
motions for reconsideration, and second, the rule on immutability of judgments. The
reconsideration of the Decisions and Resolutions is justified by the higher interest of
substantial justice.

The Rule on Appeal Bonds

Under Section 6, Rule VI of the 2011 Rules of Procedure, it stated that No motion to
reduce bond shall be entertained except on meritorious grounds and upon the posting of a
bond in a reasonable amount in relation to the monetary award. While the CA allowed an
appeal bond to be reduced, the initial SC decision provided otherwise. It stated that:
a. the Court to give utmost regard to the legislative and administrative intent to
strictly require the employer to post a cash or surety bond securing the full
amount of the monetary award within the 10[-]day reglementary period.
Nothing in the Labor Code or the NLRC Rules of Procedure authorizes the
posting of a bond that is less than the monetary award in the judgment, or
would deem such insufficient posting as sufficient to perfect the appeal.
b. While the bond may be reduced upon motion by the employer, this is subject
to the conditions that (1) the motion to reduce the bond shall be based on
meritorious grounds; and (2) a reasonable amount in relation to the monetary
award is posted by the appellant.
c. The qualification effectively requires that unless the NLRC grants the
reduction of the cash bond within the 10[-lday reglementary period, the
employer is still expected to post the cash or surety bond securing the full
amount within the said 10[-]day period. If the NLRC does eventually grant the
motion for reduction after the reglementary period has elapsed, the correct
relief would be to reduce the cash or surety bond already posted by the
employer within the 10-day period.

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 The Court now rectified the prior pronouncement. The unqualified statement that even
an appellant who seeks a reduction of an appeal bond before the NLRC is expected to post a
cash or surety bond securing the full amount of the judgment award within the 10-day
reglementary period to perfect the appeal

Meritorious Ground As A Condition For Reduction

The reduction of the appeal bond shall be justified by meritorious grounds and
accompanied by the posting of the required appeal bond in a reasonable amount. The
requirement on the existence of a "meritorious ground" delves on the worth of the parties'
arguments, taking into account their respective rights and the circumstances that attend the
case.

In this case, the NLRC then should have considered the respondents' arguments in the
memorandum on appeal that was filed with the motion to reduce the requisite appeal bond.
Although a consideration of said arguments at that point would have been merely preliminary
and should not in any way bind the eventual outcome of the appeal, it was apparent that the
respondents' defenses came with an indication of merit that deserved a full review of the
decision of the LA.

The Court finds the reduction of the appeal bond justified by the substantial amount of
the LA's monetary award. Given its considerable amount, we find reason in the respondents'
claim that to require an appeal bond in such amount could only deprive them of the right to
appeal, even force them out of business and affect the livelihood of their employees.

38. INDOPHIL TEXTILE MILLS INC. VS. ENGR. ADVIENTO

GR No. 171212, August 4, 2014

Petitioner Indophil Textile Mills Inc is a domestic corporation engaged in the business
of manufacturing thread for weaving.  On Aug 21, 1990, Indophil hired respondent Engr.
Salvador Adviento as Civil Engineer to maintain its facilities in Bulacan. On Aug 7, 2002,
Engr. Adviento consulted a physician due to recurring weakness and dizziness. A few days
later, he was diagnosed with Chronic Poly Sinusitis and then severe and persistent Allergic
Rhinitis. The doctor advised him to totally avoid house dust mite and textile dust as it might
give more problems.

Engr. Adviento then filed a complaint against Indophil with NLRC for alleged illegal
dismissal and for the payment of backwages, separation pay, actual damages and attorney’s
fees. The NLRC case was still pending at the time this instant petition was filed. 

77 | P a g e
 Engr. Adviento then filed another complaint with the RTC of Cagayan, alleging that
he contracted the occupational disease due to the company’s gross negligence of providing
him with a safe, healthy and workable environment. He alleged the following: (RTC
Complaint) 
o As his job, he regularly maintains and checks on company’s facilities
including the dye house area. This place is very hot and emits foul chemical
odor with no adequate safety measures 
o Moreover, the air washer dampers and all roof exhaust vests are blown into
open air which carries dust. 
o He told the company to place a roof insulation to minimize and even eradicate
the health hazards in the workplace. However, management disproved due to
high costs. 
o He also recommended the relocation of the engineering office since its
location allows dust to accumulate in the said office. This was aggravated by
the new filters. However, management didn’t do anything 
o These health hazards were already persistent complaints but they fell on deaf
ears. 
o He tried to find a new job but employers turned him down due to his present
health condition. 

Indophil filed a Motion to Dismiss in return, alleging that the RTC has no jurisdiction
over the case as it lies with the LA. Moreover, there was already an action in the NLRC.

RTC sustained that it had jurisdiction since the company’s failure is an act of
negligence. As such, it is not within the LA’s jurisdiction. Moreover, the NLRC case has a
different cause of action which is illegal dismissal and prayer for backwages and other
damages. Indophil appealed to CA, but it was dismissed. Then the case was elevated to the
SC.

ISSUE:
Whether or not the RTC has jurisdiction over the said case 

SC RULING:
Jurisdiction of the LA and NLRC is provided for in Art 217 of the Labor Code, as
amended by Sec 9 of RA 6715. These are the following cases:  
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may
file involving wages, rates of pay, hours of work and other terms and
conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from
employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code including
questions involving the legality of strikes and lockouts; and
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

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 While worker-employer controversies are lodged with the LA, not all claims
involving these parties can be resolved by the labor courts. As such, SC established the
“reasonable causal connection rule” wherein if there is a reasonable causal connection
between the claim asserted and the employer-employee relations, then the case falls with the
labor courts. Otherwise, it belongs to the regular courts. 

In this case, jurisdiction belongs to the regular courts. The maintenance of a safe and
healthy work environment is ordinarily a subject of labor cases. Moreover, the case also
seemed to involve employee-employer relations considering their work relationship. 

However, Adviento’s claim for damages is grounded on Indophil’s GROSS

NEGLIGENCE to provide a safe, healthy, and workable environment for its employees
which is a QUASI-DELICT. This was proven in the allegations Adviento made in his
complaint. In this case, the requisites were complied with. Adviento suffered a work-
contracted disease due to continued and prolonged exposure to textile dust. 

39. LOCKHEED DETECTIVE & WATCHMAN AGENCY VS UP

G.R. No. 185918, April 18, 2012

Petitioner entered into a contract for security services with respondent. Several
security guards assigned to UP filed separate complaints against Lockheed and UP for
payment of underpaid wages, 25% overtime pay, premium pay for rest days and special
holidays, holiday pay, service incentive leave pay, night shift differentials, 13th month pay,
refund of cash bond, refund of deductions for the Mutual Benefits Aids System (MBAS), and
unpaid wages.

The Labor Arbiter rendered a decision declaring that respondents Lockheed Detective
and Watchman Agency, Inc. and UP as job contractor and principal, respectively, are hereby
declared to be solidarily liable to complainants for the following claims of the latter. NLRC
affirmed the decision with modifications. 

A Notice of Garnishment was issued to Philippine National Bank UP Diliman Branch

for the satisfaction of the award. 

UP filed an Urgent Motion to Quash Garnishment contending that the funds being
subjected to garnishment at PNB are government/public funds. Hence, as public funds, the
subject PNB account cannot be disbursed except pursuant to an appropriation required by
law.

Despite the claim by UP, the funds were nonetheless garnished. UP sought
reimbursement from Lockheed for the garnishment as part of his share in the liability.

ISSUE:
Whether or not UP PNB funds should be garnished since it is considered public funds
Whether Lockheed should reimburse UP for the payment since it is solidarily liable

SC RULING:

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 We agree with UP that there was no point for Lockheed in discussing the doctrine of
state immunity from suit as this was never an issue in this case. Clearly, UP consented to be
sued when it participated in the proceedings below. What UP questions is the hasty
garnishment of its funds in its PNB account.

UP is a juridical personality separate and distinct from the government and has the
capacity to sue and be sued. Thus it cannot evade execution, and its funds may be subject to
garnishment or levy. However, before execution may be had, a claim for payment of the
judgment award must first be filed with the COA.

As to the fait accompli argument of Lockheed, contrary to its claim that there is
nothing that can be done since the funds of UP had already been garnished, since the
garnishment was erroneously carried out and did not go through the proper procedure (the
filing of a claim with the COA), UP is entitled to reimbursement of the garnished funds plus
interest of 6% per annum, to be computed from the time of judicial demand to be reckoned
from the time UP filed a petition for certiorari before the CA which occurred right after the
withdrawal of the garnished funds from PNB

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 40. QUANTUM FOODS, INC. VS ESLOYO AND MAGSILA
G.R. No. 213696, December 9, 2015

Quantum Foods, Inc. (QFI) is a domestic corporation that is engaged in the

distribution and selling of food products nationwide, their principal office is located in Brgy.
Merville, Parañaque City. QFI hired Esloyo as Major Accounts Representative and was later
promoted to the position of Regional Sales Manager for the Visayas and Mindanao due to his
consistent good performance which led to successive promotions. Magsila was hired as Key
Accounts Representative under probationary status which later turned into a “permanent”
status. While in the course of their employment, they were each required to post a bond in the
amount of P10,000 and P7,000 respectively.

In 2005, QFI faced a drastic net income drop that made the corporation decide to
reorganize its sales force nationwide a year later. Magsila was among those who were
retrenched by the corporation by a termination letter and to turn over and clear his
responsibilities and accountabilities to facilitate the release of his final pay. However, such
was not released due to alleged discovery of unauthorized/undocumented deductions which
Magsila failed to explain about. 

Meanwhile, there was several anonymous complaints against Esloyo for alleged
misbehavior and violations of various company rules and regulations, such as sexual
harassment, misappropriation of company funds/property, falsification/padding of reports and
serious misconduct. An investigation was conducted by QFI’s auditor, Vilma A. Almendrala,
and directed Esloyo to explain. He submitted his explanation denying such allegations.
Consequently, Eslayo was informed of his termination on the ground of loss of trust and
confidence due to his numerous violations of the company rules and regulations. 

Both aggrieved of the termination, they filed complaints separately on illegal

dismissal with money claims against the President/General Manager and HR Manager of QFI
before the NLRC. They also impleaded Dole Philippines, Inc. (Dole) as party to the case,
claiming that said company required them to perform additional tasks that were necessary
and desirable for its operations, and that Dole, as well as its Executive personnel had created
and organized QFI, and thus, should be held jointly and solidarily liable with QFI for
respondents' claims.

Esloyo asserted that his dismissal was illegal, claiming that: (a) the charges were all
fabricated; (b) no formal investigation was conducted; and (c) he was not given the
opportunity to confront his accusers. Magsila, on the other hand, averred that there was no
valid retrenchment as the losses claimed by QFI were unsubstantiated and that he was merely
replaced. 
The petitioners maintained their argument that there was a valid dismissal, hence, they
are not liable for their money claims. While Dole denied any employer-employee relationship
with the respondents.

The Labor Arbiter ruled that respondents were illegally dismissed and ordered QFI to
pay them in their respective backwashes and other unpaid salaries. The LA held that Esloyo's
dismissal was tainted with malice and bad faith, finding that: (a) he was not given the

81 | P a g e
opportunity to refute the charges leveled against him, and (b) the audit report submitted was
based on unverified statements. The LA likewise found no substantial evidence to support the
charges against Esloyo, and thus ruled that the claim of loss of trust and confidence was
without basis. In the same vein, the LA declared Magsila's dismissal to be illegal. On the
other hand, Dole was deleted as party to the case, upon a finding that it has no employer-
employee relationship with respondents; while the impleaded QFI officials were absolved
from personal liability. 

QFI filed before the NLRC a notice of appeal and a memorandum. The memorandum
was accompanied by: (a) a motion to reduce bond averring that it was encountering difficulty
raising the amount of the bond and finding an insurance company that can cover said amount
during the short period of time allotted for an appeal; and (b) a cash bond in the amount of
P400,000.00 (partial bond).

Contrary to the LA’s ruling, NLRC held that respondents were not illegally dismissed.
It gave credence to the audit report which showed the various infractions committed by
Esloyo in violation of the company rules and regulations, and in breach of the confidence
reposed on him, warranting his dismissal. It also found substantial evidence to support the
losses suffered by QFI, and thus, declared Magsila's dismissal to prevent losses as a valid
exercise of the management's prerogative. Subsequently, but before the NLRC could act on
the motion to reduce bond, QFI posted a surety bond from an accredited insurance company
fully covering the monetary judgment, which respondents vehemently opposed.

Respondents filed a petition for certiorari to the CA. The CA reversed and set aside
the ruling of the NLRC and reinstated LA’s decision. It ruled that QFI's failure to post the
required bond in an amount equivalent to the monetary judgment impeded the perfection of
its appeal, and rendered the LA's Decision final and executory. Thus, the NLRC was bereft of
jurisdiction and abused its discretion in entertaining the appeal. 

ISSUE:
Whether the CA erred in ascribing grave abuse of discretion on the part of the NLRC
in giving due course to QFI’s appeal. 

SC RULING:
Yes. In Nicol v. Footjoy Industrial Corp., 555 Phil. 275 (2007), the Court summarized
the guidelines under which the NLRC must exercise its discretion in considering an
appellant’s motion for reduction of bond in this wise:
“The bond requirement on appeals involving monetary awards has been and
may be relaxed in meritorious cases. These cases include instances in which (1) there
was substantial compliance with the Rules, (2) surrounding facts and circumstances
constitute meritorious grounds to reduce the bond, (3) a liberal interpretation of the
requirement of an appeal bond would serve the desired objective of resolving
controversies on the merits, or (4) the appellants, at the very least, exhibited their
willingness and/or good faith by posting a partial bond during the reglementary
period.”

As to what constitutes “a reasonable amount of bond” that must accompany the

motion to reduce bond in order to suspend the period to perfect an appeal, the Court, in

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McBurnie v. Ganzon, G.R. Nos. 178034, 178117, and 186984-85, October 17, 2013, 707
SCRA 646, 679, pronounced:

To be able to ensure that the provisions of Section 6, Rule VI of the NLRC Rules of
Procedure give parties the chance to seek a reduction of the appeal bond are effectively
carried out, without however defeating the benefits of the bond requirement in favor of a
winning litigant, all motions to reduce bond that are to be filed with the NLRC shall be
accompanied by the posting of a cash or surety bond equivalent to 10 percent of the monetary
award that is subject of the appeal, which shall provisionally be deemed the reasonable
amount of the bond in the meantime that an appellant’s motion is pending resolution by the
Commission. In conformity with the NLRC Rules, the monetary award, for the purpose of
computing the necessary appeal bond, shall exclude damages and attorney’s fees. Only after
the posting of a bond in the required percentage shall an appellant’s period to perfect an
appeal under the NLRC Rules be deemed suspended. (Emphasis and underscoring supplied)

Hence, the posting of a P400,000.00 cash bond equivalent to more than 20 percent of
the monetary judgment, together with the Motion to Reduce Bond within the reglementary
period was sufficient to suspend the period to perfect the appeal. The posting of the said
partial bond coupled with the subsequent posting of a surety bond in an amount equivalent to
the monetary judgment also signified QFI’s good faith and willingness to recognize the final
outcome of its appeal.

In determining the reasonable amount of appeal bonds, however, the Court primarily
considers the merits of the motions and the appeals. It should be emphasized that the NLRC
has full discretion to grant or deny the motion to reduce bond, and its ruling will not be
disturbed unless tainted with grave abuse of discretion. Verily, an act of a court or tribunal
can only be considered to be tainted with grave abuse of discretion when such act is done in a
capricious or whimsical exercise of judgment as is equivalent to lack of jurisdiction, which
clearly is not extant with respect to the NLRC’s cognizance of QFI’s appeal. 

Far from having gravely abused its discretion, the NLRC correctly preferred
substantial justice over the rigid and stringent application of procedural rules. 
 
 

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84 | P a g e
 41. ALIVIADO ET.AL. V PROCTER & GAMBLE PHILS., INC., & PROMM-GEM,
INC.
G.R. No. 160506, March 9, 2010

 
Petitioners worked as merchandisers of P&G from various dates. They individually
signed employment contracts with either Promm-Gem or SAPS for periods of more or less
five months at a time, and were assigned at different outlets, supermarkets and stores where
they handled all P&G products. Their wages were collected from Promm-Gem or SAPS.
SAPS and Promm-Gem imposed disciplinary measures on erring merchandisers for reasons
such as habitual absenteeism, dishonesty or changing day-off without prior notice. 

P&G entered into contracts with Promm-Gem and SAPS for promotion and
merchandising of its products to enhance consumer awareness and acceptance. Petitioners
filed a complaint against P&G for regularization, service incentive leave pay and other
benefits with damages, and later added matter of subsequent dismissal. 

The Labor Arbiter dismissed the complain for lack of merit and rule that there is no
employer-employee relationship between petitioners and P&G. It was found that the selection
and engagement of the petitioners, the payment of their wages, the power of dismissal and
control with respect to the means and methods by which their work was accomplished, were
all done and exercised by Promm-Gem/SAPS. The petitioners appealed to the NLRC, only to
get their petition denied. They ten filed to the CA, alleging grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of the Labor Arbiter and the NLRC.
However, CA denied the petition. 

ISSUE:
Whether there is an employer-employee relationship that exists between the petitioner
and P&G.

SC RULING:
It is important to first determine whether Promm-Gem and SAPS are labor-only
contractors or legitimate job contractors.

It is clear that the law and its implementing rules allow contracting arrangements for
the performance of specific jobs, works or services. However, in order for such outsourcing
to be valid, it must be made to an independent contractor because the current labor rules
expressly prohibit labor-only contracting.

85 | P a g e
 There is "labor-only" contracting where the person supplying workers to an
employer does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by such
person are performing activities which are directly related to the principal business of such
employer. In such cases, the person or intermediary shall be considered merely as an agent of
the employer who shall be responsible to the workers in the same manner and extent as if the
latter were directly employed by him. [Article 106 of the Labor Code]

Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as
amended by Department Order No. 18-02: 
Section 3. Trilateral Relationship in Contracting Arrangements. — In
legitimate contracting, there exists a trilateral relationship under which there is a
contract for a specific job, work or service between the principal and the contractor or
subcontractor, and a contract of employment between the contractor or subcontractor
and its workers. Hence, there are three parties involved in these arrangements, the
principal which decides to farm out a job or service to a contractor or subcontractor,
the contractor or subcontractor which has the capacity to independently undertake the
performance of the job, work or service, and the contractual workers engaged by the
contractor or subcontractor to accomplish the job[,] work or service. 
Section 5. Prohibition against labor-only contracting. — Labor-only
contracting is hereby declared prohibited. For this purpose, labor-only contracting
shall refer to an arrangement where the contractor or subcontractor merely recruits,
supplies or places workers to perform a job, work or service for a principal, and any
of the following elements are present:
The contractor or subcontractor does not have substantial capital or
investment which relates to the job, work or service to be performed and the
employees recruited, supplied or placed by such contractor or subcontractor
are performing activities which are directly related to the main business of the
principal; or
[T]he contractor does not exercise the right to control over the
performance of the work of the contractual employee.

Evidence shows that Promm-Gem supplied its complainant-workers with the relevant
materials, such as markers, tapes, liners and cutters, necessary for them to perform their
work. At the same time, Promm-Gem also issued uniforms to them and it is also relevant to
mention that Promm-Gem already considered the complainants working under it as its
regular, not merely contractual or project, employees. Under such circumstances, Promm-
Gem cannot be considered as a mere labor-only contractor, rather, it is a legitimate
independent actor. 

Thus, petitioners, who have worked under and been dismissed by Promm-Gem are
considered employees of Promm-Gem and not of P&G. 

42. ATTY. ORTIZ vs. SAN MIGUEL CORPORATION

G.R. No. 151983-84, July 31, 2008

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 Petitioner represented the complainants in two separate cases for illegal dismissal
with backwages and other benefits against respondent (1992 & 1993). In both cases, the
Labor Arbiter ruled in favor of petitioner’s clients.

SMC elevated the matter to the NLRC then to the Court of Appeals. NLRC rendered a
decision modifying the award to 10% attorney's fees of the total monetary award or
P198,296.95. While the private respondent's Petitions for Certiorari were pending before the
Court of Appeals, all but one of the remaining complainants in both cases appeared on
various dates before LA’s and in the presence of two witnesses, signed separate Deeds of
Release, Waiver and Quitclaim in favor of private respondent. Complainants agreed to settle
their claims against private respondent for amounts less than what the NLRC actually
awarded. Private respondent withheld 10% of the total amount agreed upon by the parties in
the said Deeds as attorney's fees and handed it over to petitioner.

The Court of Appeals rendered a Decision affirming the NLRC Decision only insofar
as it concerned complainant Alfredo Gadian, Jr., the only complainant who did not execute a
Deed of Release, Waiver and Quitclaim. With respect to the other complainants, their
complaints were dismissed on account of their duly executed Deeds of Release, Waiver and
Quitclaim.

Herein petitioner, for their part, likewise moved for the partial reconsideration of the
same Decision of the appellate court praying that the award of attorney's fees of 10% should
be based on the monetary awards adjudged by the NLRC.

ISSUE:
Whether he is entitled to the amount of attorney's fees as adjudged by the NLRC or
only to the 10% of the amounts actually paid to his clients

SC RULING:
Since the complainants decided to settle their complaints against the private
respondent, the amounts actually received by them pursuant to the Deeds of Release, Waiver
and Quitclaim are the amounts "recovered" and the proper basis for determining the 10%
attorney's fees.

Article 111 of the Labor Code, as amended, specifically provides that “in cases of
unlawful withholding of wages the culpable party may be assessed attorney's fees equivalent
to ten percent of the amount of wages recovered”.

There are two commonly accepted concepts of attorney's fees, the so-called ordinary
and extraordinary. In its ordinary concept, an attorney's fee is the reasonable compensation
paid to a lawyer by his client for the legal services the former has rendered to the latter. The
basis of this compensation is the fact of the attorney's employment by and his agreement with
the client. 

In its extraordinary concept, attorney's fees are deemed indemnity for damages
ordered by the court to be paid by the losing party in a litigation. It is payable not to the
lawyer but to the client, unless they have agreed that the award shall pertain to the lawyer as
additional compensation or as part thereof. Article 111 of the LC, as amended, contemplates
the extraordinary concept of attorney's fees. 

87 | P a g e
 Based on the foregoing, the attorney's fees awarded by the NLRC pertain to the
complainants, petitioner's clients, as indemnity for damages; and not to petitioner as
compensation for his legal services.

Records show that the petitioner neither alleged nor proved that his clients, the
complainants, willingly agreed that the award of attorney's fees would accrue to him as an
additional compensation or part thereof. What the complainants explicitly agreed to in their
individual Deeds of Release, Waiver, and Quitclaim was that the 10% attorney's fees of the
petitioner shall be deducted from the amount of the gross settlement

Thus, the Court had no recourse but to interpret the award of attorney's fees by the
NLRC in its extraordinary concept. And since the attorney's fees pertained to the
complainants as indemnity for damages, it was totally within the complainants' right to waive
the amount of said attorney's fees and settle for a lesser amount thereof in exchange for the
immediate end to litigation. Petitioner cannot prevent complainants from compromising
and/or withdrawing their complaints at any stage of the proceedings just to protect his
anticipated attorney's fees. 

Even assuming arguendo that the complainants did indeed agree that the attorney's
fees awarded by the NLRC should be considered in their ordinary concept, i.e., as
compensation for petitioner's services, we refer back to Article 111 of the Labor Code, as
amended, which provides that the attorney's fees should be equivalent to 10% of the amount
of wages recovered. 

However, as previously stated, since the complainants decided to settle their

complaints against the private respondent, the amounts actually received by them pursuant to
the Deeds of Release, Waiver and Quitclaim are the amounts "recovered" and the proper
basis for determining the 10% attorney's fees.

Furthermore, as to the validity of the Deeds of Release, Waiver and Quitclaim

executed by the complainants, the Court ruled that “while quitclaims executed by employees
are commonly frowned upon as contrary to public policy and are ineffective to bar claims for
the full measure of the employees’ legal rights, there are legitimate waivers that represent a
voluntary and reasonable settlement of laborers’ claims which should be respected by the
courts as the law between the parties.

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 43. KAISAHAN AT KAPATIRAN NG MGA MANGGAGAWA VS
MANILA WATER COMPANY, INC.

The Union is the duly recognized bargaining agent of the rank-and-file employees of
the respondent Manila Water Company, Inc. (Company) while Borela is the Union President.

On February 21, 1997, Metropolitan Waterworks and Sewerage

System (MWSS) entered into a Concession Agreement (Agreement)with the Company to
privatize the operations of the MWSS. Article 6.1.3 of the Agreement provides that "the
Concessionaire shall grant [its] employees benefits no less favorable than those granted to
MWSS employees at the time of [their] separation from MWSS." Among the benefits
enjoyed by the employees of the MWSS were the amelioration allowance (AA) and the cost-
of-living allowance (COLA) granted in August 1979, pursuant to Letter of Implementation
No. 97 issued by the Office of the President. The payment of the AA and the COLA was
discontinued pursuant to Republic Act No. 6758, otherwise known as the "Salary
Standardization Law," which integrated the allowances into the standardized salary. 

Nonetheless, in 2001, the Union demanded from the Company the payment of the AA
and the COLA during the renegotiation of the parties' Collective Bargaining
Agreement (CBA).  The Company initially turned down this demand, however, it
subsequently agreed to an amendment of the CBA on the matter. Thereafter, the Company
integrated the AA into the monthly payroll of all its employees beginning August 1, 2002,
payment of the AA and the COLA after an appropriation was made and approved by the
MWSS Board of Trustees. 

The Company, however, did not subsequently include the COLA since the
Commission on Audit disapproved its payment because the Company had no funds to cover
this benefit. As a result, the Union and Borela filed on April 15, 2003 a complaint against the

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Company for payment of the AA, COLA, moral and exemplary damages, legal interest, and
attorney's fees before the NLRC.

The Labor Arbiter ruled in favor of the petitioners and ordered the payment of their
AA and COLA, six percent (6%) interest of the total amount awarded, and ten percent (10%)
attorney's fees. The National Labor Relations Commission affirmed with modification the
LA's decision. It set aside the award of the COLA benefits because the claim was not proven
and established, but ordered the Company to pay the petitioners their accrued AA of about
P107,300,000.00 in lump sum and to continue paying the AA starting August 1, 2002. It also
upheld the award of 10% attorney's fees to the petitioners. It both MPRs, prompting the
Company to elevate the case to the CA via a petition for certiorari under Rule 65 of the Rules
of Court.
The Court of Appeals modified the assailed NLRC rulings by deleting "[t]he orders
for respondent MWCI to pay attorney's fees equivalent to 10% of the total judgment awards.
It recognized the binding effect of the MOA between the Company and the Union; it stressed
that any further award of attorney's fees is unfounded considering that it did not find anything
in the Agreement that is contrary to law, morals, good customs, public policy or public order.
CA cited Traders Royal Bank Employees Union-Independent v. NLRC where SC
distinguished between the two commonly accepted concepts of attorney's fees — the ordinary
and the extraordinary. The Supreme Court held in that case that under its ordinary concept,
attorney's fees are the reasonable compensation paid to a lawyer by his client for legal
services rendered. On the other hand, in its extraordinary concept, attorney's fees represent an
indemnity for damages ordered by the court to be paid by the losing party in a litigation based
on what the law provides; it is payable to the client not to the lawyer, unless there is an
agreement to the contrary. The CA noted that the fees at issue in this case fall under the
extraordinary concept — the NLRC having ordered the Company, as losing party, to pay the
Union and its members ten percent (10%) attorney's fees. It found the award without basis
under Article 111 of the Labor Code which provides that attorney's fees equivalent to ten
percent (10%) of the amount of wages recovered may be assessed only in cases of unlawful
withholding of wages. The facts of the case do not indicate any unlawful withholding of
wages or bad faith attributable to the Company. The additional grant of 10% attorney's fees
violates Article 111 of the Labor Code considering that the MOA between the parties already
ensured the payment of 10% attorney's fees, deductible from the AA and CBA receivables of
the Union's members.

ISSUE:
Whether the NLRC gravely abused its discretion in awarding ten percent (10%)
attorney's fees to the petitioners. 

SC RULING:
Article 111 of the Labor Code, as amended, governs the grant of attorney's fees in
labor cases:
Art. 111. Attorney's fees. — (a) In cases of unlawful withholding of wages, the
culpable party may be assessed attorney's fees equivalent to ten percent of the amount
of wages recovered. (b) It shall be unlawful for any person to demand or accept, in
any judicial or administrative proceedings for the recovery of wages, attorney's fees
which exceed ten percent of the amount of wages recovered.

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

90 | P a g e
 Section 8. Attorney's fees. — Attorney's fees in any judicial or administrative
proceedings for the recovery of wages shall not exceed 10% of the amount awarded.
The fees may be deducted from the total amount due the winning party.

The ten percent (10%) attorney's fees awarded by the NLRC on the basis of Article
111 of the Labor Code accrue to the Union's members as indemnity for damages and not to
the Union's counsel as compensation for his legal services, unless, they agreed that the award
shall be given to their counsel as additional or part of his compensation.

In this case the Union bound itself to pay 10% attorney's fees to its counsel under the
MOA and also gave up the attorney's fees awarded to the Union's members in favor of their
counsel. This is supported by Borela's affidavit which stated that "[t]he 10% attorney's fees
paid by the members/employees is separate and distinct from the obligation of the company
to pay the 10% awarded attorney's fees which we also gave to our counsel as part of our
contingent fee agreement." 

The limit to this agreement is that the indemnity for damages imposed by the NLRC
on the losing party (i.e., the Company) cannot exceed ten percent (10%).

Properly viewed from this perspective, the award cannot be taken to mean an
additional grant of attorney's fees, in violation of the ten percent (10%) limit under Article
111 of the Labor Code since it rests on an entirely different legal obligation than the one
contracted under the MOA.

Simply stated, the attorney's fees contracted under the MOA do not refer to the
amount of attorney's fees awarded by the NLRC; the MOA provision on attorney's fees does
not have any bearing at all to the attorney's fees awarded by the NLRC under Article 111 of
the Labor Code. Based on these considerations, it is clear that the CA erred in ruling that the
LA's award of attorney's fees violated the maximum limit of ten percent (10%) fixed by
Article 111 of the Labor Code.

44. PAL VS ZAMORA

G.R. No. 166996, February 6, 2007

Zamora is a Cargo Representative at PAL’s Import Operations Division. Zamora was

dismissed from service for insubordination, neglect of customer, disrespect for authority and
absence without official leave. Zamora filed a complaint against petitioners before NLRC for
illegal dismissal, unfair labor practice, non-payment of wages, damages and attorney’s fees.

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 The Labor Arbiter dismissed Zamora’s complaint for lack of merit. Ordered Zamora
to report to his new assignment at PAL and for PAL to accept him back to work under the
same terms and conditions of employment prior to the dispute as soon as it resumes
operations or, for PAL to pay him his appropriate separation pay in the event it finally closed
shop.

The National Labor Relations Commission ordered the immediate reinstatement of

Zamora to his former position. PAL "failed to substantiate that Zamora’s transfer was for a
just and proper cause."

PAL, et al. filed a Petition for Certiorari before CA. Zamora filed anew a Motion for
Partial Execution reiterating his earlier prayer for the execution of the NLRC Decision with
regard to his reinstatement to his former position and the payment of monetary benefits
allegedly due him. 

NLRC advised LA to issue a Writ of Execution which, due to a supervening event,

the abolition of PAL’s Import Operations Division – must vary the terms of the final
judgment to the extent that: (1) the complainant must be awarded, in lieu of reinstatement,
separation pay equivalent to 1 month’s salary for every year of service from February 9, 1981
to June 30, 2000; and (2) the award of backwages must be computed from December 15,
1995 to June 30, 2000.

The Court of Appeals set aside NLRC Resolution. REINSTATED Zamora to his
former position without loss of seniority rights as decreed in the 1 st NLRC decision which has
already become final and executory. PAL’s rehabilitation plan was submitted in 1999 and it
has been almost five years since then. Disallowing the enforcement to the claim that it would
unnecessarily add to the burden of management, does not justify the aggravation caused in
the delay in execution of the judgment in favor of Zamora.

Zamora has been detained in jail after having been charged with the crime of murder
 
The Court of Appeals modified NLRC resolution. Considering that Zamora is a
detention prisoner making reinstatement impossible, PAL is hereby ordered to pay Zamora
his separation pay, in lieu of reinstatement, to be computed at one month salary for every year
of service and backwages. As PAL is still under receivership, the monetary claims of Zamora
must be presented to PAL Rehabilitation Receiver, subject to the rules on preference of
credits.

ISSUE:
Whether or not CA committed grave error in ordering that Zamora’s monetary claim
be presented to PAL rehabilitation receiver, subject to rules on preference of credits

SC RULING:
Section 5(d) and Section 6(c)of PD 902-A respectively:
SECTION 5. In addition to the regulatory adjudicative functions of the
Securities and Exchange Commission over corporations, partnerships and other forms
of associations registered with it as expressly granted under existing laws and decrees,
it shall have original and exclusive jurisdiction to hear and decide cases involving:

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 d) Petitions of corporations, partnerships or associations to be declared
in the state of suspension of payments in cases where the corporation,
partnership or association possesses property to cover all its debts but foresees
the impossibility of meeting them when they respectively fall due or in cases
where the corporation, partnership or association has no sufficient assets to
cover its liabilities, but is under the [management of a rehabilitation receiver
or] management committee created pursuant to this Decree.
SECTION 6. In order to effectively exercise such jurisdiction, the
Commission shall possess the following:
c) To appoint one or more receivers of the property, real or personal,
which is the subject of the action pending before the Commission in
accordance with the pertinent provisions of the Rules of Court in such other
cases whenever necessary in order to preserve the rights of the parties-litigants
and /or protect the interest of the investing public and creditors: Provided,
finally, That upon appointment of a management committee, the rehabilitation
receiver, board or body, pursuant to this Decree, all actions for claims against
corporations, partnerships or associations under management or receivership
pending before any court, tribunal, board or body shall be suspended
accordingly. 

In BF Homes vs CA, the raison d'être behind the suspension of claims pending
rehabilitation proceedings is to enable the management committee or rehabilitation receiver
to effectively exercise its/his powers free from any judicial or extra-judicial interference that
might unduly hinder or prevent the "rescue" of the debtor company.

In Rubberworld vs NLRC, "upon the appointment [by the SEC] of a management

committee or a rehabilitation receiver," all actions for claims against the corporation pending
before any court, tribunal or board shall ipso jure be suspended. 

The law is clear: upon the creation of a management committee or the appointment of
a rehabilitation receiver, all claims for actions "shall be suspended accordingly." No
exception in favor of labor claims is mentioned in the law. Since the law makes no distinction
or exemptions, neither should this Court. Ubi lex non distinguit nec nos distinguere debemos.

The rendition of judgment while petitioner is under a state of receivership could

render violence to the rationale for suspension of payments in Section 6 (c) of P.D. 902-A, if
the judgment would result in the granting of private respondent’s claim to separation pay,
thus defeating the basic purpose behind Section 6 (c) of P.D. 902-A which is to prevent
dissipation of the distressed company’s resources.

In PAL vs CA, “all actions for claims against a corporation pending before any court,
tribunal or board shall ipso jure be suspended in whatever stage such actions may be found
upon the appointment by the SEC of a management committee or a rehabilitation receiver.”

Otherwise stated, no other action may be taken in, including the rendition of judgment
during the state of suspension – what is automatically stayed or suspended are the
proceedings of an action or suit and not just the payment of claims during the execution stage
after the case had become final and executory. 

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 The suspension of action for claims against a corporation under rehabilitation receiver
or management committee embraces all phases of the suit, be it before the trial court or any
tribunal or before this Court. Furthermore, the actions that are suspended cover all claims
against a distressed corporation whether for damages founded on a breach of contract of
carriage, labor cases, collection suits or any other claims of a pecuniary nature.

45. POLYFOAM-RGC INTERNATIONAL, CORPORATION & GRAMAJE VS

EDGARDO CONCEPCION
G.R. No. 172349, June 13, 2012

Edgardo Concepcion alleged that he was hired by Polyfoam as an "all-around" factory

worker and served as such for almost six years.  On January 14, 2000, he allegedly
discovered that his time card was not in the rack and was later informed by the security guard
that he could no longer punch his time card. When he protested to his supervisor, the latter
allegedly told him that the management decided to dismiss him due to an infraction of a
company rule. Cheng, the company manager, also refused to face him. Respondent counsel
later wrote a letter to Polyfoam manager requesting that respondent be re-admitted to work,
but the request remained unheeded prompting the latter to file the complaint for illegal
dismissal.

On April 28, 2000, Gramaje filed a Motion for Intervention claiming to be the real
employer of respondent.  On the other hand, Polyfoam and Cheng filed a Motion to Dismiss
on the grounds that the NLRC has no jurisdiction over the case, because of the absence of
employer-employee relationship between Polyfoam and respondent and that the money
claims had already prescribed. 

On May 24, 2000, Labor Arbiter Adolfo Babiano issued an Order granting Gramaje
motion for intervention, it appearing that she is an indispensable party and denying Polyfoam
and Cheng motion to dismiss as the lack of employer-employee relationship is only a matter
of defense.

Polyfoam and Cheng insisted that the NLRC has no jurisdiction over the case,
because respondent was not their employee. They likewise contended that respondent money
claims had already prescribed.

Gramaje claimed that P.A. Gramaje Employment Services (PAGES) is a legitimate

job contractor who provided some manpower needs of Polyfoam. It was alleged that
respondent was hired as "packer" and assigned to Polyfoam, charged with packing the latter
finished foam products.  She argued, however, that respondent was not dismissed from
employment, rather, he simply stopped reporting for work.
 
Labor Arbiter found respondent to have been illegally dismissed from employment
and holding Polyfoam and Gramaje/PAGES solidarily liable for respondent money claims.
NLRC modified the LA decision by exonerating Polyfoam from liability for respondent claim

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for separation pay and deleting the awards of backwages, 13th month pay, damages, and
attorney fees.

The CA agreed with the LA conclusion that Gramaje is not a legitimate job contractor
but only a "labor-only" contractor.  The appellate court affirmed the LA findings of illegal
dismissal as respondent was dismissed from the service without cause and due process.
Consequently, separation pay in lieu of reinstatement was awarded. The CA quoted with
approval the LA conclusions on the award of respondent other money claims.

ISSUE:
Whether or not Gramaje is an independent job contractor

SC RULING:
Gramaje is a Labor-Only Contractor - Article 106 of the Labor Code explains the
relations which may arise between an employer, a contractor, and the contractor employees.
The test of independent contractorship is "whether one claiming to be an independent
contractor has contracted to do the work according to his own methods and without being
subject to the control of the employer, except only as to the results of the work." 

In San Miguel Corporation v. Semillano, the Court laid down the criteria in
determining the existence of an independent and permissible contractor relationship. Simply
put, the totality of the facts and the surrounding circumstances of the case are to be
considered. Each case must be determined by its own facts and all the features of the
relationship are to be considered.

Applying the foregoing tests, we agree with the CA conclusion that Gramaje is not an
independent job contractor, but a "labor-only" contractor.

First, Gramaje has no substantial capital or investment. The presumption is that a

contractor is a labor-only contractor unless he overcomes the burden of proving that it has
substantial capital, investment, tools, and the like. The employee should not be expected to
prove the negative fact that the contractor does not have substantial capital, investment and
tools to engage in job-contracting.

Gramaje claimed that it has substantial capital of its own as well as investment in its
office, equipment and tools. She pointed out that she furnished the plastic containers and
carton boxes used in carrying out the function of packing the mattresses of Polyfoam. She
added that she had placed in Polyfoam workplace ten (10) sealing machines, twenty (20)
hand trucks, and two (2) forklifts to enable respondent and the other employees of Gramaje
assigned at Polyfoam to perform their job. Finally, she explained that she had her own office
with her own staff. 

However, aside from her own bare statement, neither Gramaje nor Polyfoampresented
evidence showing Gramaje ownership of the equipment and machineries used in the
performance of the alleged contracted job. Considering that these machineries are found in
Polyfoam premises, there can be no other logical conclusion but that the tools and equipment
utilized by Gramaje and her "employees" are owned by Polyfoam. Neither did Polyfoam nor
Gramaje show that the latter had clients other than the former. Since petitioners failed to
adduce evidence that Gramaje had any substantial capital, investment or assets to perform the
work contracted for, the presumption that Gramaje is a labor-only contractor stands.

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 Second, Gramaje did not carry on an independent business or undertake the
performance of its service contract according to its own manner and method, free from the
control and supervision of its principal, Polyfoam, its apparent role having been merely to
recruit persons to work for Polyfoam. It is undisputed that respondent had performed his task
of packing Polyfoam foam products in Polyfoam premises. 

As to the recruitment of respondent, petitioners were able to establish only that

respondent application was referred to Gramaje, but that is all. Prior to his termination,
respondent had been performing the same job in Polyfoambusiness for almost six (6) years.
He was even furnished a copy of Polyfoam "Mga Alituntunin at Karampatang Parusa,"which
embodied Polyfoam rules on attendance, the manner of performing the employee duties,
ethical standards, cleanliness, health, safety, peace and order. These rules carried with them
the corresponding penalties in case of violation.

While it is true that petitioners submitted the Affidavit of Polyfoam supervisor Victor
Abadia, claiming that the latter did not exercise supervision over respondent because the
latter was not Polyfoam but Gramaje employee, said Affidavit is insufficient to prove such
claim. Petitioners should have presented the person who they claim to have exercised
supervision over respondent and their alleged other employees assigned to Polyfoam. It was
never established that Gramaje took entire charge, control and supervision of the work and
service agreed upon. And as aptly observed by the CA, "it is likewise highly unusual and
suspect as to the absence of a written contract specifying the performance of a specified
service, the nature and extent of the service or work to be done and the term and duration of
the relationship."
A finding that a contractor is a "labor-only" contractor, as opposed to permissible job
contracting, is equivalent to declaring that there is an employer-employee relationship
between the principal and the employees of the supposed contractor, and the "labor-only"
contractor is considered as a mere agent of the principal, the real employer. 

In this case, Polyfoam is the principal employer and Gramaje is the labor-only
contractor. Polyfoam and Gramaje are, therefore, solidarily liable for the rightful claims of
respondent.

46. GOYA, INC VS GOYA, INC EMPLOYEES UNION

G.R. No. 170052, January 21, 2013

Goya, Inc. hired contractual employees from PESO Resources Development

Corporation to perform temporary and occasional services in its factory in Marikina City.
Goya, Inc. Employees UnionFFW (Union) requested for a grievance conference on the
ground that the contractual workers do not belong to the categories of employees stipulated in
the existing Collective Bargaining Agreement.

Both parties manifested before the Voluntary Arbitrator to submit themselves for
resolution the solitary issue of "whether or not the Company is guilty of unfair labor acts in
engaging the services of PESO, a 3rd party service provider, under the existing CBA”.

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 Union asserted that the hiring of contractual employees from PESO is not a
management prerogative and in gross violation of the CBA. The contractual workers have
been assigned to work in positions previously handled by regular workers and Union
members, violating Section 4, Article I of the CBA

The Company argued that: (c) Section 4, Article I of the CBA merely provides for the
definition of the categories of employees and does not put a limitation on the Company’s
right to engage the services of job contractors or its management prerogative.

VA directed the Company to observe and comply with its commitment under the
CBA. The Company should have directly hired the services of casual employees rather than
do it through PESO. The engagement of PESO is not in keeping with the intent and spirit of
the CBA provision. The right of management to outsource parts of its operations is not totally
eliminated but is merely limited by the CBA. Given the foregoing, the Company’s
engagement of PESO for the given purpose is indubitably a violation of the CBA.

The Court of Appeals ruled that the PESO contractual employees do not fall within
the enumerated categories of employees stated in the CBA. Since the Company engaged the
services of PESO to perform temporary or occasional services akin to those performed by
casual employees, the Company should have tapped the services of casual employees instead
of engaging PESO. The Company’s management prerogative of contracting out services is
not without limitation. In the case at bench, the CBA of the parties has already provided for
the categories of the employees in the Company’s establishment. These categories of
employees particularly with respect to casual employees serve as limitation to the Company’s
prerogative to outsource parts of its operations. With the provision on casual employees, the
hiring of PESO contractual employees, therefore, is not in keeping with the spirit and intent
of their CBA.

ISSUE:
Whether or not the management prerogative of the Company can be limited by the
CBA

SC RULING:
VA and the CA correctly ruled that the Company’s act of contracting out/outsourcing
is within the purview of management prerogative. Both did not say, however, that such act is
a valid exercise thereof. Obviously, this is due to the recognition that the CBA provisions
agreed upon by the Company and the Union delimit the free exercise of management
prerogative pertaining to the hiring of contractual employees.

Indeed, the VA opined that "the right of the management to outsource parts of its
operations is not totally eliminated but is merely limited by the CBA," while the CA held that
"this management prerogative of contracting out services, however, is not without limitation.
These categories of employees particularly with respect to casual employees serve as
limitation to the prerogative to outsource parts of its operations when hiring contractual
employees."

A collective bargaining agreement is the law between the parties. It is familiar and
fundamental doctrine in labor law that the CBA is the law between the parties and they are
obliged to comply with its provisions.

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 In Honda Phils., Inc. v. Samahan ng Malayang Manggagawa sa Honda, 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.

Moreover, if the terms of a contract, as in a CBA, are clear and leave no doubt upon
the intention of the contracting parties, the literal meaning of their stipulations shall control.

In this case, Section 4, Article I of the CBA between the Company and the Union
must be read in conjunction with its Section 1, Article III (on union security). Both are
interconnected and must be given full force and effect. Also, these provisions are clear and
unambiguous. The terms are explicit and the language of the CBA is not susceptible to any
other interpretation. Hence, the literal meaning should prevail.

The exercise of management prerogative is not unlimited; it is subject to the

limitations found in law, collective bargaining agreement or the general principles of fair play
and justice. Evidently, this case has one of the restrictions- the presence of specific CBA
provisions.

To reiterate, the CBA is the norm of conduct between the parties and compliance
therewith is mandated by the express policy of the law.

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99 | P a g e
 47. UNIVERSITY OF THE EAST, ET AL. vs. PEPANIO
G.R. No. 193897, January 23, 2013

In 1992, DECS issued the Revised Manual of Regulations for Private Schools, which
requires college faculty members to have a master's degree as a minimum educational
qualification for acquiring regular status.

University of the East hired respondent Mariti D. Bueno (Bueno) in 1997 and
respondent Analiza F. Pepanio (Pepanio) in 2000, both on a semester-to-semester basis to
teach in its college. During this time, the 1994 CBA was still in force. It provided that UE
shall extend only semester-to-semester appointments to college faculty staffs who did not
possess the minimum qualifications. Meantime, DECS-CHED-TESDA-DOLE Joint Order 1
was issued which provides that “teaching or academic personnel who do not meet the
minimum academic qualifications shall not acquire tenure or regular status.”

Then in 2001, UE and the faculty union entered into a new CBA that would have the
school extend probationary full-time appointments to full-time faculty members who did not
yet have the required postgraduate degrees provided that the latter would obtain such
requirement during their probationary period. Hence, UE extended probationary
appointments to Bueno and Pepanio. The two, however, failed to obtain post-graduate
degrees.

UE informed Bueno and Pepanio that their probationary status is about to expire since
they lack the required post-graduate qualification. However, Bueno and Pepanio demanded
that they should be considered as regular employees since they were hired in 1997 and 2000,
when what was in force was the 1994 CBA which did not require a master’s degree before
attaining regular status. UE did not heed to their demands.

Thus, they filed a case for illegal dismissal before the Labor Arbiter. The LA ruled in
their favor. Dissatisfied, UE appealed to the NLRC. The NLRC reversed the LA’s ruling.

On petition for certiorari, the Court of Appeals rendered a Decision reinstating the LA’s
Decision by reason of technicality. This prompted UE to file the present petition.

ISSUE:
Whether Bueno and Pepanio were validly terminated from their employment

SC RULING:
Yes. The policy requiring postgraduate degrees of college teachers was provided in
the Manual of Regulations as early as 1992. Indeed, recognizing this, the 1994 CBA provided
even then that UE was to extend only semester- to-semester appointments to college faculty
staffs, like Bueno and Pepanio, who did not possess the minimum qualifications for their
positions. 

Besides, as the Court held in Escorpizo v. University of Baguio, a school CBA must
be read in conjunction with statutory and administrative regulations governing faculty
qualifications. Such regulations form part of a valid CBA without need for the parties to
make express reference to it. While the contracting parties may establish such stipulations,

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clauses, terms and conditions, as they may see fit, the right to contract is still subject to the
limitation that the agreement must not be contrary to law or public policy.

Here, UE gave Bueno and Pepanio more than ample opportunities to acquire the
postgraduate degree required of them. But they did not take advantage of such opportunities.
Justice, fairness, and due process demand that an employer should not be penalized for
situations where it had little or no participation or control. NLRC’s decision is reinstated.

48. PROVINCIAL BUS OPERATORS ASSOCIATION OF THE PHIL VS DOLE

G.R. NO. 202275, JULY 17, 2018

To ensure road safety and address the risk-taking behavior of bus drivers as its
declared objective, the LTFRB issued Memorandum Circular No. 2012-001 1 on January 4,
2012, requiring "all Public Utility Bus (PUB) operators . . . to secure Labor Standards
Compliance Certificates" under pain of revocation of their existing certificates of public
convenience or denial of an application for a new certificate.

The LFRB created this policy based on the finding that the boundary payment scheme
that has since determined the take-home pay of bus drivers and conductors has been proven
inadequate in providing our public utility bus drivers and conductors a decent and living
wage. It decided that this was the best approach to ensure that they get the economic and
social welfare benefits that they deserve.

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 Herein petitioners assail the constitutionality of Department Order No. 118-12 and
Memorandum Circular No. 2012-001, arguing that these issuances violate petitioners' rights
to non-impairment of obligation of contracts, due process of law, and equal protection of the
laws. 

ISSUE: 
Whether or not the DOLE Department Order No. 118-12 and the LTFRB
Memorandum Circular No. 2012-001 deprive public utility bus operators of their right to due
process of law?
Whether or not the DOLE Department Order No. 118-12 and the LTFRB
Memorandum Circular No. 2012-001 impair public utility bus operators' right to non-
impairment of obligation of contracts?
Whether or not the DOLE Department Order No. 118-12 and the LTFRB
Memorandum Circular No. 2012-001 deny public utility bus operators of their right to equal
protection of the laws?

SC RULING:
Anent to the First Issue
No. Department Order No. 118-12 and Memorandum Circular No. 2012-001 are not
violative of due process, either procedural or substantive. Department Order No. 118-12 and
Memorandum Circular No. 2012-001 were issued in the exercise of quasi-legislative powers
of the DOLE and the LTFRB, respectively. As such, notice and hearing are not required for
their validity. In any case, it is undisputed that the DOLE created a Technical Working Group
that conducted several meetings and consultations with interested sectors before
promulgating Department Order No. 118-12. 

Among those invited were bus drivers, conductors, and operators with whom officials
of the DOLE conducted focused group discussions. The conduct of these discussions more
than complied with the requirements of procedural due process. Neither are Department
Order No. 118-12 and Memorandum Circular No. 2012- 001 offensive of substantive due
process. Department Order No. 118-12 and Memorandum Circular No. 2012-001 are
reasonable and are valid police power issuances. The pressing need for Department Order
No. 118-12 is obvious considering petitioners' admission that the payment schemes prior to
the Order's promulgation consisted of the "payment by results," the "commission basis," or
the boundary system. These payment schemes do not guarantee the payment of minimum
wages to bus drivers and conductors.

There is also no mention of payment of social welfare benefits to bus drivers and
conductors under these payment schemes which have allegedly been in effect since "time
immemorial." There can be no meaningful implementation of Department Order No. 118-12
if violating it has no consequence. As such, the LTFRB was not unreasonable when it
required bus operators to comply with the part-fixed-part-performance-based payment
scheme under pain of revocation of their certificates of public convenience. The LTFRB has
required applicants or current holders of franchises to comply with labor standards as regards
their employees, and bus operators must be reminded that certificates of public convenience
are not property. Certificates of public convenience are franchises always subject to
amendment, repeal, or cancellation. Additional requirements may be added for their issuance,
and there can be no violation of due process when a franchise is cancelled for non-
compliance with the new requirement. 

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 An equally important reason for the issuance of Department Order No. 118-12 and
Memorandum Circular No. 2012-001 is to ensure "road safety" by eliminating the "risk-
taking behaviors" of bus drivers and conductors. In Hernandez v. Dolor, this Court observed
that the boundary system "place[s] the riding public at the mercy of reckless and irresponsible
drivers-reckless because the measure of their earnings depends largely upon the number of
trips they make and, hence, the speed at which they drive." Behavioral economics explains
this phenomenon. 

The boundary system puts drivers in a "scarcity mindset" that creates a tunnel vision
where bus drivers are nothing but focused on meeting the boundary required and will do so
by any means possible and regardless of risks. They stop for passengers even outside of the
designated bus stops, impeding traffic flow. They compete with other bus drivers for more
income without regard to speed limits and bus lanes. Some drivers even take in performance-
enhancing drugs and, reportedly, even illegal drugs such as shabu, just to get additional trips.
This scarcity mindset is eliminated by providing drivers with a fixed income plus variable
income based on performance.

The fixed income equalizes the playing field, so to speak, so that competition and
racing among bus drivers are prevented. The variable pay provided in Department Order No.
118-12 is based on safety parameters, incentivizing prudent driving. In sum, Department
Order No. 118-12 and Memorandum Circular No. 2012-001 are in the nature of social
legislations to enhance the economic status of bus drivers and conductors, and to promote the
general welfare of the riding public. They are reasonable and are not violative of due
process. 

Anent to the Second Issue

No. Not all contracts are protected under the non-impairment clause. Contracts whose
subject matters are so related to the public welfare are subject to the police power of the State
and, therefore, some of its terms may be changed or the whole contract even set aside without
offending the Constitution. By statutory declaration, labor contracts are impressed with
public interest and, therefore, must yield to the common good. Labor contracts are subject to
special laws on wages, working conditions, hours of labor, and similar subjects. 

In other words, labor contracts are subject to the police power of the State. Not only
does Department Order No. 118-12 aim to uplift the economic status of bus drivers and
conductors; it also promotes road and traffic safety. Further, certificates of public
convenience granted to bus operators are subject to amendment. When certificates of public
convenience were granted in 2012, Memorandum Circular No. 2011-004 on the "Revised
Terms and Conditions of [Certificates of Public Convenience] and Providing Penalties for
Violations Thereof" was already in place. This Memorandum Circular, issued before
Memorandum Circular No. 2012-001, already required public utility vehicle operators to
comply with labor and social legislations. Franchise holders cannot object to the reiteration
made in Memorandum Circular No. 2012-001. 

Anent to the Third Issue

No. The initial implementation of Department Order No. 118-12 is not violative of the
equal protection clause. Petitioners did not even bother explaining how exactly Department
Order No. 118-12 infringed on their right to equal protection. In Taxicab Operators of Metro
Manila, Inc. v. The Board of Transportation, this Court upheld the initial implementation of
the phase-out of old taxicab units in Metro Manila because of the "heavier traffic pressure

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and more constant use" of the roads. The difference in the traffic conditions in Metro Manila
and in other parts of the country presented a substantial distinction. The same substantial
distinction can be inferred here. Department Order No. 118-12 has also been implemented in
other parts of the country. Petitioners' weak argument is now not only moot. It also deserves
no merit.

49. BERNARDO, ET AL. VS NLRC

G.R. No. 122917 July 12, 1999

43 deaf-mutes were hired on various periods from 1988 to 1993 by Far East Bank and
Trust Co. as Money Sorters and Counters, through a uniformly worded agreement called
“Employment Contract for Handicapped Workers.” Subsequently, they were dismissed.

The petitioners argued that they should be considered regular employees because their
task as money sorters and counters was necessary and desirable to the business of respondent
bank.

Private respondent argued that the petitioners were hired only as “special workers”
and that their employment was merely an “accommodation” in response to the requests of
government officials and civic-minded citizens.

ISSUE:
Whether or not the deaf-mute employees can be considered as regular employees?

RULING:
Yes. The petitioners, except sixteen of them, should be deemed regular employees.
The renewal of the contracts of the handicapped workers and the hiring of others lead to the
conclusion that their tasks were beneficial and necessary to the bank. More importantly, these
facts show that they were qualified to perform the responsibilities of their positions. In other
words, their disability did not render them unqualified or unfit for the tasks assigned to them.

The Magna Carta for Disabled Persons under Section 5 mandates that a qualified
disabled employee should be given the same terms and conditions of employment as a
qualified able-bodied person. This being so, the petitioners are covered under Article 280 of
the Labor Code which defines regular employment to be that the employee has been engaged
to perform activities usually necessary or desirable in the usual business or trade of the
employer.

In De Leon vs. NLRC, the Court ruled that the primary standard of determining
regular employment is the reasonable connection between the particular activity performed
by the employee in relation to the usual trade or business of the employer.

The task of counting and sorting bills is necessary to the business of respondent bank.
With the exception of sixteen of them, twenty-seven petitioners performed these tasks for
more than six months and should be deemed regular employees entitled to security of tenure.

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 In the present case, the handicap of petitioners is not a hindrance to their work. The
eloquent proof of such is the repeated renewal of their employment contracts. Why then
should they be dismissed, simply because they are physically impaired? After showing their
fitness for the work assigned to them, they should be treated and granted the same rights like
any other regular employees.

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 50. OCEAN BUILDERS CONSTRUCTION CORP VS SPOUSES CUBACUB
GR No. 150898, April 13, 2011

Bladimir Cubacub was employed as maintenance in the company of Ocean Builders

Construction Corporation. Bladimir was afflicted with chicken pox and was advised by
Dennis Hao, the company’s general manager, to rest for three days. Bladimir rested in the
barracks of the company where he lived free of charge. Three days later when he went on his
usual chores in the company, he suddenly asked his co-worker Silannga to accompany him to
his house in Tarlac so he could rest. Silangga informed Hao, instead of bringing Bladimir
home Hao ordered him to bring Bladimir to the nearest hospital - Caybiga Community
Hospital, a primary care hospital - where he was confined. 

The parents of Bladimir together with Dr. Frias, their friend, transferred Bladimir to
Quezon City General Hospital and was placed in the ICU. Bladimir died the following day.
According to the death certificate issued by QCGH, the cause of death was cardio-respiratory

106 | P a g e
arrest and the antecedent cause is pneumonia. On the other hand, death certificate issued by
Dr. Frias recorded the causes of death as cardiac arrest, multiple organ system failure,
septicemia and chicken pox. 

Bladimir’s parents filed a complaint for damages alleging that Hao was guilty of
negligence which resulted in the deterioration of Bladimir’s condition leading to his death. 

RTC ruled that Hao was not negligent and dismissed the case. Respondent’s appealed
to the CA, and reversed the RTC’s decision. The CA held that Hao’s failure to bring Bladimir
to a better-equipped hospital violated Article 161 of the Labor Code. It went on to state that
Hao should have foreseen that Bladimir, an adult, could suffer complications from
chickenpox and, had he been brought to hospitals like St. Luke's, Capitol Medical Center,
Philippine General Hospital and the like, Bladimir could have been saved.

Petitioners maintain that Hao exercised diligence more than what the law requires,
hence, they are not liable for damages.  

ISSUE:
Whether Hao and the company is liable for negligence.

SC RULING:
No. Art. 161 of the Labor Code provides:
Article 161.  Assistance of employer. – It shall be the duty of any employer to
provide all the necessary assistance to ensure the adequate and immediate medical and
dental attendance and treatment to an injured or sick employee in case of emergency.  

The Implementing Rules of the Code do not enlighten what the phrase “adequate and
immediate” medical attendance means in relation to an “emergency.”  It would thus appear
that the determination of what it means is left to the employer, except when a full-time
registered nurse or physician is available on-site as required, also under the Labor Code,
specifically Art. 157 which provides:
Article 157.  Emergency Medical and Dental Services. ─ It shall be the duty
of every employer to furnish his employees in any locality with free medical and
dental attendance and facilities consisting of: 
(a) The services of a full-time registered nurse when the number of
employees exceeds fifty (50) but not more than two hundred (200) except
when the employer does not maintain hazardous workplaces, in which case,
the services of a graduate first-aider shall be provided for the protection of
workers, where no registered nurse is available.  The Secretary of Labor and
Employment shall provide by appropriate regulations, the services that shall
be required where the number of employees does not exceed fifty (50) and
shall determine by appropriate order, hazardous workplaces for purposes of
this Article;
(b) The services of a full-time registered nurse, a part-time physician
and dentist, and an emergency clinic, when the number of employees exceeds
two hundred (200) but not more than three hundred (300); and
(c) The services of a full-time physician, dentist and a full-time
registered nurse as well as a dental clinic and an infirmary or emergency
hospital with one bed capacity for every one hundred (100) employees when
the number of employees exceeds three hundred (300).

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 In the present case, there is no allegation that the company premises are hazardous. 
Neither is there any allegation on the number of employees the company has.  If Hao’s
testimony would be believed, the company had only seven regular employees and 20
contractual    employees ─ still short of the minimum 50 workers that an establishment must
have for it to be required to have a full-time registered nurse.

The Court can thus only determine whether the actions taken by petitioners when
Bladimir became ill amounted to the “necessary assistance” to ensure “adequate and
immediate medical attendance” to Bladimir as required under Art. 161 of the Labor Code.  
 
As found by the trial court and evidenced by the records, petitioner Hao’s advice for 
Bladimir to, as he did, take a 3-day rest and to later have him brought to the nearest hospital
constituted “adequate and immediate medical” attendance that he is mandated, under Art.
161, to provide to a sick employee in an emergency.

The alleged negligence of Hao cannot be considered as the proximate cause of the
death of Bladimir.  Proximate cause is that which, in natural and continuous sequence,
unbroken by an efficient intervening cause, produces injury, and without which, the result
would not have occurred.  An injury or damage is proximately caused by an act or failure to
act, whenever it appears from the evidence in the case that the act or omission played a
substantial part in bringing about or actually causing the injury or damage, and that the injury
or damage was either a direct result or a reasonably probable consequence of the act or
omission.

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51. U-BIX CORPORATION VS BANDIOLA
525 SCRA 566 (2007)

Bandiola was employed by U-BIX to install furniture for its customers. Bandiola and
two other U-BIX employees were involved in a vehicular accident on their way to Baguio,
where they were assigned by U-BIX to install furniture for an exhibit. As a result of the
accident, Bandiola sustained a fracture on his left leg. Bandiola’s broken leg was cemented
and was advised to return for future medical treatment by the Philippine Orthopedic Hospital.
U-BIX paid all the medical expenses. But according to Bandiola, when he asked for financial
assistance, U-BIX refused. Bandiola wasn’t able to return to the Orthopedic hospital because
he can no longer afford it. Instead he went to the nearest hospital to where he had his leg cast
in fiberglass. He showed receipts of his hospital transactions and showed that the leg has not
healed after Orthopedic put a plaster on it. 

Bandiola was the one paying for the expenses. He kept on bugging U-BIX and its
high ranked employees, but instead he was told to pay for the expenses in the meantime. And
when he asked for a salary advance while waiting for his leg to heal, he was declined for the
reason that it wasn’t possible because he had not rendered work since the accident. He then
filed a complaint to the Labor Arbiter where he alleged underpayment of salary; non-payment
of overtime pay; premium pay for work performed on holidays and rest days; separation pay;
service pay; 13th month pay; and the payment of actual, moral and exemplary damages.
Bandiola asserts that U-BIX failed to extend to him any financial assistance after he was
injured in the performance of his duties, and that as a result, he suffered physical pain, mental
torture, fright, sleepless nights, and serious anxiety. He claims that this entitles him to moral
and exemplary damages. 

U-BIX denied that Bandiola notified them of any medical expenses he purportedly
incurred until the complaint was filed before the Labor Arbiter. The Labor Arbiter allowed
Bandiola's claim for salary differential, service incentive leave pay and 13th month pay due
to U-BIX's failure to present payrolls or similar documents. Incidentally, the award of these
claims is no longer questioned in the present petition. The other claims, particularly those for
medical expenses that Bandiola allegedly incurred and for moral and exemplary damages,
were dismissed. Bandiola filed an appeal before the NLRC. 

The National Labor Relations Commission amended the decision of the Labor
Arbiter. It ruled that U-BIX should reimburse Bandiola on the medical expenses incurred,
and should pay actual, moral and exemplary damages. U-BIX appealed. Court of Appeals
affirmed Bandiolas entitlement to reimbursement of the medical expenses but reduced the
amount and such actual damages must be proven. 

ISSUE:
Whether Bandiola is entitled to reimbursement

SC RULING:

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 Yes, U-BIX is liable to pay Bandiola reimbursement because of its failure to perform
legal obligations afforded under the Labor Code on medical expenses of employees,
especially on those who suffered in an accident while in the performance of their work. 

The reimbursement of medical expenses for injuries incurred in the course of

employment is part of the benefits enjoyed by U-BIX's employees. The only justification for
its refusal to reimburse Bandiola was that he intended to defraud the company by presenting
spurious receipts amounting to P7,742.50 that were allegedly issued four months before their
presentation. 

Articles 205 and 206 of the Labor Code set the reportorial requirements in cases when
an employee falls sick or suffers an injury arising in the course of employment. An injury is
said to arise "in the course of employment" when it takes place within the period of
employment, at a place where the employee may reasonably be, and while he is fulfilling his
duties or is engaged in doing something incidental thereto. 

As a general rule, the injured employee must notify his employer, who is obligated to
enter the notice in a logbook within five days after notification. Within five days after making
the entry, the employer of a private company reports the work-related sickness or injury to
the SSS. The claim is forwarded to the SSS, which decides on the validity of the claim. When
the SSS denies the claim, the denial may be appealed to the Employees' Compensation
Commission (ECC) within 30 days. 

In the present case, there is no dispute that Bandiola's leg injury was sustained in the
course of his employment with U-BIX. Given the foregoing circumstances, U-BIX had the
legal obligation to record pertinent information in connection with the injuries sustained by
Bandiola in its logbook within five days after it had known about the injuries; and to report
the same to the SSS within five days after it was recorded in the logbook, in accordance with
Articles 205 and 206 of the Labor Code. Had U-BIX performed its lawful duties, the SSS, or
the ECC on appeal, could have properly considered whether or not Bandiola was entitled to
reimbursement for his medical expenses, as well as disability benefits while he was unable to
work. However, U-BIX did not present any evidence showing that it had complied with these
legal requirements. It had not even replied to Bandiola's allegations in his Position Paper,
dated 13 April 1998, that its employees were not even members of the SSS. 

In De Jesus v. Employee's Compensation Commission, this Court further noted that

while the present law protects employers from spurious and long overdue claims, it stresses at
the same time that the claims for compensation are to be promptly and properly addressed.
More importantly, employers no longer need to determine the validity of a claim or to defend
themselves from spurious claims. 

By failing to report Bandiola's injury to the SSS, U-BIX disregarded the law and its
purpose; that is, to provide a proper and prompt settlement of his claims. Instead, U-BIX
arrogated upon itself the duty of determining which medical expenses are proper for
reimbursement. In doing so, it could unnecessarily delay and unjustifiably refuse to reimburse
Bandiola for medical expenses even if they were adequately supported by receipts, as was
done in this instance. The expense and delay undergone by Bandiola since 1997 in obtaining
reimbursement for his medical expenses of P7,742.50 very clearly defeat the purpose of the
law.

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 52. PENTAGON INTERNATIONAL SHIPPING SERVICES, INC.
VS COURT OF APPEALS
G.R. No. 169158, July 1, 2015

Pentagon, a domestic corporation, was a private manning agency licensed by the

POEA to engage in the recruitment of seafarers to service the crewing and personnel
management needs of shipping companies accredited to it. Respondent JDA Inter-Phil, also a
domestic corporation, was similarly engaged in the recruitment of seafarers. 

On March 27, 1998, Pentagon hired respondents Madrio and Rubiano as chief officer
and second engineer, respectively, in behalf of its foreign principal, Baleen Marine, a
corporation based in Singapore. When their 10-month contract expired, they were repatriated
to the Philippines.  Alleging non-payment and underpayment of wages, and claiming
damages and attorney's fees, they separately brought claims against Pentagon and the owners
and managers of Baleen Marine stating that Pentagon and Baleen Marine had reduced their
monthly gross salary by 20% without the prior approval by the POEA; and that Pentagon and
Baleen Marine had not paid their salaries from November 1, 1998 until their repatriation on
March 24, 1999. 

Pentagon denied liability, countering that it had ceased to be the manning agency of
Baleen Marine effective October 1, 1998;  that on June 25, 1998, its Executive Vice-
President had met with Baleen Marine in Singapore to notify the latter that it had been
meanwhile appointed by Neptank Bunkering Services as its exclusive local manning agency.

It further denied liability insisting that the minutes of the October 9, 1998 meeting
partook of the nature of the agreement required by law to effectively transfer the agency and
the corresponding liability to JDA Inter-Phil.

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JDA Inter-Phil insisted that although it had applied with the POEA for the transfer
and accreditation of Baleen Marine's vessels in its favor, it withdrew the application and did
not execute an affidavit of assumption and responsibility as required; that, consequently,
Pentagon continued to be jointly and severally liable with Baleen Marine for the money
claims of Madrio and Rubiano.
  
The Labor Arbiter ruled in favor of Pentagon, declaring JDA Inter-Phil jointly and
solidarity liable with Baleen Marine that had also involved both Pentagon and JDA Inter-Phil
and their principal Baleen Marine. NLRC ruled in favor of Pentagon. The CA reversed the
decision of the NLRC.

ISSUE:
Whether or not Pentagon is jointly and severally liable with Baleen Marine for the
money claims and other benefits of Madrio and Rubiano

SC RULING:
Yes. Pentagon is jointly and severally liable with Baleen Marine for the money claims
and other benefits of Madrio and Rubiano.

A local manning agency seeking accreditation of its foreign principal is mandated to

submit the requirements listed under Section 2, Rule I, Book III of the Rules and Regulations
Governing Overseas Employment. While the list is not exhaustive, the POEA identified the
foremost requisite to be the authenticated special power of attorney and manning agreement. 

The law clearly mandates that the special power of attorney and manning agreement
should be authenticated, save only when the authorized officials of both the principal or
hiring company and its local agent signed the document in the presence of any member of the
POEA Directorate or duly designated officers of the POEA.

There was no effective transfer of agency from Pentagon to JDA Inter-Phil. Even
assuming arguendo that JDA Inter-Phil did not withdraw its application for accreditation with
the POEA, there was still no valid transfer of agency to speak of in the first place because
JDA Inter-Phil did not submit the required authenticated special power of attorney and
manning agreement. The minutes of the October 9, 1998 meeting could not, by any stretch of
the imagination, supplant this mandatory requirement. 

Although we do not preclude the possibility that JDA Inter-Phil had really agreed to
the transfer of accreditation, it remains that the agreement to do so did not ultimately come to
fruition. We cannot but hold that the agreement reached during the meeting was only a
preliminary step in the transfer of accreditation, and would not have standing in the POEA for
the purpose intended.

It is relevant to observe that Pentagon cannot feign ignorance of Section 10, paragraph
2, of the Migrant Workers' Act of 1995 to the effect that its liabilities would continue during
the entire period or duration of the employment contract, and would not be affected by any
substitution, amendment or modification of the contract made either locally or in a foreign
country. The provisions of the POEA Rules and Regulations to the effect that the manning

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agreement extends up to and until the expiration of the employment contracts of the
employees recruited and employed pursuant to the recruitment agreement are also clear
enough. As such, Pentagon is not exempt from its liabilities and responsibilities towards
Madrio and Rubiano. 

Although JDA Inter-Phil undertook in the meeting of October 1, 1998 to assume the
responsibility as the local agent to Baleen Marine, the actual transfer of the accreditation
would not be completed without JDA Inter-Phil's compliance with the requirements under the
aforementioned rules. What actually happened between the time the meeting took place and
the eventual withdrawal of the application by the JDA Inter-Phil remained to be mere
conjecture. Nevertheless, Madrio and Rubiano should not be prejudiced by any purported
transfer of accreditation or agreement that they were not privy to. For sure, Pentagon
remained under the law the only recognized manning agent of Baleen Marine.

53. ALDOVINO ET AL., VS. GOLD & GREEN MANPOWER MANAGEMENT &
DEVELOPMENT SERVICES
G.R. NO. 200811, JUNE 19, 2019

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 Petitioners applied for work at Gold and Green Manpower Management and
Development Services, Inc. (G&G) – a local manning agency whose foreign principal is Sage
International Development Company, Ltd. (Sage) – and were hired as sewers for a Taiwan-
based company. Their contracts provided for an 8- hour working day, fixed monthly salary,
and overtime pay. Once they arrived in Taiwan, G&G took all their travel documents and
were made to sign another contract that they would be paid on a piece-rate. 

Petitioners worked from 8 am to 9 pm for 6 days a week without any overtime

premium. Petitioners filed a complaint against their employer before the local court in
Taiwan. But they eventually entered into a Compromise Agreement, which led the petitioners
to execute an Affidavit of Quitclaim and Release, and returned to the Philippines. They filed
before the Labor Arbiter a case for illegal termination, underpayment, and other money
claims. 

ISSUE:
Whether or not petitioners are entitled to the payment of their salaries for the
unexpired portion of their employment contract? Consequently, whether Sec 7 of RA 10022,
which reinstated the 3-month cap, has the force and effect of law
Whether or not the Compromise Agreement barred the other claims of the petitioners
Whether or not the petitioners were illegally dismissed?

SC RULING: 
Anent to the First Issue
Yes. In Serrano, this Court ruled that the clause "or for three (3) months for every
year of the unexpired term, whichever is less" under Section 10 of the Migrant Workers and
Overseas Filipinos Act is unconstitutional for violating the equal protection and substantive
due process clauses.

Later, however, this clause was kept when the law was amended by Republic Act No.
10022 in 2010. However, in Sameer Overseas Placement Agency, Inc. v. Cabiles, the Court
was confronted with the question of the constitutionality of the reinstated clause in Republic
Act No. 10022. Reiterating their finding in Serrano, the Court ruled that "limiting wages that
should be recovered by an illegally dismissed overseas worker to three months is both a
violation of due process and the equal protection clauses of the Constitution.

The case at bar should be no different from Serrano and Sameer. A statute declared

unconstitutional "confers no rights; it imposes no duties; it affords no protection; it creates no
office; it is inoperative as if it has not been passed at all." 65 Incorporating a similarly worded
provision in a subsequent legislation does not cure its unconstitutionality. Without any
discemable change in the circumstances warranting a reversal, this Court will not hesitate to
strike down the same provision.

As such, we reiterate our ruling in Sameer that the reinstated clause in Section 7 of

Republic Act No. 10022 has no force and effect of law. It is unconstitutional. Hence,
petitioners are entitled to the award of salaries based on the actual unexpired portion of their
employment contracts. The award of petitioners' salaries, in relation to the three (3)-month
cap, must be modified accordingly.

Anent to the Second Issue

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 No. Waivers and quitclaims executed by employees are generally frowned upon for
being contrary to public policy. This is based on the recognition that employers and
employees do not stand on equal footing. Quitclaims do not bar employees from filing labor
complaints and demanding benefits to which they are legally entitled. 48 They are "ineffective
in barring recovery of the full measure of a worker's rights, and the acceptance of benefits
therefrom does not amount to estoppel." The law does not recognize agreements that result in
compensation less than what is mandated by law. These quitclaims do not prevent employees
from subsequently claiming benefits to which they are legally entitled.

In the case at bar, the parties entered into the Compromise Agreement to terminate the
case for underpayment of wages, which petitioners had previously filed against respondents
in Taiwan. The object and foundation of the Compromise Agreement was to settle the
payment of salaries and overtime premiums to which petitioners were legally entitled. Hence,
it should not be construed as a restriction on petitioners' right to prosecute other legitimate
claims they may have against respondents.

Paragraph 7 of the Compromise Agreement, which stipulates that petitioners "shall

give up other rights of compensation . . . [and] shall not ask for any compensation based on
any other causes”, cannot bar petitioners from filing this case and from being indemnified
should respondents be adjudged liable. Blanket waivers exonerating employers from liability
on the claims of their employees are ineffective.

Besides, at the time the parties' Compromise Agreement was executed, respondents
had just terminated petitioners from employment. Petitioners, therefore, had no other choice
but to accede to the terms and conditions of the agreement to recover the difference in their
salaries and overtime pay. With no means of livelihood, they signed the Compromise
Agreement out of dire necessity.
Anent to the Third Issue
Yes. In illegal dismissal cases, the burden of proof that employees were validly
dismissed rests on the employers. Failure to discharge this burden means that the dismissal is
illegal.

A review of the records here shows that the termination of petitioners' employment
was effected merely because respondents no longer wanted their services. This is not an
authorized or just cause for dismissal under the Labor Code. Employment contracts cannot be
terminated on a whim. Moreover, petitioners did not voluntarily sever their employment
when they signed the Compromise Agreement, which, again, cannot be used to justify a
dismissal.

Furthermore, petitioners were not accorded due process. A valid dismissal must
comply with substantive and procedural due process: there must be a valid cause and a valid
procedure. The employer must comply with the two (2)-notice requirement, while the
employee must be given an opportunity to be heard. Here, petitioners were only verbally
dismissed, without any notice given or having been informed of any just cause for their
dismissal.

This Court cannot rest easy on respondents' insistence that petitioners voluntarily
terminated their employment. Contrary to their assertion, petitioners were left with no choice
but to accept the Compromise Agreement and to go back to the Philippines.

116 | P a g e
 After accumulating a huge amount of debt to work abroad, petitioners were burdened
to continue working for respondents that they were constrained to sign the piece-rate-based
contract upon arriving in Taiwan. As a result, they were paid less than if they were paid on a
monthly basis and, worse, they were deprived of their overtime premium. Petitioners
inevitably defaulted on their loan obligations. To make matters worse, they were terminated
from employment on a whim and were left homeless.

One can only imagine how all these compounded a heavy burden upon petitioners.
Overseas Filipino workers venture out into unfamiliar lands in the hope of providing a better
future for their families. They endure years of being away from their loved ones while
bearing a life of toil abroad. Our laws afford protection to our workers, whether employed
locally or abroad. It is this Court's bounden duty to uphold these laws and dispense justice for
petitioners. With their right to substantive and procedural due process denied, it is clear that
petitioners were illegally dismissed from service.

54. ATCI OVERSEAS CORP. ET AL., VS. ECHIN

G.R. No. 178551, October 11, 2010

Respondent Josefina Echin was hired by petitioner ATCI Overseas Corporation on

behalf of its co-petitioner, the Ministry of Public Health of Kuwait. She was hired as a
medical technologist under a 2-year contract with a monthly salary of USD 1,200. 

In the MOA, all newly-hired employees undergo a 1-year probationary period and are
covered by Kuwait’s Civil Service Board Employment Contract No. 2. 

Echin was deployed on Feb 17, 2000 but was terminated on Feb 11, 2001 as she
didn’t pass the probationary period. As such, she returned to the Philippines on March 17 and
shouldered her own airfare. 

On July 27, she filed with the NLRC a complaint for illegal dismissal against ATCI
and the Ministry.  LA ruled in favor of Echin, finding that there was no just cause to warrant
her dismissal. LA ordered the petitioners to pay her USD 3,600 which represents her salary
for the 3-month unexpired portion of her contract. NLRC affirmed LA’s decision. CA also
affirmed. Case was elevated to the SC. 

Petitioner’s Arguments: (1) They cannot be held liable since Echin’s employment

contract stipulates that the employment shall be governed by Kuwait’s Civil Service Law and
Regulations. Hence, it was wrong to apply the Labor Code provisions. (2) Assuming that
Philippine laws are applicable, the Ministry is immune from suit given that it is a government
agency. ATCI also cannot be held liable since Ministry’s liability had not been judicially
determined

ISSUE:
Whether or not petitioners are liable to pay the unexpired portion of respondent’s
contract 

SC RULING: 

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 Yes. ATCI, a private recruitment agency, cannot evade responsibility for the money
claims of OFWs by claiming that its foreign principal is immune from suit or that the
principal’s liability must first be established before it, as agent, can be held jointly and
solidarily liable. 

In providing for the joint and solidary liability of private recruitment agencies with
their foreign principals, RA 8042 (Migrant Worker’s Act) provides OFWs with a recourse
and assures them of immediate and sufficient payment of what is due to them. 

In Skippers United Pacific v Maguad, SC ruled that:  The obligations covenanted in

the recruitment agreement entered into by and between the local agent and its foreign
principal are not coterminous with the term of such agreement so that if either or both of the
parties decide to end the agreement, the responsibilities of such parties towards the contracted
employees under the agreement do not at all end, but the same extends up to and until the
expiration of the employment contracts of the employees recruited and employed pursuant to
the said recruitment agreement. Otherwise, this will render nugatory the very purpose for
which the law governing the employment of workers for foreign jobs abroad was enacted

The imposition of joint and solidary liability is pursuant with the state’s policy to
protect and alleviate the plight of the working class. 

Moreover, to allow petitioners to invoke immunity from suit or to wait judicial

determination of foreign principal’s liability would render the law nugatory. 

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