supreme court cases--labor law

7/28/2019 Supreme Court Cases--Labor Law

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Republic of the PhilippinesDepartment of Labor and Employment

NATIONAL LABOR RELATIONS COMMISSIONQuezon City

2012 SUPREME COURT DECISIONS

LABOR LAW

(January-June 2012)

Overtime Pay; Holiday Pay; Service Incentive Leave Pay and 13th Month Pay

In the absence of any concrete proof that additional service beyond the normalworking hours and days had indeed been rendered, we cannot affirm the grant of overtime pay to Pigcaulan.

However, with respect to the award for holiday pay, service incentive leave payand 13th month pay, we affirm and rule that Pigcaulan is entitled to these benefits.

Article 94 of the Labor Code provides that:

ART. 94. RIGHT TO HOLIDAY PAY. – (a) Every worker shall be paid his regular daily wage during regular holidays, except in retail and service establishments regularly employing less than ten (10) workers;

While Article 95 of the Labor Code provides:

ART. 95. RIGHT TO SERVICE INCENTIVE LEAVE. – (a) Every employee whohas rendered at least one year of service shall be entitled to a yearly service incentiveof five days with pay.

x x x x

Under the Labor Code, Pigcaulan is entitled to his regular rate on holidays evenif he does not work. Likewise, express provision of the law entitles him to serviceincentive leave benefit for he rendered service for more than a year already.Furthermore, under Presidential Decree No. 851, he should be paid his 13th month pay.

As employer, SCII has the burden of proving that it has paid these benefits to its

employees. SCII presented payroll listings and transmittal letters to the bank to show that Canoy and Pigcaulan received their salaries as well as benefits which it claimed are already integrated in the employees’ monthly salaries. However, the documents

presented do not prove SCII’s allegation. SCII failed to show any other concrete proof by means of records, pertinent files or similar documents reflecting that the specific claims have been paid. With respect to 13th month pay, SCII presented proof that thisbenefit was paid but only for the years 1998 and 1999. To repeat, the burden of proving

payment of these monetary claims rests on SCII, being the employer. It is a rule that

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one who pleads payment has the burden of proving it. “Even when the plaintiff allegesnon-payment, still the general rule is that the burden rests on the defendant to prove

payment, rather than on the plaintiff to prove non-payment.” Since SCII failed to provideconvincing proof that it has already settled the claims, Pigcaulan should be paid hisholiday pay, service incentive leave benefits and proportionate 13th month pay for the

year 2000. (Pigcaulan vs. Security and Credit Investigation, Inc., G.R. No. 173648,January 16, 2012)

Just Causes

Article 279 of the Labor Code of the Philippines provides that “(i)n cases of regular employment, the employer shall not terminate the services of an employeeexcept for a just cause or when authorized by this Title. x x x” The just causes areenumerated in Article 282, which provides:

Article 282. Termination by employer. - An employer may terminate anemployment for any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work;

(b) Gross and habitual neglect by the employee of his duties;

(c) Fraud or willful breach by the employee of the trust reposed in him by hisemployer or duly authorized representative;

(d) Commission of a crime or offense by the employee against the person of hisemployer or any immediate member of his family or his duly authorized representative;and

(e) Other causes analogous to the foregoing.

The requirement for a just cause was satisfied in this case. We note that the petitioner's employment was terminated by the herein respondents for violation of Section 7, par. 3 of Meralco's Company Code on Employee Discipline, and for theexistence of just cause under Article 282 (a), (c), (d) and (e) of the Labor Code.

The petitioner's violation of the company rules was evident. While he denies any

involvement in the installation of the shunting wires which Meralco discovered, it issignificant that said SIN 708668501 is registered under his name, and its meter base issituated within the premises of his property. Said meter registered electric consumptionduring the time his electric service was officially disconnected by Meralco. It was the

petitioner and his family who could have benefited from the illegal connection, being theresidents of the area covered by the service. His claim that he failed to know or evennotice the shunted wires fails to persuade as we consider the meter located in the front

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of his house, the nature of his work as branch field representative, his long-timeemployment with Meralco and his familiarity with illegal connections of this kind.

The logical conclusion that may be deduced from these attending circumstancesis that the petitioner was a party, or at the very least, one who agreed to the installation

of the shunted wires, and who also benefited from the illegal connection at the expenseof his employer-company. In sustaining the CA's findings, we consider the rule that inadministrative and quasi-judicial proceedings, as in proceedings before the NLRC which had original jurisdiction over the complaint for illegal dismissal, the quantum of

proof necessary is substantial evidence or such relevant evidence as a reasonablemind may accept as adequate to support a conclusion.

Significantly, “(t)ampering with electric meters or metering installations of theCompany or the installation of any device, with the purpose of defrauding the Company” is classified as an act of dishonesty from Meralco employees, expressly prohibited under company rules. It is reasonable that its commission is classified as a severe act

of dishonesty, punishable by dismissal even on its first commission, given the natureand gravity of the offense and the fact that it is a grave wrong directed against their employer.

To reiterate, Article 282 (a) provides that an employer may terminate anemployment because of an employee's serious misconduct, a cause that was present inthis case in view of the petitioner's violation of his employer's code of conduct.Misconduct is defined as the “transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment.” For serious misconduct to justify dismissal, thefollowing requisites must be present: (a) it must be serious; (b) it must relate to the

performance of the employee's duties; and (c) it must show that the employee hasbecome unfit to continue working for the employer.

In reviewing the CA’s Decision, we again consider the petitioner's duties and powers as a Meralco employee. And we conclude that he committed a seriousmisconduct. Installation of shunting wires is without doubt a serious wrong as it demonstrates an act that is willful or deliberate, pursued solely to wrongfully obtainelectric power through unlawful means. The act clearly relates to the petitioner's

performance of his duties given his position as branch field representative who isequipped with knowledge on meter operations, and who has the duty to test electric meters and handle customers' violations of contract. Instead of protecting thecompany’s interest, the petitioner himself used his knowledge to illegally obtain electric

power from Meralco. His involvement in this incident deems him no longer fit tocontinue performing his functions for respondent-company.

While the installation of the shunted wires benefited the herein petitioner as acustomer of Meralco, his act cannot be fully severed from his status as the respondent'semployee. As correctly observed by the CA, “(i)t is an offense against the Company

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Code of Employee Discipline. As a field representative, he is knowledgeable on themechanics of meter and metering installation.”

The dismissal is also justified as the act imputed upon the petitioner qualifies as“fraud or willful breach by the employee of the trust reposed in him by his employer or

duly authorized representative” under Article 282 (c) of the Labor Code. While the petitioner contests this ground by denying that his position is one of trust and confidence, it is undisputed that at the time of his dismissal, he was holding asupervisory position after he rose from the ranks since commencement of hisemployment with Meralco. As a supervisor with duty and power that included testing of service meters and investigation of violations of contract of customers, his position canbe treated as one of trust and confidence, requiring a high degree of honesty ascompared with ordinary rank-and-file employees. This Court declared in The Coca-ColaExport Corporation v. Gacayan:

Law and jurisprudence have long recognized the right of employers to dismiss

employees by reason of loss of trust and confidence. More so, in the case of supervisors or personnel occupying positions of responsibility, loss of trust justifiestermination. Loss of confidence as a just cause for termination of employment is

premised from the fact that an employee concerned holds a position of trust and confidence. This situation holds where a person is entrusted with confidence on delicatematters, such as the custody, handling, or care and protection of the employer's

property. But, in order to constitute a just cause for dismissal, the act complained of must be “work-related” such as would show the employee concerned to be unfit tocontinue working for the employer. (citations omitted)

In this case, the acts complained of were clearly work-related because they related to matters the petitioner handled as branch field representative. Taking intoaccount the results of its investigations, Meralco cannot be expected to trust Yabut to

properly perform his functions and to meet the demands of his job. His dishonesty,involvement in theft and tampering of electric meters clearly prejudice respondent Meralco, since he failed to perform the duties which he was expected to perform.

Considering the foregoing, this Court agrees that there were just causes for the petitioner's dismissal. We emphasize that dismissal of a dishonest employee is to thebest interest not only of the management but also of labor. As a measure of self-

protection against acts inimical to its interest, a company has the right to dismiss itserring employees. An employer cannot be compelled to continue employing anemployee guilty of acts inimical to the employer’s interest, justifying loss of confidencein him. (Yabut vs. MERALCO, G.R. No. 1904436, January 16, 2012)

Procedural Due Process

On the matter of procedural due process, it is well-settled that notice and hearingconstitute the essential elements of due process in the dismissal of employees. Theemployer must furnish the employee with two written notices before termination of

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employment can be legally effected. The first apprises the employee of the particular acts or omissions for which dismissal is sought. The second informs the employee of the employer's decision to dismiss him. With regard to the requirement of a hearing, theessence of due process lies simply in an opportunity to be heard, and not that an actualhearing should always and indispensably be held.

These requirements were satisfied in this case. The first required notice wasdated November 3, 2003, sufficiently notifying the petitioner of the particular acts beingimputed against him, as well as the applicable law and the company rules considered tohave been violated. Notably, in his sworn statement dated November 17, 2003, thepetitioner admitted receiving Meralco's notice of investigation dated November 3, 2003.On November 17, 2003, Meralco conducted a hearing on the charges against thepetitioner. During said time, the petitioner was accorded the right to air his side andpresent his defenses on the charges against him. Significantly, a high-ranking officer of the supervisory union of Meralco assisted him during the said investigation. His swornstatement that forms part of the case records even listed the matters that were raisedduring the investigation. Finally, Meralco served a notice of dismissal dated February 4,2004 upon the petitioner. Such notice notified the latter of the company's decision todismiss him from employment on the grounds clearly discussed therein. (Yabut vs.MERALCO, G.R. No. 1904436, January 16, 2012)

OFW Contract: Novation

Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which extinguishes or modifies the first, either by changing the object or principal conditions, or, by substituting another in place of thedebtor, or by subrogating a third person in the rights of the creditor. In order for novationto take place, the concurrence of the following requisites is indispensable:

1. There must be a previous valid obligation,2. There must be an agreement of the parties concerned to a new contract,3. There must be the extinguishment of the old contract, and 4. There must be the validity of the new contract.

In its ruling, the Labor Arbiter clarified that novation had set in between the first and second contract. To quote:

xxx [T]his office would like to make it clear that the first contract entered into by

and between the complainant and the respondents is deemed to have been novated by the execution of the second contract. In other words, respondents cannot be held liablefor the first contract but are clearly and definitely liable for the breach of the second contract.

This ruling was later affirmed by the Court of Appeals in its decision ruling that:

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Guided by the foregoing legal precepts, it is evident that novation took place inthis particular case. The parties impliedly extinguished the first contract by agreeing toenter into the second contract to placate Medequillo, Jr. who was unexpectedly dismissed and repatriated to Manila. The second contract would not have beennecessary if the petitioners abided by the terms and conditions of Madequillo, Jr.’s

employment under the first contract. The records also reveal that the 2nd contract extinguished the first contract by changing its object or principal. These contracts werefor overseas employment aboard different vessels. The first contract was for employment aboard the MV “Stolt Aspiration” while the second contract involved working in another vessel, the MV “Stolt Pride.” Petitioners and Madequillo, Jr.accepted the terms and conditions of the second contract. Contrary to petitioners’ assertion, the first contract was a “previous valid contract” since it had not yet beenterminated at the time of Medequillo, Jr.’s repatriation to Manila. The legality of hisdismissal had not yet been resolved with finality. Undoubtedly, he was still employed under the first contract when he negotiated with petitioners on the second contract. Assuch, the NLRC correctly ruled that petitioners could only be held liable under the

second contract.

We concur with the finding that there was a novation of the first employment contract.

We reiterate once more and emphasize the ruling in Reyes v. National Labor Relations Commission, to wit:

x x x [F]indings of quasi-judicial bodies like the NLRC, and affirmed by the Court of Appeals in due course, are conclusive on this Court, which is not a trier of facts.

x x x Findings of fact of administrative agencies and quasi-judicial bodies, whichhave acquired expertise because their jurisdiction is confined to specific matters, aregenerally accorded not only respect, but finality when affirmed by the Court of Appeals.Such findings deserve full respect and, without justifiable reason, ought not to bealtered, modified or reversed.(Emphasis supplied)

With the finding that respondent “was still employed under the first contract whenhe negotiated with petitioners on the second contract”, novation became anunavoidable conclusion.

Equally settled is the rule that factual findings of labor officials, who are deemed to have acquired expertise in matters within their jurisdiction, are generally accorded not only respect but even finality by the courts when supported by substantial evidence, i.e.,the amount of relevant evidence which a reasonable mind might accept as adequate to

justify a conclusion. But these findings are not infallible. When there is a showing that they were arrived at arbitrarily or in disregard of the evidence on record, they may beexamined by the courts. In this case, there was no showing of any arbitrariness on the

part of the lower courts in their findings of facts. Hence, we follow the settled rule.

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We need not dwell on the issue of prescription. It was settled by the Court of Appeals with its ruling that recovery of damages under the first contract was alreadytime-barred. Thus:

Accordingly, the prescriptive period of three (3) years within which Medequillo Jr.may initiate money claims under the 1st contract commenced on the date of his

repatriation. xxx The start of the three (3) year prescriptive period must therefore bereckoned on February 1992, which by Medequillo Jr.’s own admission was the date of his repatriation to Manila. It was at this point in time that Medequillo Jr.’s cause of actionalready accrued under the first contract. He had until February 1995 to pursue a casefor illegal dismissal and damages arising from the 1st contract. With the filing of hisComplaint-Affidavit on March 6, 1995, which was clearly beyond the prescriptive period,the cause of action under the 1st contract was already time-barred.

The issue that proceeds from the fact of novation is the consequence of the non-deployment of respondent.

The petitioners argue that under the POEA Contract, actual deployment of theseafarer is a suspensive condition for the commencement of the employment. Weagree with petitioners on such point. However, even without actual deployment, the

perfected contract gives rise to obligations on the part of petitioners.

A contract is a meeting of minds between two persons whereby one bindshimself, with respect to the other, to give something or to render some service. Thecontracting parties may establish such stipulations, clauses, terms and conditions asthey may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.

The POEA Standard Employment Contract provides that employment shall commence “upon the actual departure of the seafarer from the airport or seaport in the

port of hire.” We adhere to the terms and conditions of the contract so as to credit thevalid prior stipulations of the parties before the controversy started. Else, the obligatory force of every contract will be useless. Parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law.

Thus, even if by the standard contract employment commences only “uponactual departure of the seafarer”, this does not mean that the seafarer has no remedy incase of non-deployment without any valid reason. Parenthetically, the contention of the

petitioners of the alleged poor performance of respondent while on board the first shipMV “Stolt Aspiration” cannot be sustained to justify the non-deployment, for no evidenceto prove the same was presented.

We rule that distinction must be made between the perfection of the employment contract and the commencement of the employer-employee relationship. The perfectionof the contract, which in this case coincided with the date of execution thereof, occurred when petitioner and respondent agreed on the object and the cause, as well as the rest of the terms and conditions therein. The commencement of the employer-employee

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relationship, as earlier discussed, would have taken place had petitioner been actually deployed from the point of hire. Thus, even before the start of any employer-employeerelationship, contemporaneous with the perfection of the employment contract was thebirth of certain rights and obligations, the breach of which may give rise to a cause of action against the erring party. Thus, if the reverse had happened, that is the seafarer

failed or refused to be deployed as agreed upon, he would be liable for damages.

Further, we do not agree with the contention of the petitioners that the penalty isa mere reprimand.

The POEA Rules and Regulations Governing Overseas Employment dated 31May 1991 provides for the consequence and penalty against in case of non-deployment of the seafarer without any valid reason. It reads:

Section 4. Worker’s Deployment. — An agency shall deploy its recruits within thedeployment period as indicated below:

b. Thirty (30) calendar days from the date of processing by the administration of the employment contracts of seafarers.

Failure of the agency to deploy a worker within the prescribed period without valid reasons shall be a cause for suspension or cancellation of license or fine. Inaddition, the agency shall return all documents at no cost to the worker.(Emphasis and underscoring supplied)

The appellate court correctly ruled that the penalty of reprimand provided under Rule IV, Part VI of the POEA Rules and Regulations Governing the Recruitment and

Employment of Land-based Overseas Workers is not applicable in this case. Thebreach of contract happened on February 1992 and the law applicable at that time wasthe 1991 POEA Rules and Regulations Governing Overseas Employment. The penalty for non-deployment as discussed is suspension or cancellation of license or fine.

Now, the question to be dealt with is how will the seafarer be compensated by reason of the unreasonable non-deployment of the petitioners?

The POEA Rules Governing the Recruitment and Employment of Seafarers donot provide for the award of damages to be given in favor of the employees. The claim

provided by the same law refers to a valid contractual claim for compensation or benefits arising from employer-employee relationship or for any personal injury, illnessor death at levels provided for within the terms and conditions of employment of seafarers. However, the absence of the POEA Rules with regard to the payment of damages to the affected seafarer does not mean that the seafarer is precluded fromclaiming the same. The sanctions provided for non-deployment do not end with thesuspension or cancellation of license or fine and the return of all documents at no cost to the worker. As earlier discussed, they do not forfend a seafarer from instituting anaction for damages against the employer or agency which has failed to deploy him.

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We thus decree the application of Section 10 of Republic Act No. 8042 (Migrant Workers Act) which provides for money claims by reason of a contract involving Filipinoworkers for overseas deployment. The law provides:

Sec. 10. Money Claims. – Notwithstanding any provision of law to the contrary,the Labor Arbiters of the National Labor Relations Commission (NLRC) shall have theoriginal and exclusive jurisdiction to hear and decide, within ninety (90) calendar daysafter the filing of the complaint, the claims arising out of an employer-employeerelationship or by virtue of any law or contract involving Filipino workers for overseasdeployment including claims for actual, moral, exemplary and other forms of damages.

x x x (Underscoring supplied)

Following the law, the claim is still cognizable by the labor arbiters of the NLRC under the second phrase of the provision.

Applying the rules on actual damages, Article 2199 of the New Civil Code provides that one is entitled to an adequate compensation only for such pecuniary losssuffered by him as he has duly proved. Respondent is thus liable to pay petitioner actual damages in the form of the loss of nine (9) months’ worth of salary as provided inthe contract.38 This is but proper because of the non-deployment of respondent without

just cause. (Stolt-Nielsen Transportation Group, Inc. vs. Medequillo, Jr., G.R. No.177498, January 18, 2012)

Satisfaction of Award: Receipt of Monetary Award; Doctrineof Piercing the Veil of Corporate Fiction; Reinstatement

The petitioner’s receipt of the monetary award adjudicated by the NLRC is not absolute, unconditional and unqualified. The petitioner’s May 3, 2007 Motion for Release contains a reservation, stating in his prayer that: “it is respectfully prayed that the respondents and/or Great Domestic Insurance Co. be ordered to RELEASE/GIVE the amount of P23,521.67 in favor of the complainant TIMOTEO H. SARONA without

prejudice to the outcome of the petition with the CA.”

In Leonis Navigation Co., Inc., et al. v. Villamater, et al., this Court ruled that theprevailing party’s receipt of the full amount of the judgment award pursuant to a writ of execution issued by the labor arbiter does not close or terminate the case if suchreceipt is qualified as without prejudice to the outcome of the petition for certiorari

pending with the CA.

Simply put, the execution of the final and executory decision or resolution of theNLRC shall proceed despite the pendency of a petition for certiorari, unless it isrestrained by the proper court. In the present case, petitioners already paid Villamater’swidow, Sonia, the amount of P3,649,800.00, representing the total and permanent disability award plus attorney’s fees, pursuant to the Writ of Execution issued by theLabor Arbiter. Thereafter, an Order was issued declaring the case as "closed and

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http://sc.judiciary.gov.ph/jurisprudence/2012/january2012/177498.html#sdfootnote38sym




terminated". However, although there was no motion for reconsideration of this last Order, Sonia was, nonetheless, estopped from claiming that the controversy had already reached its end with the issuance of the Order closing and terminating the case.This is because the Acknowledgment Receipt she signed when she received

petitioners’ payment was without prejudice to the final outcome of the petition for

certiorari pending before the CA.

The finality of the NLRC’s decision does not preclude the filing of a petition for certiorari under Rule 65 of the Rules of Court. That the NLRC issues an entry of

judgment after the lapse of ten (10) days from the parties’ receipt of its decision will only give rise to the prevailing party’s right to move for the execution thereof but will not

prevent the CA from taking cognizance of a petition for certiorari on jurisdictional and due process considerations. In turn, the decision rendered by the CA on a petition for certiorari may be appealed to this Court by way of a petition for review on certiorari under Rule 45 of the Rules of Court. Under Section 5, Article VIII of the Constitution,this Court has the power to “review, revise, reverse, modify, or affirm on appeal or

certiorari as the law or the Rules of Court may provide, final judgments and orders of lower courts in x x x all cases in which only an error or question of law is involved.” Consistent with this constitutional mandate, Rule 45 of the Rules of Court provides theremedy of an appeal by certiorari from decisions, final orders or resolutions of the CA inany case, i.e., regardless of the nature of the action or proceedingsinvolved, which would be but a continuation of the appellate process over the original case. Since an appeal to this Court is not an original and independent action but acontinuation of the proceedings before the CA, the filing of a petition for review under Rule 45 cannot be barred by the finality of the NLRC’s decision in the same way that a

petition for certiorari under Rule 65 with the CA cannot.

Furthermore, if the NLRC’s decision or resolution was reversed and set aside for being issued with grave abuse of discretion by way of a petition for certiorari to the CAor to this Court by way of an appeal from the decision of the CA, it is considered void abinitio and, thus, had never become final and executory.

A Rule 45 Petition should be confined to questions of law. Nevertheless, thisCourt has the power to resolve a question of fact, such as whether a corporation is amere alter ego of another entity or whether the corporate fiction was invoked for fraudulent or malevolent ends, if the findings in assailed decision is not supported by the evidence on record or based on a misapprehension of facts.

The question of whether one corporation is merely an alter ego of another is purely one of fact. So is the question of whether a corporation is a paper company, asham or subterfuge or whether the petitioner adduced the requisite quantum of evidence warranting the piercing of the veil of the respondent’s corporate personality.

As a general rule, this Court is not a trier of facts and a petition for review oncertiorari under Rule 45 of the Rules of Court must exclusively raise questions of law.Moreover, if factual findings of the NLRC and the LA have been affirmed by the CA, this

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Court accords them the respect and finality they deserve. It is well-settled and oft-repeated that findings of fact of administrative agencies and quasi-judicial bodies, whichhave acquired expertise because their jurisdiction is confined to specific matters, aregenerally accorded not only respect, but finality when affirmed by the CA.

Nevertheless, this Court will not hesitate to deviate from what are clearly procedural guidelines and disturb and strike down the findings of the CA and those of the labor tribunals if there is a showing that they are unsupported by the evidence onrecord or there was a patent misappreciation of facts. Indeed, that the impugned decision of the CA is consistent with the findings of the labor tribunals does not per seconclusively demonstrate the correctness thereof. By way of exception to the general rule, this Court will scrutinize the facts if only to rectify the prejudice and injusticeresulting from an incorrect assessment of the evidence presented.

A resolution of an issue that has supposedly become final and executory as the petitioner only raised it in his reply to the respondents’ appeal may be revisited by the

appellate court if such is necessary for a just disposition of the case.

As above-stated, the NLRC refused to disturb LA Gutierrez’s denial of the petitioner’s plea to pierce Royale’s corporate veil as the petitioner did not appeal any portion of LA Gutierrez’s May 11, 2005 Decision.

In this respect, the NLRC cannot be accused of grave abuse of discretion. Under Section 4(c), Rule VI of the NLRC Rules, the NLRC shall limit itself to reviewing and deciding only the issues that were elevated on appeal. The NLRC, while not totally bound by technical rules of procedure, is not licensed to disregard and violate theimplementing rules it implemented.

Nonetheless, technicalities should not be allowed to stand in the way of equitablyand completely resolving the rights and obligations of the parties. Technical rules arenot binding in labor cases and are not to be applied strictly if the result would bedetrimental to the working man. This Court may choose not to encumber itself withtechnicalities and limitations consequent to procedural rules if such will only serve as ahindrance to its duty to decide cases judiciously and in a manner that would put an end with finality to all existing conflicts between the parties.

Royale is a continuation or successor of Sceptre.

A corporation is an artificial being created by operation of law. It possesses theright of succession and such powers, attributes, and properties expressly authorized by law or incident to its existence. It has a personality separate and distinct from the

persons composing it, as well as from any other legal entity to which it may be related.This is basic.

Equally well-settled is the principle that the corporate mask may be removed or the corporate veil pierced when the corporation is just an alter ego of a person or of another corporation. For reasons of public policy and in the interest of justice, the

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corporate veil will justifiably be impaled only when it becomes a shield for fraud,illegality or inequity committed against third persons.

Hence, any application of the doctrine of piercing the corporate veil should bedone with caution. A court should be mindful of the milieu where it is to be applied. It

must be certain that the corporate fiction was misused to such an extent that injustice,fraud, or crime was committed against another, in disregard of rights. The wrongdoing must be clearly and convincingly established; it cannot be presumed. Otherwise, aninjustice that was never unintended may result from an erroneous application.

Whether the separate personality of the corporation should be pierced hinges onobtaining facts appropriately pleaded or proved. However, any piercing of the corporateveil has to be done with caution, albeit the Court will not hesitate to disregard thecorporate veil when it is misused or when necessary in the interest of justice. After all,the concept of corporate entity was not meant to promote unfair objectives.

The doctrine of piercing the corporate veil applies only in three (3) basic areas,namely: 1) defeat of public convenience as when the corporate fiction is used as avehicle for the evasion of an existing obligation; 2) fraud cases or when the corporateentity is used to justify a wrong, protect fraud, or defend a crime; or 3) alter ego cases,where a corporation is merely a farce since it is a mere alter ego or business conduit of a person, or where the corporation is so organized and controlled and its affairs are soconducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation.

In this regard, this Court finds cogent reason to reverse the CA’s findings.Evidence abound showing that Royale is a mere continuation or successor of Sceptre

and fraudulent objectives are behind Royale’s incorporation and the petitioner’ssubsequent employment therein. These are plainly suggested by events that therespondents do not dispute and which the CA, the NLRC and LA Gutierrez accept asfully substantiated but misappreciated as insufficient to warrant the use of the equitableweapon of piercing.

As correctly pointed out by the petitioner, it was Aida who exercised control andsupervision over the affairs of both Sceptre and Royale. Contrary to the submissions of the respondents that Roso had been the only one in sole control of Sceptre’s financesand business affairs, Aida took over as early as 1999 when Roso assigned his licenseto operate Sceptre on May 3, 1999.50 As further proof of Aida’s acquisition of the rightsas Sceptre’s sole proprietor, she caused the registration of the business name “SceptreSecurity & Detective Agency” under her name with the DTI a few months after Rosoabdicated his rights to Sceptre in her favor.51 As far as Royale is concerned, therespondents do not deny that she has a hand in its management and operation and

possesses control and supervision of its employees, including the petitioner. As the petitioner correctly pointed out, that Aida was the one who decided to stop giving any assignments to the petitioner and summarily dismiss him is an eloquent testament of the power she wields insofar as Royale’s affairs are concerned. The presence of actual

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The respondents do not likewise deny that Royale and Sceptre share the sameofficers and employees. Karen assumed the dual role of Sceptre’s Operation Manager and incorporator of Royale. With respect to the petitioner, even if he has already resigned from Sceptre and has been employed by Royale, he was still using the

patches and agency cloths of Sceptre during his assignment at Highlight Metal.

Royale also claimed a right to the cash bond which the petitioner posted whenhe was still with Sceptre. If Sceptre and Royale are indeed separate entities, Sceptreshould have released the petitioner’s cash bond when he resigned and Royale would have required the petitioner to post a new cash bond in its favor.

Taking the foregoing in conjunction with Aida’s control over Sceptre’s and Royale’s business affairs, it is patent that Royale was a mere subterfuge for Aida. Sincea sole proprietorship does not have a separate and distinct personality from that of theowner of the enterprise, the latter is personally liable. This is what she sought to avoid

but cannot prosper.

Effectively, the petitioner cannot be deemed to have changed employers asRoyale and Sceptre are one and the same. His separation pay should, thus, becomputed from the date he was hired by Sceptre in April 1976 until the finality of thisdecision. Based on this Court’s ruling in Masagana Concrete Products, et al. v. NLRC,et al., the intervening period between the day an employee was illegally dismissed and the day the decision finding him illegally dismissed becomes final and executory shall be considered in the computation of his separation pay as a period of “imputed” or “putative” service:

Separation pay, equivalent to one month's salary for every year of service, isawarded as an alternative to reinstatement when the latter is no longer an option.Separation pay is computed from the commencement of employment up to the time of termination, including the imputed service for which the employee is entitled tobackwages, with the salary rate prevailing at the end of the period of putative servicebeing the basis for computation.

It is well-settled, even axiomatic, that if reinstatement is not possible, the period covered in the computation of backwages is from the time the employee was unlawfully terminated until the finality of the decision finding illegal dismissal.

With respect to the petitioner’s backwages, this Court cannot subscribe to theview that it should be limited to an amount equivalent to three (3) months of his salary.Backwages is a remedy affording the employee a way to recover what he has lost by reason of the unlawful dismissal. In awarding backwages, the primordial considerationis the income that should have accrued to the employee from the time that he wasdismissed up to his reinstatement and the length of service prior to his dismissal isdefinitely inconsequential.

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As early as 1996, this Court, in Bustamante, et al. v. NLRC, et al., clarified in nouncertain terms that if reinstatement is no longer possible, backwages should becomputed from the time the employee was terminated until the finality of the decision,finding the dismissal unlawful.

Therefore, in accordance with R.A. No. 6715, petitioners are entitled on their full backwages, inclusive of allowances and other benefits or their monetary equivalent,from the time their actual compensation was withheld on them up to the time of their actual reinstatement.

As to reinstatement of petitioners, this Court has already ruled that reinstatement is no longer feasible, because the company would be adjustly prejudiced by thecontinued employment of petitioners who at present are overage, a separation pay equal to one-month salary granted to them in the Labor Arbiter's decision was in order and, therefore, affirmed on the Court's decision of 15 March 1996. Furthermore, sincereinstatement on this case is no longer feasible, the amount of backwages shall be

computed from the time of their illegal termination on 25 June 1990 up to the time of finality of this decision. (emphasis supplied)

A further clarification was made in Javellana, Jr. v. Belen:

Article 279 of the Labor Code, as amended by Section 34 of Republic Act 6715 instructs:

Art. 279. Security of Tenure. - In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or whenauthorized by this Title. An employee who is unjustly dismissed from work shall be

entitled to reinstatement without loss of seniority rights and other privileges and to hisfull backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to thetime of his actual reinstatement.

Clearly, the law intends the award of backwages and similar benefits toaccumulate past the date of the Labor Arbiter's decision until the dismissed employee isactually reinstated. But if, as in this case, reinstatement is no longer possible, this Court has consistently ruled that backwages shall be computed from the time of illegal dismissal until the date the decision becomes final. (citation omitted)

In case separation pay is awarded and reinstatement is no longer feasible,backwages shall be computed from the time of illegal dismissal up to the finality of thedecision should separation pay not be paid in the meantime. It is the employee’s actualreceipt of the full amount of his separation pay that will effectively terminate theemployment of an illegally dismissed employee. Otherwise, the employer-employeerelationship subsists and the illegally dismissed employee is entitled to backwages,taking into account the increases and other benefits, including the 13th month pay, thatwere received by his co-employees who are not dismissed. It is the obligation of the

15



employer to pay an illegally dismissed employee or worker the whole amount of thesalaries or wages, plus all other benefits and bonuses and general increases, to whichhe would have been normally entitled had he not been dismissed and had not stopped working.

In fine, this Court holds Royale liable to pay the petitioner backwages to becomputed from his dismissal on October 1, 2003 until the finality of this decision.Nonetheless, the amount received by the petitioner from the respondents in satisfactionof the November 30, 2005 Decision shall be deducted accordingly. Finally, moral damages and exemplary damages at P25,000.00 each as indemnity for the petitioner’sdismissal, which was tainted by bad faith and fraud, are in order. Moral damages may be recovered where the dismissal of the employee was tainted by bad faith or fraud, or where it constituted an act oppressive to labor, and done in a manner contrary tomorals, good customs or public policy while exemplary damages are recoverable only if the dismissal was done in a wanton, oppressive, or malevolent manner. (Sarona vs.NLRC, et. al., G.R. No. 185280, January 18, 2012)

Just and Valid Cause

To dismiss an employee, the law requires the existence of a just and valid cause. Article 282 of the Labor Code enumerates the just causes for termination by theemployer: (a) serious misconduct or willful disobedience by the employee of the lawfulorders of his employer or the latter’s representative in connection with the employee’swork; (b) gross and habitual neglect by the employee of his duties; (c) fraud or willfulbreach by the employee of the trust reposed in him by his employer or his dulyauthorized representative; (d) commission of a crime or offense by the employeeagainst the person of his employer or any immediate member of his family or his dulyauthorized representative; and (e) other causes analogous to the foregoing.

The NLRC held that the termination of the petitioner was due to loss of trust and confidence. Sustaining the NLRC, the CA stated:

With the finding of probable cause not only by the investigating prosecutor but by the Secretary of Justice no less, it cannot be validly claimed, as the Petitioner does, inher Petition at bench, that there is no lawful cause for her dismissal xxx.

Admittedly, there is no direct evidence that the Petitioner took the money fromthe drawer in the cabinet in the Kiosk. But direct evidence that the Petitioner took the

money is not required for the Petitioner to be lawfully dismissed for the loss of themoney of the Private Respondent corporation. If circumstantial evidence is sufficient onwhich to anchor a judgment of conviction in criminal cases under Section 4, Rule 133 of the Revised Rules of Evidence, there is no cogent reason why circumstantial evidenceis not sufficient on which to anchor a factual basis for the dismissal of the Petitioner for loss of confidence.

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The petitioner still argues, however, that there was no evidence at all upon whichMinex could validly dismiss her considering that she had not yet been found guilty beyond reasonable doubt of the crime of qualified theft.

The petitioner’s argument is not novel. It has been raised and rejected many

times before on the basis that neither conviction beyond reasonable doubt for a crimeagainst the employer nor acquittal after criminal prosecution was indispensable. Nor was a formal charge in court for the acts prejudicial to the interest of the employer a

pre-requisite for a valid dismissal.

In its 1941 ruling in National Labor Union, Inc. v. Standard Vacuum Oil Company, the Court expressly stated thus:

xxx The conviction of an employee in a criminal case is not indispensable towarrant his dismissal by his employer. If there is sufficient evidence to show that theemployee has been guilty of a breach of trust, or that his employer has ample reason to

distrust him, it cannot justly deny to the employer the authority to dismiss suchemployee. All that is incumbent upon the Court of Industrial Relations (now National Labor Relations Commission) to determine is whether the proposed dismissal is for just cause xxx. It is not necessary for said court to find that an employee has been guilty of a crime beyond reasonable doubt in order to authorize his dismissal. (Emphasissupplied)

In Philippine Long Distance Telephone Co.(BLTB Co.) vs. NLRC, the Court held that the acquittal of the employee from the criminal prosecution for a crime committed against the interest of the employer did not automatically eliminate loss of confidenceas a basis for administrative action against the employee; and that in cases where theacts of misconduct amounted to a crime, a dismissal might still be properly ordered notwithstanding that the employee was not criminally prosecuted or was acquitted after a criminal prosecution.

In Batangas Laguna Tayabas Bus Co. v. NLRC, the Court explained further, asfollows:

Fraud or willful breach of trust reposed upon an employee by his employer is arecognized cause for termination of employment and it is not necessary that theemployer should await the employee’s final conviction in the criminal case involving such fraud or breach of trust before it can terminate the employee’s services. In fact,even the dropping of the charges or an acquittal of the employee therefrom does not

preclude the dismissal of an employee for acts inimical to the interests of the employer.

To our mind, the criminal charges initiated by the company against privaterespondents and the finding after preliminary investigation of their prima facie guilt of the offense charged constitute substantial evidence sufficient to warrant a finding by theLabor Tribunal of the existence of a just cause for their termination based on loss of trust and confidence. The Labor Tribunal need not have gone further as to require

private respondent’s conviction of the crime charged, or inferred innocence on their part

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from their release from detention, which was mainly due to their posting of bail.(Emphasis supplied)

Indeed, the employer is not expected to be as strict and rigorous as a judge in acriminal trial in weighing all the probabilities of guilt before terminating the employee.

Unlike a criminal case, which necessitates a moral certainty of guilt due to the loss of the personal liberty of the accused being the issue, a case concerning an employeesuspected of wrongdoing leads only to his termination as a consequence. The quantumof proof required for convicting an accused is thus higher – proof of guilt beyond reasonable doubt – than the quantum prescribed for dismissing an employee –substantial evidence. In so stating, we are not diminishing the value of employment, but only noting that the loss of employment occasions a consequence lesser than the lossof personal liberty, and may thus call for a lower degree of proof.

It is also unfair to require an employer to first be morally certain of the guilt of theemployee by awaiting a conviction before terminating him when there is already

sufficient showing of the wrongdoing. Requiring that certainty may prove too late for theemployer, whose loss may potentially be beyond repair. Here, no less than the DOJ Secretary found probable cause for qualified theft against the petitioner. That finding was enough to justify her termination for loss of confidence. To repeat, her responsibility as the supervisor tasked to oversee the affairs of the kiosk, including seeing to the secure handling of the sales proceeds, could not be ignored or downplayed. The employer’s loss of trust and confidence in her was directly rooted inthe manner of how she, as the supervisor, had negligently handled the large amount of sales by simply leaving the amount inside the cabinet drawer of the kiosk despite being aware of the great risk of theft. At the very least, she could have resorted to the SOP of first seeking guidance from the main office on how to secure the amount if she could

not deposit in the bank due to that day being a Sunday.

Yet, even as we now say that the respondents had a just or valid cause for terminating the petitioner, it becomes unavoidable to ask whether or not they complied with the requirements of due process prior to the termination as embodied in Section 2 (d) of Rule I of the Implementing Rules of Book VI of the Labor Code, viz:

Section 2. Security of tenure. – xxx

(d) In all cases of termination of employment, the following standards of due process shall be substantially observed:

For termination of employment based on just causes as defined in Article 282 of the Labor Code:

(i) A written notice served on the employee specifying the ground or grounds for termination, and giving said employee reasonable opportunity within which to explainhis side.

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(ii) A hearing or conference during which the employee concerned, with theassistance of counsel if he so desires is given opportunity to respond to the charge,

present his evidence, or rebut the evidence presented against him.

(iii) A written notice of termination served on the employee, indicating that upon

due consideration of all the circumstances, grounds have been established to justify histermination. (emphasis supplied)

x x x

Where the dismissal is for a just cause, as in the instant case, the lack of statutory due process should not nullify the dismissal, or render it illegal, or ineffectual.However, the employer should indemnify the employee for the violation of his statutory rights, as ruled in Reta v. National Labor Relations Commission. The indemnity to beimposed should be stiffer to discourage the abhorrent practice of “dismiss now, pay later,” which we sought to deter in the Serrano ruling. The sanction should be in thenature of indemnification or penalty and should depend on the facts of each case,taking into special consideration the gravity of the due process violation of theemployer.

Under the Civil Code, nominal damages is adjudicated in order that a right of theplaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered byhim.

As enunciated by this Court in Viernes v. National Labor Relations Commissions,an employer is liable to pay indemnity in the form of nominal damages to an employeewho has been dismissed if, in effecting such dismissal, the employer fails to comply with the requirements of due process. The Court, after considering the circumstancestherein, fixed the indemnity at P2,590.50, which was equivalent to the employee’s onemonth salary. This indemnity is intended not to penalize the employer but to vindicate or recognize the employee’s right to statutory due process which was violated by theemployer.

The violation of the petitioners’ right to statutory due process by the privaterespondent warrants the payment of indemnity in the form of nominal damages. Theamount of such damages is addressed to the sound discretion of the court, taking intoaccount the relevant circumstances. Considering the prevailing circumstances in thecase at bar, we deem it proper to fix it at P30,000.00. We believe this form of damageswould serve to deter employers from future violations of the statutory due process rightsof employees. At the very least, it provides a vindication or recognition of thisfundamental right granted to the latter under the Labor Code and its Implementing Rules. (emphasis is in the original text) (Concepcion vs. Minex Import Corporation,et. al., G.R. No. 153569, January 24, 2012)

Constructive Dismissal

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Constructive dismissal exists where there is cessation of work because"continued employment is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank or a diminution in pay" and other benefits. Aptly called adismissal in disguise or an act amounting to dismissal but made to appear as if it were

not, constructive dismissal may, likewise, exist if an act of clear discrimination,insensibility, or disdain by an employer becomes so unbearable on the part of theemployee that it could foreclose any choice by him except to forego his continued employment. In cases of a transfer of an employee, the rule is settled that the employer is charged with the burden of proving that its conduct and action are for valid and legitimate grounds such as genuine business necessity and that the transfer is not unreasonable, inconvenient or prejudicial to the employee. If the employer cannot overcome this burden of proof, the employee’s transfer shall be tantamount to unlawful constructive dismissal. (Morales vs. Harbour Centre Port Terminal, Inc., G.R. No.174208, January 25, 2012)

Permanent Total Disability

The Court affirmed the award of disability benefits to the seaman, citing ECC v.Sanico, GSIS v. CA, and Bejerano v. ECC that “disability should not be understood more on its medical significance but on the loss of earning capacity. Permanent total disability means disablement of an employee to earn wages in the same kind of work,or work of similar nature that [he] was trained for or accustomed to perform, or any kind of work which a person of [his] mentality and attainment could do. It does not meanabsolute helplessness.” It likewise cited Bejerano v. ECC, that in a disability compensation, it is not the injury which is compensated, but rather it is the incapacity towork resulting in the impairment of one’s earning capacity.

The same principles were cited in the more recent case of Crystal Shipping, Inc.v. Natividad. In addition, the Court cited GSIS v. Cadiz and Ijares v. CA that “permanent disability is the inability of a worker to perform his job for more than 120 days,regardless of whether or not he loses the use of any part of his body.”

These facts clearly prove that petitioner was unfit to work as drummer for at least 11-13 months – from the onset of his ailment on March 16, 1998 to 8-10 months after June 25, 1998. This, by itself, already constitutes permanent total disability. x x x

In Vergara v. Hammonia Maritime Services, Inc., we also said that the standard

terms of the POEA Standard Employment Contract agreed upon are intended to beread and understood in accordance with Philippine laws, particularly, Articles 191 to 193of the Labor Code, as amended, and the applicable implementing rules and regulationsin case of any dispute, claim or grievance.

Thus, the CA was correct in applying the Labor Code provisions in Lobusta’sclaim for disability benefits. The Labor Arbiter erred in failing to apply them.

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Article 192(c)(1) under Title II, Book IV of the Labor Code, as amended, reads:

ART. 192. Permanent total disability. – x x x x x x x

(c) The following disabilities shall be deemed total and permanent:

(1) Temporary total disability lasting continuously for more than one hundred twenty days, except as otherwise provided in the Rules;

x x x x

Section 2(b), Rule VII of the Implementing Rules of Title II, Book IV of the Labor Code, as amended, or the Amended Rules on Employees’ Compensation Commission(ECC Rules), reads:

Sec. 2. Disability. – x x x

(b) A disability is total and permanent if as a result of the injury or sickness theemployee is unable to perform any gainful occupation for a continuous period exceeding 120 days, except as otherwise provided for in Rule X of these Rules.

x x x x

Section 2, Rule X of the ECC Rules reads:

SEC. 2. Period of entitlement.— (a) The income benefit shall be paid beginning on the first day of such disability. If caused by an injury or sickness it shall not be paid longer than 120 consecutive days except where such injury or sickness still requiresmedical attendance beyond 120 days but not to exceed 240 days from onset of

disability in which case benefit for temporary total disability shall be paid. However, theSystem may declare the total and permanent status at any time after 120 days of continuous temporary total disability as may be warranted by the degree of actual lossor impairment of physical or mental functions as determined by the System.

x x x x

According to Vergara, these provisions of the Labor Code, as amended, andimplementing rules are to be read hand in hand with the first paragraph of Section 20(B)(3) of the 2000 POEA Standard Employment Contract which reads:

Upon sign-off from the vessel for medical treatment, the seafarer is entitled to

sickness allowance equivalent to his basic wage until he is declared fit to work or thedegree of permanent disability has been assessed by the company-designated physician[,] but in no case shall this period exceed one hundred twenty (120) days.Vergara continues:

As these provisions operate, the seafarer, upon sign-off from his vessel, must report to the company-designated physician within three (3) days from arrival for diagnosis and treatment. For the duration of the treatment but in no case to exceed 120

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days, the seaman is on temporary total disability as he is totally unable to work. Hereceives his basic wage during this period until he is declared fit to work or histemporary disability is acknowledged by the company to be permanent, either partially or totally, as his condition is defined under the POEA Standard Employment Contract and by applicable Philippine laws. If the 120 days initial period is exceeded and no such

declaration is made because the seafarer requires further medical attention, then thetemporary total disability period may be extended up to a maximum of 240 days,subject to the right of the employer to declare within this period that a permanent partial or total disability already exists. The seaman may of course also be declared fit to work at any time such declaration is justified by his medical condition.

x x x x

As we outlined above, a temporary total disability only becomes permanent whenso declared by the company physician within the periods he is allowed to do so, or uponthe expiration of the maximum 240-day medical treatment period without a declarationof either fitness to work or the existence of a permanent disability.

To be sure, there is one Labor Code concept of permanent total disability, asstated in Article 192(c)(1) of the Labor Code, as amended, and the ECC Rules. We alsonote that the first paragraph of Section 20(B)(3) of the 2000 POEA Standard Employment Contract was lifted verbatim from the first paragraph of Section 20(B)(3) of the 1996 POEA Standard Employment Contract, to wit:

Upon sign-off from the vessel for medical treatment, the seafarer is entitled tosickness allowance equivalent to his basic wage until he is declared fit to work or thedegree of permanent disability has been assessed by the company-designated

physician, but in no case shall this period exceed one hundred twenty (120) days. Applying the foregoing considerations, we agree with the CA that Lobusta suffered permanent total disability. On this point, the NLRC ruling was not in accord with law and jurisprudence.

Upon repatriation, Lobusta was first examined by the Pulmonologist and Orthopedic Surgeon on May 22, 1998. The maximum 240-day (8-month) medical-treatment period expired, but no declaration was made that Lobusta is fit to work. Nor was there a declaration of the existence of Lobusta’s permanent disability. On February 16, 1999, Lobusta was still prescribed medications for his lumbosacral pain and wasadvised to return for reevaluation. May 22, 1998 to February 16, 1999 is 264 days or 6 days short of 9 months.

On Lobusta’s other ailment, Dr. Roa’s clinical summary also shows that as of

December 16, 1999, Lobusta was still unfit to resume his normal work as a seaman dueto the persistence of his symptoms. But neither did Dr. Roa declare the existence of Lobusta’s permanent disability. Again, the maximum 240-day medical treatment period had already expired. May 22, 1998 to December 16, 1999 is 19 months or 570 days. InRemigio, unfitness to work for 11-13 months was considered permanent total disability.So it must be in this case. And Dr. David’s much later report that Lobusta “ought not tobe considered fit to return to work as an Able Seaman” validates that his disability is

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permanent and total as provided under the POEA Standard Employment Contract and the Labor Code, as amended.

In fact, the CA has found that Lobusta was not able to work again as a seamanand that his disability is permanent “as he has been unable to work since 14 May 1998

to the present or for more than 120 days.” This period is more than eight years, counted until the CA decided the case in August 2006. On the CA ruling that Lobusta’s disability is permanent since he was unable to work “for more than 120 days,” we have clarified in Vergara that this “temporary total disability period may be extended up to a maximumof 240 days.”

Thus, we affirm the award to Lobusta of US$60,000 as permanent total disability benefits, the maximum award under Section 30 and 30-A of the 1996 POEA Standard Employment Contract. We also affirm the award of US$2,060 as sickness allowancewhich is not contested and appears to have been accepted by the parties.

On the matter of attorney’s fees, under Article 2208 33 of the Civil Code,attorney’s fees can be recovered in actions for recovery of wages of laborers and actions for indemnity under employer’s liability laws. Attorney’s fees are alsorecoverable when the defendant’s act or omission has compelled the plaintiff to incur expenses to protect his interest.34 Such conditions being present here, we affirm theaward of attorney’s fees, which we compute as US$3,103 or 5% of US$62,060.(Magsaysay Maritime Corporation vs. Lobusta, G.R. No. 177578, January 25,2012)

Voluntary Arbitrator ; Preventive Suspension

In Sime Darby Pilipinas, Inc. v. Deputy Administrator Magsalin, we ruled that thevoluntary arbitrator had plenary jurisdiction and authority to interpret the agreement toarbitrate and to determine the scope of his own authority – subject only, in a proper case, to the certiorari jurisdiction of this Court. In that case, the specific issue presentedwas “the issue of performance bonus.” We then held that the arbitrator had the authorityto determine not only the issue of whether or not a performance bonus was to begranted, but also the related question of the amount of bonus, were it to be granted. Wethen said that there was no indication at all that the parties to the arbitration agreementhad regarded “the issue of performance bonus” as a two-tiered issue, only one aspectof which was being submitted to arbitration; thus, we held that the failure of the partiesto specifically limit the issues to that which was stated allowed the arbitrator to assume

jurisdiction over the related issue.

A more recent case is Ludo & Luym Corporation v. Saornido. In that case, werecognized that voluntary arbitrators are generally expected to decide only thosequestions expressly delineated by the submission agreement; that, nevertheless, they can assume that they have the necessary power to make a final settlement on therelated issues, since arbitration is the final resort for the adjudication of disputes. Thus,we ruled that even if the specific issue brought before the arbitrators merely mentioned

23







the question of “whether an employee was discharged for just cause,” they could reasonably assume that their powers extended beyond the determination thereof toinclude the power to reinstate the employee or to grant back wages. In the same vein, if the specific issue brought before the arbitrators referred to the date of regularization of the employee, law and jurisprudence gave them enough leeway as well as adequate

prerogative to determine the entitlement of the employees to higher benefits inaccordance with the finding of regularization. Indeed, to require the parties to fileanother action for payment of those benefits would certainly undermine labor

proceedings and contravene the constitutional mandate providing full protection to labor and speedy labor justice.

Consequently, could the PVA herein view that the issue presented before it – thequestion of the validity of the transfer order – necessarily included the question of respondent Delada’s insubordination and willful disobedience of the transfer order?

Pursuant to the doctrines in Sime Darby Pilipinas and Ludo & Luym Corporation,the PVA was authorized to assume jurisdiction over the related issue of insubordinationand willful disobedience of the transfer order. Nevertheless, the doctrine in theaforementioned cases is inapplicable to the present Petition. In those cases, thevoluntary arbitrators did in fact assume jurisdiction over the related issues and maderulings on the matter. In the present case, however, the PVA did not make a ruling onthe specific issue of insubordination and willful disobedience of the transfer order. ThePVA merely said that its disagreement with the 90-day penalty of suspension stemmedfrom the fact that the penalty went beyond the 30-day limit for preventive suspension:

But to us, what militates against the validity of Delada’s preventive suspension isthe fact that it went beyond the 30-day period prescribed by the Implementing Rules of the Labor Code (Section 4, Rules XIV, Book V). The preventive suspension of Delada is

supposed to expire on 09 June 2007, but without notifying Delada, the MPH proceededto impose a separate penalty of 90-days suspension to him which took effect only on 18June 2007, or way beyond the 30-day rule mandated by the Rules. While the intentionof the MPH is to impose the 90-day suspension as a separate penalty against Delada,the former is already proscribed from doing so because as of 05 June 2007, the disputeat hand is now under the exclusive jurisdiction of the panel of arbitrators. In fact, by itsown admission, the MPH categorically stated in its Position Paper that as of 25 May2007, or before the suspension order was issued, MPH and Delada had alreadyformulated and submitted the issues for arbitration. For all legal intents and purposes,therefore, the MPH has now relinquished its authority to suspend Delada because theissue at this juncture is now within the Panel’s ambit of jurisdiction. MPH’s authority to

impose disciplinary action to Delada must now give way to the jurisdiction of this panelof arbitrators to rule on the issues at hand. By necessary implication, this Panel is thusconstrained to declare both the preventive suspension and the separate suspension of 90-days meted to Delada to be not valid and justified.

First, it must be pointed out that the basis of the 30-day preventive suspensionimposed on Delada was different from that of the 90-day penalty of suspension. The 30-day preventive suspension was imposed by MPH on the assertion that Delada might

24



sabotage hotel operations if preventive suspension would not be imposed on him. Onthe other hand, the penalty of 90-day suspension was imposed on respondent as a formof disciplinary action. It was the outcome of the administrative proceedings conductedagainst him. Preventive suspension is a disciplinary measure resorted to by theemployer pending investigation of an alleged malfeasance or misfeasance committed

by an employee. The employer temporarily bars the employee from working if hiscontinued employment poses a serious and imminent threat to the life or property of theemployer or of his co-workers. On the other hand, the penalty of suspension refers tothe disciplinary action imposed on the employee after an official investigation or administrative hearing is conducted. The employer exercises its right to discipline erringemployees pursuant to company rules and regulations. Thus, a finding of validity of thepenalty of 90-day suspension will not embrace the issue of the validity of the 30-daypreventive suspension. In any event, petitioner no longer assails the ruling of the CA onthe illegality of the 30-day preventive suspension.

It can be seen that, unlike in Sime Darby Pilipinas and Ludo & Luym Corporation,

the PVA herein did not make a definitive ruling on the merits of the validity of the 90-day suspension. The panel only held that MPH lost its jurisdiction to impose disciplinary action on respondent. Accordingly, we rule in this case that MPH did not lose itsauthority to discipline respondent for his continued refusal to report to his new assignment. In relation to this point, we recall our Decision in Allied Banking Corporation v. Court of Appeals.

In Allied Banking Corporation, employer Allied Bank reassigned respondentGalanida from its Cebu City branch to its Bacolod and Tagbilaran branches. He refusedto follow the transfer order and instead filed a Complaint before the Labor Arbiter for constructive dismissal. While the case was pending, Allied Bank insisted that he reportto his new assignment. When he continued to refuse, it directed him to explain in writingwhy no disciplinary action should be meted out to him. Due to his continued refusal toreport to his new assignment, Allied Bank eventually terminated his services. When theissue of whether he could validly refuse to obey the transfer orders was brought beforethis Court, we ruled thus:

The refusal to obey a valid transfer order constitutes willful disobedience of alawful order of an employer. Employees may object to, negotiate and seek redressagainst employers for rules or orders that they regard as unjust or illegal. However, untiland unless these rules or orders are declared illegal or improper by competentauthority, the employees ignore or disobey them at their peril. For Galanida’s continuedrefusal to obey Allied Bank's transfer orders, we hold that the bank dismissed Galanida

for just cause in accordance with Article 282(a) of the Labor Code. Galanida is thus notentitled to reinstatement or to separation pay. (Emphasis supplied, citations omitted).

It is important to note what the PVA said on Delada’s defiance of the transfer order: In fact, Delada cannot hide under the legal cloak of the grievance machinery of the CBA or the voluntary arbitration proceedings to disobey a valid order of transfer from the management of the hotel. While it is true that Delada’s transfer to Seasons isthe subject of the grievance machinery in accordance with the provisions of their CBA,

25



Delada is expected to comply first with the said lawful directive while awaiting theresults of the decision in the grievance proceedings. This issue falls squarely in thecase of Allied Banking Corporation vs. Court of Appeals x x x.

Pursuant to Allied Banking, unless the order of MPH is rendered invalid, there is

a presumption of the validity of that order. Since the PVA eventually ruled that thetransfer order was a valid exercise of management prerogative, we hereby reverse theDecision and the Resolution of the CA affirming the Decision of the PVA in this respect.MPH had the authority to continue with the administrative proceedings for insubordination and willful disobedience against Delada and to impose on him the

penalty of suspension. As a consequence, petitioner is not liable to pay back wagesand other benefits for the period corresponding to the penalty of 90-day suspension.(Manila Pavilion Hotel vs. Delada, G.R. No. 189947, January 25, 2012)

Loss of Trust and Confidence

For loss of trust and confidence to be a valid ground for dismissal, it must bebased on a willful breach of trust and founded on clearly established facts. A breach iswillful if it is done intentionally, knowingly and purposely, without justifiable excuse, asdistinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently. Inaddition, loss of trust and confidence must rest on substantial grounds and not on theemployer’s arbitrariness, whims, caprices or suspicion.

In the case at bench, Beltran attributed her delay in turning over Chang’spayment to her difficult family situation as she and her husband were having maritalproblems and her child was suffering from an illness. Admittedly, she was reminded of Chang’s payment by her supervisor on January 7, 1997 but denied having been ordered

to remit the money on that day. She then reasoned that her continued delay wascaused by an inevitable need to take a leave of absence for her to attend to the needsof her child who was suffering from asthma.

It should be emphasized at this point that the burden of proving the legality of anemployee’s dismissal lies with the employer. “Unsubstantiated suspicions, accusations,and conclusions of employers do not provide legal justification for dismissingemployees.” “[M]ere conjectures cannot work to deprive employees of their means of livelihood.” To begin with, MERALCO cannot claim or conclude that Beltranmisappropriated the money based on mere suspicion. The NLRC thus erred inconcluding that Beltran made use of the money from the mere fact that she took a leave

of absence after having been reminded of the unremitted funds. And even if Beltrandelayed handing over the funds to the company, MERALCO still has the burden of proof to show clearly that such act of negligence is sufficient to justify termination fromemployment. Moreover, we find that Beltran’s delay does not clearly and convincinglyestablish a willful breach on her part, that is, which is done “intentionally, knowingly andpurposely, without any justifiable excuse.” True, the reasons Beltran proffered for her delay in remitting the cash payment are mere allegations without any concrete proof.Nonetheless, we emphasize that as the employer, the burden still lies on MERALCO to

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provide clear and convincing facts upon which the alleged loss of confidence is to bemade to rest.

Undoubtedly, Beltran was remiss in her duties for her failure to immediately turnover Chang’s payment to the company. Such negligence, however, is not sufficient to

warrant separation from employment. To justify removal from service, the negligenceshould be gross and habitual. “Gross negligence x x x is the want of even slight care,acting or omitting to act in a situation where there is duty to act, not inadvertently butwillfully and intentionally, with a conscious indifference to consequences insofar asother persons may be affected.” Habitual neglect, on the other hand, connotes repeatedfailure to perform one’s duties for a period of time, depending upon the circumstances.No concrete evidence was presented by MERALCO to show that Beltran’s delay inremitting the funds was done intentionally. Neither was it shown that same is willful,unlawful and felonious contrary to MERALCO’s finging as stated in the letter of termination it sent to Beltran. Surely, Beltran’s single and isolated act of negligencecannot justify her dismissal from service.

Moreover, Beltran’s simple negligence did not result in any loss. From the timeshe received the payment on September 28, 1996 until January 7, 1997 when she wasapprised by her supervisor about Chang’s payment, no harm or damage to thecompany or to its customers attributable to Beltran’s negligence was alleged by MERALCO. Also, from the time she was apprised of the non-remittance by her superior on January 7, 1997, until the turn-over of the amount on January 13, 1997, no suchharm or damage was ever claimed by MERALCO.

Under the circumstances, MERALCO’s sanction of dismissal will not becommensurate to Beltran’s inadvertence not only because there was no clear showingof bad faith and malice but also in consideration of her untainted record of long anddedicated service to MERALCO. In the similar case of Philippine Long DistanceTelephone Company v. Berbano, Jr., we held that:

The magnitude of the infraction committed by an employee must be weighed and equated with the penalty prescribed and must be commensurate thereto, in view of thegravity of the penalty of dismissal or termination from the service. The employer should bear in mind that in termination cases, what is at stake is not simply the employee’s jobor position but [her] very livelihood.

Where a penalty less punitive would suffice, whatever missteps may becommitted by an employee ought not to be visited with a consequence so severe suchas dismissal from employment. Hence, we find no reversible error or any grave abuseof discretion on the part of the CA in ordering Beltran’s reinstatement without backwages. The forfeiture of her salary is an equitable punishment for the simplenegligence committed. (Manila Electric Company vs. Beltran, G.R. No. 173774,January 30, 2012)

In illegal dismissal cases, the employer bears the burden of proving that thetermination was for a valid or authorized cause. Just cause is required for a valid

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dismissal. The Labor Code provides that an employer may terminate an employment based on fraud or willful breach of the trust reposed on the employee. Such breach isconsidered willful if it is done intentionally, knowingly, and purposely, without justifiableexcuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently. It must also be based on substantial evidence and not on the employer’s

whims or caprices or suspicions otherwise, the employee would eternally remain at themercy of the employer. Loss of confidence must not be indiscriminately used as ashield by the employer against a claim that the dismissal of an employee was arbitrary.

And, in order to constitute a just cause for dismissal, the act complained of must bework-related and shows that the employee concerned is unfit to continue working for the employer. In addition, loss of confidence as a just cause for termination of employment is premised on the fact that the employee concerned holds a position of responsibility, trust and confidence or that the employee concerned is entrusted withconfidence with respect to delicate matters, such as the handling or care and protectionof the property and assets of the employer. The betrayal of this trust is the essence of the offense for which an employee is penalized.

Breach of trust is present in this case.

We agree with the ruling of the Labor Arbiter and Court of Appeals that thequantity of tubs expected to be received was the same as that which was loaded.However, what is material is the kind of fish loaded and then unloaded. Sameness islikewise needed.

We cannot close our eyes to the positive and clear narration of facts of the threewitnesses to the commission of qualified theft. Jonathan Distajo, a crew member of the

Analyn VIII, stated in his letter addressed to De Borja dated 8 August 1998, that whilethe vessel was traversing San Nicolas, Cavite, he saw a small boat approach them.When the boat was next to their vessel, Alcovendas went inside the stockroom whileSebullen pushed an estimated four tubs of fish away from it. Ariola, on the other hand,served as the lookout and negotiator of the transaction. Finally, Bañez and Calinaohelped in putting the tubs in the small boat. He further added that he received P800.00 as his share for the transaction. Romanito Clarido, who was also on board the vessel,corroborated the narration of Distajo on all accounts in his 25 August 1998 affidavit. Headded that Alcovendas told him to keep silent about what happened on that day.Sealing tight the credibility of the narration of theft is the affidavit executed by ElordeBañez dated 3 May 1999. Bañez was one of the dismissed employees who actively

participated in the taking of the tubs. He clarified in the affidavit that the four tubs takenout of the stockroom in fact contained fish taken from the eight tubs. He further stated

that Ariola told everyone in the vessel not to say anything and instead file a labor caseagainst the management. Clearly, we cannot fault Lynvil and De Borja when it dismissed the employees. (Lynvil Fishing Enterprises, Inc. vs. Ariola, et. al., G.R.No. 181974, February 1, 2012)

Fixed-Contract Agreement

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Jurisprudence, laid two conditions for the validity of a fixed-contract agreement between the employer and employee: First, the fixed period of employment wasknowingly and voluntarily agreed upon by the parties without any force, duress, or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent; or Second, it satisfactorily appears that the

employer and the employee dealt with each other on more or less equal terms with nomoral dominance exercised by the former or the latter. (Lynvil Fishing Enterprises,Inc. vs. Ariola, et. al., G.R. No. 181974, February 1, 2012)

Jurisdiction; Perfection of Appeal

A corporation can only exercise its powers and transact its business through itsboard of directors and through its officers and agents when authorized by a board resolution or its bylaws. The power of a corporation to sue and be sued is exercised by the board of directors. The physical acts of the corporation, like the signing of

documents, can be performed only by natural persons duly authorized for the purposeby corporate bylaws or by a specific act of the board. The purpose of verification is tosecure an assurance that the allegations in the pleading are true and correct and havebeen filed in good faith.

Thus, we agree with petitioner that, absent the requisite board resolution, neither Timbol-Roman nor Atty. Mallari, who signed the Memorandum of Appeal and Joint

Affidavit of Declaration allegedly on behalf of respondent corporation, may beconsidered as the “appellant” and “employer” referred to by Rule VI, Sections 4 to 6 of the NLRC Rules of Procedure, which state:

SECTION 4. REQUISITES FOR PERFECTION OF APPEAL. - (a) The Appeal

shall be filed within the reglementary period as provided in Section 1 of this Rule; shallbe verified by appellant himself in accordance with Section 4, Rule 7 of the Rules of Court, with proof of payment of the required appeal fee and the posting of a cash or surety bond as provided in Section 6 of this Rule; shall be accompanied bymemorandum of appeal in three (3) legibly typewritten copies which shall state thegrounds relied upon and the arguments in support thereof; the relief prayed for; and astatement of the date when the appellant received the appealed decision, resolution or order and a certificate of non-forum shopping with proof of service on the other party of such appeal. A mere notice of appeal without complying with the other requisitesaforestated shall not stop the running of the period for perfecting an appeal.

(b) The appellee may file with the Regional Arbitration Branch or Regional Officewhere the appeal was filed, his answer or reply to appellant's memorandum of appeal,not later than ten (10) calendar days from receipt thereof. Failure on the part of theappellee who was properly furnished with a copy of the appeal to file his answer or replywithin the said period may be construed as a waiver on his part to file the same.

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(c) Subject to the provisions of Article 218, once the appeal is perfected inaccordance with these Rules, the Commission shall limit itself to reviewing and decidingspecific issues that were elevated on appeal.

SECTION 5. APPEAL FEE. -The appellant shall pay an appeal fee of one

hundred fifty pesos (P150.00) to the Regional Arbitration Branch or Regional Office,and the official receipt of such payment shall be attached to the records of the case.

SECTION 6. BOND. - In case the decision of the Labor Arbiter or the Regional Director involves a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond. The appeal bond shall either be in cash or surety in an amount equivalent to the monetary award, exclusive of damages and attorney’s fees.

In case of surety bond, the same shall be issued by a reputable bonding company duly accredited by the Commission or the Supreme Court, and shall beaccompanied by:

(a) a joint declaration under oath by the employer, his counsel, and the bonding company, attesting that the bond posted is genuine, and shall be in effect until final disposition of the case.

(b) a copy of the indemnity agreement between the employer-appellant and bonding company; and

(c) a copy of security deposit or collateral securing the bond.

A certified true copy of the bond shall be furnished by the appellant to theappellee who shall verify the regularity and genuineness thereof and immediately report to the Commission any irregularity.

Upon verification by the Commission that the bond is irregular or not genuine,the Commission shall cause the immediate dismissal of the appeal.

No motion to reduce bond shall be entertained except on meritorious groundsand upon the posting of a bond in a reasonable amount in relation to the monetary award.

The filing of the motion to reduce bond without compliance with the requisites inthe preceding paragraph shall not stop the running of the period to perfect an appeal.(Emphasis supplied)

The OGCC failed to produce any valid authorization from the board of directorsdespite petitioner Salenga’s repeated demands. It had been given more than enoughopportunity and time to produce the appropriate board resolution, and yet it failed to doso. In fact, many of its pleadings, representations, and submissions lacked board authorization.

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We cannot agree with the OGCC’s attempt to downplay this procedural flaw byclaiming that, as the statutorily assigned counsel for GOCCs, it does not need suchauthorization. In Constantino-David v. Pangandaman-Gania, we exhaustively explainedwhy it was necessary for government agencies or instrumentalities to execute theverification and the certification against forum-shopping through their duly authorized

representatives. We ruled thereon as follows:

But the rule is different where the OSG is acting as counsel of record for agovernment agency. For in such a case it becomes necessary to determine whether the

petitioning government body has authorized the filing of the petition and is espousing the same stand propounded by the OSG. Verily, it is not improbable for government agencies to adopt a stand different from the position of the OSG since they weigh not

just legal considerations but policy repercussions as well. They have their respectivemandates for which they are to be held accountable, and the prerogative to determinewhether further resort to a higher court is desirable and indispensable under thecircumstances.

The verification of a pleading, if signed by the proper officials of the client agency itself, would fittingly serve the purpose of attesting that the allegations in the pleading are true and correct and not the product of the imagination or a matter of speculation,and that the pleading is filed in good faith. Of course, the OSG may opt to file its own

petition as a “People's Tribune” but the representation would not be for a client officebut for its own perceived best interest of the State.

The case of Commissioner of Internal Revenue v. S.C. Johnson and Son, Inc., isnot also a precedent that may be invoked at all times to allow the OSG to sign thecertificate of non-forum shopping in place of the real party-in-interest. The ruling thereinmentions merely that the certification of non-forum shopping executed by the OSGconstitutes substantial compliance with the rule since “the OSG is the only lawyer for the petitioner, which is a government agency mandated under Section 35, Chapter 12,Title III, Book IV, of the 1987 Administrative Code (Reiterated under MemorandumCircular No. 152 dated May 17, 1992) to be represented only by the Solicitor General.”

By its very nature, “substantial compliance” is actually inadequate observance of the requirements of a rule or regulation which are waived under equitablecircumstances to facilitate the administration of justice there being no damage or injury caused by such flawed compliance. This concept is expressed in the statement “therigidity of a previous doctrine was thus subjected to an inroad under the concept of substantial compliance.” In every inquiry on whether to accept “substantial compliance,” the focus is always on the presence of equitable conditions to administer justiceeffectively and efficiently without damage or injury to the spirit of the legal obligation.

The fact that the OSG under the 1987 Administrative Code is the only lawyer for a government agency wanting to file a petition, or complaint for that matter, does not operate per se to vest the OSG with the authority to execute in its name the certificateof non-forum shopping for a client office. For, in many instances, client agencies of theOSG have legal departments which at times inadvertently take legal matters requiring court representation into their own hands without the intervention of the OSG.

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Consequently, the OSG would have no personal knowledge of the history of a particular case so as to adequately execute the certificate of non-forum shopping; and even if theOSG does have the relevant information, the courts on the other hand would have noway of ascertaining the accuracy of the OSG's assertion without precise references inthe record of the case. Thus, unless equitable circumstances which are manifest from

the record of a case prevail, it becomes necessary for the concerned government agency or its authorized representatives to certify for non-forum shopping if only to besure that no other similar case or incident is pending before any other court.

We recognize the occasions when the OSG has difficulty in securing theattention and signatures of officials in charge of government offices for the verificationand certificate of non-forum shopping of an initiatory pleading. This predicament isespecially true where the period for filing such pleading is non-extendible or can nolonger be further extended for reasons of public interest such as in applications for thewrit of habeas corpus, in election cases or where sensitive issues are involved. Thisquandary is more pronounced where public officials have stations outside Metro Manila.

But this difficult fact of life within the OSG, equitable as it may seem, does not excuse it from wantonly executing by itself the verification and certificate of non-forum shopping.If the OSG is compelled by circumstances to verify and certify the pleading in behalf of a client agency, the OSG should at least endeavor to inform the courts of its reasons for doing so, beyond instinctively citing City Warden of the Manila City Jail v. Estrella and Commissioner of Internal Revenue v. S.C. Johnson and Son, Inc.

Henceforth, to be able to verify and certify an initiatory pleading for non-forumshopping when acting as counsel of record for a client agency, the OSG must (a) allegeunder oath the circumstances that make signatures of the concerned officialsimpossible to obtain within the period for filing the initiatory pleading; (b) append to the

petition or complaint such authentic document to prove that the party-petitioner or complainant authorized the filing of the petition or complaint and understood and adopted the allegations set forth therein, and an affirmation that no action or claiminvolving the same issues has been filed or commenced in any court, tribunal or quasi-

judicial agency; and, (c) undertake to inform the court promptly and reasonably of any change in the stance of the client agency.

Anent the document that may be annexed to a petition or complaint under letter (b) hereof, the letter-endorsement of the client agency to the OSG, or other correspondence to prove that the subject-matter of the initiatory pleading had been

previously discussed between the OSG and its client, is satisfactory evidence of thefacts under letter (b) above. In this exceptional situation where the OSG signs the

verification and certificate of non-forum shopping, the court reserves the authority todetermine the sufficiency of the OSG's action as measured by the equitableconsiderations discussed herein. (Emphasis ours, italics provided)

The ruling cited above may have pertained only to the Office of the Solicitor General’s representation of government agencies and instrumentalities, but we see noreason why this doctrine cannot be applied to the case at bar insofar as the OGCC isconcerned.

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While in previous decisions we have excused transgressions of these rules, it has always been in the context of upholding justice and fairness under exceptional circumstances. In this case, though, respondent failed to provide any iota of rhyme or reason to compel us to relax these requirements. Instead, what is clear to us is that the

so-called appeal was done against the instructions of then President/CEO Naguiat not to file an appeal. Timbol-Roman, who signed the Verification and the Certificationagainst forum-shopping, was not even an authorized representative of the corporation.The OGCC was equally remiss in its duty. It ought to have advised respondent corporation, the proper procedure for pursuing an appeal. Instead, it maintained theappeal and failed to present any valid authorization from respondent corporation evenafter petitioner had questioned OGCC’s authority all throughout the proceedings. Thus,it is evident that the appeal was made in bad faith.

The unauthorized and overzealous acts of officials of respondent CDC and theOGCC have led to a waste of the government’s time and resources. More alarmingly,they have contributed to the injustice done to petitioner Salenga. By taking matters intotheir own hands, these officials let the case drag on for years, depriving him of theenjoyment of property rightfully his. What should have been a simple case of illegal dismissal became an endless stream of motions and pleadings.

Time and again, we have said that the perfection of an appeal within the periodprescribed by law is jurisdictional, and the lapse of the appeal period deprives the courtsof jurisdiction to alter the final judgment. Thus, there is no other recourse but to respect the findings and ruling of the labor arbiter. Clearly, therefore, the CA committed graveabuse of discretion in entertaining the Petition filed before it after the NLRC had dismissed the case based on lack of jurisdiction. The assailed CA Decision did not even resolve petitioner Salenga’s consistent and persistent claim that the NLRC should not have taken cognizance of the appeal in the first place, absent a board resolution.Thus, LA Darlucio’s Decision with respect to the liability of the corporation still stands.However, we note from that Decision that Rufo Colayco was made solidarily liable withrespondent corporation. Colayco thereafter filed his separate appeal. As to him, theNLRC correctly held in its 30 July 2001 Decision that he may not be held solidarily responsible to petitioner. As a result, it dropped him as respondent. Notably, in the caseat bar, petitioner does not question that ruling.

Based on the foregoing, all other subsequent proceedings regarding the issue of petitioner’s dismissal are null and void for having been conducted without jurisdiction.Thus, it is no longer incumbent upon us to rule on the other errors assigned in the

matter of petitioner Salenga’s dismissal. (Salenga and NLRC vs. Court of Appeals,et. al., G.R. No. 174941, February 1, 2012)

Separation Pay in Lieu of Reinstatement; Backwages

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At the outset, it should be stressed that a determination of the applicability of thedoctrine of strained relations is essentially a factual question and, thus, not a proper subject in the instant petition.

The well-entrenched rule in our jurisdiction is that only questions of law may be

entertained by this Court in a petition for review on certiorari. This rule, however, is not ironclad and admits certain exceptions, such as when, inter alia, the findings of fact areconflicting.

Here, in view of the conflicting findings of the NLRC and the CA, this Court isconstrained to pass upon the propriety of the application of the doctrine of strained relations to justify the award of separation pay to the respondent in lieu of reinstatement.

The law on reinstatement is provided for under Article 279 of the Labor Code of the Philippines:

Article 279. Security of Tenure. - In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or whenauthorized by this Title. An employee who is unjustly dismissed from work shall beentitled to reinstatement without loss of seniority rights and other privileges and to hisfull backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to thetime of his actual reinstatement. (emphasis supplied)

Under the law and prevailing jurisprudence, an illegally dismissed employee isentitled to reinstatement as a matter of right. However, if reinstatement would only

exacerbate the tension and strained relations between the parties, or where therelationship between the employer and the employee has been unduly strained by reason of their irreconcilable differences, particularly where the illegally dismissed employee held a managerial or key position in the company, it would be more prudent to order payment of separation pay instead of reinstatement.

Under the doctrine of strained relations, the payment of separation pay isconsidered an acceptable alternative to reinstatement when the latter option is nolonger desirable or viable. On one hand, such payment liberates the employee fromwhat could be a highly oppressive work environment. On the other hand, it releases theemployer from the grossly unpalatable obligation of maintaining in its employ a worker it could no longer trust.

In such cases, it should be proved that the employee concerned occupies aposition where he enjoys the trust and confidence of his employer; and that it is likelythat if reinstated, an atmosphere of antipathy and antagonism may be generated as toadversely affect the efficiency and productivity of the employee concerned.

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Here, we agree with the CA that the relations between the parties had beenalready strained thereby justifying the grant of separation pay in lieu of reinstatement infavor of the respondent.

First, it cannot be gainsaid that the petitioner’s reinstatement to his former

position would only serve to intensify the atmosphere of antipathy and antagonismbetween the parties. Undoubtedly, the petitioner’s filing of various criminal complaintsagainst the respondent for qualified theft and the subsequent filing by the latter of thecomplaint for illegal dismissal against the latter, taken together with the pendency of theinstant case for more than six years, had caused strained relations between the parties.

Second, considering that the respondent’s former position as bank encoder involves the handling of accounts of the depositors of the Bank of Lubao, it would not be equitable on the part of the petitioner to be ordered to maintain the former in itsemploy since it may only inspire vindictiveness on the part of the respondent.

Third, the refusal of the respondent to be re-admitted to work is in itself indicativeof the existence of strained relations between him and the petitioner. In the case of Lagniton, Sr. v. National Labor Relations Commission, the Court held that the refusal of the dismissed employee to be re-admitted is constitutive of strained relations:

It appears that relations between the petitioner and the complainants have beenso strained that the complainants are no longer willing to be reinstated. As suchreinstatement would only exacerbate the animosities that have developed between the

parties, the public respondents were correct in ordering instead the grant of separation pay to the dismissed employees in the interest of industrial peace.

Time and again, this Court has recognized that strained relations between theemployer and employee is an exception to the rule requiring actual reinstatement for illegally dismissed employees for the practical reason that the already existing antagonism will only fester and deteriorate, and will only worsen with possible adverseeffects on the parties, if we shall compel reinstatement; thus, the use of a viablesubstitute that protects the interests of both parties while ensuring that the law isrespected.

Anent the second issue, the petitioner claimed that the respondent is not entitled to the payment of backwages considering that there was no bad faith on its part when it terminated the latter’s employment. The petitioner insists that it is within its prerogativeto dismiss the respondent on the basis of loss of trust and confidence.

The arguments raised by the petitioner with regard to the issue of backwages,essentially, attacks the factual findings of the CA, the NLRC and the LA. As stated earlier, subject to well-defined exceptions, factual questions may not be raised in a

petition for review on certiorari under Rule 45 as this Court is not a trier of facts. The petitioner failed to assert any circumstance which would impel this Court to disregard

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the findings of fact of the lower tribunals on the propriety of the award of backwages infavor of the respondent.

However, the backwages that should be awarded to the respondent should bemodified. Employees who are illegally dismissed are entitled to full backwages,

inclusive of allowances and other benefits or their monetary equivalent, computed fromthe time their actual compensation was withheld from them up to the time of their actual reinstatement. But if reinstatement is no longer possible, the backwages shall becomputed from the time of their illegal termination up to the finality of the decision.

Thus, when there is an order of reinstatement, the computation of backwagesshall be reckoned from the time of illegal dismissal up to the time that the employee isactually reinstated to his former position.

Pursuant to the order of reinstatement rendered by the LA, the petitioner sent therespondent a letter requiring him to report back to work on May 4, 2007.

Notwithstanding the said letter, the respondent opted not to report for work. Thus, it isbut fair that the backwages that should be awarded to the respondent be computed from the time that the respondent was illegally dismissed until the time when he wasrequired to report for work, i.e. from September 1, 2005 until May 4, 2007. It is only during the said period that the respondent is deemed to be entitled to the payment of backwages.

The fact that the CA, in its April 4, 2009 decision, ordered the payment of separation pay in lieu of the respondent’s reinstatement would not entitle the latter tobackwages. It bears stressing that decisions of the CA, unlike that of the LA, are not immediately executory. Accordingly, the petitioner should only pay the respondent

backwages from September 1, 2005, the date when the respondent was illegally dismissed, until May 4, 2007, the date when the petitioner required the former to report to work. (Bank of Lubao, Inc. vs. Manabat, G.R. No. 188722, February 1, 2012)

Dismissal; Probationary Employee

In International Catholic Migration Commission v. NLRC, the Court explained that a probationary employee, as understood under Article 281 of the Labor Code, isone who is on trial by an employer, during which, the latter determines whether or not he is qualified for permanent employment. A probationary appointment gives theemployer an opportunity to observe the fitness of a probationer while at work, and to

ascertain whether he would be a proper and efficient employee.

The essence of a probationary period of employment fundamentally lies in the purpose or objective of both the employer and the employee during the period. Whilethe employer observes the fitness, propriety and efficiency of a probationer to ascertainwhether he is qualified for permanent employment, the latter seeks to prove to theformer that he has the qualifications to meet the reasonable standards for permanent employment.

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The “trial period” or the length of time the probationary employee remains on probation depends on the parties’ agreement, but it shall not exceed six (6) monthsunder Article 281 of the Labor Code, unless it is covered by an apprenticeshipagreement stipulating a longer period. Article 281 provides:

Probationary employment. — Probationary employment shall not exceed six (6)months from the date the employee started working, unless it is covered by anapprenticeship agreement stipulating a longer period. The services of an employeewho has been engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standardsmade known by the employer to the employee at the time of his engagement. Anemployee who is allowed to work after a probationary period shall be considered aregular employee.

As the Court explained in International Catholic Migration Commission, “the word

‘probationary,’ as used to describe the period of employment, implies the purpose of theterm or period, but not its length.” Thus, the fact that Dalangin was separated from theservice after only about four weeks does not necessarily mean that his separation fromthe service is without basis. (Canadian Opportunities Unlimited, Inc. vs. Dalangin,Jr., G.R. No. 172223, February 6, 2012)

Dismissal: Procedural and Substantive Due Process; Home Allotment Pay

For a worker’s dismissal to be considered valid, it must comply with both procedural and substantive due process. The legality of the manner of dismissal constitutes procedural due process, while the legality of the act of dismissal constitutessubstantive due process.

Procedural due process in dismissal cases consists of the twin requirements of notice and hearing. The employer must furnish the employee with two written noticesbefore the termination of employment can be effected: (1) the first notice apprises theemployee of the particular acts or omissions for which his dismissal is sought; and (2)the second notice informs the employee of the employer’s decision to dismiss him.Before the issuance of the second notice, the requirement of a hearing must becomplied with by giving the worker an opportunity to be heard. It is not necessary that an actual hearing be conducted.

Substantive due process, on the other hand, requires that dismissal by theemployer be made under a just or authorized cause under Articles 282 to 284 of theLabor Code.

In this case, there was no written notice furnished to De Gracia, et al. regarding the cause of their dismissal. Cosmoship furnished a written notice (telex) to Skippers,the local manning agency, claiming that De Gracia, et al. were repatriated because thelatter voluntarily pre-terminated their contracts. This telex was given credibility and

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weight by the Labor Arbiter and NLRC in deciding that there was pre-termination of theemployment contract “akin to resignation” and no illegal dismissal. However, ascorrectly ruled by the CA, the telex message is “a biased and self-serving document that does not satisfy the requirement of substantial evidence.” If, indeed, De Gracia, et al. voluntarily pre-terminated their contracts, then De Gracia, et al. should have

submitted their written resignations.

Article 285 of the Labor Code recognizes termination by the employee of theemployment contract by “serving written notice on the employer at least one (1) monthin advance.” Given that provision, the law contemplates the requirement of a writtennotice of resignation. In the absence of a written resignation, it is safe to presume that the employer terminated the seafarers. In addition, the telex message relied upon by the Labor Arbiter and NLRC bore conflicting dates of 22 January 1998 and 22 January 1999, giving doubt to the veracity and authenticity of the document. In 22 January 1998,De Gracia, et al. were not even employed yet by the foreign principal. For thesereasons, the dismissal of De Gracia, et al. was illegal.

On the issue of home allotment pay, Skippers effectively admitted non-remittance of home allotment pay for the month of December 1998 in its Position Paper.Skippers sought the repatriation expenses to be offset with the home allotment pay.However, since De Gracia, et al.’s dismissal was illegal, their repatriation expenseswere for the account of Skippers and could not be offset with the home allotment pay.

Contrary to the claim of the Labor Arbiter and NLRC that the home allotment pay is in “the nature of extraordinary money where the burden of proof is shifted to theworker who must prove he is entitled to such monetary benefit,” Section 8 of POEAMemorandum Circular No. 55, series of 1996, states that the allotment actually constitutes at least eighty percent (80%) of the seafarer’s salary:

The seafarer is required to make an allotment which is payable once a month tohis designated allottee in the Philippines through any authorized Philippine bank. Themaster/employer/agency shall provide the seafarer with facilities to do so at no expenseto the seafarer. The allotment shall be at least eighty percent (80%) of the seafarer’smonthly basic salary including backwages, if any. (Emphasis supplied)

Paragraph 2 of the employment contracts of De Gracia, Lata and Aprostaincorporated the provisions of above Memorandum Circular No. 55, series of 1996, inthe employment contracts. Since said memorandum states that home allotment of seafarers actually constitutes at least eighty percent (80%) of their salary, homeallotment pay is not in the nature of an extraordinary money or benefit, but should actually be considered as salary which should be paid for services rendered. For thisreason, such non-remittance of home allotment pay should be considered as unpaid salaries, and Skippers shall be liable to pay the home allotment pay of De Gracia, et al.for the month of December 1998. (Skippers United Pacific, Inc. vs. Doza, G.R. No.175558, February 8, 2012)

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OFW Employment Contract

An employment contract, like any other contract, is perfected at the moment (1)the parties come to agree upon its terms; and (2) concur in the essential elementsthereof: (a) consent of the contracting parties, (b) object certain which is the subject

matter of the contract, and (c) cause of the obligation. The object of the contract wasthe rendition of service by respondent on board the vessel for which service he would be paid the salary agreed upon.

Hence, in this case, the employment contract was perfected on January 15, 2000 when it was signed by the parties, respondent and petitioners, who entered into thecontract in behalf of their principal, Ranger Marine S.A., thereby signifying their consent to the terms and conditions of employment embodied in the contract, and the contract was approved by the POEA on January 17, 2000. However, the employment contract did not commence, since petitioners did not allow respondent to leave on January 17,2000 to embark the vessel M/V AUK in Germany on the ground that he was not yet

declared fit to work on the day of departure, although his Medical Certificate dated January 17, 2000 proved that respondent was fit to work.

In Santiago v. CF Sharp Crew Management, Inc., the Court held that theemployment contract did not commence when the petitioner therein, a hired seaman,was not able to depart from the airport or seaport in the point of hire; thus, no employer-employee relationship was created between the parties.

Nevertheless, even before the start of any employer-employee relationship,contemporaneous with the perfection of the employment contract was the birth of certain rights and obligations, the breach of which may give rise to a cause of actionagainst the erring party. If the reverse happened, that is, the seafarer failed or refused to be deployed as agreed upon, he would be liable for damages.

The Court agrees with the NLRC that a recruitment agency, like petitioner BMC,must ensure that an applicant for employment abroad is technically equipped and

physically fit because a labor contract affects public interest. Nevertheless, in this case, petitioners failed to prove with substantial evidence that they had a valid ground to prevent respondent from leaving on the scheduled date of his deployment. While thePOEA Standard Contract must be recognized and respected, neither the manning agent nor the employer can simply prevent a seafarer from being deployed without avalid reason. (Bright Maritime Corporation vs. Fantonial, G.R. No. 165935,February 8, 2012)

NLRC Contempt Powers

On the first issue, we stress that under Article 218 of the Labor Code, the NLRC (and the labor arbiters) may hold any offending party in contempt, directly or indirectly,and impose appropriate penalties in accordance with law. The penalty for direct contempt consists of either imprisonment or fine, the degree or amount depends on

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whether the contempt is against the Commission or the labor arbiter. The Labor Code,however, requires the labor arbiter or the Commission to deal with indirect contempt inthe manner prescribed under Rule 71 of the Rules of Court.

Rule 71 of the Rules of Court does not require the labor arbiter or the NLRC to

initiate indirect contempt proceedings before the trial court. This mode is to be observed only when there is no law granting them contempt powers. As is clear under Article218(d) of the Labor Code, the labor arbiter or the Commission is empowered or has

jurisdiction to hold the offending party or parties in direct or indirect contempt. The petitioners, therefore, have not improperly brought the indirect contempt chargesagainst the respondents before the NLRC.

The second issue pertains to the nature of contempt proceedings, especially withrespect to the remedy available to the party adjudged to have committed indirect contempt or has been absolved of indirect contempt charges. In this regard, Section 11,Rule 71 of the Rules of Court states that the judgment or final order of a court in a case

of indirect contempt may be appealed to the proper court as in a criminal case. This isnot the point at issue, however, in this petition. It is rather the question of whether thedismissal of a contempt charge, as in the present case, is appealable. The CA held that the NLRC’s dismissal of the contempt charges against the respondents amountsto an acquittal in a criminal case and is not subject to appeal.

In Yasay, Jr. v. Recto, the Court declared:

A distinction is made between a civil and [a] criminal contempt. Civil contempt isthe failure to do something ordered by a court to be done for the benefit of a party. Acriminal contempt is any conduct directed against the authority or dignity of the court.

The Court further explained in Remman Enterprises, Inc. v. Court of Appeals and People v. Godoy the character of contempt proceedings, thus –

The real character of the proceedings in contempt cases is to be determined by the relief sought or by the dominant purpose. The proceedings are to be regarded ascriminal when the purpose is primarily punishment and civil when the purpose is

primarily compensatory or remedial.

Still further, the Court held in Santiago v. Anunciacion, Jr. that:

But whether the first or the second, contempt is still a criminal proceeding inwhich acquittal, for instance, is a bar to a second prosecution. The distinction is for the

purpose only of determining the character of punishment to be administered.

In the earlier case of The Insurance Commissioner v. Globe Assurance Co., Inc.,the Court dismissed the appeal from the ruling of the lower court denying a petition to

punish the respondent therein from contempt for lack of evidence. The Court said inthat case:

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It is not the sole reason for dismissing this appeal. In the leading case of In reMison, Jr. v. Subido, it was stressed by Justice J.B.L. Reyes as ponente, that thecontempt proceeding far from being a civil action is “of a criminal nature and of summary character in which the court exercises but limited jurisdiction.” It was thenexplicitly held: “Hence, as in criminal proceedings, an appeal would not lie from the

order of dismissal of, or an exoneration from, a charge of contempt of court.” [footnoteomitted]

Is the NLRC’s dismissal of the contempt charges against the respondentsbeyond review by this Court? On this important question, we note that the petitioners, inassailing the CA main decision, claim that the appellate court committed grave abuse of discretion in not ruling on the dismissal by the NLRC of the contempt charges. They also charge the NLRC of having gravely abused its discretion and having committed reversible errors in:

(1) setting aside its earlier resolutions and orders, including the writ of

preliminary injunction it issued, with its dismissal of the petition to cite the respondentsin contempt of court;(2) overturning this Court’s resolutions upholding the TRO and the writ of

preliminary injunction;(3) failing to impose administrative fines upon the respondents for violation of the

TRO and the writ of preliminary injunction; and (4) failing to order the reinstatement of the dismissed petitioners and the

payment of their accrued wages and other benefits.

We find no grave abuse of discretion in the assailed NLRC ruling. It rightlyavoided delving into issues which would clearly be in excess of its jurisdiction for theyare issues involving the merits of the case which are by law within the original andexclusive jurisdiction of the labor arbiter. To be sure, whether payroll reinstatement of some of the petitioners is proper; whether the resignation of some of them wascompelled by dire economic necessity; whether the petitioners are entitled to their money claims; and whether quitclaims are contrary to law or public policy are issuesthat should be heard by the labor arbiter in the first instance. The NLRC can inquire intothem only on appeal after the merits of the case shall have been adjudicated by thelabor arbiter.

The NLRC correctly dismissed the contempt charges against the respondents.The CA likewise committed no grave abuse of discretion in not disturbing the NLRC resolution. In light of the above discussion, we find no need to dwell into the other issues the parties raised. (Robosa, et. al. vs. NLRC, et. al., G.R. No. 176085,February 8, 2012)

Bonus

From a legal point of view, a bonus is a gratuity or act of liberality of the giver which the recipient has no right to demand as a matter of right. The grant of a bonus is

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basically a management prerogative which cannot be forced upon the employer whomay not be obliged to assume the onerous burden of granting bonuses or other benefitsaside from the employee’s basic salaries or wages.

A bonus, however, becomes a demandable or enforceable obligation when it is

made part of the wage or salary or compensation of the employee. Particularlyinstructive is the ruling of the Court in Metro Transit Organization, Inc. v. National Labor Relations Commission, where it was written:

Whether or not a bonus forms part of wages depends upon the circumstancesand conditions for its payment. If it is additional compensation which the employer

promised and agreed to give without any conditions imposed for its payment, such assuccess of business or greater production or output, then it is part of the wage. But if it is paid only if profits are realized or if a certain level of productivity is achieved, it cannot be considered part of the wage. Where it is not payable to all but only to someemployees and only when their labor becomes more efficient or more productive, it is

only an inducement for efficiency, a prize therefore, not a part of the wage.

Granting arguendo that the CBA Side Agreement does not contractually bindpetitioner ETPI to give the subject bonuses, nevertheless, the Court finds that its act of granting the same has become an established company practice such that it hasvirtually become part of the employees’ salary or wage. A bonus may be granted onequitable consideration when the giving of such bonus has been the company’s longand regular practice. In Philippine Appliance Corporation v. Court of Appeals, it was

pronounced:

To be considered a “regular practice,” however, the giving of the bonus should

have been done over a long period of time, and must be shown to have been consistent and deliberate. The test or rationale of this rule on long practice requires an indubitableshowing that the employer agreed to continue giving the benefits knowing fully well that said employees are not covered by the law requiring payment thereof.

The giving of the subject bonuses cannot be peremptorily withdrawn by ETPI without violating Article 100 of the Labor Code:

Art. 100. Prohibition against elimination or diminution of benefits. – Nothing inthis 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.

The rule is settled that any benefit and supplement being enjoyed by theemployees cannot be reduced, diminished, discontinued or eliminated by the employer.The principle of non-diminution of benefits is founded on the constitutional mandate to

protect the rights of workers and to promote their welfare and to afford labor full protection. (Eastern Telecommunications Philippines, Inc. vs. Eastern TelecomsEmployees Union, G.R. No. 185665, February 8, 2012)

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Labor-Only Contracting

Article 106. Contractor or subcontractor. - Whenever, an employer enters into acontract with another person for the performance of the former’s work, the employees of

the contractor and of the latter’s subcontractor shall be paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of hisemployees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work

performed under the contract, in the same manner and extent that he is liable toemployees directly employed by him.

The Secretary of Labor may, by appropriate regulations, restrict or prohibit thecontracting out of labor to protect the rights of workers established under this Code. In

so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered theemployer for purposes of this Code, to prevent any violation or circumvention of any

provision of this Code.There is “labor-only” contracting where the person supplying workers to an

employer does not have substantial capital or investment in the form of tools,equipment, machineries, work premises, among others, and the workers recruited and

placed by such persons are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall beconsidered merely as an agent of the employer who shall be responsible to the workersin the same manner and extent as if the latter were directly employed by him.[Underscoring provided]

In the same vein, Sections 8 and 9, DOLE Department Order No. 10, Series of 1997, state that:

Sec. 8. Job contracting. – There is job contracting permissible under the Code if the following conditions are met:

(1) The contractor carries on an independent business and undertakes thecontract work on his own account under his own responsibility according to his ownmanner and method, free from the control and direction of his employer or principalin all matters connected with the performance of the work except as to the resultsthereof; and

(2) The contractor has substantial capital or investment in the form of tools,equipment, machineries, work premises, and other materials which are necessary in theconduct of his business.

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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 wheresuch 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 inwhich workers are habitually employed.

(b) Labor-only contracting as defined herein is hereby prohibited and the personacting as contractor shall be considered merely as an agent or intermediary of theemployer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.

(c) For cases not falling under this Article, the Secretary of Labor shall determinethrough appropriate orders whether or not the contracting out of labor is permissible inthe light of the circumstances of each case and after considering the operating needs of the employer and the rights of the workers involved. In such case, he may prescribeconditions and restrictions to insure the protection and welfare of the workers.”

On the matter of labor-only contracting, Section 5 of Rule VIII-A of the OmnibusRules Implementing the Labor Code, provides:

Section 5. Prohibition against labor-only contracting. Labor-only contracting ishereby declared prohibited. For this purpose, labor-only contracting shall refer to an

arrangement where the contractor or subcontractor merely recruits, supplies or placesworkers 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 related to the main business of the principal, or

The contractor does not exercise the right to control over the performance of thework of the contractual employee.

X x x x

Thus, in determining the existence of an independent contractor relationship,several factors may be considered, such as, but not necessarily confined to, whether or not the contractor is carrying on an independent business; the nature and extent of thework; the skill required; the term and duration of the relationship; the right to assign the

performance of specified pieces of work; the control and supervision of the work to

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another; the employer’s power with respect to the hiring, firing and payment of thecontractor’s workers; the control of the premises; the duty to supply premises, tools,appliances, materials and labor; and the mode, manner and terms of payment.

On the other hand, there is labor-only contracting where: (a) the person

supplying workers to an employer does not have substantial capital or investment in theform of tools, equipment, machineries, work premises, among others; and (b) theworkers recruited and placed by such person are performing activities which are directly related to the principal business of the employer.

Generally, the presumption is that the contractor is a labor-only contracting unless such contractor overcomes the burden of proving that it has the substantial capital, investment, tools and the like. (Garden of Memories Park, et. al. vs. NLRC,et. al., G.R. No. 160278, February 8, 2012)

Disease as Ground for Termination

With regard to disease as a ground for termination, Article 284 of the Labor Codeprovides that an employer may terminate the services of an employee who has beenfound to be suffering from any disease and whose continued employment is prohibitedby law or is prejudicial to his health, as well as to the health of his co-employees.

In order to validly terminate employment on this ground, Section 8, Rule I, BookVI of the Omnibus Rules Implementing the Labor Code requires that:

Section 8. Disease as a ground for dismissal. — Where the employee suffersfrom a disease and his continued employment is prohibited by law or prejudicial to his

health or to the health of his co-employees, the employer shall not terminate hisemployment unless there is a certification by a competent public health authority thatthe disease is of such nature or at such a stage that it cannot be cured within a period of six (6) months even with proper medical treatment. If the disease or ailment can becured within the period, the employer shall not terminate the employee but shall ask theemployee to take a leave. The employer shall reinstate such employee to his former position immediately upon the restoration of his normal health.

In Triple Eight Integrated Services, Inc. v. NLRC, the Court held that therequirement for a medical certificate under Article 284 of the Labor Code cannot bedispensed with; otherwise, it would sanction the unilateral and arbitrary determination

by the employer of the gravity or extent of the employee’s illness and, thus, defeat the public policy on the protection of labor. In the present case, there was no showing that prior to terminating respondent's employment, petitioner secured the required certification from a competent public health authority that the disease he suffered wasof such nature or at such a stage that it cannot be cured within six months despite

proper medical treatment, pursuant to Section 8, Rule I, Book VI of the Omnibus RulesImplementing the Labor Code.

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It bears stressing that respondent was not an ordinary rank-and-file employee.With the nature of his position, he was reposed with managerial duties to oversee

petitioner's business in his assigned area. As a managerial employee, respondent wastasked to perform important and crucial functions and, thus, bound by more exacting work ethic. He should have realized that such sensitive position required the full trust

and confidence of his employer in every exercise of managerial discretion insofar as theconduct of the latter's business is concerned. The power to dismiss an employee is arecognized prerogative inherent in the employer's right to freely manage and regulatehis business. The law, in protecting the rights of the laborers, authorizes neither oppression nor self-destruction of the employer. The worker's right to security of tenureis not an absolute right, for the law provides that he may be dismissed for cause. As ageneral rule, employers are allowed wide latitude of discretion in terminating theemployment of managerial personnel. The mere existence of a basis for believing that such employee has breached the trust and confidence of his employer would suffice for his dismissal. Needless to say, an irresponsible employee like respondent does not deserve a place in the workplace, and it is petitioner's management prerogative to

terminate his employment. To be sure, an employer cannot be compelled to continuewith the employment of workers when continued employment will prove inimical to theemployer's interest. (Wuerth Philippines, Inc. vs. Ynson, G.R. No. 175932, February 15, 2012)

Method of Compensation

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

While the Constitution is committed to the policy of social justice and the protection of the working class, it should not be supposed that every labor dispute will be automatically decided in favor of labor. Management also has its rights which areentitled to respect and enforcement in the interest of simple fair play. Out of its concernfor the less privileged in life, the Court has inclined, more often than not, toward theworker and upheld his cause in his conflicts with the employer. Such favoritism,however, has not blinded the Court to the rule that justice is in every case for thedeserving, to be dispensed in the light of the established facts and the applicable law and doctrine. (Javier vs. Fly Ace Corporation, G.R. No. 192558, February 15, 2012)

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Constructive Dismissal: Demotion

We have held that management is free to regulate, according to its owndiscretion and judgment, all aspects of employment, including hiring, work assignments,working methods, time, place and manner of work, processes to be followed,supervision of workers, working regulations, transfer of employees, work supervision,lay off of workers and discipline, dismissal and recall of workers. The exercise of management prerogative, however, is not absolute as it must be exercised in good faithand with due regard to the rights of labor.

In constructive dismissal cases, the employer has the burden of proving that thetransfer of an employee is for just or valid ground, such as genuine business necessity.The employer must demonstrate that the transfer is not unreasonable, inconvenient, or

prejudicial to the employee and that the transfer does not involve a demotion in rank or a diminution in salary and other benefits. “If the employer fails to overcome this burdenof proof, the employee’s transfer is tantamount to unlawful constructive dismissal.”

In this case, petitioners insist that the transfer of respondents was a measure of self-preservation and was prompted by a desire to protect the health of the buying

public, claiming that respondents should be transferred to a position where they could not sabotage the business pending resolution of their cases. According to petitioners,the possibility that respondents might introduce harmful substances to the bread whilein the performance of their duties as chief bakers is not imaginary but real as borne out by what Tolores did in one of the bakeshops in Culasi, Antique where he was assigned as baker.

This postulation is not well-taken. On the contrary, petitioners failed to satisfy theburden of proving that the transfer was based on just or valid ground. Petitioners’ bareassertions of imminent threat from the respondents are mere accusations which are notsubstantiated by any proof. This Court is proscribed from making conclusions based onmere presumptions or suppositions. An employee’s fate cannot be justly hinged uponconjectures and surmises. The act attributed against Tolores does not even convince usas he was merely a suspected culprit in the alleged sabotage for which no investigationtook place to establish his guilt or culpability. Besides, Reyes still retained Tolores asan employee and chief baker when he could have dismissed him for cause if theallegations were indeed found true. In view of these, this Court finds no compellingreason to justify the transfer of respondents from chief bakers to utility/security

personnel. What appears to this Court is that respondents’ transfer was an act of retaliation on the part of petitioners due to the former’s filing of complaints against them,and thus, was clearly made in bad faith. In fact, petitioner Reyes even admitted that hecaused the reassignments due to the pending complaints filed against him.

“[D]emotion involves a situation in which an employee is relegated to asubordinate or less important position constituting a reduction to a lower grade or rank,with a corresponding decrease in duties and responsibilities, and usually accompanied

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by a decrease in salary.” When there is a demotion in rank and/or a diminution in pay;when a clear discrimination, insensibility or disdain by an employer becomesunbearable to the employee; or when continued employment is rendered impossible,unreasonable or unlikely, the transfer of an employee may constitute constructivedismissal.

Although there was no diminution in pay, there was undoubtedly a demotion intitular rank. One cannot deny the disparity between the duties and functions of a chief baker to that of a utility/security personnel tasked to clean and manage the orderlinessof the outside premises of the bakeshop. Respondents were even prohibited fromentering the bakeshop. The change in the nature of their work undeniably resulted to ademeaning and humiliating work condition.

In Globe Telecom, Inc. v. Florendo-Flores, we held:

The managerial prerogative to transfer personnel must be exercised without

grave abuse of discretion. It must always bear in mind the basic elements of justice and fair play. Having the right must not be confused with the manner that right is exercised.Thus, it cannot be used as a subterfuge by the employer to rid himself of an undesirableworker.

Petitioners’ claim that respondents abandoned their job stands on shallow grounds. Respondents cannot be faulted for refusing to report for work as they werecompelled to quit their job due to a demotion without any just cause. Moreover, wehave consistently held that a charge of abandonment is inconsistent with the filing of acomplaint for constructive dismissal. Respondents’ demand to maintain their positionsas chief bakers by filing a case and asking for the relief of reinstatement belies

abandonment.

As the transfer proves unbearable to respondents as to foreclose any choice ontheir part except to forego continued employment, same amounts to constructivedismissal for which reinstatement without loss of seniority rights, full backwages,inclusive of allowances, and other benefits or their monetary equivalent, computed fromthe time their compensation was withheld up to the time of their actual reinstatement,should be granted. The CA, therefore, did not err in awarding the reliefs prayed for by the respondents as they were, without a doubt, constructively dismissed. (Julie’sBakeshop vs. Arnaiz, et. al., G.R. No. 173882, February 15, 2012)

Forum Shopping; Res Judicata

For forum shopping to exist, it is necessary that (a) there be identity of parties or at least such parties that represent the same interests in both actions; (b) there beidentity of rights asserted and relief prayed for, the relief being founded on the samefacts; and (c) the identity of the two preceding particulars is such that any judgment rendered in one action will, regardless of which party is successful, amount to res

judicata in the other action.

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Petitioners are correct as to the first two requisites of forum shopping. First, thereis identity of parties involved: Negros Slashers Inc. and respondent Teng. Second,there is identity of rights asserted i.e., the right of management to terminateemployment and the right of an employee against illegal termination. However, the

third requisite of forum shopping is missing in this case. Any judgment or ruling of theOffice of the Commissioner of the MBA will not amount to res judicata. As defined in Agustin v. Delos Santos,

Res Judicata is defined as “a matter adjudged; a thing judicially acted upon or decided; a thing or matter settled by judgment.” According to the doctrine of res

judicata, an existing final judgment or decree rendered on the merits, and without fraud or collusion, by a court of competent jurisdiction, upon any matter within its jurisdiction,is conclusive of the rights of the parties or their privies, in all other actions or suits in thesame or any other judicial tribunal of concurrent jurisdiction on the points and matters inissue in the first suit. To state simply, a final judgment or decree on the merits by acourt of competent jurisdiction is conclusive of the rights of the parties or their privies in

all later suits on all points and matters determined in the former suit. (Emphasissupplied.)

To clarify, res judicata is defined in jurisprudence as to have four basic elements:(1) the judgment sought to bar the new action must be final; (2) the decision must havebeen rendered by a court having jurisdiction over the subject matter and the parties; (3)the disposition of the case must be a judgment on the merits; and (4) there must be asbetween the first and second action, identity of parties, subject matter, and causes of action.

Here, although contractually authorized to settle disputes, the Office of theCommissioner of the MBA is not a court of competent jurisdiction as contemplated by law with respect to the application of the doctrine of res judicata. At best, the Office of the Commissioner of the MBA is a private mediator or go-between as agreed upon by team management and a player in the MBA Player’s Contract of Employment. Any

judgment that the Office of the Commissioner of the MBA may render will not result in abar for seeking redress in other legal venues. Hence, respondent’s action of filing thesame complaint in the Regional Arbitration Branch of the NLRC does not constituteforum shopping. (Negros Slashers, Inc., et. al. vs. Teng, G.R. No. 187122, February 22, 2012)

Abandonment

Abandonment is a matter of intention and cannot lightly be presumed fromcertain equivocal acts, especially during times of hardship. Thus, we have ruled in aseries of cases that there are two elements that must concur in order for an act toconstitute abandonment: (1) failure to report for work or absence without valid or

justifiable reason; and (2) a clear intention to sever the employer-employee relationship.The second element is the more determinative factor, which must be manifested by some overt acts. Mere absence or failure to report for work does not, ipso facto, amount

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to abandonment of work. To prove abandonment, the employer must show that theemployee deliberately and unjustifiably refused to resume his employment without any intention of returning. (Josan, JPS, Santiago Cargo Movers vs. Aduna, G.R. No.190794, February 22, 2012)

Prescription

The dispute is the period of prescription of action for illegal dismissal. It will benoticed that in their Motion to Dismiss before the NLRC, petitioners allege that theprescriptive period to be applied should be three (3) years from the time the cause of action accrued in accordance with the Labor Code. However, in their petition beforethis Court, they changed their stand and alleged that the applicable provision should bethat which is stated in the POEA Standard Employment Contract for Filipino Seamenbecause seafarers are not regular employees and as such, are not covered by theLabor Code.

In Callanta v. Carnation Philippines, Inc., this Court ruled that actions based oninjury to rights prescribe in four (4) years under Article 1146 of the Civil Code rather than three (3) years as provided for the Labor Code. An action for damages involving aplaintiff separated from his employment for alleged unjustifiable causes is one for “injuryto the rights of the plaintiff, and must be brought within four (4) years.” Privaterespondent had gone to the Labor Arbiter on a charge, fundamentally, of illegaldismissal, of which his money claims form but an incidental part. Essentially, hiscomplaint is one for “injury to rights” arising from his forced disembarkation. Thus,

Article 1146 is the applicable provision. It provides:

Art. 1146. The following actions must be instituted within four years:

(1) Upon an injury to the rights of the plaintiff;(2) Upon a quasi-delict;

It is a principle in American jurisprudence which, undoubtedly, is well-recognizedin this jurisdiction that one’s employment, profession, trade or calling is a “propertyright,” and the wrongful interference therewith is an actionable wrong. The right isconsidered to be property within the protection of a constitutional guaranty of dueprocess of law. Clearly then, when one is arbitrarily and unjustly deprived of his job or means of livelihood, the action instituted to contest the legality of one’s dismissal fromemployment constitutes, in essence, an action predicated “upon an injury to the rights

of the plaintiff,” as contemplated under Art. 1146 of the New Civil Code, which must bebrought within four (4) years.

As in other causes of action, the prescriptive period for money claims is subject to interruption, and in view of the absence of an equivalent Labor Code provision for determining when said period may be interrupted, Article 1155 of the Civil Code isapplicable. It states that:

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Article 1155. The prescription of actions is interrupted when they are filed beforethe Court, when there is written extra-judicial demand by the creditors, and when thereis any written acknowledgment of the debt by the debtor. (Teekay Shipping Phils., Inc.vs. Concha, G.R. No. 185463, February 22, 2012)

Appeal

In Rosewood Processing, Inc. v. NLRC, the Court held:

The perfection of an appeal within the reglementary period and in the manner prescribed by law is jurisdictional, and noncompliance with such legal requirement isfatal and effectively renders the judgment final and executory. The Labor Code

provides:

ART. 223. Appeal. — Decisions, awards or orders of the Labor Arbiter are final and executory unless appealed to the Commission by any or both parties within ten (10)calendar days from receipt of such decisions, awards, or orders.

In case of a judgment involving a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a reputablebonding company duly accredited by the Commission in the amount equivalent to themonetary award in the judgment appealed from.

Indisputable is the legal doctrine that the appeal of a decision involving amonetary award in labor cases may be perfected “only upon the posting of a cash or surety bond.” The lawmakers intended the posting of the bond to be an indispensablerequirement to perfect an employer’s appeal.

However, in a number of cases, this Court has relaxed this requirement in order to bring about the immediate and appropriate resolution of controversies on the merits.Some of these cases include: “(a) counsel’s reliance on the footnote of the notice of thedecision of the labor arbiter that the aggrieved party may appeal within ten (10) working days; (b) fundamental consideration of substantial justice; (c) prevention of miscarriageof justice or of unjust enrichment, as where the tardy appeal is from a decision granting separation pay which was already granted in an earlier final decision; and (d) special circumstances of the case combined with its legal merits or the amount and the issueinvolved.”

In Quiambao vs. National Labor Relations Commission, this Court ruled that arelaxation of the appeal bond requirement could be justified by substantial compliancewith the rule.

In Globe General Services and Security Agency vs. National Labor RelationsCommission, the Court observed that the NLRC, in actual practice, allows the reductionof the appeal bond upon motion of the appellant and on meritorious grounds; hence,

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petitioners in that case should have filed a motion to reduce the bond within thereglementary period for appeal.

That is the exact situation in the case at bar. Here, petitioner claims to havereceived the labor arbiter’s Decision on April 6, 1993. On April 16, 1993, it filed,

together with its memorandum on appeal and notice of appeal, a motion to reduce theappeal bond accompanied by a surety bond for fifty thousand pesos issued by Prudential Guarantee and Assurance, Inc. Ignoring petitioner’s motion (to reduce bond),Respondent Commission rendered its assailed Resolution dismissing the appeal due tothe late filing of the appeal bond.

The solicitor general argues for the affirmation of the assailed Resolution for thesole reason that the appeal bond, even if it was filed on time, was defective, as it wasnot in an amount “equivalent to the monetary award in the judgment appealed from.”

The Court disagrees. We hold that petitioner’s motion to reduce the bond is asubstantial compliance with the Labor Code. This holding is consistent with the normthat letter-perfect rules must yield to the broader interest of substantial justice.

In Ong v. Court of Appeals, the Court held that the bond requirement on appealsmay be relaxed when there is substantial compliance with the Rules of Procedure of theNLRC or when the appellant shows willingness to post a partial bond. The Court held that, “While the bond requirement on appeals involving monetary awards has beenrelaxed in certain cases, this can only be done where there was substantial complianceof the Rules or where the appellants, at the very least, exhibited willingness to pay by

posting a partial bond.” (Garcia, et. al. vs. KJ Commercial, G.R. No. 196830,February 29, 2012)

DOLE’s Visitorial and Enforcement Power vs. NLRC Jurisdiction

The prior decision of this Court in the present case accepts such answer, butplaces a limitation upon the power of the DOLE, that is, the determination of theexistence of an employer-employee relationship cannot be co-extensive with thevisitorial and enforcement power of the DOLE. But even in conceding the power of theDOLE to determine the existence of an employer-employee relationship, the Court heldthat the determination of the existence of an employer-employee relationship is stillprimarily within the power of the NLRC, that any finding by the DOLE is merely

preliminary. This conclusion must be revisited.

No limitation in the law was placed upon the power of the DOLE to determine theexistence of an employer-employee relationship. No procedure was laid down wherethe DOLE would only make a preliminary finding, that the power was primarily held bythe NLRC. The law did not say that the DOLE would first seek the NLRC’sdetermination of the existence of an employer-employee relationship, or that should theexistence of the employer-employee relationship be disputed, the DOLE would refer the

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matter to the NLRC. The DOLE must have the power to determine whether or not anemployer-employee relationship exists, and from there to decide whether or not to issuecompliance orders in accordance with Art. 128(b) of the Labor Code, as amended byRA 7730.

The DOLE, in determining the existence of an employer-employee relationship,has a ready set of guidelines to follow, the same guide the courts themselves use. Theelements to determine the existence of an employment relationship are: (1) theselection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; (4) the employer’s power to control the employee’s conduct. The use of thistest is not solely limited to the NLRC. The DOLE Secretary, or his or her representatives, can utilize the same test, even in the course of inspection, making useof the same evidence that would have been presented before the NLRC.

The determination of the existence of an employer-employee relationship by theDOLE must be respected. The expanded visitorial and enforcement power of the

DOLE granted by RA 7730 would be rendered nugatory if the alleged employer could,by the simple expedient of disputing the employer-employee relationship, force thereferral of the matter to the NLRC. The Court issued the declaration that at least a

prima facie showing of the absence of an employer-employee relationship be made tooust the DOLE of jurisdiction. But it is precisely the DOLE that will be faced with that evidence, and it is the DOLE that will weigh it, to see if the same does successfully refute the existence of an employer-employee relationship.

If the DOLE makes a finding that there is an existing employer-employeerelationship, it takes cognizance of the matter, to the exclusion of the NLRC. TheDOLE would have no jurisdiction only if the employer-employee relationship hasalready been terminated, or it appears, upon review, that no employer-employeerelationship existed in the first place.

The Court, in limiting the power of the DOLE, gave the rationale that suchlimitation would eliminate the prospect of competing conclusions between the DOLE and the NLRC. The prospect of competing conclusions could just as well have beeneliminated by according respect to the DOLE findings, to the exclusion of the NLRC,and this We believe is the more prudent course of action to take.

This is not to say that the determination by the DOLE is beyond question or review. Suffice it to say, there are judicial remedies such as a petition for certiorari under Rule 65 that may be availed of, should a party wish to dispute the findings of theDOLE.

It must also be remembered that the power of the DOLE to determine theexistence of an employer-employee relationship need not necessarily result in anaffirmative finding. The DOLE may well make the determination that no employer-employee relationship exists, thus divesting itself of jurisdiction over the case. It must not be precluded from being able to reach its own conclusions, not by the parties, and certainly not by this Court.

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Under Art. 128(b) of the Labor Code, as amended by RA 7730, the DOLE is fully empowered to make a determination as to the existence of an employer-employeerelationship in the exercise of its visitorial and enforcement power, subject to judicial review, not review by the NLRC.

There is a view that despite Art. 128(b) of the Labor Code, as amended by RA7730, there is still a threshold amount set by Arts. 129 and 217 of the Labor Code whenmoney claims are involved, i.e., that if it is for PhP 5,000 and below, the jurisdiction iswith the regional director of the DOLE, under Art. 129, and if the amount involved exceeds PhP 5,000, the jurisdiction is with the labor arbiter, under Art. 217. The view states that despite the wording of Art. 128(b), this would only apply in the course of regular inspections undertaken by the DOLE, as differentiated from cases under Arts.129 and 217, which originate from complaints. There are several cases, however,where the Court has ruled that Art. 128(b) has been amended to expand the powers of the DOLE Secretary and his duly authorized representatives by RA 7730. In these

cases, the Court resolved that the DOLE had the jurisdiction, despite the amount of themoney claims involved. Furthermore, in these cases, the inspection held by the DOLE regional director was prompted specifically by a complaint. Therefore, the initiation of acase through a complaint does not divest the DOLE Secretary or his duly authorized representative of jurisdiction under Art. 128(b).

To recapitulate, if a complaint is brought before the DOLE to give effect to thelabor standards provisions of the Labor Code or other labor legislation, and there is afinding by the DOLE that there is an existing employer-employee relationship, theDOLE exercises jurisdiction to the exclusion of the NLRC. If the DOLE finds that thereis no employer-employee relationship, the jurisdiction is properly with the NLRC. If acomplaint is filed with the DOLE, and it is accompanied by a claim for reinstatement, the

jurisdiction is properly with the Labor Arbiter, under Art. 217(3) of the Labor Code,which provides that the Labor Arbiter has original and exclusive jurisdiction over thosecases involving wages, rates of pay, hours of work, and other terms and conditions of employment, if accompanied by a claim for reinstatement. If a complaint is filed withthe NLRC, and there is still an existing employer-employee relationship, the jurisdictionis properly with the DOLE. The findings of the DOLE, however, may still be questioned through a petition for certiorari under Rule 65 of the Rules of Court.

In the present case, the finding of the DOLE Regional Director that there was anemployer-employee relationship has been subjected to review by this Court, with thefinding being that there was no employer-employee relationship between petitioner and

private respondent, based on the evidence presented. Private respondent presented self-serving allegations as well as self-defeating evidence. The findings of the Regional Director were not based on substantial evidence, and private respondent failed to provethe existence of an employer-employee relationship. The DOLE had no jurisdictionover the case, as there was no employer-employee relationship present. Thus, thedismissal of the complaint against petitioner is proper. (People’s Broadcasting Service vs. The Secretary of the DOLE, G.R. No. 179652, March 6, 2012)

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Abandonment; Constructive Dismissal

Abandonment is a form of neglect of duty, one of the just causes for an employer to terminate an employee. It is a hornbook precept that in illegal dismissal cases, the

employer bears the burden of proof. For a valid termination of employment on theground of abandonment, the employer must prove, by substantial evidence, theconcurrence of the employee’s failure to report for work for no valid reason and hiscategorical intention to discontinue employment.

Constructive dismissal exists where there is cessation of work becausecontinued employment is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank and a diminution in pay. Constructive dismissal is adismissal in disguise or an act amounting to dismissal but made to appear as if it werenot. In constructive dismissal cases, the employer is, concededly, charged with theburden of proving that its conduct and action or the transfer of an employee are for valid and legitimate grounds such as genuine business necessity. (Galang vs. Malasugui,G.R. No. 174173, March 7, 2012)

Dismissal: Corporate Officer

As a general rule, a corporate officer cannot be held liable for acts done in hisofficial capacity because a corporation, by legal fiction, has a personality separate anddistinct from its officers, stockholders, and members. In illegal dismissal cases,corporate officers may only be held solidarily liable with the corporation if thetermination was done with malice or bad faith. We find that the aforementioned circumstance did not obtain in the case of Jose and Linda relative to Arlene and Joseph's dismissal from service. (Blue Sky Trading Company, Inc. vs. Blas, G.R. No.190559, March 7, 2012)

Project Employees

Article 280 of the Labor Code distinguishes a "project employee" from a "regular employee," thus:

Article 280. Regular and Casual Employment − The provisions of writtenagreement to the contrary notwithstanding and regardless of the oral agreement of the

parties, an employment shall be deemed to be regular where the employee has beenengaged to perform activities which are usually necessary or desirable in the usualbusiness or trade of the employer, except where the employment has been fixed for aspecific project or undertaking the completion or termination of which has beendetermined at the time of the engagement of the employee or where the work or serviceto be performed is seasonal in nature and the employment is for the duration of theseason.

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An employment shall be deemed to be casual if it is not covered by the precedingparagraph: Provided, That, any employee who has rendered at least one year service,whether such service is continuous or broken, shall be considered a regular employeewith respect to the activity in which he is employed and his employment shall continue

while such activity exists.

In Hanjin Heavy Industries and Construction Co. Ltd. v. Ibañez, this Courtextensively discussed the above distinction, thus:

x x x [T]he principal test for determining whether particular employees are properlycharacterized as "project employees" as distinguished from "regular employees" iswhether or not the project employees were assigned to carry out a "specific project or undertaking," the duration and scope of which were specified at the time the employeeswere engaged for that project.

In a number of cases, the Court has held that the length of service or the re-hiring of construction workers on a project-to-project basis does not confer upon themregular employment status, since their re-hiring is only a natural consequence of thefact that experienced construction workers are preferred. Employees who are hired for carrying out a separate job, distinct from the other undertakings of the company, thescope and duration of which has been determined and made known to the employeesat the time of the employment , are properly treated as project employees and their services may be lawfully terminated upon the completion of a project. Should the termsof their employment fail to comply with this standard, they cannot be considered projectemployees.

In Abesco Construction and Development Corporation v. Ramirez, which alsoinvolved a construction company and its workers, this Court considered it crucial that the employees were informed of their status as project employees:

The principal test for determining whether employees are "project employees" or "regular employees" is whether they are assigned to carry out a specific project or undertaking, the duration and scope of which are specified at the time they are engaged for that project. Such duration, as well as the particular work/service to be performed, isdefined in an employment agreement and is made clear to the employees at the time of hiring.

In this case, petitioners did not have that kind of agreement with respondents.

Neither did they inform respondents of the nature of the latter’s work at the time of hiring. Hence, for failure of petitioners to substantiate their claim that respondents were

project employees, we are constrained to declare them as regular employees.

In Caramol v. National Labor Relations Commission, and later reiterated inSalinas, Jr. v. National Labor Relations Commission, the Court markedly stressed theimportance of the employees' knowing consent to being engaged as project employeeswhen it clarified that "there is no question that stipulation on employment contract

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providing for a fixed period of employment such as “project-to-project” contract is valid provided the period was agreed upon knowingly and voluntarily by the parties, without any force, duress or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent x x x." (Aro, et. al. vs. NLRC, G.R.No. 174792, March 7, 2012)

Promulgation of Decision

Petitioners question the CA Resolution dated October 24, 2008, arguing that it modified its March 31, 2008 Decision which has already attained finality insofar asrespondent is concerned. Petitioners point out that the October 24, 2008 CAResolution clarified that the payment of separation pay and back wages shall bereckoned from the time respondent was illegally suspended until finality of the March31, 2008 CA Decision. But petitioners point out that when the Labor Arbiter declared that the payment of back wages shall be “until the promulgation of this Decision,” hewas referring to his own Decision promulgated on March 14, 2003.

We do not agree. Such contention is misplaced. The CA merely clarified the period of payment of back wages and separation pay up to the finality of its decision(March 31, 2008) modifying the Labor Arbiter’s decision. In view of the modification of monetary awards in the Labor Arbiter’s decision, the time frame for the payment of back wages and separation pay is accordingly modified to the finality of the CA decision.The clarification thus made on motion of the respondent was not an amendment of theMarch 31, 2008 Decision. Even assuming that the CA indeed corrected or amended the dispositive portion of its decision, it is well within its appellate jurisdiction to treat respondent’s motion for clarification as a partial motion for reconsideration insofar only as to declare until when the payment of such back wages and separation pay shall bemade. (Norkis Distributors, Inc. vs. Descallar, G.R. No. 185255, March 14, 2012)

No Strike-No Lockout Provision

Article 264 (a) of the Labor Code lays down the liabilities of the Union officersand members participating in illegal strikes and/or committing illegal acts, to wit:

ART. 264. PROHIBITED ACTIVITIES

x x x

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

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Thus, the above-quoted provision sanctions the dismissal of a Union officer whoknowingly participates in an illegal strike or who knowingly participates in thecommission of illegal acts during a lawful strike. In this case, the Union officers were inclear breach of the above provision of law when they knowingly participated in the illegal

strike.

As to the Union members, the same provision of law provides that a member isliable when he knowingly participates in the commission of illegal acts during a strike.We find no reason to reverse the conclusion of the Court that CASI presentedsubstantial evidence to show that the striking Union members committed the followingprohibited acts:

a. They threatened, coerced, and intimidated non-striking employees, officers,suppliers and customers;

b. They obstructed the free ingress to and egress from the company

premises; and

c. They resisted and defied the implementation of the writ of preliminaryinjunction issued against the strikers.

The commission of the above prohibited acts by the striking Union memberswarrants their dismissal from employment.

As clearly narrated earlier, the LA found the strike illegal and sustained thedismissal of the Union officers, but ordered the reinstatement of the striking Unionmembers for lack of evidence showing that they committed illegal acts during the illegal

strike. This decision, however, was later reversed by the NLRC. Pursuant to Article 223of the Labor Code and well-established jurisprudence, the decision of the LA reinstatinga dismissed or separated employee, insofar as the reinstatement aspect is concerned,shall immediately be executory, pending appeal. The employee shall either be admittedback to work under the same terms and conditions prevailing prior to his dismissal or separation, or, at the option of the employee, merely reinstated in the payroll. It isobligatory on the part of the employer to reinstate and pay the wages of the dismissedemployee during the period of appeal until reversal by the higher court. If the employer fails to exercise the option of re-admitting the employee to work or to reinstate him inthe payroll, the employer must pay the employee’s salaries during the period betweenthe LA’s order of reinstatement pending appeal and the resolution of the higher court

overturning that of the LA. In this case, CASI is liable to pay the striking Union memberstheir accrued wages for four months and nine days, which is the period from the noticeof the LA’s order of reinstatement until the reversal thereof by the NLRC.

Citing Escario v. National Labor Relations Commission (Third Division), CASIclaims that the award of the four-month accrued salaries to the Union members is notsanctioned by jurisprudence. In Escario, the Court categorically stated that the strikerswere not entitled to their wages during the period of the strike (even if the strike might

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be legal), because they performed no work during the strike. The Court further held thatit was neither fair nor just that the dismissed employees should litigate against their employer on the latter’s time. In this case, however, the four-month accrued salariesawarded to the Union members are not the backwages referred to in Escario. To besure, the awards were not given as their salaries during the period of the strike. Rather,

they constitute the employer’s liability to the employees for its failure to exercise theoption of actual reinstatement or payroll reinstatement following the LA’s decision toreinstate the Union members as mandated by Article 223 of the Labor Code adequatelydiscussed earlier. In other words, such monetary award refers to the Union members’accrued salaries by reason of the reinstatement order of the LA which is self-executorypursuant to Article 223. We, therefore, sustain the award of the four-month accruedsalaries.

Finally, as regards the separation pay as a form of financial assistance awarded

by the Court, we find it necessary to reconsider the same and delete the awardpursuant to prevailing jurisprudence. Separation pay may be given as a form of financialassistance when a worker is dismissed in cases such as the installation of labor-savingdevices, redundancy, retrenchment to prevent losses, closing or cessation of operationof the establishment, or in case the employee was found to have been suffering from adisease such that his continued employment is prohibited by law. It is a statutory rightdefined as the amount that an employee receives at the time of his severance from theservice and is designed to provide the employee with the wherewithal during the periodthat he is looking for another employment. It is oriented towards the immediate future,the transitional period the dismissed employee must undergo before locating areplacement job. As a general rule, when just causes for terminating the services of anemployee exist, the employee is not entitled to separation pay because lawbreakersshould not benefit from their illegal acts. The rule, however, is subject to exceptions.The Court, in Philippine Long Distance Telephone Co. v. NLRC, laid down theguidelines when separation pay in the form of financial assistance may be allowed, towit:

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

A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather than punishing the erring employee for his offense. And we do notagree that the punishment is his dismissal only and that the separation pay has nothingto do with the wrong he has committed x x x.

We had the occasion to resolve the same issue in Toyota Motor Phils. Corp.Workers Association (TMPCWA) v. National Labor Relations Commission. Followingthe declaration that the strike staged by the Union members is illegal, the Union officers

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and members were considered validly dismissed from employment for committing illegalacts during the illegal strike. The Court affirmed the CA’s conclusion that thecommission of illegal acts during the illegal strike constituted serious misconduct.Hence, the award of separation pay to the Union officials and members was notsustained.

Indeed, we applied social justice and equity considerations in several cases to justify the award of financial assistance. In Piñero v. National Labor RelationsCommission, the Court declared the strike to be illegal for failure to comply with theprocedural requirements. We, likewise, sustained the dismissal of the Union presidentfor participating in said illegal strike. Considering, however, that his infraction is not soreprehensible and unscrupulous as to warrant complete disregard of his long years of service, and considering further that he has no previous derogatory records, we grantedfinancial assistance to support him in the twilight of his life after long years of service.The same compassion was also applied in Aparente, Sr. v. NLRC where the employeewas declared to have been validly terminated from service after having been foundguilty of driving without a valid driver’s license, which is a clear violation of thecompany’s rules and regulations. We, likewise, awarded financial assistance inSalavarria v. Letran College to the legally dismissed teacher for violation of schoolpolicy because such infraction neither amounted to serious misconduct nor reflectedthat of a morally depraved person.

However, in a number of cases cited in Toyota Motor Phils. Corp. Workers Association (TMPCWA) v. National Labor Relations Commission, we refrained fromawarding separation pay or financial assistance to Union officers and members whowere separated from service due to their participation in or commission of illegal actsduring the strike. In Pilipino Telephone Corporation v. Pilipino Telephone Employees

Association (PILTEA), the strike was found to be illegal because of procedural infirmitiesand for defiance of the Secretary of Labor’s assumption order. Hence, we upheld theUnion officers’ dismissal without granting financial assistance. In Sukhotai Cuisine andRestaurant v. Court of Appeals, and Manila Diamond Hotel and Resort, Inc. (ManilaDiamond Hotel) v. Manila Diamond Hotel Employees Union, the Union officers andmembers who participated in and committed illegal acts during the illegal strike weredeemed to have lost their employment status and were not awarded financialassistance.

In Telefunken Semiconductors Employees Union v. Court of Appeals, the Courtheld that the strikers’ open and willful defiance of the assumption order of the Secretaryof Labor constitute serious misconduct and reflective of their moral character, hence,

granting of financial assistance to them cannot be justified. In Chua v. National Labor Relations Commission, we disallowed the award of financial assistance to thedismissed employees for their participation in the unlawful and violent strike whichresulted in multiple deaths and extensive property damage because it constitutesserious misconduct on their part.

Here, not only did the Court declare the strike illegal, rather, it also found theUnion officers to have knowingly participated in the illegal strike. Worse, the Union

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members committed prohibited acts during the strike. Thus, as we concluded in Toyota,Telefunken, Chua and the other cases cited above, we delete the award of separation

pay as a form of financial assistance. (C. Alcantara & Sons, Inc. vs. Court of Appeals, et. al., G.R. No. 155109, March 14, 2012)

Disability Benefits; Medical Report of Company-Designated Physician

Citing several jurisprudence, petitioner argues that the determination of disabilityrating is not left to the sole discretion of the company-designated physician. Hence,according to him, the two medical reports issued by his physicians may be admitted asproof that he is still suffering from the illness that brought about his repatriation and thatsame should be made the basis for his claim for total and permanent disability in theamount of $60,000.00 or at least $39,180.00, corresponding to Grade 3 disability rate inaccordance with the POEA-SEC.

It is worthy to note that when petitioner executed an employment contract withrespondents on July 21, 1999, it was the 1996 POEA-SEC, based on POEAMemorandum Circular No. 055-96, that was applied, deemed written in and appended to his employment contract. Section 20(B) thereof states:

The liabilities of the employer when the seafarer suffers injury or illness during the term of his contract are as follows:

x x x x

If the injury or illness requires medical and/or dental treatment in a foreign port,the employer shall be liable for the full cost of such medical, serious dental, surgical and hospital treatment as well as board and lodging until the seafarer is declared fit to work or to be repatriated.

However, if after repatriation, the seafarer still requires medical attention arising from said injury or illness, he shall be so provided at cost to the employer until suchtime he is declared fit or the degree of his disability has been established by thecompany-designated physician.


physician, but in no case shall this period exceed one hundred twenty (120) days.

For this purpose, the seafarer shall submit himself to a post-employment medical examination by a company-designated physician within three working days upon hisreturn except when he is physically incapacitated to do so, in which case, a writtennotice to the agency within the same period is deemed as compliance. Failure of theseafarer to comply with the mandatory reporting requirement shall result in his forfeitureof the right to claim the above benefits.

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x x x x

From the foregoing provision, it is explicit and clear that for purposes of determining the seafarer’s degree of disability, it is the company-designated physicianwho must proclaim that he sustained a permanent disability, whether total or partial, due

to either injury or illness, during the term of his employment. This was the ruling inPanganiban v. Tara Trading Shipmanagement, Inc, where it was held that there being no ambiguity in the wordings of the Standard Employment Contract that the only qualification prescribed for the physician entrusted with the task of assessing thedisability is that he be “company-designated,” the literal meaning of the same shall thuscontrol.

In Seagull Maritime Corp. v. Dee, however, a case involving an employmentcontract entered into in 1999 as in this case, we have held that resort to prognosis of other physicians may be allowed especially so if there are serious doubts on theevaluation made by the company-designated physician. The same ruling was applied in

Abante v. KJGS Fleet Management Manila in that the seafarer was given an option toseek a second opinion from his preferred physician notwithstanding the fact that it wasthe POEA Memorandum Circular No. 05-96 which governed the parties’ contract of employment. Hence, “while it is the company-designated physician who must declarethat the seaman suffers a permanent disability during employment, it does not deprivethe seafarer of his right to seek a second opinion, hence the Contract recognizes theprerogative of the seafarer to request a second opinion and, for this purpose, to consulta physician of his choice.”

The case of Maunlad Transport, Inc. v. Manigo, Jr. has also reiterated the prerogative of a seafarer to request for a second opinion with the qualification that the physician’s report shall still be evaluated according to its inherent merit for the Court’sconsideration, viz:

All told, the rule is that under Section 20-B(3) of the 1996 POEA-SEC, it ismandatory for a claimant to be examined by a company-designated physician withinthree days from his repatriation. The unexplained omission of this requirement will bar the filing of a claim for disability benefits. However, in submitting himself to examinationby the company-designated physician, a claimant does not automatically bind himself tothe medical report issued by the company-designated physician; neither are the labor tribunals and the courts bound by said medical report. Its inherent merit will be weighed and duly considered. Moreover, the claimant may dispute the medical report issued by the company-designated physician by seasonably consulting another physician. The

medical report issued by said physician will also be evaluated by the labor tribunal and the court based on its inherent merits. (Emphasis in the original.)

We hold that the CA is correct in ruling thus. The company-designated physicianhas cleared petitioner for employment resumption after two months of continuoustreatment and after medication has successfully controlled his hypertension. As aptly held by the CA, the extensive medical attention given by the company-designated

physician to petitioner enabled the former to acquire a detailed knowledge and

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familiarity of petitioner’s medical condition. This enabled the company-designated physician to arrive at a more accurate prognosis of petitioner’s disability as compared toother physicians not privy to petitioner’s case from the beginning. It has been held that the doctor who have had a personal knowledge of the actual medical condition, having closely, meticulously and regularly monitored and actually treated the seaman’s illness,

is more qualified to assess the seaman’s disability. (Ison vs. Crewserve, Inc., et. al.,G.R. No. 173951, April 16, 2012)

Retrenchment

Retrenchment is the reduction of work personnel usually due to poor financialreturns, aimed to cut down costs for operation particularly on salaries and wages. It isone of the economic grounds to dismiss employees and is resorted by an employer

primarily to avoid or minimize business losses.

Retrenchment programs are purely business decisions within the purview of avalid and reasonable exercise of management prerogative. It is one way of downsizingan employer’s workforce and is often resorted to by the employer during periods of business recession, industrial depression, or seasonal fluctuations, and during lulls inproduction occasioned by lack of orders, shortage of materials, conversion of the plantfor a new production program, or introduction of new methods or more efficientmachinery or automation. It is a valid management prerogative, provided it is done ingood faith and the employer faithfully complies with the substantive and proceduralrequirements laid down by law and jurisprudence.

In the case at bar, despite the fact that respondent was employed by Petrocon asan OFW in Saudi Arabia, still both he and his employer are subject to the provisions of the Labor Code when applicable. The basic policy in this jurisdiction is that all Filipinoworkers, whether employed locally or overseas, enjoy the protective mantle of Philippine labor and social legislations. In the case of Royal Crown Internationale v.NLRC, this Court has made the policy pronouncement, thus:

x x x. Whether employed locally or overseas, all Filipino workers enjoy the protectivemantle of Philippine labor and social legislation, contract stipulations to the contrary notwithstanding. This pronouncement is in keeping with the basic public policy of theState to afford protection to labor, promote full employment, ensure equal work opportunities regardless of sex, race or creed, and regulate the relations betweenworkers and employers. x x x

Philippine Law recognizes retrenchment as a valid cause for the dismissal of amigrant or overseas Filipino worker under Article 283 of the Labor Code, which

provides:

Closure of establishment and reduction of personnel. - The employer may alsoterminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of

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operations of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Department of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent

to at least one (1) month pay or to at least one (1) month pay for every year of service,whichever is higher. In case of retrenchment to prevent losses and in cases of closureor cessation of operations of establishment or undertaking not due to serious businesslosses or financial reverses, the separation pay shall be equivalent to at least one (1)month pay or at least one-half (1/2) month pay for every year of service, whichever ishigher. A fraction of at least six (6) months shall be considered as one (1) whole year.

Thus, retrenchment is a valid exercise of management prerogative subject to thestrict requirements set by jurisprudence, to wit:

(1) That the retrenchment is reasonably necessary and likely to prevent

business losses which, if already incurred, are not merely de minimis, but substantial,serious, actual and real, or if only expected, are reasonably imminent as perceived objectively and in good faith by the employer;

(2) That the employer served written notice both to the employees and to theDepartment of Labor and Employment at least one month prior to the intended date of retrenchment;

(3) That the employer pays the retrenched employees separation pay equivalent to one month pay or at least ½ month pay for every year of service, whichever is higher;

(4) That the employer exercises its prerogative to retrench employees in good faith for the advancement of its interest and not to defeat or circumvent the employees' right to security of tenure; and

(5) That the employer used fair and reasonable criteria in ascertaining whowould be dismissed and who would be retained among the employees, such as status,

x x x efficiency, seniority, physical fitness, age, and financial hardship for certainworkers.

Applying the above-stated requisites for a valid retrenchment in the case at bar,it is apparent that the first, fourth and fifth requirements were complied with by respondent’s employer. However, the second and third requisites were absent whenPetrocon terminated the services of respondent.

As aptly found by the NLRC and justly sustained by the CA, Petrocon exercised its prerogative to retrench its employees in good faith and the considerable reduction of work allotments of Petrocon by Saudi Aramco was sufficient basis for Petrocon toreduce the number of its personnel, thus:

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As to proof of claimed financial losses, the NLRC itself has recognized thedrastic reduction of Petrocon’s work allocation, thereby necessitating the retrenchment of some of its employees.

As for the notice requirement, however, contrary to petitioner’s contention,

proper notice to the DOLE within 30 days prior to the intended date of retrenchment isnecessary and must be complied with despite the fact that respondent is an overseasFilipino worker. In the present case, although respondent was duly notified of histermination by Petrocon 30 days before its effectivity, no allegation or proof wasadvanced by petitioner to establish that Petrocon ever sent a notice to the DOLE 30 days before the respondent was terminated. Thus, this requirement of the law was not complied with.

Also, petitioner’s contention that respondent freely consented to his dismissal isunsupported by substantial evidence. Respondent’s recourse of finding a new employer during the 30-day period prior to the effectivity of his dismissal and eventual return to

the Philippines is but logical and reasonable under the circumstances. Faced with theeventuality of his termination from employment, it is understandable for respondent toseize the opportunity to seek for other employment and continue working in Saudi

Arabia.

Moreover, petitioner’s insistence that the case of Jariol v. IMS should be appliedin the present case is untenable. Being a mere decision of the NLRC, it could not beconsidered as a precedent warranting its application in the case at bar. Suffice it tostate that although Article 8 of the Civil Code recognizes judicial decisions, applying or interpreting statutes as part of the legal system of the country, such level of recognitionis not afforded to administrative decisions.

In the recent case of Magsaysay Maritime Corp. v. Lobusta, this Court alsoreferred to, and applied, the ruling in Vergara in this manner:

Article 192(c)(1) under Title II, Book IV of the Labor Code, as amended, reads:

ART. 192. Permanent total disability. – x x x

x x x

(c) The following disabilities shall be deemed total and permanent:

(1) Temporary total disability lasting continuously for more than one hundred twenty days, except as otherwise provided in the Rules;

x x x x

Section 2(b), Rule VII of the Implementing Rules of Title II, Book IV of the Labor Code, as amended, or the Amended Rules on Employees’ Compensation Commission(ECC Rules), reads:

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Sec. 2. Disability. – x x x

(b) A disability is total and permanent if as a result of the injury or sickness theemployee is unable to perform any gainful occupation for a continuous period

exceeding 120 days, except as otherwise provided for in Rule X of these Rules.

x x x x

Section 2, Rule X of the ECC Rules reads:

SEC. 2. Period of entitlement.— (a) The income benefit shall be paid beginning on the first day of such disability. If caused by an injury or sickness it shall not be paid longer than 120 consecutive days except where such injury or sickness still requiresmedical attendance beyond 120 days but not to exceed 240 days from onset of disability in which case benefit for temporary total disability shall be paid. However, the

System may declare the total and permanent status at any time after 120 days of continuous temporary total disability as may be warranted by the degree of actual lossor impairment of physical or mental functions as determined by the System.

x x x x

According to Vergara, these provisions of the Labor Code, as amended, and implementing rules are to be read hand in hand with the first paragraph of Section 20(B)(3) of the 2000 POEA Standard Employment Contract which reads:


physician[,] but in no case shall this period exceed one hundred twenty (120) days.

Vergara continues:

As these provisions operate, the seafarer, upon sign-off from his vessel, must report to the company-designated physician within three (3) days from arrival for diagnosis and treatment. For the duration of the treatment but in no case to exceed 120 days, the seaman is on temporary total disability as he is totally unable to work. Hereceives his basic wage during this period until he is declared fit to work or histemporary disability is acknowledged by the company to be permanent, either partially or totally, as his condition is defined under the POEA Standard Employment Contract and by applicable Philippine laws. If the 120 days initial period is exceeded and no suchdeclaration is made because the seafarer requires further medical attention, then thetemporary total disability period may be extended up to a maximum of 240 days,subject to the right of the employer to declare within this period that a permanent partial or total disability already exists. The seaman may of course also be declared fit to work at any time such declaration is justified by his medical condition.

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x x x

As we outlined above, a temporary total disability only becomes permanent whenso declared by the company physician within the periods he is allowed to do so, or uponthe expiration of the maximum 240-day medical treatment period without a declaration

of either fitness to work or the existence of a permanent disability.

To be sure, there is one Labor Code concept of permanent total disability, asstated in Article 192(c)(1) of the Labor Code, as amended, and the ECC Rules. We alsonote that the first paragraph of Section 20(B)(3) of the 2000 POEA Standard Employment Contract was lifted verbatim from the first paragraph of Section 20(B)(3) of the 1996 POEA Standard Employment Contract, to wit:


physician, but in no case shall this period exceed one hundred twenty (120) days. In said Magsaysay Maritime Corp. case, the employee (Oberto Lobusta) was

eventually awarded the maximum disability benefit of $60,000.00. Applying the Vergaracase, the Court ruled that he was suffering from permanent total disability because themaximum 240-day (8 months) medical treatment period expired with no declarationfrom the attending physician that he was already fit to work. Neither was there adeclaration that Lobusta was afflicted with a permanent disability. From May 22, 1998,his initial examination, to February 16, 1999, when he was still prescribed medicationsfor his lumbosacral pain and was even advised to return for reevaluation, the number of days would be 264 days or 6 days short of 9 months, way beyond the prescribed 240

day period.

In contrast, in the case at bench, two days after repatriation on March 17, 2005,Santiago underwent several tests and treatment. On April 8, 2005, a neurologist conducted EMG/NCV on him. On August 13, Dr. Lim, the company-designated

physician, opined that he was suffering from a “Grade 12” disability only, not a permanent total one. Counting the days from March 17 to August 13, this assessment by Dr. Lim was made on the 148th day, more or less, and, therefore, within the 240-day

period. Thus, Santiago’s condition cannot be considered a permanent total disability that would entitle him to the maximum disability benefit of $60,000.00. To stress, therule is that a temporary total disability only becomes permanent when the company-designated physician, within the 240 day period, declares it to be so, or when after thelapse of the same, he fails to make such declaration.

Santiago relies too much on the Crystal Shipping case for his permanent total disability claim. Unfortunately, his reliance on the ruling in said case is misplaced. In theVergara case, this Court held in resolving the seeming conflict between the two casesby stating:

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x x x This declaration of permanent total disability after the initial 120 days of temporary total disability cannot, however, be simply lifted and applied as a general rulefor all cases in all contexts. The specific context of the application should beconsidered, as we must do in the application of all rulings and even of the law and of the implementing regulations.

Crystal Shipping was a case where the seafarer was completely unable to work for three years and was indisputably unfit for sea duty “due to respondent’s need for regular medical check-up and treatment which would not be available if he were at sea.” While the case was not clear on how the initial 120-day and the subsequent temporary total disability period operated, what appears clear is that the disability went beyond 240 days without any declaration that the seafarer was fit to resume work. Under thecircumstances, a ruling of permanent and total disability was called for, fully inaccordance with the operation of the period for entitlement that we described above.(Emphases supplied)

Furthermore, the Court takes note that even after Santiago was informed by Dr.Lim of his finding, he sought the opinion of independent doctors. First he went to seeDr. Collantes, a neurologist, who diagnosed him to have cerebral concussion, C5-C7 Radiculopathy secondary to trauma. It is interesting to note, however, that the clinical summary stated, among others, that his reflexes were normal and he was ambulatory and able to perform his daily chores although he still experienced neck pains and headaches. These findings negate a claim for total disability.

Finally, Santiago went to see Dr. Vicaldo of the Philippine Heart Center, whosefindings also belied his claim for permanent total disability. The doctor, after only asingle session, gave him a disability grading of 7, which would not entitle him to a

permanent total disability compensation.

At any rate, said finding ought not to be given more weight than the disability grading given by the company-designated doctor. The POEA Standard Employment Contract clearly provides that when a seafarer sustains a work-related illness or injury while onboard the vessel, his fitness or unfitness for work shall be determined by the company-designated physician. However, if the doctor appointed by the seafarer makes a finding contrary to that of the assessment of the company-designated physician, the opinion of a third doctor may be agreed jointly between the employer and the seafarer as thedecision final and binding on both of them. In this case, Santiago did not avail of this

procedure. There was no agreement on a third doctor who shall examine him anew and whose finding shall be final and binding. Thus, this Court is left without choice but touphold the certification made by Dr. Lim with respect to Santiago’s disability. (Santiagovs. Pacbasin Shipmanagement, Inc., G.R. No. 194677, April 18, 2012)

Retrenchment is the termination of employment initiated by the employer throughno fault of and without prejudice to the employees. It is resorted to during periods of business recession, industrial depression, or seasonal fluctuations or during lullsoccasioned by lack of orders, shortage of materials, conversion of the plant for a new

production program or the introduction of new methods or more efficient machinery or of automation. It is an act of the employer of dismissing employees because of losses in

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the operation of a business, lack of work, and considerable reduction on the volume of his business.

In case of retrenchment, proof of financial losses becomes the determining factor in proving its legitimacy. In establishing a unilateral claim of actual or potential losses,

financial statements audited by independent external auditors constitute the normal method of proof of profit and loss performance of a company. The condition of business losses justifying retrenchment is normally shown by audited financial documents like yearly balance sheets and profit and loss statements as well as annual income tax returns.

Retrenchment is subject to faithful compliance with the substantative andprocedural requirements laid down by law and jurisprudence. For a valid retrenchment,the following elements must be present:

That retrenchment is reasonably necessary and likely to prevent business losses

which, if already incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected, are reasonably imminent as perceived objectively and ingood faith by the employer;

That the employer served written notice both to the employees and to theDepartment of Labor and Employment at least one month prior to the intended date of retrenchment;

That the employer pays the retrenched employees separation pay equivalent toone (1) month pay or at least ½ month pay for every year of service, whichever ishigher;

That the employer exercises its prerogative to retrench employees in good faithfor the advancement of its interest and not to defeat or circumvent the employees’ right to security of tenure; and

That the employer used fair and reasonable criteria in ascertaining who would bedismissed and who would be retained among the employees, such as status, efficiency,seniority, physical fitness, age, and financial hardship for certain workers.

All these elements were successfully proven by petitioner. First, the huge lossessuffered by the Club for the past two years had forced petitioner to close it down toavert further losses which would eventually affect the operations of petitioner. Second,all 45 employees working under the Club were served with notice of termination. Thecorresponding notice was likewise served to the DOLE one month prior toretrenchment. Third, the employees were offered separation pay, most of whom haveaccepted and opted not to join in this complaint. Fourth, cessation of or withdrawal from business operations was bona fide in character and not impelled by a motive todefeat or circumvent the tenurial rights of employees. As a matter of fact, as of thiswriting, the Club has not resumed operations. Neither is there a showing that petitioner carried out the closure of the business in bad faith. No labor dispute existed between

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management and the employees when the latter were terminated. (Waterfront Cebu City Hotel vs. Jimenez, et. al., G.R. No. 174214, June 13, 2012)

Procedural Requirements of Valid Dismissal

In King of Kings Transport, Inc. v. Mamac, this Court laid down the manner by which the procedural due requirements of due process can be satisfied:

To clarify, the following should be considered in terminating the services of employees:

The first written notice to be served on the employees should contain the specific causes or grounds for termination against them, and a directive that the employees aregiven the opportunity to submit their written explanation within a reasonable period."Reasonable opportunity" under the Omnibus Rules means every kind of assistancethat management must accord to the employees to enable them to prepare adequately for their defense. This should be construed as a period of at least five (5) calendar days from receipt of the notice to give the employees an opportunity to study theaccusation against them, consult a union official or lawyer, gather data and evidence,and decide on the defenses they will raise against the complaint. Moreover, in order toenable the employees to intelligently prepare their explanation and defenses, the noticeshould contain a detailed narration of the facts and circumstances that will serve asbasis for the charge against the employees. A general description of the charge will not suffice. Lastly, the notice should specifically mention which company rules, if any, areviolated and/or which among the grounds under Art. 282 is being charged against theemployees.

After serving the first notice, the employers should schedule and conduct ahearing or conference wherein the employees will be given the opportunity to: (1)explain and clarify their defenses to the charge against them; (2) present evidence insupport of their defenses; and (3) rebut the evidence presented against them by themanagement. During the hearing or conference, the employees are given the chanceto defend themselves personally, with the assistance of a representative or counsel of their choice. Moreover, this conference or hearing could be used by the parties as anopportunity to come to an amicable settlement.

(3) After determining that termination of employment is justified, the employersshall serve the employees a written notice of termination indicating that: (1) all

circumstances involving the charge against the employees have been considered; and (2) grounds have been established to justify the severance of their employment.(Realda vs. New Age Graphics, Inc., G.R. No. 192190, April 25, 2012)

It is fundamental that in order to validly dismiss an employee, the employer isrequired to observe both substantive and procedural due process – the termination of employment must be based on a just or authorized cause and the dismissal must beeffected after due notice and hearing. An employer may terminate an employment on

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the ground of serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work. Willful disobedience requires the concurrence of two elements: (1) the employee's assailed conduct must have been willful, that is, characterized by a wrongful and perverseattitude; and (2) the order violated must have been reasonable, lawful, made known to

the employee, and must pertain to the duties which he had been engaged to discharge.Both elements are present in this case. The existence of a single just cause is enoughto order their dismissal and it is now inconsequential if the other charges against themdo not merit their dismissal from service. (KAKAMPI, et. al. vs. Kingspoint Expressand Logistic, G.R. No. 194813, April 25, 2012)

“Under the Labor Code, the requirements for the lawful dismissal of an employeeare two-fold[:] the substantive and the procedural aspects. Not only must the dismissalbe for a just or authorized cause, the rudimentary requirements of due process— notice and hearing — must, likewise, be observed x x x. Without the concurrence of the two, the termination would x x x be illegal[;] employment is a property right of whichone cannot be deprived of without due process.” In Perez v. Philippine Telegraph andTelephone Company, the Court underscored the significance of the two-notice rule indismissing an employee: To meet the requirements of due process in the dismissal of an employee, an employer must furnish the worker with two written notices: (1) a writtennotice specifying the grounds for termination and giving to said employee a reasonableopportunity to explain his side and (2) another written notice indicating that, upon dueconsideration of all circumstances, grounds have been established to justify theemployer’s decision to dismiss the employee.

Contrary to Esguerra’s allegation, the law does not require that an intention toterminate one’s employment should be included in the first notice. It is enough that employees are properly apprised of the charges brought against them so they can

properly prepare their defenses; it is only during the second notice that the intention toterminate one’s employment should be explicitly stated.

There is also no basis to question the absence of a proper hearing. In Perez, theCourt provided the following guiding principles in connection withthe hearing requirement in dismissal cases:

"ample opportunity to be heard" means any meaningful opportunity (verbal or written) given to the employee to answer the charges against him and submit evidencein support of his defense, whether in a hearing, conference or some other fair, just and reasonable way.

a formal hearing or conference becomes mandatory only when requested by theemployee in writing or substantial evidentiary disputes exist or a company rule or

practice requires it, or when similar circumstances justify it.

the "ample opportunity to be heard" standard in the Labor Code prevails over the"hearing or conference" requirement in the implementing rules and regulations.

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In sum, the existence of an actual, formal "trial-type" hearing, although preferred, is not absolutely necessary to satisfy the employee's right to be heard.Esguerra was able to present her defenses; and only upon proper consideration of it did Valle Verde send the second memorandum terminating her employment. Since

Valle Verde complied with the two-notice requirement, no procedural defect exists inEsguerra’s termination. (Esguerra vs. Valle Verde Country Club, Inc., G.R. No.173012, June 13, 2012)

Breach of Trust and Confidence

We have held that there are two (2) classes of positions of trust – the first classconsists of managerial employees, or those vested with the power to lay downmanagement policies; and the second class consists of cashiers, auditors, property custodians or those who, in the normal and routine exercise of their functions, regularly

handle significant amounts of money or property.

Esguerra held the position of Cost Control Supervisor and had the duty to remitto the accounting department the cash sales proceeds from every transaction she wasassigned to. This is not a routine task that a regular employee may perform; it is related to the handling of business expenditures or finances. For this reason, Esguerraoccupies a position of trust and confidence – a position enumerated in the second classof positions of trust. Any breach of the trust imposed upon her can be a valid cause for dismissal.

In Jardine Davies, Inc. v. National Labor Relations Commission, we held that loss of confidence as a just cause for termination of employment can be invoked whenan employee holds a position of responsibility, trust and confidence. In order toconstitute a just cause for dismissal, the act complained of must be related to the

performance of the duties of the dismissed employee and must show that he or she isunfit to continue working for the employer for violation of the trust reposed in him or her.

We find no merit in the allegation that it was Esguerra’s daughter who should beheld liable. She had no custody of the cash sales since it was not part of her duties as afood checker. It was Esguerra’s responsibility to account for the cash proceeds; in caseof problems, she should have promptly reported it, regardless of who was at fault.Instead, she settled the unaccounted amount only after the accounting department informed her about the discrepancy, almost one month following the incident.Esguerra’s failure to make the proper report reflects on her irresponsibility in thecustody of cash for which she was accountable, it was her duty to account for the sales

proceeds, and she should have known about the missing amount immediately after theevent.

We cannot favorably consider Esguerra’s explanation about the unauthorized charging on Judge Bonifacio’s account. It is highly unethical for an employee to bring home food intended to be sold to customers. At any rate, her explanation is self-serving

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not, therefore, misuse the rules of procedure to defeat the ends of justice or unduly delay a case, impede the execution of a judgment or misuse court processes. (3rd

Alert Security and Detective Services, Inc. vs. Navia, G.R. No. 200653, June 13,2012)

Breach of Trust and Confidence

Willful breach of trust or loss of confidence requires that the employee (1)occupied a position of trust or (2) was routinely charged with the care of the employer’sproperty. As correctly appreciated by the CA, petitioner was charged with the care andcustody of PLDT’s property. To warrant dismissal based on loss of confidence, theremust be some basis for the loss of trust or the employer must have reasonable groundsto believe that the employee is responsible for misconduct that renders the latter unworthy of the trust and confidence demanded by his or her position. Here, petitioner disputes the sufficiency of PLDT’s basis for loss of trust and confidence. He alleges thathe did not steal the plant materials, considering that he had lawful possession.However, assuming that he lawfully possessed the materials, PLDT still had amplereason or basis to already distrust petitioner. For more than a month, he did not eveninform PLDT of the whereabouts of the plant materials. Instead, he stocked thesematerials at his residence even if they were needed in the daily operations of thecompany. In keeping with the honesty and integrity demanded by his position, he shouldhave turned over these materials to the plant’s warehouse. The fact that petitioner didnot present any documents or requisition slips at the time that the PNP took the plantmaterials logically excites suspicion. In addition, PLDT received a security report statingthat petitioner had engaged in the illicit disposal of its plant materials, which wererecovered during the search conducted at his residence. Thus, PLDT reasonablysuspected petitioner of stealing the company’s property. At that juncture, the employer may already dismiss the employee since it had reasonable grounds to believe or toentertain the moral conviction that the latter was responsible for the misconduct, and thenature of his participation therein rendered him absolutely unworthy of the trust andconfidence demanded by his position.

In a final effort to impugn his dismissal, petitioner claims that he could only befaulted for breaching PLDT’s rules and regulations which prohibited the employees frombringing home company materials. In this regard, petitioner exacerbates his position. By admitting that he breached company rules, he buttressed his employer’s claim that hecommitted serious misconduct. Employees cannot take company rules for granted,especially in this case where petitioner’s breach involved various plant materials that may cause major disruption in the company’s operations. Indeed, an employer may discharge an employee for refusal to obey a reasonable company rule. As a rule,although this Court leans over backwards to help workers and employees continue withtheir employment, acts of dishonesty in the handling of company property are a different matter.

Given these circumstances, it would have been unfair for PLDT to keep petitioner in its employ. Petitioner displayed actions that made him untrustworthy. Thus,

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as a measure of self-protection, PLDT validly terminated his services for seriousmisconduct and loss of confidence. Having established the validity of petitioner’sdismissal, we sustain the rulings of the tribunals a quo. To emphasize, “our empathy with the cause of labor should not blind us to the rights of management. This Court should stamp out, rather than tolerate, the commission of irregular acts wherever these

are noted. Malpractices should not be allowed to continue but should be rebuked.” (Paulino vs. NLRC, et. al., G.R. No. 176184, June 13, 2012)

Closure of Business; Piercing the Veil of Corporate Fiction

For a dismissal based on the closure of business to be valid, three (3)requirements must be established. Firstly, the cessation of or withdrawal from businessoperations must be bona fide in character. Secondly, there must be payment to theemployees of termination pay amounting to at least one-half (1/2) month pay for eachyear of service, or one (1) month pay, whichever is higher. Thirdly, the company mustserve a written notice on the employees and on the DOLE at least one (1) month beforethe intended termination.

Basing their conclusion on the Memorandum of Agreement and Supplemental Agreement between Miramar and Mar Fishing’s labor union, as well as the GeneralInformation Sheets and Company Profiles of the two companies, petitioners assert thatMiramar simply took over the operations of Mar Fishing. In addition, they assert thatthese companies are one and the same entity, given the commonality of their directorsand the similarity of their business venture in tuna canning plant operations.

At the fore, the question of whether one corporation is merely an alter ego of another is purely one of fact generally beyond the jurisdiction of this Court. In any case,given only these bare reiterations, this Court sustains the ruling of the LA as affirmed by the NLRC that Miramar and Mar Fishing are separate and distinct entities, based on themarked differences in their stock ownership. Also, the fact that Mar Fishing’s officersremained as such in Miramar does not by itself warrant a conclusion that the twocompanies are one and the same. As this Court held in Sesbreño v. Court of Appeals,the mere showing that the corporations had a common director sitting in all the boardswithout more does not authorize disregarding their separate juridical personalities.

Neither can the veil of corporate fiction between the two companies be pierced by the rest of petitioners’ submissions, namely, the alleged take-over by Miramar of Mar Fishing’s operations and the evident similarity of their businesses. At this point, it bears

emphasizing that since piercing the veil of corporate fiction is frowned upon, those whoseek to pierce the veil must clearly establish that the separate and distinct personalitiesof the corporations are set up to justify a wrong, protect a fraud, or perpetrate adeception. This, unfortunately, petitioners have failed to do. In Indophil Textile Mill Workers Union vs. Calica, we ruled thus:

In the case at bar, petitioner seeks to pierce the veil of corporate entity of Acrylic,alleging that the creation of the corporation is a devi[c]e to evade the application of the

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CBA between petitioner Union and private respondent company. While we do not discount the possibility of the similarities of the businesses of private respondent and

Acrylic, neither are we inclined to apply the doctrine invoked by petitioner in granting therelief sought. The fact that the businesses of private respondent and Acrylic arerelated, that some of the employees of the private respondent are the same persons

manning and providing for auxiliary services to the units of Acrylic, and that the physical plants, offices and facilities are situated in the same compound, it is our considered opinion that these facts are not sufficient to justify the piercing of the corporate veil of

Acrylic. (Emphasis supplied.)

Having been found by the trial courts to be a separate entity, Mar Fishing – and not Miramar – is required to compensate petitioners. Indeed, the back wages and retirement pay earned from the former employer cannot be filed against the new ownersor operators of an enterprise.

Evidently, the assertions of petitioners fail on both procedural and substantiveaspects. Therefore, no special reasons exist to reverse the CA’s dismissal of the casedue to their failure to abide by the mandatory procedure for filing a petition for review oncertiorari. Given the correctness of the appellate court’s ruling and the lack of appropriate remedies, this Court will no longer dwell on the exact computation of

petitioners’ claims for back wages, which have been sufficiently threshed out by the LAand the NLRC. Judicial review of labor cases does not go beyond an evaluation of thesufficiency of the evidence upon which labor officials' findings rest.

While we sympathize with the situation of the workers in this case, we cannot disregard, absent compelling reasons, the factual determinations and the legal doctrines that support the findings of the courts a quo. Generally, the findings of fact and the conclusion of the labor courts are not only accorded great weight and respect,but are even clothed with finality and deemed binding on this Court, as long as they aresupported by substantial evidence.

On a final note, this Court reminds the parties seeking the ultimate relief of certiorari to observe the rules, since nonobservance thereof cannot be brushed asideas a “mere technicality.” Procedural rules are not to be belittled or simply disregarded,for these prescribed procedures ensure an orderly and speedy administration of justice.(Ramirez, et. al. vs. Mar Fishing Co., Inc., G.R. No. 168208, June 13, 2012)

The Court’s discussion in Mabeza v. National Labor Relations Commission isinstructive: Loss of confidence as a just cause for dismissal was never intended to

provide employers with a blank check for terminating their employees. Such a vague,all-encompassing pretext as loss of confidence, if unqualifiedly given the seal of approval by this Court, could readily reduce to barren form the words of theconstitutional guarantee of security of tenure. Having this in mind, loss of confidenceshould ideally apply only to cases involving employees occupying positions of trust andconfidence or to those situations where the employee is routinely charged with the careand custody of the employer's money or property. To the first class belong managerialemployees, i.e., those vested with the powers or prerogatives to lay down management

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policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or disciplineemployees or effectively recommend such managerial actions; and to the second classbelong cashiers, auditors, property custodians, etc., or those who, in the normal androutine exercise of their functions, regularly handle significant amounts of money or property. Evidently, an ordinary chambermaid who has to sign out for linen and other

hotel property from the property custodian each day and who has to account for eachand every towel or bedsheet utilized by the hotel's guests at the end of her shift wouldnot fall under any of these two classes of employees for which loss of confidence, if ablysupported by evidence, would normally apply. Illustrating this distinction, this Court, inMarina Port Services, Inc. vs. NLRC, has stated that:

To be sure, every employee must enjoy some degree of trust and confidencefrom the employer as that is one reason why he was employed in the first place. Onecertainly does not employ a person he distrusts. Indeed, even the lowly janitor must enjoy that trust and confidence in some measure if only because he is the one whoopens the office in the morning and closes it at night and in this sense is entrusted with

the care or protection of the employer's property. The keys he holds are the symbol of that trust and confidence. By the same token, the security guard must also beconsidered as enjoying the trust and confidence of his employer, whose property he issafeguarding. Like the janitor, he has access to this property. He too, is charged withits care and protection.

Notably, however, and like the janitor again, he is entrusted only with the physicaltask of protecting that property. The employer's trust and confidence in him is limited tothat ministerial function. He is not entrusted, in the Labor Arbiter's words, 'with theduties of safekeeping and safeguarding company policies, management instructions,and company secrets such as operation devices.' He is not privy to these confidentialmatters, which are shared only in the higher echelons of management. It is the personson such levels who, because they discharge these sensitive duties, may be consideredholding positions of trust and confidence. The security guard does not belong in suchcategory.

More importantly, we have repeatedly held that loss of confidence should not besimulated in order to justify what would otherwise be, under the provisions of law, anillegal dismissal. "It should not be used as a subterfuge for causes which are illegal,improper and unjustified. It must be genuine, not a mere afterthought to justify an earlier action taken in bad faith."

In Bristol Myers Squibb (Phils.), Inc. v. Baban, the Court discussed the requisitesfor a valid dismissal on the ground of loss of trust and confidence:

It is clear that Article 282(c) of the Labor Code allows an employer to terminatethe services of an employee for loss of trust and confidence. The right of employers todismiss employees by reason of loss of trust and confidence is well established in

jurisprudence.

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The first requisite for dismissal on the ground of loss of trust and confidence isthat the employee concerned must be one holding a position of trust and confidence.Verily, We must first determine if respondent holds such a position.

There are two (2) classes of positions of trust. The first class consists of

managerial employees. They are defined as those vested with the powers or prerogatives to lay down management policies and to hire, transfer suspend, lay-off,recall, discharge, assign or discipline employees or effectively recommend suchmanagerial actions. The second class consists of cashiers, auditors, propertycustodians, etc. They are defined as those who in the normal and routine exercise of their functions, regularly handle significant amounts of money or property.

The second requisite is that there must be an act that would justify the loss of trust and confidence. Loss of trust and confidence to be a valid cause for dismissal must be based on a willful breach of trust and founded on clearly established facts. Thebasis for the dismissal must be clearly and convincingly established but proof beyond

reasonable doubt is not necessary.

Thus, the first question to be addressed is whether Vallota held a position of trustand confidence. In previous cases, the following positions were classified under thesecond class of holders of positions of trust and confidence: a pharmaceuticalcompany’s district manager employed to handle pharmaceutical products for distributionto medical practitioners and sale to drug outlets, a bank manager, and an employeetasked with purchasing supplies and equipment. The position of a contract claimsassistant tasked with monitoring enforcement of contracts involving large sums of money was also classified to be analogous to this second class of holders of positionsof trust and confidence.

Based on the standards set by previous jurisprudence, Vallota’s position asJunior Programmer is analogous to the second class of positions of trust and confidence. Though he did not physically handle money or property, he became privy toconfidential data or information by the nature of his functions. At a time when the most sensitive of information is found not printed on paper but stored on hard drives and servers, an employee who handles or has access to data in electronic form naturally becomes the unwilling recipient of confidential information.

While the law and this Court recognize the right of an employer to dismiss anemployee based on loss of trust and confidence, the evidence of the employer mustclearly and convincingly establish the facts upon which the loss of trust and confidencein the employee is based. To be a valid ground for dismissal, loss of trust andconfidence must be based on a willful breach of trust and founded on clearlyestablished facts. A breach is willful if it is done intentionally, knowingly and purposely,without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly,heedlessly or inadvertently. It must rest on substantial grounds and not on theemployer’s arbitrariness, whims, caprices or suspicion; otherwise, the employee wouldremain eternally at the mercy of the employer. Further, in order to constitute a just

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cause for dismissal, the act complained of must be work-related and show that theemployee concerned is unfit to continue working for the employer. Such ground for dismissal has never been intended to afford an occasion for abuse because of itssubjective nature.

It must also be remembered that in illegal dismissal cases like the one at bench,the burden of proof is upon the employer to show that the employee’s termination fromservice is for a just and valid cause. The employer’s case succeeds or fails on thestrength of its evidence and not the weakness of that adduced by the employee, inkeeping with the principle that the scales of justice should be tilted in favor of the latter in case of doubt in the evidence presented by them. Often described as more than amere scintilla, the quantum of proof is substantial evidence which is understood as suchrelevant evidence as a reasonable mind might accept as adequate to support aconclusion, even if other equally reasonable minds might conceivably opine otherwise.Failure of the employer to discharge the foregoing onus would mean that the dismissal is not justified and, therefore, illegal.

Termination of employment is a drastic measure reserved for the most serious of offenses. When the act complained of is not so grave as to result in a complete loss of trust and confidence, a lower penalty such as censure, warning, or even suspension,would be more circumspect. This is of particular significance here where during Vallota’s ten years of service to PGAI, not once was he ever warned or reprimanded for such printing services.

The Court explained the concept of the opportunity to be heard in the case of Perez v. Philippine Telegraph and Telephone Company:

After receiving the first notice apprising him of the charges against him, theemployee may submit a written explanation (which may be in the form of a letter,memorandum, affidavit or position paper) and offer evidence in support thereof, likerelevant company records (such as his 201 file and daily time records) and the swornstatements of his witnesses. For this purpose, he may prepare his explanationpersonally or with the assistance of a representative or counsel. He may also ask theemployer to provide him copy of records material to his defense. His written explanationmay also include a request that a formal hearing or conference be held. In such a case,the conduct of a formal hearing or conference becomes mandatory, just as it is wherethere exist substantial evidentiary disputes or where company rules or practice requiresan actual hearing as part of employment pretermination procedure. To this extent, werefine the decisions we have rendered so far on this point of law.

This interpretation of Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor Code reasonably implements the “ample opportunity to be heard” standard under Article 277(b) of the Labor Code without unduly restricting the language of thelaw or excessively burdening the employer. This not only respects the power vested inthe Secretary of Labor and Employment to promulgate rules and regulations that will lay down the guidelines for the implementation of Article 277(b). More importantly, this isfaithful to the mandate of Article 4 of the Labor Code that “[a]ll doubts in the

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implementation and interpretation of the provisions of [the Labor Code], including itsimplementing rules and regulations shall be resolved in favor of labor.”

In sum, the following are the guiding principles in connection with the hearing requirement in dismissal cases:

(a) “ample opportunity to be heard” means any meaningful opportunity (verbal or written) given to the employee to answer the charges against him and submit evidencein support of his defense, whether in a hearing, conference or some other fair, just and reasonable way.

(b) a formal hearing or conference becomes mandatory only when requested bythe employee in writing or substantial evidentiary disputes exist or a company rule or practice requires it, or when similar circumstances justify it.

(c) the “ample opportunity to be heard” standard in the Labor Code prevails over the “hearing or conference” requirement in the implementing rules and regulations.

In Golden Ace Builders v. Tagle, it was written:

Thus, an illegally dismissed employee is entitled to two reliefs: backwages and reinstatement. The two reliefs provided are separate and distinct. In instances wherereinstatement is no longer feasible because of strained relations between the employeeand the employer, separation pay is granted. In effect, an illegally dismissed employeeis entitled to either reinstatement, if viable, or separation pay if reinstatement is nolonger viable, and backwages.

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

payment of separation pay is in addition to payment of backwages. (emphasis, italicsand underscoring supplied)

Velasco v. National Labor Relations Commission, emphasizes:

The accepted doctrine is that separation pay may avail in lieu of reinstatement if reinstatement is no longer practical or in the best interest of the parties. Separation pay in lieu of reinstatement may likewise be awarded if the employee decides not to bereinstated. (Emphasis in the original; italics supplied)

Under the doctrine of strained relations, the payment of separation pay isconsidered an acceptable alternative to reinstatement when the latter option is nolonger desirable or viable. On one hand, such payment liberates the employee fromwhat could be a highly oppressive work environment. On the other hand, it releases the

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employer from the grossly unpalatable obligation of maintaining in its employ a worker it could no longer trust.

This has been the consistent ruling in the award of separation pay to illegally dismissed employees in lieu of reinstatement, in addition to the award of backwages.

Finally, Vallota, having been compelled to litigate in order to seek redress, isentitled, as he had prayed early on, to the award of attorney’s fees equivalent to 10% of the total monetary award. (Prudential Guarantee and Assurance Employee Labor Union vs. NLRC, et. al., G.R. No. 185335, June 13, 2012)

CBA under R.A. 8042

It is true that R.A. 8042 is a special law governing overseas Filipino workers.However, a careful reading of this special law would readily show that there is nospecific provision thereunder which provides for jurisdiction over disputes or unresolvedgrievances regarding the interpretation or implementation of a CBA. Section 10 of R.A.8042, which is cited by petitioner, simply speaks, in general, of “claims arising out of anemployer-employee relationship or by virtue of any law or contract involving Filipinoworkers for overseas deployment including claims for actual, moral, exemplary andother forms of damages.” On the other hand, Articles 217(c) and 261 of the Labor Codeare very specific in stating that voluntary arbitrators have jurisdiction over cases arisingfrom the interpretation or implementation of collective bargaining agreements. Stateddifferently, the instant case involves a situation where the special statute (R.A. 8042)refers to a subject in general, which the general statute (Labor Code) treats in particular.In the present case, the basic issue raised by Merridy Jane in her complaint filed withthe NLRC is: which provision of the subject CBA applies insofar as death benefits dueto the heirs of Nelson are concerned. The Court agrees with the CA in holding that thisissue clearly involves the interpretation or implementation of the said CBA. Thus, thespecific or special provisions of the Labor Code govern.

In any case, the Court agrees with petitioner's contention that the CBA is the law or contract between the parties. Article 13.1 of the CBA entered into by and betweenrespondent GCI and AMOSUP, the union to which petitioner belongs, provides asfollows:

The Company and the Union agree that in case of dispute or conflict in theinterpretation or application of any of the provisions of this Agreement, or enforcement of Company policies, the same shall be settled through negotiation, conciliation or voluntary arbitration. The Company and the Union further agree that they will use their best endeavor to ensure that any dispute will be discussed, resolved and settled amicably by the parties hereof within ninety (90) days from the date of filing of thedispute or conflict and in case of failure to settle thereof any of the parties retain their freedom to take appropriate action. (Emphasis supplied)

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From the foregoing, it is clear that the parties, in the first place, really intended tobring to conciliation or voluntary arbitration any dispute or conflict in the interpretation or application of the provisions of their CBA. It is settled that when the parties havevalidly agreed on a procedure for resolving grievances and to submit a dispute tovoluntary arbitration then that procedure should be strictly observed.

It may not be amiss to point out that the abovequoted provisions of the CBA arein consonance with Rule VII, Section 7 of the present Omnibus Rules and RegulationsImplementing the Migrant Workers and Overseas Filipinos Act of 1995, as amended by Republic Act No. 10022, which states that “[f]or OFWs with collective bargaining agreements, the case shall be submitted for voluntary arbitration in accordance with

Articles 261 and 262 of the Labor Code.” The Court notes that the said Omnibus Rulesand Regulations were promulgated by the Department of Labor and Employment (DOLE) and the Department of Foreign Affairs (DFA) and that these departments weremandated to consult with the Senate Committee on Labor and Employment and theHouse of Representatives Committee on Overseas Workers Affairs.

In the same manner, Section 29 of the prevailing Standard Terms and Conditions Governing the Employment of Filipino Seafarers on Board Ocean Going Vessels, promulgated by the Philippine Overseas Employment Administration (POEA),

provides as follows:

Section 29. Dispute Settlement Procedures. − In cases of claims and disputesarising from this employment, the parties covered by a collective bargaining agreementshall submit the claim or dispute to the original and exclusive jurisdiction of thevoluntary arbitrator or panel of arbitrators. If the parties are not covered by a collectivebargaining agreement, the parties may at their option submit the claim or dispute to

either the original and exclusive jurisdiction of the National Labor Relations Commission(NLRC), pursuant to Republic Act (RA) 8042, otherwise known as the Migrant Workersand Overseas Filipinos Act of 1995 or to the original and exclusive jurisdiction of thevoluntary arbitrator or panel of arbitrators. If there is no provision as to the voluntary arbitrators to be appointed by the parties, the same shall be appointed from theaccredited voluntary arbitrators of the National Conciliation and Mediation Board of theDepartment of Labor and Employment.

The Philippine Overseas Employment Administration (POEA) shall exerciseoriginal and exclusive jurisdiction to hear and decide disciplinary action on cases, whichare administrative in character, involving or arising out of violations of recruitment laws,rules and regulations involving employers, principals, contracting partners and Filipinoseafarers. (Emphasis supplied)

It is clear from the above that the interpretation of the DOLE, in consultation withtheir counterparts in the respective committees of the Senate and the House of Representatives, as well as the DFA and the POEA is that with respect to disputesinvolving claims of Filipino seafarers wherein the parties are covered by a collectivebargaining agreement, the dispute or claim should be submitted to the jurisdiction of avoluntary arbitrator or panel of arbitrators. It is only in the absence of a collective

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bargaining agreement that parties may opt to submit the dispute to either the NLRC or to voluntary arbitration. It is elementary that rules and regulations issued byadministrative bodies to interpret the law which they are entrusted to enforce, have theforce of law, and are entitled to great respect. Such rules and regulations partake of thenature of a statute and are just as binding as if they have been written in the statute

itself. In the instant case, the Court finds no cogent reason to depart from this rule.

The above interpretation of the DOLE, DFA and POEA is also in consonancewith the policy of the state to promote voluntary arbitration as a mode of settling labor disputes.

No less than the Philippine Constitution provides, under the third paragraph,Section 3, Article XIII, thereof that “[t]he State shall promote the principle of shared responsibility between workers and employers and the preferential use of voluntary modes in settling disputes, including conciliation, and shall enforce their mutual compliance therewith to foster industrial peace.”

Consistent with this constitutional provision, Article 211 of the Labor Code provides the declared policy of the State “[t]o promote and emphasize the primacy of free collective bargaining and negotiations, including voluntary arbitration, mediationand conciliation, as modes of settling labor or industrial disputes.”

On the basis of the foregoing, the Court finds no error in the ruling of the CA that the voluntary arbitrator has jurisdiction over the instant case. (Estate of Nelson R.Dulay vs. Aboitiz Jebsen Maritime, Inc., G.R. No. 172642, June 13, 2012) Independent Job Contractor

Article 106 of the Labor Code explains the relations which may arise between anemployer, a contractor, and the contractor’s employees, thus:

ART. 106. Contractor or subcontracting. − Whenever an employer enters into acontract with another person for the performance of the former’s work, the employees of the contractor and of the latter’s subcontractor, if any, shall be paid in accordance withthe provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of hisemployees in accordance with this Code, the employer shall be jointly and severallyliable with his contractor or subcontractor to such employees to the extent of the workperformed under the contract, in the same manner and extent that he is liable to

employees directly employed by him.

The Secretary of Labor and Employment may, by appropriate regulations, restrictor prohibit the contracting out of labor to protect the rights of workers established under the Code. In so prohibiting or restricting, he may make appropriate distinctions betweenlabor-only contracting and job contracting as well as differentiations within these typesof contracting and determine who among the parties involved shall be considered the

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employer for purposes of this Code, to prevent any violation or circumvention of anyprovision of this Code.

There is labor-only contracting where the person supplying workers to anemployer 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 beconsidered merely as an agent of the employer who shall be responsible to the workersin the same manner and extent as if the latter were directly employed by him.

In Sasan, Sr. v. National Labor Relations Commission 4th Division, the Court distinguished permissible job contracting or subcontracting from “labor-only” contracting, to wit:

Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to put out or farm out to a contractor or subcontractor the

performance or completion of a specific job, work or service within a definite or predetermined period, regardless of whether such job, work or service is to be performed or completed within or outside the premises of the principal. A person isconsidered engaged in legitimate job contracting or subcontracting if the following conditions concur:

The contractor or subcontractor carries on a distinct and independent businessand undertakes to perform the job, work or service on its own account and under itsown responsibility according to its own manner and method, and free from the controland direction of the principal in all matters connected with the performance of the workexcept as to the results thereof;

(b) The contractor or subcontractor has substantial capital or investment; and

(c) The agreement between the principal and contractor or subcontractor assuresthe contractual employees entitlement to all labor and occupational safety and healthstandards, free exercise of the right to self-organization, security of tenure, and socialand welfare benefits.

In contrast, labor-only contracting, a prohibited act, is an arrangement where thecontractor or subcontractor merely recruits, supplies or places workers to perform a job,work or service for a principal. In labor-only contracting, the following elements arepresent:

The contractor or subcontractor does not have substantial capital or investmentto actually perform the job, work or service under its own account and responsibility;and

(b) 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.

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The test of independent contractorship is “whether one claiming to be anindependent contractor has contracted to do the work according to his own methodsand 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 indetermining the existence of an independent and permissible contractor relationship, to

wit:

x x x [W]hether or not the contractor is carrying on an independent business; thenature and extent of the work; the skill required; the term and duration of therelationship; 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 tosupply the premises, tools, appliances, materials, and labor; and the mode, manner and terms of payment.

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 thefeatures of the relationship are to be considered.

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-employeerelationship between the principal and the employees of the supposed contractor, andthe “labor-only” contractor is considered as a mere agent of the principal, the realemployer. In this case, Polyfoam is the principal employer and Gramaje is the labor-onlycontractor. Polyfoam and Gramaje are, therefore, solidarily liable for the rightful claimsof respondent.

Abandonment cannot be inferred from the actuations of respondent. When hediscovered that his time card was off the rack, he immediately inquired from hissupervisor. He later sought the assistance of his counsel, who wrote a letter addressed to Polyfoam requesting that he be re-admitted to work. When said request was not acted upon, he filed the instant illegal dismissal case. These circumstances clearly negate the intention to abandon his work.

Petitioners failed to show any valid or authorized cause under the Labor Codewhich allowed it to terminate the services of respondent. Neither was it shown that respondent was given ample opportunity to contest the legality of his dismissal. Nonotice of termination was given to him. Clearly, respondent was not afforded due

process. Having failed to establish compliance with the requirements of termination of employment under the Labor Code, the dismissal of respondent was tainted withillegality. Consequently, respondent is entitled to reinstatement without loss of seniority rights, and other privileges and to his full backwages inclusive of allowances and to hisother benefits or their monetary equivalent computed from the time his compensationwas withheld up to the time of his actual reinstatement. However, if reinstatement is nolonger feasible as in this case, separation pay equivalent to one month salary for every year of service shall be awarded as an alternative. Thus, the CA is correct in affirming the LA’s award of separation pay with full backwages and other monetary benefits.

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(Polyfoam-RGC International Corporation vs. Concepcion, G.R. No. 172349, June13, 2012)

Closure of Establishment

Article 283 of the Labor Code provides:

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

Article 283 of the Labor Code identifies closure or cessation of operation of theestablishment as an authorized cause for terminating an employee. Similarly, the said

provision mandates that employees who are laid off from work due to closures that arenot due to business insolvency should be paid separation pay equivalent to one-month

pay or to at least one-half month pay for every year of service, whichever is higher. Afraction of at least six months shall be considered one whole year.

Although business reverses or losses are recognized by law as an authorized cause, it is still essential that the alleged losses in the business operations be provenconvincingly; otherwise, this ground for termination of employment would be susceptibleto abuse by conniving employers, who might be merely feigning business losses or reverses in their business ventures in order to ease out employees. (Ever Electrical Manufacturing, Inc. vs. Samahang Manggagawa ng Ever Electrical, G.R. No.194795, June 13, 2012)

Aspects of Dismissal

Dismissal from employment has two aspects: 1) the legality of the act of dismissal per se, which constitutes substantive due process, and 2) the legality of themanner of dismissal, which constitutes procedural due process.

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As to the first, the legal provision in point is Article 282 of the Labor Code which provides:

Art. 282. Termination by Employer. — An employer may terminate anemployment for any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work;

(b) Gross and habitual neglect by the employee of his duties;

(c) Fraud or willful breach by the employee of the trust reposed in him by hisemployer or duly authorized representative;

(d) Commission of a crime or offense by the employee against the person of hisemployer or any immediate member of his family or his duly authorized representative;

and


In the case of Cruz v. Court of Appeals, the Court had the occasion to enumeratethe essential elements for “willful breach by the employee of the trust reposed in him by his employer”:

Xxx the loss of trust and confidence must be based on willful breach of the trust reposed in the employee by his employer. Such breach is willful if it is doneintentionally, knowingly, and purposely, without justifiable excuse, as distinguished froman act done carelessly, thoughtlessly, heedlessly or inadvertently. Moreover, it must bebased on substantial evidence and not on the employer’s whims or caprices or suspicions otherwise, the employee would eternally remain at the mercy of theemployer. Loss of confidence must not be indiscriminately used as a shield by theemployer against a claim that the dismissal of an employee was arbitrary. And, in order to constitute a just cause for dismissal, the act complained of must be work-related and shows that the employee concerned is unfit to continue working for the employer. Inaddition, loss of confidence as a just cause for termination of employment is premised on the fact that the employee concerned holds a position of responsibility, trust and confidence or that the employee concerned is entrusted with confidence with respect todelicate matters, such as handling or case and protection of the property and assets of the employer. The betrayal of this trust is the essence of the offense for which anemployee is penalized. [Underscoring supplied]

As a safeguard against employers who indiscriminately use “loss of trust and confidence” to justify arbitrary dismissal of employees, the Court, in addition to theabove elements, came up with the following guidelines for the application of thedoctrine: (1) loss of confidence should not be simulated; (2) it should not be used as asubterfuge for causes which are improper, illegal or unjustified; (3) it may not bearbitrarily asserted in the face of overwhelming evidence to the contrary; and (4) it must

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be genuine, not a mere afterthought, to justify an earlier action taken in bad faith.(Villanueva, Jr. vs. NLRC, et. al., G.R. No. 176893, June 13, 2012)

To validly dismiss an employee on the ground of loss of trust and confidenceunder Article 282 (c) of the Labor Code of the Philippines, the following guidelines must

be observed: “1) loss of confidence should not be simulated; 2) it should not be used assubterfuge for causes which are improper, illegal or unjustified; 3) it may not bearbitrarily asserted in the face of overwhelming evidence to the contrary; and 4) it mustbe genuine, not a mere afterthought to justify earlier action taken in bad faith.” Moreimportant, it “must be based on a willful breach of trust and founded on clearly established facts.”

All told, we find that the testimony of Lobitaña constitutes substantial evidence to prove that respondent, as the then Power Plant Manager, accepted commissionsand/or “kickbacks” from suppliers, which is a clear violation of Section 2.04 of

petitioner’s Company Rules and Regulations. Jurisprudence consistently holds that for managerial employees “the mere existence of a basis for believing that such employeehas breached the trust of his employer would suffice for his dismissal.” As we then seeit, respondent’s termination was for a just and valid cause. (Apo Cement Corporationvs. Baptisma, G.R. No. 176671, June 20, 2012)

Termination; Misconduct

Article 282. Termination by Employer. - An employer may terminate anemployment for any of the following causes:

(a) Serious misconduct or willful disobendience by the employee of the lawful

orders of his employer or his representatives in connection with his work;

x x x x x x x x x


Misconduct involves “the transgression of some established and definite rule of action, forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment.” For misconduct to be serious and therefore avalid ground for dismissal, it must be:

1. of grave and aggravated character and not merely trivial or unimportant and 2. connected with the work of the employee.

In this case, petitioner dismissed respondent based on the NBI's finding that thelatter stole and used Yuseco’s credit cards. But since the theft was not committed against petitioner itself but against one of its employees, respondent's misconduct wasnot work-related and therefore, she could not be dismissed for serious misconduct.

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Nonetheless, Article 282(e) of the Labor Code talks of other analogous causes or those which are susceptible of comparison to another in general or in specific detail. For an employee to be validly dismissed for a cause analogous to those enumerated in

Article 282, the cause must involve a voluntary and/or willful act or omission of theemployee.

A cause analogous to serious misconduct is a voluntary and/or willful act or omission attesting to an employee’s moral depravity. Theft committed by an employeeagainst a person other than his employer, if proven by substantial evidence, is a causeanalogous to serious misconduct. (Emphasis supplied.)

In this case, the LA has already made a factual finding, which was affirmed by both the NLRC and the CA, that Fermin had committed theft when he took Braga’scellphone. Thus, this act is deemed analogous to serious misconduct, rendering Fermin’s dismissal from service just and valid.

Further, the CA was correct in ruling that previous infractions may be cited as justification for dismissing an employee only if they are related to the subsequent offense. However, it must be noted that such a discussion was unnecessary since thetheft, taken in isolation from Fermin’s other violations, was in itself a valid cause for thetermination of his employment.

Finally, it must be emphasized that the award of financial compensation or assistance to an employee validly dismissed from service has no basis in law.Therefore, considering that Fermin’s act of taking the cellphone of his co-employee is acase analogous to serious misconduct, this Court is constrained to reverse the CA’sruling as regards the payment of his full retirement benefits. In the same breath, neither can this Court grant his prayer for backwages. (Cosmos Bottling Corp. vs. Fermin,

G.R. No. 193676, June 20, 2012)

Employer-Employee Relationship

In Pamplona Plantation Company v. Acosta, petitioner therein raised for the first time in its appeal to the NLRC that respondents therein were not its employees but of another company. In brushing aside this defense, the Court held:

x x x Petitioner is estopped from denying that respondents worked for it. In thefirst place, it never raised this defense in the proceedings before the Labor Arbiter.

Notably, the defense it raised pertained to the nature of respondents’ employment, i.e.,whether they are seasonal employees, contractors, or worked under the pakyaw system. Thus, in its Position Paper, petitioner alleged that some of the respondents arecoconut filers and copra hookers or sakadors; some are seasonal employees whoworked as scoopers or lugiteros; some are contractors; and some worked under the

pakyaw system. In support of these allegations, petitioner even presented thecompany’s payroll which will allegedly prove its allegations.

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By setting forth these defenses, petitioner, in effect, admitted that respondentsworked for it, albeit in different capacities. Such allegations are negative pregnant –denials pregnant with the admission of the substantial facts in the pleading responded to which are not squarely denied, and amounts to an acknowledgment that respondentswere indeed employed by petitioner. (Emphasis supplied.)

Also in Telephone Engineering & Service Co., Inc. v. WCC, et al., the Court held that the lack of employer-employee relationship is a matter of defense that the employer should properly raise in the proceedings below. The determination of this relationshipinvolves a finding of fact, which is conclusive and binding and not subject to review by this Court.

In this case, petitioner insisted that respondent was dismissed from employment for cause and after the observance of the proper procedure for termination.Consequently, petitioner cannot now deny that respondent is its employee. Whileindeed, jurisdiction cannot be conferred by acts or omission of the parties, petitioner’sbelated denial that it is the employer of respondent is obviously an afterthought, a

devise to defeat the law and evade its obligations.

It is a fundamental rule of procedure that higher courts are precluded fromentertaining matters neither alleged in the pleadings nor raised during the proceedingsbelow, but ventilated for the first time only in a motion for reconsideration or on appeal.Petitioner is bound by its submissions that respondent is its employee and it should not be permitted to change its theory. Such change of theory cannot be tolerated onappeal, not due to the strict application of procedural rules, but as a matter of fairness.

As to the legality of respondent’s dismissal, it is well settled that under Rule 45 of the Rules of Court, only questions of law may be raised, the reason being that this Courtis not a trier of facts, and it is not for this Court to reexamine and reevaluate theevidence on record. Findings of fact and conclusions of the Labor Arbiter as well asthose of the NLRC or, for that matter, any other adjudicative body which can beconsidered as a trier of facts on specific matters within its field of expertise, should beconsidered as binding and conclusive upon the appellate courts.

Petitioner dismissed respondent from employment based on therecommendation of the DFPDC holding respondent guilty of dishonesty for his directparticipation in the “fake condemnation” and “pilferage” of the missing 1,020 MarlboroPack of 5 cigarettes. Respondent was implicated in the anomalous transaction by hisco-employees who pointed to the former as the one who ordered the other suspects tolook for a vehicle that would be used to transport the subject cigarettes. This, according to the DFPDC, was odd and strange. With this act alone and by reason of his position,the DFPDC concluded, and affirmed by petitioner, that respondent definitely had knowledge of the “fake condemnation.” From these circumstances, petitioner sustained the findings of dishonesty and dismissed respondent from employment.

Again, we agree with the appellate court that DFPDC’s conclusions are not supported by clear and convincing evidence to warrant the dismissal of respondent. In

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illegal dismissal cases, the employer is burdened to prove just cause for terminating theemployment of its employee with clear and convincing evidence. This principle isdesigned to give flesh and blood to the guaranty of security of tenure granted by theConstitution to employees under the Labor Code. In this case, petitioner failed to submit clear and convincing evidence of respondent’s direct participation in the alleged fake

condemnation proceedings. To be sure, unsubstantiated suspicions, accusations, and conclusions of employers do not provide for legal justification for dismissing employees.In case of doubt, such cases should be resolved in favor of labor, pursuant to the social

justice policy of labor laws and the Constitution. (Duty Free Philippines Services, Inc.vs. Tria, G.R. No. 174809, June 27, 2012)

Retirement Pay Differentials

In Philippine Veterans Bank v. NLRC, this Court explained that banks under liquidation retain their legal personality. In fact, even if they are prohibited fromconducting regular banking business, it is necessary that debts owed to them becollected. Lazaro performed the duty of foreclosing debts in favor of Banco Filipino. It cannot rightfully disclaim Lazaro’s work that benefitted it. Consequently, we find nogrievous error committed by the CA in crediting the years covered by the liquidation

period as part of Lazaro’s retirement pay.

With respect to Banco Filipino Staff Association v. Banco Filipino Savings and Mortgage Bank, which Banco Filipino cites in order to prove that this Court had earlier excluded the seven-year period of closure from the length of service of the bank’semployees, the CA read the case correctly; i.e. that this Court did not categorically exclude the seven-year period of closure from the length of service of Banco Filipinoemployees. Thus, the bank cannot use our pronouncement in the said case to defeat Lazaro’s claim for retirement pay differential.

Notably, Lazaro remains unsatisfied with the award of retirement pay differential.He seeks these further adjustments: (1) the basis for the computation of his retirement

pay should be increased from ₱ 38,000 to ₱ 50,000; and (2) the retirement pay differential should include 8 years, and not just 7 years and 7 months of his service.

With respect to the claim that the base for computing the retirement pay should be ₱ 50,000 and not ₱ 38,000, the courts a quo found that since the applicable Rules of the Banco Filipino Retirement Fund state that the computation shall be for “eachcompleted month of service,” Lazaro – who did not complete his services for December

1995 – cannot claim the salary increase granted, when he has already left BancoFilipino, and credit it to his retirement pay. Conversely, Lazaro argues that the Rules of the Banco Filipino Retirement Fund do not explicitly state that the computation shall befor each completed month of service.

Referring to the Rules of the Banco Filipino Retirement Fund, this Court observes that they refer to the “final salary” of the employee as basis for computing thelatter’s retirement pay.

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As established by the LA, the NLRC and the CA, the final salary of Lazaro was₱ 38,000, and not ₱ 50,000. This consistent factual determination can no longer beretried. It is aphoristic that a reexamination of factual findings cannot be done through a

petition for review on certiorari under Rule 45 of the Rules of Court, because this Court

reviews only questions of law.

With regard to the second adjustment Lazaro prays for, we note that heassiduously went through the whole process of appeal to seek a rounding off of his 27 years and 10 months of work to 28 years and consequently obtain a higher retirement

pay. Considering the bank’s grant of 20 years and 7 months of retirement pay, plus theCA’s award of a 7-year retirement pay differential, in effect, only 5 months worth of

prorated retirement pay remains unsettled. At this juncture, this Court reminds everyonethat while access to the courts is guaranteed, there must be limits thereto.

We rule that the CA committed no reversible error when it did not round off Lazaro’s length of service. To begin with, his plea for rounding off his length of serviceis mistakenly based on Article 287 of the Labor Code, which provides:

Art. 287. Retirement. – Any employee may be retired upon reaching theretirement age established in the collective bargaining agreement or other applicableemployment contract.

In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have earned under existing laws and any collective bargaining agreement and other agreements: Provided, however, that an employee's retirement benefits under any collective bargaining and other agreements shall not be less thanthose provided herein.

In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby declared thecompulsory retirement age, who has served at least five (5) years in the said establishment, may retire and shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at least six (6) monthsbeing considered as one whole year.

Unless the parties provide for broader inclusions, the term one-half (1/2) monthsalary shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the

cash equivalent of not more than five (5) days of service incentive leaves. x x x.(Emphasis supplied.)

Lazaro cannot anchor his claim on the said provision, because governing in thiscase is the Rules of the Banco Filipino Retirement Fund. Indeed, as found in theImplementing Rules of the Retirement Pay Law and in jurisprudence, only in theabsence of an applicable retirement agreement shall Article 287 of the Labor Code

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apply. There is a proviso however, that an employee's retirement benefits under any agreement shall not be less than those provided in the said article.

It cannot be gainsaid that the Rules of the Banco Filipino Retirement Fund provide for benefits lower than those in the Labor Code. In fact, the bank offers a

retirement pay equivalent to one and one-half month salary for every year of service, arate over and above the one-half month salary threshold provided by the law.

Moreover, although the Rules of the Banco Filipino Retirement Fund do not grant a rounding off scheme, they nonetheless provide that prorated credit shall be given for incomplete years, regardless of the fraction of months in the retiree’s length of service.Hence, even if the retiree rendered only a fraction of five months, the retiree shall still be credited with retirement benefits based on the fraction of five months of serviceactually rendered.

Notwithstanding the lack of a rounding-up provision, still, the higher retirement pay, together with the prorated crediting, cannot be deemed to be less favorable thanthat provided for by the law. Ultimately, the more important threshold to be considered in construing whether the retirement agreement provides less benefits, compared tothose provided by the Retirement Pay Law, is that the retirement benefits in the said agreement should at least amount to one-half of the employee’s monthly salary.

Therefore, considering that Lazaro is bound by the terms of the Rules of theBanco Filipino Retirement Fund, it follows that he cannot claim his 27 years and 10 months of work to be rounded off to 28 years in order to obtain a higher retirement pay.

Attorney’s Fees and Profit Shares. Lazaro must establish a legal basis – either by law,contract or other sources of obligations – to merit the receipt of the additional 10%attorney’s fees collected in the various foreclosure procedures he settled as the bank’s

legal officer.

After a perusal of the instant Petition, we note that Lazaro has not produced any contract or provision of law that would warrant the payment of the additional attorney’sfees. Without any basis, therefore, this Court sustains the rulings of the courts below that he is only entitled to his salaries as the bank’s legal officer, because the serviceshe rendered in the foreclosure proceedings was part of his official tasks.

Anent the claim for profit shares, the CA has already made a finding that Lazaroreceived full payment thereof based on the check, voucher, Withholding Tax Certificateand Quitclaim attached by Banco Filipino. However, he points out that the payment

covered only his profit shares in 1984, 1994 and 1995; and, hence, the bank reneged on it duty to give his shares from 1985 to 1993. On this point, this Court cannot try thecase anew to determine fully whether the CA seriously erred in making a factual conclusion that Lazaro received full payment of his profit shares. We generally do not weigh anew the evidence already passed upon by the CA. In any event, Lazaro has not demonstrated that Banco Filipino earned profits from 1985 to 1993, the very period during which the bank was closed.

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The records show that Banco Filipino’s allegation pertaining to its profit sharesfor 1985 to 1993 remains unrefuted. Considering that Lazaro does not dispute itssubmission, we rule that he has failed to substantiate the affirmative relief prayed for.One-day salary differential and Lazaro’s claims for moral and exemplary damages,attorney’s fees and expenses of suit

Prefatorily, Lazaro’s claims for one-day salary differential, which was raised only before the CA, merits instant dismissal. This ruling is supported by basic considerationsof due process, which prohibits the raising of issues for the first time on appeal. Pointsof law, theories, issues, and arguments not brought to the attention of the lower court will not be considered by the reviewing court. To consider them would be unfair to theadverse party, who would have no opportunity to present contrary evidence as it could have done had it been aware of the new theory at the time of the hearing before the trial court. (Banco Filipino Savings and Mortgage Bank vs. Lazaro, G.R. No. 185346,June 27, 2012)

Dismissal: Floating Status

Petitioners argue that they were illegally dismissed, based on the 1989 case Agro Commercial Security Services Agency, Inc. v. NLRC., which holds that when thefloating status of employees lasts for more than six (6) months, they may be consideredto have been illegally dismissed from the service.

Unfortunately, the above-mentioned case is not applicable here. In Agro, theservice contracts of the security agency therein with various corporations andgovernment agencies – to which the security guards were previously assigned – were

terminated, generally due to the sequestration of the said offices. Accordingly, many of the security guards were placed on floating status. “Floating status” means an indefiniteperiod of time when one does not receive any salary or financial benefit provided bylaw.

In this case, petitioners were actually reassigned to new posts, albeit in adifferent location from where they resided. Thus, there can be no floating status or indefinite period to speak of. Instead, petitioners were the ones who refused to report for work in their new assignment. In cases involving security guards, a relief and transfer order in itself does not sever the employment relationship between the security guards and their agency. Employees have the right to security of tenure, but this does

not give them such a vested right to their positions as would deprive the company of its prerogative to change their assignment or transfer them where their services, assecurity guards, will be most beneficial to the client.

An employer has the right to transfer or assign its employees from one office or area of operation to another in pursuit of its legitimate business interest, provided thereis no demotion in rank or diminution of salary, benefits, and other privileges; and the

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transfer is not motivated by discrimination or bad faith, or effected as a form of punishment or demotion without sufficient cause.

While petitioners may claim that their transfer to Manila will cause added expenses and inconvenience, we agree with the CA that, absent any showing of bad

faith or ill motive on the part of the employer, the transfer remains valid. (Mojar, et. al.vs. Agro Commercial Security Service Agency, Inc., et. al., G.R. No. 187188, June27, 2012)

-end-

Prepared by:

PURDEY P. PEREZOfficer-in-ChargeResearch, Information and Publications Division

781-7881

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